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

                            -------------------------
                                    FORM 20-F

[ ]   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE 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, 2004

                                       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 333-7484

                           INNOVA, S. DE R.L. DE C.V.

             (Exact name of Registrant as specified in its charter)

                                       N/A
                 (Translation of Registrant's name into English)

                              UNITED MEXICAN STATES
                 (Jurisdiction of incorporation or organization)

                           INSURGENTES SUR 694, PISO 8
                                COLONIA DEL VALLE
                               03100 MEXICO, D.F.
                                     MEXICO
                    (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: None

              Securities for which there is a reporting obligation
                      pursuant to Section 15(d) of the Act:

                          9.375% SENIOR NOTES DUE 2013

   The number of outstanding shares of each of the issuer's classes of capital
or common stock as of December 31, 2004 was:

   One Series A-1 Social Part, One Series B-1 Social Part, One Series B-2 Social
Part and One Series C Social Part

   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. Yes [X] No [ ]

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

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                           PAGE
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<S>                                                                                                        <C>
ITEM 1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.......................................       1

ITEM 2.   OFFER STATISTICS AND EXPECTED TIMETABLE.....................................................       1

ITEM 3.   KEY INFORMATION.............................................................................       1

                Selected Financial Data...............................................................       1
                Exchange Rate Information.............................................................       2
                Dividends and Dividend Policy.........................................................       3
                Risk Factors..........................................................................       4
                Forward Looking Statements............................................................      15

ITEM 4.   INFORMATION ON THE COMPANY..................................................................      17

                History and Development of the Company................................................      17
                Business Overview.....................................................................      21
                Organizational Structure..............................................................      39
                Property, Plant and Equipment.........................................................      40

ITEM 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS................................................      42

                Overview..............................................................................      42
                Operating Results.....................................................................      44
                Liquidity and Capital Resources.......................................................      49
                Research and Development, Patents and Licenses, etc. .................................      51
                Off Balance Sheet Arrangements........................................................      51
                Contractual Obligations and Commercial Commitments....................................      52

ITEM 6.   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES..................................................      59

                Directors and Senior Management.......................................................      59
                Compensation..........................................................................      63
                Board Practices.......................................................................      63
                Employees.............................................................................      64
                Share Ownership.......................................................................      64

ITEM 7.   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS...........................................      65

                Major Shareholders....................................................................      65
                Related Party Transactions............................................................      65

ITEM 8.   FINANCIAL INFORMATION.......................................................................      70

ITEM 9.   THE OFFER AND LISTING.......................................................................      70

ITEM 10.  ADDITIONAL INFORMATION......................................................................      70

                Bylaws................................................................................      70
                Material Contracts....................................................................      73
                Legal Proceedings.....................................................................      73
                Exchange Controls.....................................................................      74
                Taxation..............................................................................      74
                Documents on Display..................................................................      80

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..................................      81

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES......................................      82

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.............................................      83

ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS................      83
</TABLE>

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<TABLE>
<S>                                                                                                         <C>
ITEM 15.  CONTROLS AND PROCEDURES.....................................................................      83

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT............................................................      83

ITEM 16B. CODE OF ETHICS..............................................................................      83

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES......................................................      84

ITEM 17.  FINANCIAL STATEMENTS........................................................................      85

ITEM 18.  FINANCIAL STATEMENTS........................................................................      85

ITEM 19.  EXHIBITS....................................................................................      85
</TABLE>

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      The terms "we", "us", "our" and "Innova" are used in this annual report to
refer to Innova, S. de R.L. de C.V. and its consolidated subsidiaries. We
maintain our books and records in Pesos and present our financial statements in
conformity with generally accepted accounting principles in Mexico, or Mexican
GAAP. Mexican GAAP differ in some significant respects from generally accepted
accounting principles in the United States, or U.S. GAAP, and generally accepted
accounting principles adopted in other countries. For example, under Mexican
GAAP, we must account for the effects of inflation. Accordingly, we have
adjusted all data in our consolidated financial statements and the notes
thereto, as well as our selected consolidated financial information, to reflect
the 5.2% inflation Mexico experienced in the fiscal year ended December 31,
2004, unless otherwise indicated. See Note 3 to our consolidated financial
statements.

      We use the Mexican Interbank free market exchange rate, commonly known as
the Interbank Rate, as reported by Banco Nacional de Mexico, S.A., to prepare
our financial statements. Unless otherwise indicated, references to "Ps." or
"Pesos" in this annual report are to Mexican Pesos and references to "U.S.
Dollars," "US$" or "$," are to United States Dollars. See "Item 3 -- Key
Information -- Exchange Rate Information" for information regarding the rates of
exchange between the Peso and the U.S. Dollar for specified periods. You should
not construe the exchange rate translations in this report as representations
that the Peso amounts represent actual U.S. Dollar amounts or that they could be
converted into U.S. Dollars at the rate indicated or at any other rate.

                                     -iii-
<PAGE>

                                     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

                             SELECTED FINANCIAL DATA

      The following table presents our selected consolidated financial
information as of and for each of the periods indicated. This data is qualified
in its entirety by reference to, and should be read together with, our audited
year-end financial statements and the notes to those financial statements. The
following data for each of the years ended December 31, 2000, 2001, 2002, 2003
and 2004 has been derived from our audited year-end financial statements,
including the consolidated balance sheets as of December 31, 2003 and 2004, and
the related consolidated statements of income (loss) and changes in financial
position for the years ended December 31, 2002, 2003 and 2004 and the
accompanying notes included in this annual report. The data should also be read
together with "Item 5 -- Operating and Financial Review and Prospects." Unless
otherwise indicated, financial information is presented in constant Mexican
Pesos in purchasing power as of December 31, 2004.

      Our consolidated annual financial statements were prepared in accordance
with Mexican GAAP, which differs in some significant respects from U.S. GAAP.
Note 20 to the consolidated annual financial statements describes the principal
differences between Mexican GAAP and U.S. GAAP with respect to Innova and
reconciles net (loss) income to U.S. GAAP. In addition, the selected
consolidated financial information below provides U.S. GAAP figures for net
sales, operating (loss) income, total assets, net liabilities and equity owners'
deficit.

<TABLE>
<CAPTION>
                                                                   AS OF AND FOR THE YEAR ENDED DECEMBER 31,
                                                ------------------------------------------------------------------------------
                                                     2000             2001            2002           2003             2004
                                                --------------   -------------   -------------   -------------   -------------
                                                          (IN THOUSANDS OF CONSTANT DECEMBER 31, 2004 MEXICAN PESOS)
<S>                                             <C>              <C>             <C>             <C>             <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................................   Ps.  2,800,235   Ps. 3,572,306   Ps. 3,754,787   Ps. 4,019,067   Ps. 4,769,027
Depreciation and amortization................         (923,779)     (1,037,264)     (1,011,827)       (850,603)       (764,499)
Operating (loss) profit......................       (1,176,453)       (305,081)          9,866         402,750         974,949
Total integral results of financing(1).......         (385,032)        (77,287)     (1,802,323)     (1,258,286)       (387,335)
Other (expenses) income, net.................                -               -         (23,854)          3,659               -
Transponder services-Solidaridad 2
 and repointing costs(2).....................         (471,324)              -         (28,364)              -               -
Restructuring charges(2).....................                -         (14,849)         (7,104)       (112,445)        (10,958)
(Loss) income  before provisions for taxes...       (2,032,810)       (397,216)     (1,851,779)       (964,322)        576,656
Provisions for taxes(3)......................             (142)        (50,624)        (82,613)        123,125            (198)
Net (loss) income............................       (2,032,952)       (447,840)     (1,934,414)       (840,110)        576,287
Net sales (U.S. GAAP)(4).....................   Ps.  2,799,516   Ps. 3,435,540   Ps. 3,626,930   Ps. 3,940,289   Ps. 4,721,917
Operating (loss) income (U.S. GAAP)(4).......       (1,149,548)       (865,524)        (83,294)        464,629         975,207
Net (loss) income (U.S. GAAP) (4)............       (1,540,532)     (1,017,930)     (1,968,250)       (822,132)        599,310

BALANCE SHEET DATA:
Property and equipment, net(5)...............   Ps.  2,087,750   Ps. 2,135,239   Ps. 1,689,777   Ps. 1,470,230   Ps. 1,487,834
Satellite transponders, net(6)...............        1,532,073       1,329,428       1,357,371       1,318,503       1,179,979
Total other  non-current assets..............          381,462         238,295         114,767          69,902          41,498
Total assets.................................        4,320,159       4,128,260       3,764,270       3,641,213       4,725,887
Total assets (U.S. GAAP)(4)..................        4,395,349       4,483,531       4,024,831       3,799,544       4,906,926
Net liabilities..............................        5,209,890       5,798,293       7,553,168       3,716,714       3,000,820
Net liabilities (U.S. GAAP)(4)...............        4,506,556       5,524,469       7,492,850       3,751,788       2,972,686
Due to affiliated companies and related
 parties(7)..................................          267,022         382,412         474,063         448,408         184,740
Senior notes(8)..............................        4,349,716       3,979,072       4,291,969       4,581,377       3,344,700
Bank loan(9).................................               -                -               -               -       1,012,000
Owners' loans(7).............................        1,712,050       2,975,285       3,546,882               -               -
Satellite transponders obligation(6).........        1,610,277       1,485,648       1,554,969       1,544,615       1,395,358
Equity owners' deficit(10)...................       (5,209,890)     (5,798,293)     (7,553,168)     (3,716,714)     (3,000,820)
Social parts.................................        2,092,516       2,092,516       2,092,516       6,655,668       6,655,679
Equity owners' deficit (U.S. GAAP)(4)(10)....       (4,506,556)     (5,524,469)     (7,492,850)     (3,751,788)     (2,972,686)
</TABLE>

<PAGE>

NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA:

(1) Includes interest expense, interest income, foreign exchange gains and
    (losses) and net gain from monetary position. See Note 3 to our consolidated
    annual financial statements.

(2) See Note 14 to our consolidated annual financial statements.

(3) See Note 16 to our consolidated annual financial statements.

(4) The principal differences between Mexican GAAP and U.S. GAAP as they relate
    to us consist of differences in the capitalization and amortization of
    pre-operating expenses, the provision for costs associated with re-pointing
    our subscriber's antennas from the Solidaridad 2 satellite to the PAS-9
    satellite, the provision for the redundant use of the Solidaridad 2
    satellite, the reversal of other accruals, the capitalization of financing
    costs, the restatement of property and equipment, the recognition of the
    derivative financial instruments and the recognition of revenue. We paid
    Satelites Mexicanos, S.A. de C.V., or SatMex, a monthly service fee of
    U.S.$1.752 million for satellite signal reception and retransmission service
    from 12 transponders on Solidaridad 2 through December 31, 2001, and a flat
    fee of US$1.5 million for the use of up to eight transponders from January
    1, 2002 through April 3, 2002. The process of migrating customers from
    Solidaridad 2 to PAS-9 started in November 2000 and ended in March 2002.
    Re-pointing costs were approximately U.S.$35 million. See Note 20 to our
    consolidated annual financial statements.

(5) See Note 5 to our consolidated annual financial statements.

(6) In 2000, we accounted for the agreement for the use of 12 transponders on
    the PAS-9 satellite as a capital lease, recognizing a satellite transponder
    asset and corresponding liability equal to the net present value of the
    monthly payments over the lease term. The satellite transponder asset is
    depreciated on a straight-line-basis over the lease term. Part of the
    monthly payments are recognized in our consolidated statements of income
    (loss) as interest expense and part as a reduction of the satellite
    transponder obligation. Our consolidated statement of income (loss) also
    recognizes on a monthly basis the amortization of the net present value of
    our satellite transponder asset. Our other satellite transponder agreements
    have been accounted for as operating leases. The satellite transponder
    obligations provided represent both current and long-term obligations. See
    Note 6 to our consolidated annual financial statements.

(7) Amounts do not include accrued interest. Effective as of September 9, 2003,
    our equity owners capitalized all loans made by them or any of their
    affiliates to us. The amount of the loans and accrued interest capitalized
    was approximately Ps. 4.5 billion. See "Item 5. Operating and Financial
    Review and Prospects -- Liquidity and Capital Resources."

(8) Amounts do not include accrued interest. In September 2003, we issued
    U.S.$300.0 million of senior notes in a private offering at a price of 100%.
    The notes bear interest at a rate of 9.375% and mature on September 19,
    2013. See "Item 5. Operating and Financial Review and Prospects -- Liquidity
    and Capital Resources" and Note 10 to our consolidated annual financial
    statements.

(9) Amounts do not include accrued interest. In December 2004, we entered into a
    Ps. 1,012 million, 7-year bank loan agreement with a fixed interest rate of
    10.55% per annum and a five-year grace period for the repayment of
    principal. Televisa and News Corporation are guaranteeing this loan 51% and
    49%, respectively. See "Item 5. Operating and Financial Review and Prospects
    -- Liquidity and Capital Resources" and Note 10 to our consolidated annual
    financial statements.

(10)Represents the value of social parts authorized and issued to our equity
    owners. This line item is equivalent to capital stock. See Note 15 to our
    consolidated annual financial statements. The increase in 2003 relates to
    the capitalization by our equity owners of all loans made by them.

                            EXCHANGE RATE INFORMATION

      Since November 1991, Mexico has had a free market for foreign exchange,
and since December 1994, the Mexican government has allowed the Peso to float
freely against the U.S. Dollar. During 1998, the foreign exchange markets
experienced volatility as a result of the financial crises in Asia and Russia
and the financial turmoil in countries such as Brazil and Venezuela. More
recently, global terrorist attacks and a weaker U.S. economy, combined with the
conflicts in the Middle East, have negatively affected international markets,
which could continue to impact the value of the Peso. See " -- Risk Factors --
Risk Factors Related to Mexico -- Developments in Other Emerging Market
Countries or the United States May Affect Us and the Prices for Our Securities."
We cannot assure you that the Mexican government will maintain its current
policies with regard to the Peso or that the Peso will not further depreciate or
appreciate significantly in the future.

      The following table sets forth, for the periods indicated, the high, low,
average and period end noon buying rate in the City of New York for cable
transfers as certified for customs purposes by the Federal Reserve Bank of New
York, expressed as Ps. per U.S. $1.00. As of June 10, 2005, the noon buying rate
for the purchase of U.S. Dollars was Ps. 10.87 per U.S. Dollar.

                                       -2-
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<TABLE>
<CAPTION>
                                                                EXCHANGE RATE
                                                            ---------------------
                                                  HIGH       LOW       AVERAGE(1)      PERIOD END
                                                 -----      -----      ----------      ----------
<S>                                              <C>        <C>        <C>             <C>
YEAR ENDED DECEMBER 31,
2000.......................................      10.09       9.18         9.47            9.62
2001.......................................       9.97       8.95         9.33            9.16
2002.......................................      10.43       9.00         9.75           10.43
2003.......................................      11.41      10.11        10.80           11.24
2004.......................................      11.64      10.81        11.31           11.15
MONTH ENDED
December 31,2005                                 11.33      11.11        11.20           11.15
January 31, 2005...........................      11.41      11.17        11.27           11.21
February 28, 2005..........................      11.21      11.04        11.14           11.09
March 31, 2005.............................      11.33      11.00        11.16           11.18
April 30, 2005.............................      11.23      11.04        11.11           11.08
May 31, 2005...............................      11.03      10.89        10.97           10.91
Through June 10, 2005......................      10.88      10.81        10.85           10.87
</TABLE>

-------------
(1) Annual average rates reflect the average of noon buying rates on the last
    day of each month during the relevant period. Monthly average rates reflect
    the average of daily noon buying rates.

      The above rates may differ from the actual rates used in the preparation
of the consolidated financial statements and the other financial information
appearing in this annual report on Form 20-F. Our inclusion of these exchange
rates is not meant to suggest that the Peso amounts actually represent these
U.S. Dollar amounts or that Peso amounts could have been converted into U.S.
Dollars at any particular rate, if at all.

      Unless we otherwise indicate, all Peso amounts as of December 31, 2004 are
translated into U.S. Dollars at an exchange rate of Ps. 11.149 to $1.00, and all
amounts disclosed for the year ended December 31, 2004 are based on an average
exchange rate of Ps. 11.284 to $1.00. All amounts disclosed as of December 31,
2003 are based on an exchange rate of Ps. 11.225 to $1.00, and all amounts
disclosed for the year ended December 31, 2003 are based on an average exchange
rate of Ps. 10.797 to $1.00. All amounts disclosed as of December 31, 2002 are
based on an exchange rate of Ps. 10.464 to $1.00, and all amounts disclosed for
the year ended December 31, 2002 are based on an average exchange rate of Ps.
9.665 to $1.00. The devaluation and revaluation of the peso over the past two
years may have a considerable impact on the Peso comparisons.

      The Mexican economy has suffered balance of payment deficits and shortages
in foreign exchange reserves. While the Mexican government does not currently
restrict the ability of Mexican or foreign persons or entities to convert Pesos
to U.S. Dollars, we cannot assure you that the Mexican government will not
institute restrictive exchange control policies in the future, as has occurred
from time to time in the past. To the extent that the Mexican government
institutes restrictive exchange control policies in the future, our ability to
transfer or to convert Pesos into U.S. Dollars and other currencies for the
purpose of making timely payments of interest and principal of indebtedness, as
well as obtaining foreign programming and other goods, would be adversely
affected. See " -- Risk Factors -- Risk Factors Related to Mexico -- Currency
Fluctuations or the Devaluation and Depreciation of the Peso Could Limit the
Ability of Our Company and Other to Convert Pesos into U.S. Dollars or Other
Currencies Which Could Adversely Affect Our Business, Financial Condition or
Results of Operations."

                          DIVIDENDS AND DIVIDEND POLICY

      We have not declared or paid any dividends. Under the Amended and Restated
Social Part Holders Agreement among Grupo Televisa, S.A., or Televisa, News
Corporation, and other related parties, dated October 8, 2004, and our bylaws,
dividends, if declared, may be paid in Pesos or U.S. Dollars as determined by
our equity holders. The U.S. Dollar value of any dividends would be affected by
the exchange rate if paid in Pesos. The indenture governing our 9.375% senior
notes due 2013 and our recently acquired bank loan, restrict our ability to
declare dividends under various conditions.

                                       -3-
<PAGE>

                                  RISK FACTORS

      The following is a discussion of risks associated with our company and an
investment in our securities. Some of the risks of investing in our securities
are general risks associated with doing business in Mexico. Other risks are
specific to our business. The discussion below contains information about the
Mexican government and the Mexican economy obtained from official statements of
the Mexican government as well as other public sources. We have not
independently verified this information. Any of the following risks, if they
actually occur, could materially and adversely affect our business, financial
condition or results of operations, or the price of our securities.

RISK FACTORS RELATED TO MEXICO

ECONOMIC AND POLITICAL DEVELOPMENTS IN MEXICO MAY ADVERSELY AFFECT OUR BUSINESS

      Substantially all of our revenues are denominated in Mexican Pesos and are
generated in Mexico. Our management and many of our assets are located in
Mexico. As a result, our business, financial condition, and results of
operations may be affected by the general condition of the Mexican economy, the
devaluation of the Mexican Peso as compared to the U.S. Dollar, Mexican
inflation, interest rates, regulation, taxation, social instability and other
political, social and economic developments in or affecting Mexico.

MEXICO HAS EXPERIENCED ADVERSE ECONOMIC CONDITIONS

      Mexico has historically experienced uneven periods of economic growth.
Mexico's gross domestic product, or GDP, increased 0.7%, 1.4%, 4.4% and 0.4% in
2002, 2003, 2004 and the three month period ended March 31, 2005, respectively.
Inflation in 2002, 2003, 2004 and the three month period ended March 31, 2005
was 5.7%, 4.0%, 5.2% and 0.8%, respectively. Although these inflation rates tend
to be lower than Mexico's historical inflation rates, Mexico's current level of
inflation remains higher than the annual inflation rates of its main trading
partners, including the U.S. GDP growth surpassed Mexican government estimates
in 2004; however, according to Mexican government estimates, GDP in Mexico is
expected to grow at a slower rate, by approximately 3.5% to 4.0%, in 2005.
Although inflation is expected to be less than 4.0% in 2005, we cannot assure
you that this estimate or estimates related to GDP will prove to be accurate.

      If the Mexican economy should fall into a recession or if other economic
events such as increased inflation, interest rates or deflation occur, our
business, financial condition and results of operations may be adversely
affected for the following reasons:

         -  demand for direct to home, or DTH, satellite services, pay-per-view
            programming and other services may decrease;

         -  consumers may decrease spending on high-margin services or
            programming packages;

         -  to the extent inflation exceeds price increases, our prices and
            revenues will be adversely affected in "real" terms; and

         -  any Peso-denominated debt in the future could be incurred at high
            interest rates.

CURRENCY FLUCTUATIONS OR THE DEVALUATION AND DEPRECIATION OF THE PESO COULD
LIMIT THE ABILITY OF OUR COMPANY AND OTHERS TO CONVERT PESOS INTO U.S. DOLLARS
OR OTHER CURRENCIES WHICH COULD ADVERSELY AFFECT OUR BUSINESS, FINANCIAL
CONDITION OR RESULTS OF OPERATIONS

      Most of our indebtedness and a significant amount of our costs are U.S.
Dollar-denominated, while our revenues are primarily Peso-denominated. As a
result, decreases in the value of the Peso against the U.S. Dollar could cause
us to incur foreign exchange losses, which would reduce our net income.

      Severe devaluation or depreciation of the Peso may also result in
governmental intervention, as has resulted in Argentina, or disruption of
international foreign exchange markets. This may limit our ability to transfer
or convert Pesos into U.S. Dollars and other currencies for the purpose of
making timely payments of interest and principal on our indebtedness and
adversely affect our ability to pay our satellite and other U.S.
Dollar-denominated costs, obtain foreign programming and other imported goods.
The Mexican economy has suffered current account balance of payment deficits and
shortages in foreign exchange reserves in the past. While the Mexican government
does not

                                       -4-
<PAGE>

currently restrict, and for many years has not restricted, the right or ability
of Mexican or foreign persons or entities to convert Pesos into U.S. Dollars or
to transfer other currencies outside of Mexico, the Mexican government could
institute restrictive exchange control policies in the future. Devaluation or
depreciation of the Peso against the U.S. Dollar may also adversely affect U.S.
Dollar prices for our securities.

HIGH INFLATION RATES IN MEXICO MAY DECREASE DEMAND FOR OUR SERVICES WHILE
INCREASING OUR COSTS

      Mexico historically has experienced high levels of inflation, although the
rates have been lower in recent years. The annual rate of inflation, as measured
by changes in the Mexican National Consumer Price Index, or the NCPI, was 5.7%
for 2002, 4.0% for 2003, 5.2% for 2004 and 0.8% for the three month period ended
March 31, 2005. Nonetheless, at approximately 4.4% per annum (as measured from
March 2004 to March 2005), Mexico's current level of inflation remains higher
than the annual inflation rates of its main trading partners. High inflation
rates can adversely affect our business and results of operations in the
following ways:

         -  inflation can adversely affect consumer purchasing power, thereby
            adversely affecting consumer demand for our services and products,
            and

         -  to the extent inflation exceeds our price increases, our prices and
            revenues will be adversely affected in "real" terms.

HIGH INTEREST RATES IN MEXICO COULD INCREASE OUR FINANCING COSTS

      Mexico historically has had, and may continue to have, high real and
nominal interest rates. The interest rates on 28-day Mexican government treasury
securities averaged 7.1%, 6.2%, 6.8% and 9.1% for 2002, 2003, 2004 and the
three-month period ended March 31, 2005, respectively. These rates are
significantly higher than the interest rates for treasury securities trading in
the U.S. Accordingly, if we need to incur additional Peso-denominated debt in
the future, it will likely be at higher interest rates.

POLITICAL EVENTS IN MEXICO COULD AFFECT MEXICAN ECONOMIC POLICY AND OUR
BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      Mexico's President Vicente Fox has encountered strong opposition to a
number of his proposed reforms in both the Chamber of Deputies and the Senate,
where opposition forces have frequently joined to block his initiatives and have
worsened the outlook for meaningful structural reforms during the remainder of
President Fox's term. Although the Mexican economy has exhibited signs of
improvement, it is still struggling to recover and general economic sluggishness
continues amidst the hope that the recent signs of a recovery in the U.S. will
hold. This continuing weakness in the Mexican economy, combined with recent
political events, has slowed economic reform and progress. In elections in 2003
and 2004, the political party of President Fox, the Partido Accion Nacional or
the National Action Party, lost additional seats in the Mexican congress, as
well as state governorships. The increased party opposition and legislative
gridlock arising out of the elections could further hinder President Fox's
ability to implement his economic reforms, as has occurred during the process to
approve President Fox's proposed 2005 budget. Presidential and federal
congressional elections in Mexico are scheduled to be held in July 2006. Under
Mexican law, President Fox cannot run for re-election. The electoral process
could lead to further friction among political parties and the executive branch
officers, which could potentially cause additional political and economic
instability. Additionally, once the President and representatives are elected,
there could be significant changes in laws, public policies and government
programs, which could have a material adverse effect on the Mexican economic and
political situation which, in turn may adversely affect our business, financial
condition and results of operations.

      National politicians are currently focused on the 2006 elections and
crucial reforms regarding fiscal and labor policies, gas, electricity, social
security and oil have not been and may not be approved. In addition, on April 7,
2005, the lower house of the Mexican Congress voted in favor of stripping Lopez
Obrador's immunity from prosecution so that contempt charges can be brought
against him for violating a court order. Lopez Obrador, the mayor of Mexico
City, is one of the most popular politicians in Mexico and a candidate for the
2006 presidential election. The effects on the social and political situation in
Mexico, including the 2006 presidential elections and presidential succession,
could adversely affect the Mexican economy, including the stability of its
currency, which in turn could have a material adverse effect on our business,
financial condition and results of operations, as well as market conditions and
prices for our securities.

                                       -5-
<PAGE>

DEVELOPMENTS IN OTHER EMERGING MARKET COUNTRIES OR THE UNITED STATES MAY AFFECT
US AND THE PRICES FOR OUR SECURITIES

      The market value of securities of Mexican companies, the economic and
political situation in Mexico and our financial condition and results of
operations are, to varying degrees, affected by economic and market conditions
in other emerging market countries and in the U.S. Although economic conditions
in other emerging market countries and the U.S. may differ significantly from
economic conditions in Mexico, investors' reactions to developments in any of
these other countries may have an adverse effect on the market value or trading
price of securities of Mexican issuers, including our debt securities, or our
business.

      In particular, Argentina's continued insolvency and default on its public
debt could adversely affect Mexico, the market value of our debt securities or
our business. Although a majority of foreign holders of Argentina's indebtedness
have agreed to exchange their securities in connection with Argentina's
restructuring, holders of a substantial amount of the country's indebtedness
have refused such exchange. To the extent that the Argentine government is
unsuccessful in preventing further economic decline, the crisis may also
adversely affect the market value and trading price of our securities.

      In addition, the political and economic future of Venezuela remains
uncertain. A nationwide general strike that occurred between December 2002 and
January 2003 caused a significant reduction in oil production in Venezuela, and
has had a material adverse effect on Venezuela's oil-dependent economy. In
February 2003, Venezuelan authorities imposed foreign exchange and price
controls on specified products. Inflation continues to increase, despite price
controls, and the political and economic environment has continued to
deteriorate. We cannot predict what effect, if any, these events will have on
the economies of other emerging market countries, including Mexico, the price of
our debt securities or our business.

      The price of our securities has also historically been adversely affected
by increases in interest rates in the United States and elsewhere. The Federal
Reserve Bank of the United States has signaled that it could continue with
"measured" increases in interest rates in 2005. As interest rates rise, the
prices of our securities may fall.

THE U.S. INVASION AND OCCUPATION OF IRAQ HAVE NEGATIVELY AFFECTED INDUSTRY AND
ECONOMIC CONDITIONS GLOBALLY, AND THESE CONDITIONS HAVE HAD, AND MAY CONTINUE TO
HAVE, A NEGATIVE EFFECT ON OUR BUSINESS

      Our net sales are affected by numerous factors, including changes in
viewing preferences, programming costs, increased competition and consumers'
purchasing power. Historically, these factors have correlated positively with
the general condition of the economy and thus, are subject to the risks that
arise from adverse changes in domestic and global economic conditions. Consumer
confidence and spending may decline as a result of numerous factors outside of
our control, such as terrorist attacks and acts of war. The invasion and
occupation of Iraq have depressed economic activity in the U.S. and globally,
including the Mexican economy. Since the invasion, there have been terrorist
attacks abroad, such as the terrorist attacks in Madrid on March 11, 2004, as
well as ongoing threats of future terrorist attacks in the U.S. and abroad.
Although it is not possible at this time to determine the long-term effect of
these terrorist threats and attacks and the consequent response by the U.S.,
there can be no assurance that there will not be other attacks or threats in the
U.S. or abroad that will lead to a further economic contraction in the U.S. or
any other major markets. In the short term, however, terrorist activity against
the U.S. and the U.S. invasion and occupation of Iraq have contributed to the
uncertainty of the stability of the U.S. economy as well as global capital
markets. It is not certain how long these economic conditions will continue. If
terrorist attacks continue or become more prevalent or serious, if the economic
conditions in the U.S. decline or if a global recession materializes, our
business, financial condition and results of operations may be materially and
adversely affected.

DIFFERENCES BETWEEN MEXICAN GAAP AND U.S. GAAP MAY HAVE AN IMPACT ON THE
PRESENTATION OF OUR FINANCIAL INFORMATION

      Our annual audited consolidated financial statements are prepared in
accordance with Mexican GAAP, which differ in some significant respects from
U.S. GAAP. Therefore, potential investors may not be able to ascertain the risks
of our company as easily as they would if we were a U.S. company. See Note 20 to
our annual consolidated financial statements for a description of the principal
differences between Mexican GAAP and U.S. GAAP applicable to us.

                                       -6-
<PAGE>

RISK FACTORS RELATED TO OUR BUSINESS

WE MAY BE UNABLE TO GENERATE REVENUE SUFFICIENT TO COVER OUR COSTS AND SERVICE
OUR DEBT

      In 2004, we achieved net income for the first time. Prior to this year, we
experienced substantial net losses, and we may experience substantial net losses
during the next several years while we improve and expand our DTH service and
increase our subscriber base. In 2003, we started to generate positive cash flow
from operations for the first time and we generated positive cash flow from
operations for 2004. However, we cannot assure you that we will continue to
generate net income in the future and we may encounter difficulties continuing
to generate sufficient revenue to cover our costs in the future, particularly in
light of the intense competition we face in the pay television industry in
Mexico and our substantial level of debt. We cannot assure you that increases in
our subscriber base will result in sustained profitability or sustained positive
cash flow in future years.

OUR SIGNIFICANT DEBT LEVELS LIMIT OUR ABILITY TO FUND OUR OPERATIONS, AFFECT OUR
PROFITABILITY AND COULD LEAD TO DIFFICULTIES IN OBTAINING NEW SOURCES OF
FINANCING REQUIRED TO CONTINUE OPERATIONS

      As of December 31, 2004, we had U.S. dollar denominated indebtedness of
U.S.$388.0 million (not including normal operating liabilities), consisting of
U.S.$88.0 million in principal amount outstanding under our 12 7/8% senior notes
due 2007 (which were redeemed on January 7, 2005), and U.S.$300.0 million in
principal amount outstanding under our 9.375% senior notes due 2013, and Peso
denominated indebtedness of Ps.1,012.0 million. Additionally, as of December 31,
2004, we owed approximately U.S. $218.0 million in total pursuant to our
satellite transponder obligations (based on the remaining monthly payments of
U.S. $1.7 million). We may incur net losses for at least the next several years
as we service our indebtedness and fund continuing operations, including the
monthly U.S.$1.7 million we must pay to PanAmSat International Systems, Inc., or
PanAmSat, for satellite signal reception and retransmission services.

      In addition, we recently entered into certain agreements with DIRECTV
pursuant to which we have incurred an obligation of approximately Ps.621.1
million and we may be obligated to pay additional amounts under these
agreements. See "Item 4 -- Information on the Company -- History and Development
of the Company."

      If we cannot continue to generate enough cash flow, we may require
additional financing in the future, and cannot assure you that any such
financing will be available at all or on terms acceptable to us.

      Although the indenture governing our senior notes and our recently
acquired bank loan limit our ability and the ability of our subsidiaries to
incur additional indebtedness, we may, nonetheless, incur additional
indebtedness in connection with our business, including borrowings to fund
investments and acquisitions to improve, modernize and give continuity and
growth to our business. Our substantial debt may have important negative
consequences for us, including the following:

         -  our ability to obtain additional financing for acquisitions, working
            capital, investments or other expenditures could be impaired or
            financing may not be available on terms favorable to us;

         -  a substantial portion of our cash flow will be used to make
            principal and interest payments on our debt, reducing the funds that
            would otherwise be available to us for our operations and future
            business opportunities;

         -  a substantial decrease in our net operating cash flow or an increase
            in our expenses could make it difficult for us to meet our debt
            service requirements and force us to modify our operations;

         -  we may be placed at a competitive disadvantage if we have
            significantly more indebtedness than our competitors; and

         -  we will be more vulnerable to the effects of general economic
            downturns or to delays or increases in the costs of developing our
            network, and it will be more difficult for us to respond to changes
            affecting our financing, construction, development or operating
            plans.

      Since 2003 we have begun to generate positive net operating cash flow. If
we cannot continue to generate sufficient cash flow from operations to meet our
obligations, then our indebtedness may have to be refinanced. Any such
refinancing may not be effected successfully or on terms that are acceptable to
us. In the absence of such refinancings, we could be forced to dispose of assets
in order to make up for any shortfall in the payments due on

                                       -7-
<PAGE>

our indebtedness, including interest and principal payments due on the notes,
under circumstances that might not be favorable to realizing the best price for
such assets. Further, any assets may not be sold quickly enough or for amounts
sufficient to enable us to make any such payments. If we are unable to sell
sufficient assets to repay this debt we could be forced to issue equity
securities to make up any shortfall. Any such equity issuance would be subject
to the approval of our social part holders, who have the voting power to prevent
us from raising money in equity offerings.

      From our inception and until the first quarter of 2002, we depended on
financing from our equity owners; nonetheless, they are not obligated to lend to
us. In addition, the indenture governing our senior notes and our recently
acquired bank loan restrict our ability to incur additional indebtedness for
borrowed money, thus making us more vulnerable in the event of a substantial
downturn in general economic conditions in Mexico. Moreover, our ability to
satisfy our obligations depends upon our future performance, which is subject to
economic conditions in Mexico and to financial, business and other factors,
including factors beyond our control, such as the willingness of our owners to
contribute any additional capital to finance cash flow deficiencies, if needed.
For a discussion of the amounts invested and loaned by our owners, see "Item 5
-- Operating and Financial Review and Prospects -- Liquidity and Capital
Resources."

OUR INDENTURE AND LOAN AGREEMENT LIMIT OUR ABILITY TO CONDUCT OUR BUSINESS,
WHICH COULD NEGATIVELY AFFECT OUR ABILITY TO FINANCE FUTURE CAPITAL NEEDS AND
ENGAGE IN OTHER BUSINESS ACTIVITIES

      The covenants in the indenture relating to our senior notes due in 2013
and our recently acquired bank loan contain a number of significant limitations
on our ability to:

         -  respond to market or economic conditions;

         -  make certain capital expenditures; and

         -  take advantage of certain business opportunities.

      These restrictive covenants could negatively affect our ability to finance
our future capital needs, engage in other business activities or withstand a
future downturn in our business or the economy.

WE MAY NOT BE SUCCESSFUL IN EXPANDING OR MAINTAINING OUR SUBSCRIBER BASE WHICH
WE MUST DO TO SERVICE OUR DEBT AND ACHIEVE PROFITABILITY

      Our ability to generate subscription revenue depends, in particular, upon
subscribers' acceptance of our programming and consumer confidence and
purchasing power. Acceptance of our programming will, in turn, depend on the
availability of programming at a competitive cost, the popularity of such
programming and our ability to reach our targeted market through successful
advertising campaigns.

      Other factors beyond our control will affect the success of this operating
strategy and are impossible for us to predict, due, in part, to the limited
history of DTH services in Mexico. The market for DTH services will continue to
be affected by general economic conditions in Mexico, as well as competition,
new technology and government taxation and regulation. Consequently, we believe
there is a significant degree of uncertainty about the DTH business in Mexico,
including the size of the Mexican market for DTH television services, the
sensitivity of potential subscribers to changes in the price of installation and
subscription fees, the evolution of the competitive environment, and government
regulation. For additional discussion of our competitive environment, see " --
We Face Intense Competition in the Pay Television Market in Mexico" and "Item 4
-- Information on the Company -- Business Overview -- Competition."

      We cannot assure you that we will successfully expand or maintain our
subscriber base or that it will generate sufficient revenues, when taken
together with other sources of financing, to service our indebtedness, including
our senior notes, and to fund our operations and achieve profitability.

                                       -8-
<PAGE>

INCREASED SUBSCRIBER TURNOVER AND/OR INCREASED SUBSCRIBER ACQUISITION COSTS
COULD ADVERSELY AFFECT OUR FINANCIAL PERFORMANCE.

      A higher rate of customer turnover (e.g., customers switching to other
pay-TV providers), or churn, would adversely affect our results of operations,
because we would lose revenues from customers who switched to other pay-TV
providers, and because churn would require us to acquire more new subscribers
just to maintain the same level of subscribers. Any increase in marketing costs
in an attempt to retain our existing customers may cause us to increase our
subscription rates, which could increase churn. Churn can also increase due to
factors beyond our control, including a slowing economy, signal theft, a
maturing subscriber base and competition. The cost of adding a new subscriber,
which generally includes promotional discounted rates and fees, is a significant
factor in determining operating income and profitability for us and other
participants in the pay-TV industry. We cannot assure you that we will continue
to be able to manage our churn rates or subscriber retention costs to continue
to improve our financial performance. Similarly, any material increase in
subscriber acquisition costs from current levels could have an adverse effect on
our business and results of operations. See "Item 5. Operating and Financial
Review and Prospects -- Operating Results."

WE MAY BE UNABLE TO OBTAIN FULL BENEFITS FROM OUR TRANSACTION INVOLVING DIRECTV
MEXICO

      In October 2004, DIRECTV announced the shut down of its operations in
Mexico. To ease its subscribers' transition, and in an effort to provide an
alternative, DIRECTV, through its indirect subsidiary Grupo Galaxy Mexicana, S.
de R.L. de C.V. (Galaxy Mexico) sold its subscriber list to our subsidiary
Corporacion Novavision S. de R.L. de C.V (Novavision) in exchange for two notes
with an aggregate principal amount totaling approximately Ps. 621.1 million and
potential payments in the future, both depending on the number of subscribers
that successfully migrate. We may be unable to obtain benefits from this
transaction due to the effects on our operating results or on our financial
condition resulting from the additional debt incurred in connection with the
transaction, the significant subscriber acquisition costs incurred to attract
the previous DIRECTV subscribers to our services, and potential customer
retention costs incurred to prevent churn from the DIRECTV subscribers that
migrate to us.

OUR ABILITY TO ATTRACT SUBSCRIBERS DEPENDS ON THE AVAILABILITY OF DESIRABLE
PROGRAMMING FROM THIRD PARTY PROGRAMMERS

      We compete in part on the quality of our programming. Our ability to
attract and retain subscribers depends on our continued ability to obtain
desirable programming, particularly Spanish-language programming from Televisa
and other, soccer, reality shows and special events, and to offer such
programming to customers at competitive prices. We obtain, and anticipate that
we will continue to obtain, significant programming on a DTH exclusive basis, or
on an exclusive pay-TV basis, from Televisa and News Corporation, each an
indirect owner of us.

      We also depend on agreements with third parties to provide us with other
high quality programming for mass audiences. We directly negotiate with
programming providers, including with our owners and other affiliates. We have
entered into definitive agreements with many programming providers, while other
providers supply programming under letters of intent, invoices or other less
formal arrangements. We have no reason to believe that any of our programming
agreements will be canceled or will not be renewed upon expiration; however, if
these arrangements are canceled or not renewed, we would have to seek
programming material from other sources. In early 2002 TV Azteca, S.A. de C.V.
demanded that we (and other pay television service providers) pay a fee to carry
its over-the-air channels. In January 2002, we reached an agreement with TV
Azteca to carry channels 7 and 13 for a period of three years for a fee, and in
May 2005 we entered into a new agreement to carry these channels for an
additional three year period for a fee. Obtaining over-the-air programming from
third party providers could increase our costs.

      We cannot assure you that the third party program services that appeal to
our subscribers will continue to be available to us on acceptable terms in the
near future, or, if available, that such program services will be acceptable to
our subscribers. See "Item 4 -- Information on the Company -- Business Overview
-- Programming and Services."

WE MAY NOT SUCCESSFULLY MANAGE THE GROWTH OF OUR BUSINESS

      As our business continues to develop and expand, we will need to further
enhance operational and financial systems, and will likely require additional
employees and management, operational, financial and other resources. Though we
believe we have operated appropriately for over eight years, we cannot assure
you that we will successfully enhance and maintain such operational and
financial systems or successfully obtain, integrate and

                                       -9-
<PAGE>

utilize the required employees and management, operational and financial
resources necessary to manage a developing and expanding business in our dynamic
and challenging industry. If we fail to implement such systems successfully and
use our resources effectively, our results of operations and financial condition
could be adversely affected.

OUR ABILITY TO PROVIDE BILLING AND ORDER MANAGEMENT TO OUR SUBSCRIBERS DEPENDS
ON THE FUNCTIONALITY AND FLEXIBILITY OF OUR SUBSCRIBER MANAGEMENT SYSTEM

      In November 2003, we completed the implementation of a new subscriber
management system, or SMS, to support the growth of our subscriber base. This
system is in service and fully operational. We believe that a subscriber
management system is an essential tool for providing pay television services,
because it provides marketing, customer service and administrative operations
support. If we fail to utilize and upgrade our SMS successfully as our
operations grow, our results of operations and financial condition could be
adversely affected. See "Item 4. Information on the Company -- History and
Development of the Company -- Capital Expenditures;" and " -- Business Overview
-- Operations -- Subscriber Management System."

WE FACE INTENSE COMPETITION IN THE PAY TELEVISION MARKET IN MEXICO

      The pay television industry in Mexico has been, and we expect it to
remain, highly competitive. We believe competition in the pay television
business is primarily based upon the quality of programming, customer service,
enhanced TV features, value-added services, distribution networks, advertising
and promotion, and price. We presently compete with, or expect to compete in the
near future with, among others:

         -  more than 570 cable operators through concessions in Mexico,
            including Empresas Cablevision S.A. de C.V., or Cablevision, the
            third largest cable system in Mexico (which is majority owned and
            controlled by Televisa, the indirect majority owner of Innova);

         -  multi-channel, multi-point distribution systems, or MMDS;

         -  national broadcast networks, including the four networks owned and
            operated by Televisa, and regional and local broadcast stations;

         -  new multi-services providers (triple-play services), such as Telmex,
            the largest telephone operator in Mexico;

         -  unauthorized and pirated C-band and Ku-band television signals
            obtained by Mexican viewers on the gray market;

         -  unauthorized and pirated cable television signals; and

         -  radio, movie theaters, video rental stores, internet and other
            entertainment and leisure activities generally.

      Consolidation in the pay television industry could further intensify
competitive pressures. Some of our competitors are, and entities resulting from
any consolidation may be, better capitalized than we are or have greater
operational resources than we do. See "Item 4 -- Information on the Company --
Business Overview -- Competition." As the pay television market in Mexico
matures, we expect to face competition from an increasing number of sources,
including emerging technologies that provide new services to pay television
customers and require us to make significant capital expenditures in new
technologies.

      While we believe our programming package is competitive overall, our
subscribers must usually make an up-front investment to initiate our service and
obtain, install and activate the necessary equipment, and this up-front
investment is not required in all of our competitors' systems. While we believe
our current prices combined with the quality of our service are attractive to
subscribers, we cannot assure you that we will continue to attract and maintain
a substantial number of subscribers. Intense competition and general economic
factors have driven us to lower our subscription fee several times and to offer
special promotions on several occasions.

WE DEPEND ON OUR PRINCIPAL SUPPLIERS FOR KEY EQUIPMENT

      Expansion of our Ku-band DTH service depends, in part, on our obtaining
adequate supplies of components tailored for Ku-band transmissions from a
limited number of suppliers. If our principal suppliers fail to provide

                                      -10-
<PAGE>

needed components on a timely basis, we may not be able to replace those
suppliers without delay or additional expense. For example, Motorola, Inc. and
Thomson Commercial Electronics are currently our suppliers of integrated
receiver/decoder systems, or IRDs. However, Motorola recently informed us that
they will exit the DTH business and therefore Thomson may become our only IRD
supplier. We are currently evaluating new suppliers and, accordingly, we cannot
assure you that we will not incur any additional delays or costs should we be
unable to obtain IRDs from Motorola, Thomson or others in the future. See "Item
4 -- Information on the Company -- Business Overview -- Operations -- Integrated
Receiver/Decoder System."

WE DEPEND ON THE AVAILABILITY OF SATELLITE TRANSPONDER SERVICES FROM PANAMSAT

      We currently receive DTH signal reception and retransmission services
solely from PanAmSat's PAS-9 satellite. Our agreement with PanAmSat allows us to
use the PAS-9 satellite's services for the next 10 years or the date PAS-9 is
taken out of service, whichever happens first. When it was originally placed in
orbit in 2000, the estimated useful life of the PAS-9 satellite was projected to
be approximately 15 years, or until 2015. Although this projection has not
changed, PAS-9 could fail before 2015. Further updates to the lifetime estimate
may become available when additional data is collected to characterize the
satellite's actual on-orbit performance. Given the orbital location and
footprint of the PAS-9 satellite, it is possible that some of our current and
potential subscribers located in parts of Mexico will not be able to receive a
high quality signal.

      Communications satellites such as PAS-9 use highly complex technology and
operate in the harsh environment of space. In general, these satellites are
subject to significant operational risks that may prevent or impair proper
commercial operations, including satellite manufacturing defects, power and
electrical failures, computer and controls failures, incorrect orbital
placement, and destruction and damage from collisions with orbital debris and
objects, interstellar radiation and other causes. Historically, approximately
15% of all commercial geosynchronous satellite launches have resulted in a total
or constructive total loss due to launch failure, failure to achieve proper
orbit or failure to operate upon reaching orbit. Future disruption of PAS-9 or
the transmissions from PAS-9 would prevent us from being able to operate our
business and would have a material adverse effect on our operations. We do not
carry insurance that would specifically cover any of our losses due to an
interruption in service from PAS-9, nor are we aware of any insurance that
PanAmSat carries on PAS-9 that would cover us for such loss. We do not currently
have any arrangement for alternate service from other satellites should we
experience an interruption of service on PAS-9, nor do we have plans to
re-orient our subscribers' antennas to alternate satellites in the event of an
interruption of service from PAS-9. Our Agreement with PanAmSat, however, does
give us certain rights to require PamAmSat to construct and launch a replacement
satellite under certain conditions.

      We cannot assure you that we would be able to obtain transponder services
from an alternate satellite or provider at a commercially viable cost if we lose
the ability to receive signals from PAS-9. Furthermore, our ability to transmit
programming after the PAS-9 satellite is no longer available and to broadcast
additional channels depends on our ability to obtain rights to utilize
transponders on other satellites or to negotiate a commercially satisfactory
arrangement with PanAmSat to construct and launch a replacement satellite in a
timely manner.

SERVICE INTERRUPTIONS ARISING FROM NATURAL DISASTERS, TECHNICAL PROBLEMS,
TERRORIST ACTIVITIES OR WAR MAY CAUSE CUSTOMER CANCELLATIONS OR OTHERWISE HARM
OUR BUSINESS

      Currently, most of our business and technical operations are centrally
located or concentrated in a few geographical areas. The occurrence of natural
disasters, technical problems, terrorist activities or war could result in the
loss of customers, which would adversely affect our business, revenue and
results of operations. We do not currently have a disaster recovery plan to
mitigate the effects of such an occurrence on our business. We are currently
reviewing and evaluating the steps we might take, including the integration of a
disaster recovery plan, to respond to natural disasters, technical emergencies,
terrorist attacks or war.

THE OPERATION OF OUR BUSINESS MAY BE TERMINATED OR INTERRUPTED IF THE MEXICAN
GOVERNMENT DOES NOT RENEW OR REVOKES OUR CONCESSIONS

      The operation of satellite broadcasting systems is subject to substantial
regulation by the Comision Federal de Telecomunicaciones, or COFETEL, an
autonomous division of the Secretaria de Comunicaciones y Transportes, or SCT.
The SCT has granted us two concessions to operate satellite broadcasting systems
using a Mexican satellite until 2026 and a concession to broadcast using
services from PAS-9 until 2020. Currently, we only depend on the latter. The
concessions can be renewed with the SCT's approval and can be revoked prior to
the end of their terms if we do not comply with their terms and conditions. In
addition, the Mexican government has the right to expropriate

                                      -11-
<PAGE>

the concessions for reasons of public need or interest. We cannot assure you
that the SCT will renew the concessions on expiration or not expropriate or
revoke them prior to expiration. The SCT's rules may change in response to
industry developments, new technology and political considerations. Without our
concessions, we would not be able to deliver our services or operate our
business. See "Item 4 -- Information on the Company -- Business Overview --
Mexican Regulation of DTH Services -- Our Concessions."

WE COULD LOSE SUBSCRIBERS AND REVENUE IF OTHERS ARE ABLE TO STEAL OUR SIGNALS

      We use encryption technology to prevent signal theft or "piracy." Piracy
in the C-band, DTH, cable television and Latin American and European DTH
industries has been widely reported. We are aware of reports of signal theft in
Mexico, although we cannot accurately measure the amount of the theft. We use
"Smart Card" technology in our Ku-band receivers so we can change the
conditional access system in the event of a security breach. During 2001, we
exchanged our subscribers' Smart Cards as a routine security measure to reduce
the risk of piracy. As part of this preventive strategy, we have decided to
carry out a new Smart card change over process during 2005. We expect to
continue to exchange subscribers' Smart Cards every three to four years or
whenever we have strong evidence of signal theft. We expect the protections in
our conditional access system, subscriber management system, and the Smart Card
technology to adequately prevent unauthorized access to programming.

      We cannot assure you that the encryption technology we use will
effectively prevent security breaches and signal piracy, or that our efforts
against pirates will be successful. If our encryption technology is materially
compromised in a manner that we fail to correct promptly, our revenues could
decrease and our ability to contract for programming could be adversely
affected. See "Item 4 -- Information on the Company -- Business Overview -- Pay
Television Industry Overview -- DTH."

      During the last two years, the three major cable operators in Mexico have
invested in digital technology in order to fight piracy of their signals. We
believe, however, that the pirating of cable television signals in several
cities and small towns across Mexico continues to present a major challenge to
the pay-TV market in Mexico. Although we cannot estimate the number of
households that receive cable television via pirated signals in Mexico, we
believe the number is significant. The pirating of pay-TV signals of all types
reduces the number of potential subscribers available to us and, if unchecked,
could affect our ability to attract and retain subscribers.

CHANGES IN TECHNOLOGY COULD RENDER OUR SERVICE OBSOLETE OR INCREASE OUR COSTS

      Historically, the pay-TV industry has been, and will likely continue to
be, subject to rapid and significant changes in technology such as digital
compression technology, high definition video and interactive features.

      Digital compression technology allows transmission of multiple channels on
the same frequency and could allow the industry to field lower-cost delivery
systems. We use digital compression technology in our Ku-band DTH business.
Other transmission media, including cable and MMDS, are currently developing
this technology. If our competitors deploy lower cost digitally-compressed
systems, we may not be able to provide the same volume of programming at a
competitive price and could lose subscriber revenue. New asynchronous digital
subscriber line, or ADSL technology, is being used to provide high-speed
internet access and could be used in the future for broadband transmissions.

      These and other technological changes could impact us, and we may need to
expend substantial financial resources to develop and implement new competitive
technologies. In addition, we may, from time to time, explore alternative
technologies to deliver our programming and alternative methods to allow our
subscribers to receive signals from multiple satellites.

WE HAVE SIGNIFICANT TRANSACTIONS WITH OUR OWNERS, WHO ARE INVOLVED IN RELATED
BUSINESSES, WHICH CREATES THE POTENTIAL FOR CONFLICTS OF INTEREST

      Innova currently engages in, and expects from time to time to engage in,
transactions with Televisa, News Corporation, Liberty Media International Inc.,
or Liberty Media (each an indirect owner of Innova), and their subsidiaries and
other affiliates. These transactions present potential conflicts of interest.
Currently:

         -  We obtain significant programming content from our owners and their
            programming affiliates. Televisa and News Corporation offer us all
            of their existing program services (i.e., channels) and are
            obligated to offer us their future program services pursuant to our
            Social Part Holders Agreement. We

                                      -12-
<PAGE>

            have the DTH exclusive broadcast rights to Televisa's and News
            Corporation's programming channels in Mexico, subject to a number of
            preexisting third party agreements. However, Televisa, News
            Corporation and their programming affiliates provide, and will
            continue to provide, programming to other, non-DTH pay television
            businesses, such as cable operators, which compete with us.

         -  We obtain our conditional access and most components of our
            broadcast system from NDS Group plc (formerly known as News Digital
            Systems Limited), or NDS, a News Corporation subsidiary.

         -  We obtain play-out and uplink functions and related services from
            DTH TechCo Partners, or DTH TechCo, a joint venture in which, as a
            result of a series of transactions in October 2004, Televisa and
            DIRECTV indirectly hold 30% and 70% interests, respectively. See
            "Item 4 - Information on the Company - History and Development of
            the Company." In addition, we obtain from Televisa similar services
            relating to locally-sourced programming.

      The programming and systems we obtain from affiliates are critical to our
business. If some or all of our contracts with these parties were terminated, we
cannot assure you that we could obtain comparable programming and services from
unaffiliated third parties on similar terms. Disputes concerning these contracts
could have a material adverse effect on our business.

      In addition, as described above, we expect to continue to enter into many
transactions with our affiliates, which may create the potential for conflicts
of interest. We have not established specific procedures applicable to
transactions with affiliates to prevent future conflicts of interest.

OUR OWNERSHIP COULD SUBSTANTIALLY CHANGE, AND WE CANNOT PREDICT THE EFFECT THIS
WILL HAVE ON OUR BUSINESS

      In October 2004, we, Televisa, News Corp., Liberty Media and Globo
Comunicacoes e Partipicacoes S.A., or Globopar, entered into a series of
transactions with each other and with The DIRECTV Group, Inc., or DIRECTV,
relating to our DTH joint ventures, which, if consummated, would result in
DIRECTV and DIRECTV Latin America, or DTVLA, owning approximately 43% of our
equity and Televisa owning the remaining 57% of our equity. See "Item 4 -
Information on the Company - History and Development of the Company." At this
time, we cannot predict what impact this potential change in ownership may have
on our business as we have depended on our owners for financing in the past and
continue to be dependent on our owners for programming and systems support.

IF OUR AFFILIATE DTH TECHCO IS UNABLE TO OBTAIN FUNDING, IT MAY NOT BE ABLE TO
PROVIDE A NECESSARY SERVICE FOR OUR OPERATIONS, WHICH COULD ADVERSELY AFFECT OUR
BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      We depend on DTH TechCo for uplink, downlink and related services relating
to all of our programming other than local programming for which Televisa
provides uplink and downlink services. DTH TechCo also provides these services
to Sky Multi-Country Partners, or MCOP (a U.S. partnership which was previously
indirectly owned by Televisa, News Corporation and Globopar), and Sky Brasil
Servicos Ltda., or Sky Brasil (a DTH service which was previously owned
indirectly by Globopar, News Corporation and Liberty Media). In October 2004, in
a series of transactions involving Televisa, News Corporation, Liberty Media,
Globopar and DIRECTV, (i) MCOP became owned 40% by DIRECTV, 30% by Globopar and
30% by Televisa, and depending on the consummation of additional transactions,
DIRECTV will acquire the remaining 60% in MCOP owned by Televisa and Globopar
and (ii) DIRECTV, depending on the consummation of the transactions, will own
72% of the equity in Sky Brasil and the remainder will be held by Globopar. DTH
TechCo depends on payments from us, MCOP and Sky Brasil to fund its operations.
As a result of Globopar's financial condition, Globopar has ceased providing
financial support to DTH TechCo and MCOP since September 2002, and MCOP, in
turn, has ceased making payments to DTH TechCo, which payments, we believe,
previously accounted for over 50% of DTH TechCo's revenue. As a result,
Televisa, News Corporation and Liberty Media, and since October 2004, DIRECTV,
have been funding DTH TechCo's operating cash shortfall through loans to DTH
TechCo. However, our owners are not obligated to provide funding to DTH TechCo,
and we cannot assure you that continued funding will be available or what effect
the change in ownership of MCOP and Sky Brasil may have on continued funding. If
(i) MCOP fails to make required payments to DTH TechCo or (ii) Sky Brasil fails
to continue making its required payments to DTH TechCo, and if DTH TechCo's
owners, Televisa and DIRECTV, fail to make up the shortfall, then DTH TechCo
would be unable to provide services to us. We have not currently identified
possible replacement services providers, and, if DTH TechCo were unable to
provide services to us, we would be unable to provide a substantial portion of
our programming services to our customers, which would materially and adversely
affect our business.

                                      -13-
<PAGE>

OUR EQUITY HOLDERS HAVE, OR MAY ACQUIRE, INTERESTS IN BUSINESSES WHICH COMPETE
WITH US FOR CUSTOMERS AND BUSINESS OPPORTUNITIES

      Indirectly, Televisa owns approximately 60% of Innova's total voting
power, subject to the provisions of our bylaws and the Social Part Holders
Agreement. For more information on these provisions, see "Item 7 -- Major
Shareholders and Related Party Transactions -- Major Shareholders." In October
2004, we, Televisa, News Corp., Liberty Media and Globopar entered into a series
of transactions with each other and with The DIRECTV Group, Inc., or DIRECTV,
relating to our DTH joint ventures, which, if consummated, would result in
DIRECTV and DTVLA owning approximately 43% of our equity and Televisa owning the
remaining 57% of our equity. See "Item 4 - Information on the Company - History
and Development of the Company."

      Televisa has agreed not to engage in the DTH business in Mexico except
through Innova. However, Televisa competes with Innova in Mexico City for
customers in Mexico City's pay television market, since it controls and owns a
majority interest in Cablevision, the operator of Mexico's third-largest cable
television system. See "Item 4 -- Information on the Company -- Business
Overview -- Competition -- Cable Television and MMDS." Innova intends to compete
in all markets it serves, regardless of whether Televisa, or an entity in which
Televisa has an interest, competes in those markets. However, Cablevision could
attract potential or existing subscribers away from us, given its significantly
greater capital and operational resources and familiarity with our business
strategy and customer information as a result of Televisa's majority interest.
Televisa could also commit greater resources to Cablevision or its other
subsidiaries and affiliates than to Innova, giving those competitors a financial
advantage.

INTERESTED PARTIES COULD FORCE US TO DISSOLVE THE BUSINESS

      According to our bylaws, we must be dissolved and placed in liquidation if
a person deemed an "interested party" so requests, upon the occurrence of any of
the following events:

         -  if our term of corporate existence expires and it is not extended;

         -  if we cannot continue to fulfill our corporate purpose;

         -  by resolution taken at a members' meeting; or

         -  the loss of two-thirds of our capital, unless the capital is
            increased by the required amount.

      Our Mexican legal counsel, Mijares, Angoitia, Cortes y Fuentes, S.C., has
advised us that, although there is no court precedent, it believes that Mexican
courts would restrict the recognition of "interested parties" to: (a) the
members of Innova, some of whom currently compete with us or may compete with us
in the future, and (b) creditors that provide evidence of their interest in
dissolving Innova and liquidating our assets. We cannot assure you that a court
would permit dissolution only upon request from the parties mentioned above, or
that upon occurrence of the events described above, another party would not seek
to dissolve us.

THE OUTCOME OF LITIGATION AND GOVERNMENTAL PROCEEDINGS COULD IMPACT OUR RESULTS
OF OPERATIONS AND LIQUIDITY

      In October 2004, DIRECTV announced the shut down of its operations in
Mexico. DIRECTV, through its indirect subsidiary Grupo Galaxy Mexicana S. de
R.L. de C.V. (Galaxy Mexico) sold its subscriber list to our subsidiary
Corporacion Novavision S. de R.L. de C.V (Novavision) in exchange for two notes
with an aggregate principal amount totaling approximately Ps. 621.1 million and
potential payments in the future depending on the number of subscribers that
successfully migrate. In addition, we, Televisa, News Corp., Liberty Media and
Globopar entered into a series of transactions with each other and with The
DIRECTV Group, Inc., or DIRECTV, relating to our DTH joint ventures, which, if
consummated, would result in DIRECTV and DTVLA owning approximately 43% of our
equity and Televisa owning the remaining 57% of our equity. Darlene Investments,
LLC, or Darlene, a minority owner of DTVLA, has filed suit alleging fraud,
self-dealing and violation of fiduciary duties against DIRECTV, News Corp. and
others seeking, among other things, injunctive relief to preclude the
consummation of certain transactions between us and our owners. The timing and
outcome of the final resolutions to these matters is uncertain. See "Item 4 --
Information on the Company -- History and Development of the Company" and "Item
10 -- Legal Proceedings."

                                      -14-
<PAGE>

U.S. INVESTORS MAY RECEIVE LESS CORPORATE AND FINANCIAL DISCLOSURE FROM US THAN
U.S. PUBLIC COMPANIES

      A principal objective of the securities laws of the United States, Mexico
and other countries is to promote full and fair disclosure of all material
corporate information. As a foreign private issuer, we are generally not
required to provide as much publicly available information as is regularly
published by or about U.S. companies that have securities listed in the United
States.

IT MAY BE DIFFICULT TO ENFORCE CIVIL LIABILITIES AGAINST US OR OUR DIRECTORS,
EXECUTIVE OFFICERS AND CONTROLLING PERSONS

      We are organized under the laws of Mexico. Most of our directors,
executive officers and controlling persons reside outside of the United States,
all or a significant portion of the assets of our directors, executive officers
and controlling persons, and substantially all of our assets, are located
outside of the United States, and some of the experts named in this report also
reside outside of the United States. As a result, it may be difficult for you to
effect service of process within the United States upon these persons or to
enforce against them or us in U.S. courts judgments predicated upon the civil
liability provisions of the federal securities laws of the United States. We
have been advised by our Mexican counsel, Mijares, Angoitia, Cortes y Fuentes,
S.C., that there is doubt as to the enforceability, in original actions in
Mexican courts, of liabilities predicated solely on U.S. federal securities laws
and as to the enforceability in Mexican courts of judgments of U.S. courts
obtained in actions predicated upon the civil liability provisions of the U.S.
federal securities laws.

                           FORWARD-LOOKING STATEMENTS

      This annual report and the documents incorporated by reference into this
annual report contain forward-looking statements. These forward-looking
statements reflect our views with respect to future events and financial
performance. We may from time to time make forward-looking statements in
periodic reports to the U.S. Securities and Exchange Commission, or SEC, on Form
6-K, in future annual reports to social part holders, in offering circulars,
prospectuses, and registration statements, in press releases and other written
materials, and in oral statements made by our officers, directors or employees
to analysts, institutional investors, representatives of the media and others.
Examples of these forward-looking statements include:

         -  statements concerning our ability to increase subscribers, our cash
            requirements, financing sources, cost-containment efforts,
            advertising rates and revenues, DTH satellite and capital
            expenditures, our position relative to our competitors or cable
            television providers, or potential audience size;

         -  statements concerning the impact of our licenses to broadcast World
            Cup soccer matches, NFL matches and other high-profile events;

         -  statements concerning the construction, launch, performance and
            operation of broadcast satellites, renewal of concessions upon their
            expiration and other regulatory approvals;

         -  projections of operating revenues, net income (loss), dividends,
            capital structure or other financial items relating to us, our
            owners, or our competitors;

         -  the impact that recently issued U.S. GAAP and Mexican GAAP
            pronouncements will have on our operating revenues, net income
            (loss), dividends, capital structure or other items in our financial
            statements;

         -  statements of our plans to develop new technologies;

         -  statements about our SMS;

         -  statements of our or our owners' plans, objectives or goals,
            including those relating to anticipated trends, competition,
            regulation, rates, and any potential acquisitions of assets or stock
            of another company;

         -  statements regarding our ability to operate without cash
            contributions from our equity owners;

         -  statements about the future economic performance of Mexico or other
            countries that affect the Mexican economy and consumer purchasing
            power or demand for our services in Mexico; and

         -  statements of assumptions underlying these statements.

                                      -15-
<PAGE>

      Words such as "believe," "anticipate," "plan," "expect," "intend,"
"target," "estimate," "project," "predict," "should" and similar expressions are
intended to identify forward-looking statements, but are not the exclusive means
of identifying such statements.

      Forward-looking statements involve inherent risks and uncertainties. We
caution you that a number of important factors could cause actual results to
differ materially from the plans, objectives, expectations, estimates and
intentions expressed in such forward-looking statements. These factors, some of
which are discussed under " -- Risk Factors," include economic and political
conditions and government policies in Mexico or elsewhere, inflation rates,
exchange rates, regulatory developments, customer demand and competition. We
caution you that the foregoing list of factors is not exclusive and that other
risks and uncertainties may cause actual results to differ materially from those
listed above.

      Forward-looking statements speak only as of the date they are made, and we
do not undertake any obligation to update them in light of new information or
future developments.

                                      -16-
<PAGE>

ITEM 4. INFORMATION ON THE COMPANY

                     HISTORY AND DEVELOPMENT OF THE COMPANY

      Innova, S. de R.L. de C.V. is a Mexican limited liability company with
variable capital or sociedad de responsabilidad limitada de capital variable.
Innova was formed on July 25, 1996 as a Mexican limited liability company or
sociedad de responsabilidad limitada under Mexico's Ley General de Sociedades
Mercantiles (General Law of Mercantile Organizations) and converted to a limited
liability company with variable capital on July 2, 1998, (although it was
notarized on December 22, 1998). Our company was registered with the Public
Registry of Commerce in Mexico City under the commercial File (folio mercantil)
No. 213223. Under the terms of our estatutos sociales, or bylaws, our corporate
existence continues for 99 years through 2095 unless terminated earlier. Our
principal address is Insurgentes Sur 694, Piso 8, Colonia del Valle, 03100
Mexico D.F. in the United Mexican States. Our telephone number at that address
is (52-55)5448-4000. The trustee for our senior notes is The Bank of New York,
101 Barclay Street, New York, NY 10286, and can be contacted by requesting the
Corporate Trust Department at (212) 815-6331.

      Our net sales for each of the last three fiscal years is set forth in the
table below.

<TABLE>
<CAPTION>
                                          FOR THE YEAR ENDED DECEMBER 31,
                                --------------------------------------------------
                                     2002              2003              2004
                                --------------     -------------     -------------
                            (IN THOUSANDS OF CONSTANT DECEMBER 31, 2004 MEXICAN PESOS)
<S>                             <C>                <C>               <C>
Net Sales................       Ps.  3,754,787     Ps. 4,019,067     Ps. 4,769,027
</TABLE>

      We provide digital Ku-band direct-to-home or DTH broadcast satellite pay
television services in Mexico under the name "Sky." DTH satellite systems use
medium or high-powered satellites to deliver signals to satellite antennas
installed at homes, apartment buildings, hotels, restaurants, and other
commercial locations. In contrast to the locally-transmitted signals of MMDS, a
DTH satellite footprint can cover large land areas. DTH satellite transmission
can also reach land areas with either weak cable infrastructure or no cable
television access, such as the mountainous and rural areas of Mexico. We believe
that the Ku-band DTH satellite pay television industry in Mexico offers
substantial opportunities for growth due to the large potential market size,
high number of addressable households and low penetration of pay-TV services in
Mexico. We also believe that DTH satellite service is one of the most
cost-effective ways to distribute programming. We launched our DTH service on
December 15, 1996 and as of May 31, 2005 we were broadcasting up to 192 digital
channels (123 video, 37 pay per view and 32 audio) to approximately 1,107,500
subscribers, including approximately 63,400 non-residential subscribers. See
"Item 5 -- Operating and Financial Review and Prospects -- Operating Results";
and " -- Overview -- Trend Information."

      We currently offer our subscribers a variety of programming packages, as
described in " -- Programming and Services -- Programming Packages." In addition
to our pay television services, we currently provide subscriber management,
billing and remittance services for our own subscribers. Once a subscriber
orders programming from us, we transmit an authorization code to the
subscriber's IRD and Smart Card, permitting the subscriber to receive
programming within moments of placing the order. We believe that the SMS is
essential to providing pay television services because it provides us with
marketing, customer service and administrative operations support. These
elements include: billing and collection of subscription fees; handling service
difficulties and other inquiries; handling disconnection, alteration,
reconnection and relocation of services; and marketing of additional services.

      We are the Sky DTH platform developed in Mexico by Televisa, News Corp.
and Liberty Media. Our sponsors, together with Globopar, the largest television
broadcaster and media group in Brazil, have also developed other platforms in
Brazil and throughout Latin America. In October 1997, the partners formed MCOP,
a U.S. partnership which invests in, and supplies programming and other services
to, the Sky DTH platforms in Latin America outside of Mexico and Brazil,
including Colombia and Chile.

      In October 2004, DIRECTV Mexico announced that it was shutting down its
operations and we, Televisa, News Corp., DIRECTV, Liberty Media and Globopar
entered into a series of agreements relating to our owners' DTH joint ventures.
With respect to the DTH joint venture in Mexico:

                                      -17-
<PAGE>

   -  We and DIRECTV Mexico entered into a purchase and sale agreement, pursuant
      to which we agreed to purchase DIRECTV Mexico's subscriber list for two
      promissory notes with an aggregate original principal amount of
      approximately Ps. 621.1 million. The promissory notes mature on the
      earlier of (i) the date five business days after the date we and DIRECTV
      Mexico finally determine the number of subscribers that successfully
      migrated from DIRECTV Mexico to us, measured as of a date approximately 16
      to 22 months after the date of the agreements, or (ii) October 9, 2009;

   -  We and DIRECTV Mexico entered into a letter agreement which provides for
      (i) an additional cash amount to be paid by us to DIRECTV Mexico if more
      than 180,000 subscribers successfully migrate to Innova, (ii) a cash
      amount to be paid by DIRECTV Mexico to Innova if fewer than 70,000
      subscribers successfully migrate to Innova, and (iii) a cash amount to be
      paid by DIRECTV Mexico to Innova to the extent certain migrated
      subscribers churn before they become "good subscribers", as defined in the
      agreement;

   -  We, Innova Holdings and News Corp. entered into an option agreement,
      pursuant to which News Corp. was granted an option to acquire up to a 15%
      equity interest in each of Innova and Innova Holdings. The amount of
      equity to be received upon the exercise of the option depends on the
      successful migration and retention of DIRECTV Mexico's subscribers to
      Innova with a minimum migration of 175,000 subscribers required for the
      issuance of the full 15% equity interest. The options become exercisable
      when the DTH business operations of DIRECTV Mexico have finally ceased, we
      and DIRECTV Mexico have finally determined the number of subscribers that
      successfully migrated from DIRECTV Mexico to us, and certain other
      conditions have been satisfied. If the options become exercisable, the
      holder may exercise them by delivering to Innova and Innova Holdings the
      promissory notes for cancellation or by paying to Innova and Innova
      Holdings an amount in cash equal to the aggregate principal amount of the
      promissory notes. The options expire on October 8, 2009. If the options
      are terminated under certain limited circumstances related to regulatory
      challenges, or after a final determination that renders the options
      illegal, or expire unexercised, then within ten days of the expiration
      date, DIRECTV Mexico will be entitled to receive an aggregate cash payment
      (including any payments made under the notes described above) of up to
      approximately U.S.$137.7 million if 175,000 DIRECTV Mexico subscribers
      successfully migrate to Innova. Termination of the option is limited to
      certain specific events;

   -  DIRECTV and News Corp. entered into a purchase agreement pursuant to which
      DIRECTV acquired (i) the right (which DIRECTV concurrently assigned to
      DTVLA) to purchase from News Corp. the options granted to News Corp. by
      Innova and Innova Holdings to purchase up to an additional 15% of the
      outstanding equity of each of such entities pursuant to the option
      agreement described above, and (ii) the right to acquire News Corp.'s 30%
      interest in Innova;

   -  DIRECTV and Liberty Media, entered into a purchase agreement pursuant to
      which DIRECTV agreed to purchase all of Liberty Media's 10% interest in
      Innova for U.S. $88.0 million in cash, subject to customary closing
      conditions. DIRECTV has agreed that Televisa may purchase two-thirds (2/3)
      of any equity interest in Innova sold by Liberty Media, on the terms and
      subject to the conditions set forth in the purchase agreement between
      DIRECTV and Liberty Media;

   -  Televisa entered into an amended and restated guaranty with PanAmSat
      pursuant to which the proportionate share of our transponder lease
      obligation guaranteed by Televisa was reduced from 60% to 51%, until the
      full exercise of the options to News Corp. granted by Innova and Innova
      Holdings, at which point Televisa's guarantee will be adjusted to cover a
      percentage of the transponder lease obligations equal to its percentage
      ownership of Innova at that time. News Corporation's proportionate share
      of the guarantee was increased from 30% to 49% and Liberty Media was
      released of its guarantee;

   -  We, Televisa, News Corp., DIRECTV and DTVLA entered into a DTH agreement
      that, among other things, governs the rights of the parties with respect
      to DTVLA's announced shut down of its Mexican DTH business, planned shut
      down of its existing DTH business in certain countries in Central America
      and the Caribbean, the carriage of certain of Televisa's programming
      channels by us and other DTH platforms of DIRECTV, DTVLA, News Corp. and
      their respective affiliates, and the waiver and potential release of
      certain claims between certain of the parties; and

   -  We and Televisa entered into two channel licensing agreements pursuant to
      which we will pay Televisa a royalty to carry its over-the-air channels on
      our DTH service.

                                      -18-
<PAGE>

      If the transactions contemplated by these agreements are consummated,
Televisa will own approximately 57% of the equity interest in Innova and DIRECTV
and DTVLA will collectively own the remaining 43% equity interest in Innova.

      In connection with the October 2004 reorganization, with respect to the
DTH joint ventures elsewhere in Latin America:

      -  Televisa entered into a purchase and sale agreement with DIRECTV,
         pursuant to which among other things, (i) DIRECTV acquired all of
         Televisa's direct equity interests in Sky Latin America Partners, or
         ServiceCo (a U.S. partnership formed to provide business and management
         services), (ii) subject to the satisfaction or waiver of certain
         conditions, including the resolution of an audit currently pending
         before the U.S. Internal Revenue Service related to MCOP, DIRECTV has
         agreed to purchase all of Televisa's indirect equity interests in MCOP,
         and (iii) DIRECTV has agreed to indemnify Televisa for any and all
         losses arising out of its status as a partner in MCOP other than losses
         arising out of the pending tax audit;

      -  DIRECTV also agreed to purchase each of News Corp.'s, Liberty Media's
         and Globopar's equity interests in DTH TechCo (a U.S. partnership
         formed to provide technical services from a main uplink facility in
         Miami Lakes, Florida and a redundancy site in Port St. Lucie, Florida),
         ServiceCo and MCOP; and

      -  PanAmSat Corporation, or PanAmSat, unconditionally released Televisa
         and News Corp. from any and all obligations related to the MCOP
         transponder lease.

      As a result of the closing of these transactions, ServiceCo will be wholly
owned by DIRECTV, DTH TechCo will be owned 70% by DIRECTV and 30% by Televisa,
and MCOP will be owned 40% by DIRECTV, 30% by Globopar and 30% by Televisa. If
the transactions contemplated by the foregoing agreements are consummated,
DIRECTV will acquire the remaining 60% in MCOP owned by Televisa and by
Globopar.

      The closing of these transactions is subject to certain regulatory
approvals, including clearances from competition and telecommunications
authorities in foreign jurisdictions and other closing conditions. Therefore, we
cannot assure you that these transactions will be consummated. In addition,
Darlene Investments, LLC, or Darlene, a minority owner of DTVLA, has filed suit
alleging fraud, self-dealing and violation of fiduciary duties against DIRECTV,
News Corp. and others seeking, among other things, injunctive relief to preclude
the consummation of these transactions. The timing and outcome of the final
resolutions to these matters is uncertain. See "Item 10 -- Legal Proceedings."

      Our owners have contributed capital to us from time to time. In September
2003, our owners capitalized all loans made by them or any of their affiliates
to us. The amount of the loans and accrued interest capitalized as of September
9, 2003 was approximately Ps. 4.5 billion. For a more detailed discussion of
these transactions, see "Item 7 -- Major Shareholders and Related Party
Transactions." In 1997, we issued U.S.$375.0 million of 12 7/8% senior notes due
2007 and completed an exchange offer for all unregistered notes. We used the net
proceeds from that offering of our senior notes primarily to finance start-up
operations. In September 2003, we completed an offering for U.S.$300.0 million
of our 9.375% senior notes due 2013 and completed an exchange offer for all
outstanding notes. We used the net proceeds from this offering to redeem
U.S.$287.0 million in principal amount of our 12 7/8% senior notes due 2007.
More recently, in December 2004, we entered into a Ps. 1,012 million, 7-year
bank loan agreement with a fixed interest rate of 10.55% per annum. The net
proceeds from the loan were used on January 7, 2005 to redeem the remaining U.S.
$88.0 million principal amount of our outstanding 12 7/8% notes due 2007 plus
accrued and unpaid interest. For a more detailed discussion of these
transactions, see "Item 5 -- Operating and Financial Review and Prospects --
Liquidity and Capital Resources."

STRONG SPONSORSHIP

      Innova was historically owned by Televisa (60%), News Corp. (30%) and
Liberty Media (10%). If the transactions contemplated by the agreements with
DIRECTV are consummated, Televisa would own approximately 57% of the equity
interest in Innova and DIRECTV and DTVLA would collectively own the remaining
43% equity interest in Innova. We believe that the experience, expertise and
resources of our owners in the entertainment and media industries increases our
access to programming, technology and distribution services and helps us compete
in the Mexican Ku-band DTH satellite pay television market.

                                      -19-
<PAGE>

      Televisa is the largest television broadcaster in Mexico. We believe that
Televisa produces and owns the largest library of Spanish-language television
programming in the world. Televisa owns and operates four television networks in
Mexico, including its flagship Channel 2 network, known as "The Channel of the
Stars." Channel 2 is the leading television network in Mexico and the leading
Spanish-language television network in the world in terms of the potential
worldwide audience that can receive its signal. In addition to its Mexican
television production and broadcasting activities, Televisa has interests in
programming for pay television, international distribution of television
programming, publishing, direct-to-home satellite services, publishing and
publishing distribution, cable television, radio production and broadcasting,
professional sports and show business promotions, feature film production and
distribution, and the operation of a horizontal Internet portal. Televisa also
has an unconsolidated equity stake in Univision, the leading Spanish-language
television company in the United States.

      News Corporation is a diversified international media and entertainment
company with operations in eight industry segments: filmed entertainment;
television; cable network programming; direct broadcast satellite television;
magazines and inserts; newspapers; book publishing; and other. The activities of
News Corporation are conducted principally in the United States, the United
Kingdom, Australia, Asia and the Pacific Basin.

      Liberty Media owns and operates broadband cable television and telephony
distribution networks and provides diversified programming services in Europe,
Latin America and Asia. Its programming networks distribute services through a
number of distribution technologies, principally cable television and DTH.
Liberty Media is a wholly owned subsidiary of Liberty Media International, Inc.

      DIRECTV is the largest provider of DTH digital television services in the
United States and a leading provider of DTH digital television services
throughout Latin America based on the number of subscribers. DIRECTV provides
its subscribers with access to hundreds of channels of digital-quality video
pictures and CD-quality sound programming that are transmitted directly to its
customers' homes or businesses via high-powered geosynchronous satellites.

CAPITAL EXPENDITURES

      The table below sets forth our capital expenditures for the years ended
December 31, 2002, 2003 and 2004 and for the three months ended March 31, 2005.
See "Item 5 -- Operating and Financial Review and Prospects -- Liquidity and
Capital Resources."

<TABLE>
<CAPTION>
                                                                                            FOR THE THREE
                                                FOR THE YEAR ENDED DECEMBER 31,             MONTHS ENDED
                                        ----------------------------------------------      --------------
                                           2002              2003              2004         MARCH 31, 2005
                                        ----------        ----------        ----------      --------------
                                                (IN THOUSANDS OF U.S. DOLLARS)
<S>                                     <C>               <C>               <C>             <C>
SkyKits.........................        $   37,803        $   36,268        $   56,930        $   27,936
Subscriber Management System....             7,078             9,865             2,035                14
Transmission, Computer and
  Other Equipment...............             4,850             3,490             8,305               698
                                        ----------        ----------        ----------        ----------
TOTAL...........................        $   49,731        $   49,623        $   67,270        $   28,648
                                        ==========        ==========        ==========        ==========
</TABLE>

      Our principal capital expenditures for the fiscal years ended 2002, 2003
and 2004 and the three months ended March 31, 2005 included purchasing IRDs,
antennas, low noise blocks, or LNBs, smart cards and remote controls and
accessories, which together comprise the "Sky Kit"; transmission equipment,
computers and software; and our SMS. These capital expenditures increase as our
DTH platform and the number of subscribers grow. For a description of how we
financed these capital expenditures, see "Item 5 -- Operating and Financial
Review and Prospects -- Liquidity and Capital Resources."

                                      -20-
<PAGE>

      In November 2003, we implemented an SMS to support the growth of our
subscriber base. Currently this system is in service and is fully operational.
We believe this SMS allows us to provide more effective management and billing
services to our subscribers. For more information on the SMS, see " -- Business
Overview -- Operations -- Subscriber Management System."

      We have made significant investments in hardware and software to manage
growth of our DTH platform and to enhance customer service. These include our
previous and new subscriber management systems, compression equipment, a
customer relations management system and an integrated voice response system. We
believe that our principal capital investments will continue to be IRDs,
antennas and LNBs, transmission equipment and the hardware and software required
to manage the growth of our DTH platform.

                                BUSINESS OVERVIEW

TELEVISION MARKET IN MEXICO

      We believe that Mexico is the second-largest television market in Latin
America after Brazil with approximately 20.1 million television households as of
December 31, 2004. The television industry in Mexico has expanded from broadcast
television to pay television, including cable, MMDS, and DTH satellite services.
Mexico has a strong demand for entertainment programming, as the average
television household in Mexico watches more than seven hours of television
daily, according to figures from the Instituto Brasilero de Opinion Publica y
Estadistica.

      We estimate that as of December 31, 2004, 4.1 million households in
Mexico, not including households receiving unauthorized Ku-band and C-band
services, received pay television services. These households represented
approximately 20.4% of the Mexican television market as of that date. Mexico
remains one of the least penetrated pay-TV markets in the Latin American region.
In addition, we estimate that approximately 2.3 million of these 4.1 million
households subscribe to cable television, while approximately 0.6 million
households subscribe to MMDS, and approximately 1.2 million households subscribe
to DTH. In the past, we had estimated that there were some 1.0 million
households that received C-band DTH satellite signals on the gray market;
however, we believe this number may be decreasing due to technological advances
that make receiving and decoding unauthorized DTH signals more costly and
difficult. Additional households receive unauthorized, gray market Ku-band DTH
satellite signals from the United States, while still other receive pirated DTH
signals from within Mexico. We believe that piracy of cable television signals
across Mexico presents a major challenge to the Mexican pay-TV market. We cannot
estimate the number of households that receive pirated cable television signals
in Mexico, but we believe the number is significant.

      We believe that our potential subscriber base principally consists of
households with an annual household income of at least Ps. 137,450 and
commercial establishments such as hotels, restaurants and bars. We estimate
that, as of December 31, 2004, Mexico had approximately 8.3 million households
with annual incomes of at least Ps. 137,450, representing approximately 41% of
the country's total television households. Of these households, we believe that
6.8 million could receive DTH service. Over the past two years we have broadened
our base of potential subscribers by decreasing the annual household income that
defines our potential subscriber base and continue to consider marketing to this
wider group of consumers.

      We believe that Mexico represents one of the largest and most attractive
markets for Ku-band DTH satellite pay television services in Latin America. We
seek to further consolidate our position as the leading provider of pay-TV
services in Mexico. We believe that we can achieve our business objective by
offering a broad range of high quality programming via superior satellite
service at a competitive price. Through these means, we intend to increase our
market share by persuading our competitors' customers to switch to our service
and capitalizing on any projected increase in demand for pay television services
in Mexico.

BROADCAST TELEVISION INDUSTRY OVERVIEW

      The television industry in Mexico began in the early 1950s when the
Mexican government granted licenses for the operation of three television
channels in Mexico City. The first three channels, Channels 2, 4 and 5, were all
indirectly owned by Televisa. The Mexican government has since granted licenses
for six additional channels in Mexico City and numerous other licenses for
channels elsewhere in Mexico. The metropolitan area of Mexico City has a
population of approximately 23.4 million people, which represents nearly 22% of
Mexico's total population.

                                      -21-
<PAGE>

As a result, the television stations broadcasting in Mexico City have
historically dominated the industry and have acted as anchors for stations
located outside of Mexico City by providing these stations with all or a portion
of their programming.

      Currently, there are nine commercial television stations operating in
Mexico City (besides channel 52 from MVS, the leading MMDS operator in Mexico,
and private channels 28 and 34) and approximately 455 other television stations
elsewhere in Mexico. Most stations outside Mexico City re-transmit programming
originating on one of the Mexico City stations. Televisa owns and operates four
television stations in Mexico City, Channels 2, 4, 5, and 9, which collectively
are affiliated with 221 other repeater stations and 32 local stations outside of
Mexico City. In addition, Televisa operates an English-language television
station on the Mexico-California border. The Mexican government currently
operates two stations in Mexico City, Channel 11 (with 7 repeaters) and Channel
22, and repeater stations outside Mexico City. TV Azteca operated through a
joint venture with Televisora del Valle de Mexico, S.A. de C.V.,the CNI Channel
40, a UHF channel broadcasting in Mexico City until the union employees of this
joint venture went on strike on May 2005 and suspended the signal transmission.
The SCT is evaluating whether to revoke the Channel 40 concession due to the
suspension of the signal transmission. There are also 17 independent stations
outside of Mexico City, which are unaffiliated.

PAY TELEVISION INDUSTRY OVERVIEW

      Cable Television

      Cable television offers multiple channels of entertainment, news and
informational programming to subscribers who pay a monthly fee based upon the
package of channels they receive. Cable subscribers in Mexico generally pay a
monthly subscription fee equal to Ps. 260 for a basic package (calculated as a
weighted average) and as much as Ps. 579 for premium and digital packages. These
prices do not take into account promotions cable operators may offer from time
to time. According to Mexico's cable television trade organization, Camara
Nacional de la Industria de Television por Cable or CANITEC, there were over 570
cable operators through concessions in Mexico as of December 31, 2004. Under
Mexican law, all licenses to provide cable television services in a specific
service area are non-exclusive licenses.

      Megacable is Mexico's largest cable system operator with approximately
650,000 household subscribers as of December 31, 2004 and is located in several
regions in the country, including Veracruz, Puebla, Jalisco and the Pacific
coast. Grupo Cablemas is the second largest cable system operator with
approximately 500,000 household subscribers as of December 31, 2004 and is
located in several areas, including the Yucatan, Campeche and the Chiapas
peninsular region, central Mexico, Tijuana, Mexicali, Chihuahua, Juarez, Baja
California and other cities on the United States-Mexico border. Grupo Cablemas
is followed by Cablevision, which holds a franchise for Mexico City and the
surrounding areas and had over 355,000 household subscribers as of December 31,
2004. Televisa owns 51% of Cablevision. The remaining 49% is publicly held.

      In late 2003, the SCT authorized cable television providers to begin
providing the services of bi-directional data transmission, which permits them
to provide their customers enhanced television, interactive programming
services, near-video-on-demand services, video-on-demand services and e-commerce
applications.

      Currently, these three major cable operators are offering digital cable
television services and are focused on promoting other value-added services,
such as high speed Internet access. All of them offer basic and premium packages
to its subscribers, as well as "a la carte" channels and they are, or will
shortly be offering digital video recorders, or DVRs, also known as personal
video recorders, or PVRs.

      We believe that rural areas provide a market for our DTH satellite
services. Many rural areas of Mexico either have a weak cable infrastructure or
cannot be accessed by cable television. The mountainous Mexican landscape
impedes cable wiring of the country. Due to the competitive business
environment, cable providers find the significant cost of upgrading existing or
establishing new cable infrastructure to be economically infeasible in many
cases.

      We estimate that the metropolitan Mexico City area alone contains
approximately 26% of the households with television sets in the country. We
estimate that approximately 6.6% of households with a television set in the
metropolitan Mexico City area already receive cable television from Cablevision.
While recent comparable data for all of Mexico is not available, we believe that
the percentage of homes that own television sets and receive cable service is
generally higher in metropolitan Mexico City than in other areas of Mexico
(excluding the U.S.-Mexican

                                      -22-
<PAGE>

border). We have based our estimates on information obtained from the SCT,
CANITEC, other public information and internal estimates.

      MMDS or Wireless Cable

      MMDS, commonly called wireless cable, uses a microwave transmission
system, operating from a head-end, similar to the head-end of a cable system.
The head-end receives programming, generally via a satellite antenna. Microwave
transmitters then send this programming, via an antenna located on a tower or on
top of a building, to a small, receiving antenna at a subscriber's premises. At
the subscriber's location, microwave signals are converted to frequencies that
pass through a conventional coaxial cable into a decoder located near a
television. Sometimes signals are sent directly from the antenna converter to
the television set. MMDS requires a clear line-of-sight because microwave
signals will not pass through obstructions, unless mechanisms are used to
retransmit signals around obstructions such as hills and tall buildings.

      MMDS offers cost advantages over traditional hard-wire cable technology
because it does not require the construction and maintenance of a fiber or
coaxial cable network. MMDS is being used in other emerging pay television
markets where cable does not have a strong established position. Subscription
services introduced MMDS technology in Mexico in 1989, initially targeting the
largest urban areas of the country. Generally, MMDS subscribers receive, upon
payment of an installation fee, an antenna and decoder and must thereafter pay a
monthly programming fee for any programming package or "a la carte" channels
they select. The principal advantage of MMDS systems is their accessibility in
portions of metropolitan areas where cable for television services has not yet
been installed. However, the frequency band allocated to MMDS transmission
accommodates a maximum of approximately 32 analog television channels.

      We estimate that, of the approximately 20.1 million television households
in Mexico as of December 31, 2004, up to 600,000 of them subscribed to MMDS. At
least eighteen companies currently operate MMDS systems in Mexico. MVS
Multivision, S.A. de C.V., or Multivision, is the leading MMDS operator in
Mexico and provides MMDS services in the Mexico City area and nine other cities
across the country. MMDS systems do not rebroadcast the main over-the-air
channels.

      During the last two years, Multivision has strongly focused on offering
wireless internet access. However, it continues to offer a small package of 15
video channels (with no pay-per-view or audio channel options) for Ps. 95 per
month. Through this strategy, we believe it has continued to grow, despite
strong competition in Mexico City. Multivision also offers the choice of a
second package of 23 video channels, which includes 8 movie channels, for Ps.
285 per month.

      DTH

      DTH systems use medium or high-powered satellites to deliver signals to
satellite antennas at homes, hotels, restaurants and apartment buildings and
other locations. In contrast to MMDS signals, which are locally transmitted, a
DTH satellite footprint can cover large land areas. DTH systems in Mexico have
the following advantages:

         -  the capital investment, although initially high for the satellite
            and uplink segment of a DTH system, is fixed and does not increase
            with the number of subscribers receiving satellite transmissions;

         -  the licenses granted by the Mexican government cover the entire
            country; and

         -  the capital costs for the ground segment of a DTH system, the
            reception equipment, are directly related to, and limited by, the
            number of service subscribers.

      The disadvantages of DTH systems in Mexico as compared to other forms of
television delivery presently include:

         -  the limited ability to tailor programming packages to the interests
            of different geographic markets, such as providing local news;

         -  the fact that signal reception is subject to line-of-sight
            requirements, though generally less stringent than those typical of
            MMDS systems; and

                                      -23-
<PAGE>

         -  intermittent interference from atmospheric conditions and
            terrestrially-generated radio frequency noise.

      Gray Market C-Band and Ku-band DTH. The Mexican government does not
authorize services utilizing C-band DTH technology. However, we believe there
were some 1.0 million households receiving C-band DTH signals on the gray
market, although this number may be decreasing due to technological advances
that make it more difficult and costly to receive unauthorized DTH signals. We
cannot estimate the number of channels that C-band DTH customers receive. Some
households also receive unauthorized Ku-band DTH signals from the United States
on the gray market, while still others receive pirated DTH signals from within
Mexico. We cannot estimate the number of these households.

      Ku-Band DTH. Ku-band DTH satellite pay television services became
available for the first time in Mexico in 1996. The Ku-band DTH service's higher
power allows subscribers to receive programming with low cost antennas as small
as 60 centimeters to 1.2 meters in diameter. Our subscribers receive
transmissions from the more powerful Ku-band PAS-9 which requires antennas no
larger than 80-centimeters in diameter. This small antenna size compares
favorably with the 1.8 to 5.0 meter antennas typically used for C-band
reception. We believe that Ku-band DTH technology currently provides for the
most cost efficient, national, point-to-multi-point transmission of video,
audio, and data services. Our Ku-band service uses digital compression
technology that in comparison to analog technology, provides increased channel
capacity per transponder and improved audio and video quality. Our digital
compression technology currently permits the broadcast of up to 10 to 12 video
channels of programming per Ku-band transponder. Six of our 12 transponders use
this technology. We have invested in compression technology that allows us to
increase the number of channels and services we offer without increasing
bandwidth or satellite costs. This compression technology would allow us to
increase our capacity to up to 17 video channels per transponder or to increase
band-width required for interactive services; however, we currently only have
this technology for 6 of our 12 transponders. Technological developments have
also enabled us to start offering a variety of auxiliary services, including the
"Sky Interactive" services introduced in late 2000, and more recently to include
in some channels HTML-interactive applications as statistics, brief comments and
news.

PROGRAMMING AND SERVICES

      Rates and Fees

      In general, we currently charge our residential subscribers:

         -  a one-time fee for subscription, installation and activation equal
            to approximately Ps. 799 (discounted to Ps. 699 or Ps. 199 if the
            subscriber agrees to pay monthly programming fees via automatic
            charge to a debit card or to a credit card, respectively);

         -  a monthly programming fee ranging from Ps. 151 to Ps. 588, depending
            on which programming package the subscriber chooses and whether the
            subscriber pays within 12 days of the billing date;

         -  a monthly rental fee of Ps. 161 (Ps. 148 if the subscriber pays
            within 12 days of the billing date) for the rental of the IRD, LNB,
            Smart Card, remote control and related components;

         -  a monthly rental fee of Ps. 138 (Ps. 125 if the subscriber pays
            within 12 days of the billing date) for the rental of a second IRD
            and related components; and

         -  an annual membership fee of Ps. 268.

         We also offer promotions that include offers of free subscriptions,
installation or activation, intended to attract subscribers away from other
pay-TV systems.

         These rates and fees do not generally apply to our non-residential or
commercial subscribers, whose rate packages and arrangements are negotiated on a
case-by-case basis. Our commercial subscribers consist primarily of hotels
(where each room capable of receiving our service is counted as a separate
subscriber), restaurants and bars. While we negotiate rates with our commercial
subscribers on a case-by-case basis, these rates are substantially lower than
our residential rates. As a result, our commercial subscribers have a
substantially lower average revenue as compared to residential subscribers and
we believe that the revenue we receive from commercial subscribers is immaterial
to our results of operations.

                                      -24-
<PAGE>

      Programming Packages

      Currently, we offer residential subscribers the choice of five programming
packages: Basic (70 video channels, 32 audio channels and 31 pay-per-view); Fun
(88 video channels, 32 audio channels and 37 pay-per-view); Movie City (102
video channels, 32 audio channels and 37 pay-per-view); HBO/Max (106 video
channels, 32 audio channels and 37 pay-per-view) and Universe (123 video
channels, 32 audio channels and 37 pay-per-view).

     The current prices for residential subscribers for our five programming
packages are as follows:

<TABLE>
<CAPTION>
                                              MONTHLY         PRICE WITH        NUMBER OF
                                            PROGRAMMING     PROMPT PAYMENT        VIDEO
          PROGRAMMING PACKAGE                PRICE(1)        DISCOUNT(2)       CHANNELS(3)
          -------------------               -----------     --------------     -----------
<S>                                         <C>             <C>                <C>
Basic..................................     Ps. 228.00        Ps. 151.00            70
Fun....................................     Ps. 278.00        Ps. 241.00            88
Movie City.............................     Ps. 398.00        Ps. 351.00           102
HBO/Max................................     Ps. 448.00        Ps. 401.00           106
Universe...............................     Ps. 588.00        Ps. 541.00           123
</TABLE>

(1) Not including the monthly IRD rental fee described above, but including
    value-added tax.

(2) If payment is made within 12 days of the billing date a subscriber receives
    a discount on his or her monthly subscription. We instituted this policy in
    October 2000 after raising our monthly subscriptions by about 8%.

(3) Each package also includes 32 audio channels and 37 pay-per-view channels
    (except for Basic package, which only include 31 pay-per-view channels).

      From time to time, we offer special promotions targeted at particular
local areas in response to local competitive conditions.

      Pay-Per-View and Special Events

      We currently offer 37 pay-per-view channels. We devote 24 of these
channels to family entertainment and movies and seven channels to adult
entertainment. We set aside six extra channels exclusively for special events,
known as Sky Events, which include boxing matches, concerts, sports and movies.
We provide some Sky Events at no additional cost, while we sell other on a
pay-per-view basis.

      Sky Interactive and New DVR Technology

      Sky Interactive allows subscribers to watch different and enhanced content
on the same or different channel. As part of our regular service, we currently
offer several services with interactive features, including an Interactive
Portal, Fox News channel, "Avances Sky" (programming highlights), "Novelas
Interactive" (popular soap operas shows highlights), "Fut Interactive" (football
soccer stats and highlights), "Boomerang Interactive" (kids-oriented channel
with games) and various interactive applications during special events such as
Big Brother or sporting events. We believe this technology may also enable us to
offer more value-added services in the future, such as television-commerce,
games and subscription information services.

      Additionally, in May 2005 we launched 12 easy-to-find Mosaic-channels to
improve our service and give our customers an easier and faster way to navigate
into all of Sky's programming by genre.

      In May and June 2004, we beta-tested digital video recorders, or DVRs, in
Mexico City markets. In our Sky+ offering, we provided consumers with new
set-top boxes, which contain hard disk drives capable of recording at least 35
hours of digital video, Central Processing Units, digital video chips, modems,
and other components that allow subscribers to receive enhanced, personalized
television services. This technology allows subscribers to record shows while
watching other channels, play back and fast forward recorded shows, and pause
and rewind live television. Further, DVRs provide subscribers with personalized
service by allowing them to record their favorite shows, all season long, and
skip reruns, if desired. We believe this new technology with its enhanced
features, will enable us to offer more value-added services in the future,
including the interactive features described above. When combined with our
current offering of interactive services, this new service provides us with a
competitive

                                      -25-
<PAGE>

advantage because it offers subscribers improved home entertainment Fall from
one source. Currently, Cablevision is offering similar PVR equipment in Mexico
City. We are continuing to explore new interactive services and technology to
offer to our subscribers.

      Programming Acquisition

      During 2004, we continued to enhance our programming content by adding
special events on a pay-TV exclusive basis, including the reality shows Big
Brother VIP3 and "Confianza Ciega" and several professional sporting events,
including certain matches of the Mexican Closing Soccer Tournament and the
Opening Soccer Tournament, the pay-TV exclusive broadcast of the America team
soccer matches in the "Copa Libertadores" soccer tournament, the Wimbledon and
U.S. Open tennis tournaments, boxing matches, certain matches of the Mexican
baseball league, the LPGA, U.S. PGA and U.S. Senior PGA golf tournaments, an
interactive mosaic channel of the Olympic Games at Athens and the NFL Sunday
Ticket, previously an exclusive content of DIRECTV Mexico.

      In December 2004 we entered into a 3-year agreement with NFL International
LLC (NFL) for the pay-TV exclusive transmission of the NFL Sunday Ticket and the
non-exclusive transmission of the NFL Network channel in Mexico. In addition, we
reached an agreement with Televisa to purchase the rights to broadcast 34 of the
64 2006 FIFA World Cup soccer tournament matches on a pay-TV exclusive basis and
we are in the process of finalizing this agreement. We believe this exclusive
content represents an important competitive advantage and a driver in attracting
and retaining subscribers.

      During 2004, we also added several new channels to our line-up, including:
Antena 3, a popular channel broadcast in Spain; the "Film Zone," a movies
channel; TV Globo, a popular Brazilian channel, the "G Channel," an adult
oriented channel; the Cinecanal Classics, a classic movies channel; VH1, a music
videos channel and Universal channel, a movies channel. In addition to new
programming contracts, we continue to operate under arrangements with a number
of third party programming providers.

      We currently negotiate directly for programming with international
suppliers from the United States, Europe and Latin America. We have entered into
definitive agreements with many programming providers, while other providers
supply programming under letters of intent, invoices or other less formal
arrangements. Our suppliers include, but are not limited to: DMS Media Services
LLC (which offers Warner, Sony, E! entertainment, A&E Mundo, the History
Channel, AXN, Jetix, Disney Channel, HBO, MaxPrime and Cinemax), LAPTV (Movie
City, Cinecanal and The Film Zone), Turner Broadcasting System Latin America,
Inc. (TNT, CNN and Cartoon Network and Boomerang), Discovery Networks (People &
Arts, Discovery Channel, Discovery Kids, Animal Planet, Discovery Health and
People and Arts), Fox Latin America Channels Inc. (National Geographic, Canal
Fox, Fox Sports, Fox News, Universal channel and Speed Channel), Pramer (Film &
Arts, El Gourmet, Private Gold, Private Blue, Magic Kids, Europa Europa,
Hallmark, Reality TV and Cosmopolitan), MTV Networks (MTV, VH1 and Nickelodeon),
Claxon (Playboy, G Channel, Fashion TV and Infinito), Castalia Communications
(Globo International and BBC World) and Bloomberg LP (Bloomberg Channel). We
regularly negotiate new agreements with our programming suppliers. We also have
arrangements with the following studios to show films on an as-needed basis:
DreamWorks, 20th Century Fox, Universal Studios International, Buenavista
International, MGM, Paramount Pictures, Sony Pictures International, PWI Films,
Inc. and Independent Studios.

      These providers currently provide a number of programming alternatives for
both our basic and premium digital services packages. Substantially all of these
arrangements are on a non-exclusive basis, are denominated in U.S. Dollars and
are for limited terms, typically one to two years, and may be renewed by mutual
agreement upon their expiration. We cannot assure you, however, that these
arrangements will not be terminated, or that we will be able to renew these
contracts and arrangements upon their expiration, or if so, upon similar or
otherwise favorable terms.

      Televisa and News Corporation provide us with significant programming
content, some of which we distribute on an DTH exclusive basis in Mexico. We
have the exclusive right to distribute, via DTH in Mexico, all program services
or channels over which Televisa and News Corporation have control, subject in
each case to pre-existing third party agreements. Televisa and News Corporation
guarantee our access to the same program services or channels made available to
cable and MMDS systems in Mexico. We may access these services and channels at a
price not to exceed that extended to cable or MMDS systems. See "Item 3 -- Key
Information -- Risk Factors -- Risk Factors Related to Our Business -- Our
Ability to Attract Subscribers Depends on the Availability of Desirable
Programming from Third Party Programmers."

                                      -26-
<PAGE>

      Televisa also provides us with a variety of signals, which include
domestic and foreign programs. Among these programs are: reality shows, musical
programs, situation comedies, stand-up comedy shows, game shows, children's
programs, talk and variety shows, movies, sports, special cultural events and
musicals. We have DTH exclusive broadcast rights in Mexico to Canal Fox, which
is one of the leading general entertainment pay television channels in Mexico
and Latin America, along with Fox News, a 24-hour news channel in English, and
Fox Sports Argentina.

      In connection with the transactions that took place in October 2004, we
and Televisa entered into two channel licensing agreements pursuant to which we
will pay Televisa a royalty to carry its over-the-air channels on our DTH
service. See "Item 4 -- Information on the Company -- History and Development of
the Company." In addition, pursuant to the terms of our Amended and Restated
Social Part Holders Agreement, our sponsors have agreed to make available to us
their existing and future program services and channels on a DTH-exclusive
basis.

      In May 2005, we entered into a three-year agreement with TV Azteca for the
rights to rebroadcast its over-the-air Channels 7 and 13 for a fee of Ps. 2
million per year. We also entered into a separate agreement to purchase up to
Ps. 94 million in advertising from TV Azteca over the three years from the date
of the agreement. In a separately negotiated agreement, we obtained from TV
Azteca the pay-TV exclusive rights to broadcast various soccer matches at prices
to be negotiated in the future. Prior to May 1, 2002, we were permitted to
rebroadcast these channels at no cost. For more information, see "Item 3 -- Key
Information -- Risk Factors -- Risk Factors Related to Our Business -- Our
Ability to Attract Subscribers Depends on the Availability of Desirable
Programming from Third Party Programmers" and "Item 5 -- Operating and Financial
Review and Prospects -- Overview -- Trend Information."

      We have no other current plans to develop or produce our own programming,
except for our recently launched Mosaic-channels, which are menu channels that
allow subscribers to choose among television channels categorized into various
groupings including, but not limited to, entertainment, movies, kids and
pay-per-view.

DISTRIBUTION, SALES AND MARKETING

      In October 2000, we formed our own sales force in order to complement our
existing distribution network, increase market penetration in Mexico's main
cities, improve the quality of our subscriber base and reduce the acquisition
cost of new subscribers. We established direct sales forces in Mexico City in
2000; in Guadalajara, Monterrey, Puebla, Tijuana, Culiacan and Leon in 2001; in
Queretaro, Merida, Acapulco, Hermosillo and La Paz in 2002; in Torreon, Toluca
and Villahermosa in 2003; and in Chihuahua in 2005

      As of March 31, 2005, we sell and distribute our services through a
network of 8 wholesalers and 16 direct sales offices that control over 3,100
points of sale. These locations include leading malls, department stores,
popular retailers, supermarkets and consumer electronics outlets. We offer
commissions to our wholesalers, who, in turn, pay commissions to their retailers
and distributors. Our direct sales force employees are also paid by commission,
in addition to their salary and benefits. We also have control over some direct
distributors, who receive commissions but are not employees.

      We believe our subscription fee and programming prices are competitive
with those offered by other pay television platforms. Our entry-level product is
the SkyKit, which includes a satellite antenna, low noise block or LNB, as well
as installation and activation, the right to rent an IRD, and to use a Smart
Card, remote control and related components. From the second quarter of 1997
through September 30, 2000, we sold SkyKits exclusively through our wholesale
distribution network. Since October 1, 2000, however, we have retained ownership
over the antenna and LNB and the subscriber initiation fee now covers
installation and activation. We rent the IRD and Smart Card to our subscribers,
and provide them with the remote control and related components free of charge.
Our first 130,000 subscribers received their IRDs, Smart Cards, and remote
controls on a bailment basis. However, since February 23, 1998, substantially
all of our subscribers (residential and commercial) have rented their IRDs under
a rental plan with an indefinite term. We chose to retain ownership of the
SkyKit equipment, rather than selling it to our distributors, in order to
facilitate repossession of the equipment if subscribers terminate service or
default on their obligations. This change has had no material impact on the
revenues we receive from our distribution network.

      We focus on actively promoting our superior programming content and
exclusive events, our high quality customer service and system and technology
quality, rather than the number of channels we offer. Our programming includes
Spanish-language over-the-air channels, exclusive soccer games, special events,
reality

                                      -27-
<PAGE>

shows and other sports and entertainment programming. Our marketing strategy
includes advertising through national and regional television, radio,
newspapers, magazines, billboards, direct mail, internet, movie and airport
advertising, sponsorship of special events (such as reality shows, boxing
matches, golf and soccer tournaments) and promotional activities at restaurants,
bars, cultural and other social events. For a more detailed discussion of our
program offerings and packages, see " -- Programming and Services."

      Intense competition and general market conditions have driven us to lower
our monthly subscription fee and to offer special discounts and promotions on
several occasions. We have also targeted soccer fans by offering pay-TV
exclusive soccer matches. In 2004 we broadcasted 41 of the soccer matches for
which Televisa had the exclusive broadcast rights, as well as 24 of the soccer
matches for which TV Azteca had exclusive broadcast rights. We reward long-term
subscribers with a loyalty program known as Sky Value, which is offered without
cost and includes prizes, trips, programming and special events, such as
concerts and sporting events.

      We monitor our nationwide installation service through a centralized
operations office, which enables us to monitor the quality of service being
provided to our customers. After obtaining the SkyKit equipment, the installer
or the subscriber contacts our call center to activate the Ku-band DTH service.
Activation typically occurs within minutes of the call.

      We provide customer service to our subscribers through our proprietary,
specialized telephone call center, with a staff of approximately 1,105 to answer
general questions and provide basic information about our services, as well as
personalized service to solve more complex customer problems. Some of our
customer service personnel also carry out subscriber retention and collection
activities over the phone.

      We designed a customer service program based on Televisa's experience with
its existing Mexican cable operations and News Corporation's experience with
British Sky Broadcasting plc. We have made significant investments in hardware
and software to manage the growth of our DTH platform and to enhance customer
service. These include our SMS and our call center. Currently, the SMS is in
service and is fully operational, and we believe that our SMS provides us with
more effective management and billing services to our subscribers. We have also
improved the efficiency of our call center by using interactive voice response,
predictive dialer and customer management relationship systems. We believe that
customer service is an important factor in developing customer loyalty and
differentiating our service from that of our competitors.

      We engage a third party to publish and distribute SKY VIEW, our monthly
magazine that details all of the channels and program listings available on SKY.
SKY VIEW includes monthly programming, a guide to movies, general interest
articles about actors, actresses, entertainment, a kids-oriented section,
sports, lifestyle, culture, games, quizzes, general information about SKY
packages, enhanced TV features and promotions. SKY VIEW is one of the most
important magazines in Mexico, as measured by the number of published copies
with a monthly production of over 350,000 units. We use Grupo Medios to sell
advertising in the SKY VIEW magazine. We offer a variety of advertising sales
packages and volume discounts to match customers' needs.

      We sell advertising on our broadcasts to corporate and other clients and
advertising agencies. We use the services of a wholly owned subsidiary of
Televisa to promote and sell advertising time.

OPERATIONS

      Our digital video, audio and data signals are encoded, processed,
compressed, encrypted, multiplexed (i.e., combined with other channels),
modulated (i.e., applied to the designated carrier frequencies for transmission
to the satellite) and transmitted through our Ku-band DTH service from uplink
facilities in Mexico and the United States. Geosynchronous satellite
transponders receive, convert and amplify the signals and retransmit them to
earth in a manner that allows individual subscribers to receive and be billed
for the particular program services to which they have subscribed.

      Uplink Facilities and Play-out Facilities

      We use play-out equipment to prepare programming material for compression
and subsequent transmission to the satellite. The play-out equipment digitizes
the programming for channels provided by third party programmers, inserts
commercial or promotional material where appropriate, monitors the quality of
the picture and sound, and delivers the material to the compression and
multiplexing system. In the case of channels originating from taped material,
the play-out equipment also compiles the various programming segments and
inserts commercial and

                                      -28-
<PAGE>

promotional material where necessary. For near video-on-demand movies, the
play-out equipment stores movies and plays them out as appropriate to provide
the desired frequency of service.

      We use uplink and play-out facilities in Mexico City, Mexico and in Miami
Lakes, Florida and Port St. Lucie, Florida. We own the uplink and play-out
equipment located in Mexico City, which is housed in facilities owned by
Televisa. Televisa operates the equipment to provide us with uplink services. In
addition, DTH TechCo provides us with uplink services at its facilities in
Florida. All of the uplink facilities we use have full emergency power
generation equipment to allow uplinks to continue operations without any
disruption of service in the event of a power failure. We also use DTH TechCo
facilities to handle programming delivered from outside Latin America.

      Satellites

      We currently receive satellite signal reception and retransmission
services from 12 Ku-band transponders on PanAmSat's PAS-9 satellite under an
agreement executed with PanAmSat on February 8, 1999. PAS-9 was launched on July
28, 2000 and became operational on September 8, 2000.

      The term of the PAS-9 agreement ends on the earlier of (a) September, 2015
or (b) the date PAS-9 is taken out of service. The useful life of PAS-9 is
expected to be approximately 15 years. We pay a monthly service fee of U.S.$1.7
million for service from all 12 transponders. Televisa, News Corporation and
Liberty Media have historically guaranteed our payments to PanAmSat in
proportion to their respective beneficial interests in us. Recently, Televisa
and PanAmSat agreed to reduce Televisa's proportionate share of the guarantee
from 60% to 51% (with News Corporation guaranteeing the remaining 49%) until the
full exercise of the options to News Corporation granted to Innova and Innova
Holdings, at which point Televisa's guarantee will be adjusted to cover a
percentage of the transponder lease obligations equal to its percentage
ownership of us at that time.

      PAS-9 is located at 58.0(degree) (degree) West longitude, and its
footprint covers virtually all of Mexico's television households, as well as
other areas in the Caribbean basin and portions of the United States and Central
America. However, we believe that, in a few instances, some of our potential
subscriber base may experience some signal degradation as a result of their
particular location and PAS-9's orbital location. We do not currently have
contingency arrangements in case we lose satellite service from PAS-9, nor are
we insured against such an event. See "Item 3 -- Key Information -- Risk Factors
-- Risk Factors Related to Our Business -- We Depend on the Availability of
Satellite Transponder Services from PanAmSat."

      Our DTH concessions granted by the Mexican government currently authorize
us to offer DTH services using Mexican satellites, including current and future
satellites operated by SatMex, as well as PanAmSat's PAS-9, which is considered
a foreign satellite under Mexican law. For a more detailed discussion of our
concessions, see " -- Mexican Regulation of DTH Services -- Concessions;
Revocation; Expropriation."

      Integrated Receiver/Decoder System

      Commonly, our subscribers use a 80-centimeter satellite receiver antenna
to receive our signal; however, if required, subscribers could use a 1.2-meter
satellite receiver antenna to receive our signal, depending on the subscriber's
location within the country. Our subscribers currently pay the same initial fee
for installation and activation, regardless of the size of the satellite
receiver antenna they require.

      The IRD we currently rent to subscribers provides the interface between
the reception equipment and the subscriber's video and audio equipment. In
addition, connection to external data processing or data storage equipment is
enabled via the provision of a serial data output port in the IRD. An internal
modem in the IRD allows the on-line report-back or call-back of the subscriber's
impulse pay-per-view records to the subscriber management system.

      Authorizing information for subscription programming and the access
control algorithm are stored on a microchip embedded in a credit card-size Smart
Card. The Smart Card, which can be updated or replaced periodically, provides a
simple and effective method to authorize and de-authorize subscription
programming. A Smart Card enables the IRD to decode the program only when the
subscriber is entitled to view the program. If the Smart Card assigned to a
particular IRD is authorized for a particular channel, the data is decrypted and
passed on for audio and video decompression. After decompression, the digital
audio and digital video signals are reconstructed into analog format for display
on a standard television set. During the fourth quarter of 2001 we completed the
process of regularly replacing our subscribers' Smart Cards as a security
measure intended to reduce

                                      -29-
<PAGE>

the risk of piracy and as part of this preventive strategy, we have decided to
carry out a new smart card change over process during 2005. We estimate that
this process will have cost approximately U.S.$16.0 million.

      The IRDs have been designed to be easy to use. Subscribers can quickly and
easily access desired programming using a remote control device via an on-screen
electronic program guide. Our subscribers have access to a Mosaic channel guide,
which shows eight to sixteen direct links to our television channels,
categorized into various user-friendly groupings, including, but not limited to,
entertainment, movies, kids, sports and pay-per-view. Our customers also have
on-screen access to their account statements.

      In 2004, we purchased IRDs from Motorola, Inc. and from Thomson Commercial
Electronics, who operate manufacturing plants in Sonora and Chihuahua, Mexico,
respectively. There are other suppliers, including affiliates of Philips
Commercial Electronics Corporation N.V., Humax Co., Ltd, a South Korea-based
manufacturer and Pace Microtechnology plc, that also manufacture IRD equipment
that may be compatible with our system. We are currently engaged in negotiations
with other suppliers to provide us IRDs. We also purchased new set-top boxes
known as personal video recorders, or PVRs, from UEC Technologies (Pty) Limited,
a wholly-owned subsidiary of Allied Technologies Limited, a leading South
African high-technology group involved in the development of telecommunications
products.

      During 2003 and 2004, we continued to purchase the set-top box type "World
Box2", from Motorola and we recently began purchasing IRDs from Thomson to
provide our Sky Interactive service. The new set-top boxes from Thomson have
some additional new features, such as digital 5.1 audio support and the TV Link,
which allows a subscriber to connect an IRD to a second remote TV set and
control it through a simple interface using the same remote control.
Additionally, this new IRD allows the connection of up to four set-top boxes in
the same household, using a technology and card security control to prevent
subscribers from taking the IRDs to a non-authorized location through a blackout
of the signal.

      The "World Box 2" set-top box and interactive service allow subscribers to
choose camera angles for soccer matches, watch specific content and obtain
statistics about favorite teams and players. Recently, we have included in some
channels HTML-interactive applications, such as statistics, brief comments and
news as the first phase of our interactive services. We believe this technology
may also enable us to offer more value-added services in the future, such as
T-commerce (television-commerce), games and information services, including
news. These value-added services could represent a competitive advantage in our
market.

      We rent the IRDs and provide the remote control and smart cards to
subscribers, but retain title over them to help facilitate the recovery of the
equipment if subscribers terminate service or do not pay their fees. In
contrast, due to the recent market introduction and cost of the PVRs, our
strategy has been to sell PVRs to subscribers and to provide the remote control
and smart cards to subscribers on a rental basis.

      Broadcast and Conditional Access Systems

      Digital technology permits the compression and transmission of digital
signals to facilitate multiple channel transmission through the bandwidth used
by a single channel, giving broadcasters the ability to offer significantly more
channels than analog systems. Digitized signals are compressed using the MPEG-2
standard, encrypted and multiplexed into a Digital Video Broadcasting transport
stream of the DVB-S standard and modulated for transmission to the satellite
transponders we use. NDS previously provided the necessary equipment to
digitize, compress, encrypt and multiplex the signals transmitted to the
satellite by Innova's uplink facilities. NDS is no longer in the business of
supplying compression equipment. Therefore, starting in 2003, these technologies
were provided by Tandberg Television, a third party Norwegian company, which
provides open solutions for the digital broadcasting of audio, data and video,
and has operations in Asia, Australia, Europe and the U.S. In late 2004,
additional compression technology was provided by Harmonic Inc, a third party
U.S. company which designs, manufactures and sells digital video systems and
fiber optic systems that enable network operators to provide a range of
interactive and advanced digital services. There are other providers who provide
such technology at comparable prices.

      NDS provides our conditional access system, including the Smart Cards
necessary to decode the signal at the subscriber's home, and other security
services related to the Smart Card. NDS provides conditional access services to
other DTH providers including British Sky Broadcasting plc in the United
Kingdom, DIRECTV in the United States, Sky Italia S.p.A. in Italy, MATAV in
Israel and STAR in Asia. The basic purpose of the conditional access system is
to ensure that each program can be viewed only by those subscribers who have
paid for a program.

                                      -30-
<PAGE>

Accordingly, the conditional access system is central to the security network
that prevents unauthorized viewing of programming.

      We and NDS are parties to a System Implementation and License Agreement,
dated September 20, 1996, pursuant to which NDS designed, developed and
implemented our conditional access and broadcast systems. In exchange, we
purchased related equipment from NDS, and license the proprietary information
and rights necessary to operate NDS's conditional access and broadcast systems.
From time to time we may explore alternative technologies for delivering our
programming.

      During 2001, we replaced all the Smart Cards that were used by our
subscribers with new ones that include new technology and enhanced security as a
part of our continuous efforts to improve security against piracy. This measure
cost approximately Ps. 35.8 million. As part of this preventive strategy, we
have decided to carry out a new smart card change over process during 2005. We
estimate that this process will cost approximately U.S.$16.0 million.

      Subscriber Management System

      We currently provide subscriber management, billing and remittance
services for our own subscribers. Once a subscriber orders programming from us,
we transmit an authorization code to the subscriber's IRD and Smart Card,
permitting the subscriber to receive programming within moments of placing the
order. The subscriber management system runs the billing process for monthly
charges over-the-air via the IRD in most cases. We accept bill payment by cash
or check through a bank deposit or by credit or debit card.

      We believe our SMS is essential to providing pay television services
because it provides us with marketing, customer service and administrative
operations support. These elements include: billing and collection of
subscription fees; handling service difficulties and other inquiries; handling
disconnection, alteration, reconnection and relocation of services; and
marketing of additional services. The subscriber management system also
maintains records for each receiver and Smart Card, to maintain security and
prevent piracy. In the past, we used an SMS that we obtained from NDS under a
Subscriber Management System Implementation and License Agreement, dated October
29, 1996. Under that agreement, NDS designed, developed and implemented our
first subscriber management system. We entered into a second License Agreement
with NDS, dated August 3, 1998, for the design, development and implementation
of our former SMS, Provider II.

      In November 2003, we completed the implementation of a new SMS to support
the growth of our subscriber base based on software, licenses, hardware and
implementation and advisory services we had previously purchased from CSG. We
also used the development and support of software applications and advisory
services from Siebel and NDS to complete the requirements of the new system. CSG
is an enterprise with more than 20 years of customer care and billing expertise,
providing its services in more than 265 companies in more than 40 countries.
This system is currently in service and is fully operational. We terminated our
agreement with NDS relating to the maintenance of our old SMS at the end of
2003. We believe our SMS allows us to provide a more effective management and
billing services to our subscribers. Among other things, we believe our SMS:

         -  gives us greater flexibility to control different variables that are
            part of our service than did our previous SMS;

         -  allows us to improve our ability to respond to our subscribers'
            account management needs and aid them in reporting on their service;

         -  provides greater billing flexibility,

         -  allow us to improve overall system efficiency; and

         -  offers several options for marketing our services.

      See "Item 4 -- Information on the Company -- History and Development of
the Company -- Capital Expenditures;" "Item 3 -- Key Information -- Risk Factors
-- Risk Factors Related to Our Business -- Our Ability to Provide Billing and
Order Management to Our Subscribers Depends on the Functionality and Flexibility
of Our Subscriber Management System;" and " -- Subscriber Management System."

                                      -31-
<PAGE>

      Trademarks

      The Sky trademarks are trademarks of British Sky Broadcasting Limited, in
which News Corporation has approximately 36% interest, and are licensed to us
for an infinite duration and on an exclusive basis in Mexico for a nominal fee,
pursuant to an agreement between a subsidiary of News Corporation and us. There
are numerous trademarks in the process of being registered in Mexico, some of
which involve the Sky name, which are used in the ordinary course of business
but are not material to our results of operations.

SEASONALITY

      From time to time, we offer special promotions targeted at particular
local areas in response to local competitive conditions. These promotions often
have the effect of boosting subscriber numbers at a particular time of the year.
For instance, year-end promotions boost subscriber numbers during the Christmas
season. However, the timing and benefits of such promotions are subject to
change from year to year.

COMPETITION

      General

      Our business competes with providers of pay television services using
cable, MMDS, and Ku-band DTH transmission technologies. We also compete with
gray market and pirated DTH signals from the United States and from within
Mexico. We believe that competition is primarily focused upon programming,
customer service, distribution network, advertising and promotion and price. We
cannot assure you that, based on its potential size, the Mexican pay television
industry will be able to sustain a number of competing pay television providers.
We also compete with national broadcast networks and regional and local
broadcast stations, movie theaters, video rental stores, radio stations,
internet and other entertainment and leisure activities.

      We believe we successfully compete by offering superior programming
content, including a number of exclusive channels with proven market appeal, and
high-quality service based on optimal technology throughout Mexico. We also
believe that we have a number of competitive advantages. We currently broadcast
192 digital channels (123 video, 32 audio and 37 pay-per-view), including
Channel 2, the most popular broadcast channel in Mexico, which in the past has
not been available in all areas outside of Mexico City. We also offer local
programming as well as several specialized channels targeted to particular
communities, including RAI (Italian), TV5 (French), DeutscheWelle (German),
Galicia TV, TVE and Antena 3 (Spanish), NHK (Japanese) and TV Globo (Brazilian).

      Our digital Ku-band DTH satellite technology offers larger coverage,
greater channel selection, and enhanced video and audio quality as compared to
existing terrestrial broadcast, cable, and MMDS television services. We believe
that our competitors' existing and potential alternative technologies will not
materially adversely affect the viability or competitiveness of our service
package in the foreseeable future. For example, ADSL technology is being used to
provide high-speed internet access and could be used in the future for broadband
transmissions, but this technology is currently more expensive than other
alternatives and we do not believe that providers have shown significant
interest in the technology, other than for internet services. However, these and
other technological changes could impact us, and, depending on the technological
developments, we may need to expend substantial financial resources to develop
and implement competitive technologies.

      The growth of our subscriber base depends on our ability to offer the
services that our customers demand and to respond effectively to technological
developments in the pay television industry that may allow our competitors to
offer new and expanded services. In late 2003, the SCT authorized cable
television providers to begin providing the services of bi-directional data
transmission, which permits them to provide their customers enhanced television,
interactive programming services, near-video-on-demand services, video-on-demand
services and e-commerce applications. Currently, the three major cable operators
are focusing on actively promoting these additional value added services,
including high-speed Internet access. We are continuously analyzing the possible
impact that these new services could have in the Mexican pay-TV market as they
become available in the market.

      Our service is supported by an extensive distribution network, a
comprehensive marketing campaign and a well-trained customer service group. We
believe that the collective experience and expertise of Televisa, News
Corporation and Liberty Media in the media and entertainment industries helps us
to compete successfully in the Ku-band DTH market and increases our access to
programming, technology and distribution services. Televisa's

                                      -32-
<PAGE>

extensive network of open over-the-air television, pay television, radio
stations, and publications provides us with significant cross-promotional
opportunities.

      Cable Television and MMDS

      We expect to continue to encounter a number of challenges in competing
with cable television providers. For example:

         -  cable television providers benefit from their established position
            in the domestic consumer marketplace;

         -  cable subscribers generally face lower up-front costs than DTH
            subscribers, who must pay initial start-up fees, including
            installation of relevant equipment and activation of service;

         -  households that subscribe to our programming may pay higher monthly
            charges than they would pay for cable service, because of the
            greater number of channels and greater variety of programming
            offered; and

         -  major cable operators, including Cablevision, have already, or are
            in the process of upgrading, their plant and facilities to the
            digital technology that allows them to offer digital set-top boxes
            with new value-added services, including Internet access and
            bi-directional data transmission, which permits them to provide
            their customers enhanced television, interactive programming
            services, near-video-on-demand services, video-on-demand services
            and e-commerce applications.

      We believe our programming content has proven market appeal when compared
to that of our competitors. We distinguish our service from other existing pay
television operators in Mexico by offering more channel capacity than
conventional over-the-air television, cable, or MMDS, and providing exclusive
programming and specially-produced channels. Televisa grants us four
over-the-air broadcast channels as part of the exclusive Mexican DTH program
rights described above. These channels are among the most popular television
channels in Mexico. We are the only pay-TV provider offering all the
over-the-air broadcast signals from Mexico City (except Channel 40), as well as
signals from the State of Mexico, Guadalajara, Monterrey, Puebla and Veracruz.

      While we do not compete directly with over-the-air broadcast channels for
pay-TV subscribers, we do emphasize our DTH exclusive rights to broadcast some
of Televisa's over-the-air channels and their programming. These channels do
compete in terms of programming with other over-the-air channels, such as those
broadcast by TV Azteca. Prior to 2002, we were able to re-broadcast TV Azteca's
over-the-air channels free of charge. In January 2002, we concluded a series of
agreements with TV Azteca giving us the right to re-broadcast channels 7 and 13
for a period of three years, as well as access to soccer matches for which TV
Azteca has broadcast rights. In May 2005, we entered into new three-year
agreements with TV Azteca to continue to re-broadcast its over-the-air channels
and to have the pay-TV exclusive broadcast rights for various soccer matches. As
part of the new over-the-air channels agreement, we will receive no less
favorable terms than the terms offered by TV Azteca to any other unaffiliated
party when renewing this agreement. While viewers in Mexico City have access to
a number of free over-the-air channels, viewers in some rural areas of Mexico
have limited access to free over-the-air channels and reduced picture quality.

      Megacable, Grupo Cablemas and Cablevision are currently offering digital
cable television services and other value-added services as high speed Internet
access through cable modems. They offer basic and premium digital packages to
its subscribers, as well as "a la carte" channels, high speed internet access
and other value added services.

      Televisa holds a controlling, majority interest in Cablevision, Mexico's
third largest cable system, which competes directly with us for customers in the
pay television market in the Mexico City area. Cablevision offers a basic
digital package with 111 channels, including the nine television channels
broadcast in Mexico City and 20 audio channels. Cablevision also offers five
digital premium packages and 28 pay-per-view channels. Some of these channels
compete directly with channels we carry and our pay-per-view channels. For a
more detailed discussion of the impact of this relationship, see "Item 3 -- Key
Information -- Risk Factors -- Risk Factors Related to Our Business -- Our
Equity Holders Have, or May Acquire, Interests in Businesses Which Compete with
Us for Customers and Business Opportunities." Furthermore Cablevision is a major
digital cable television operator and high speed Internet access provider
(through cable modem) in Mexico City. Its network consists principally of fiber
optic and coaxial cable and during the last two years Cablevision has been
expanding and upgrading its existing

                                      -33-
<PAGE>

cable network into a broadband bi-directional network. Cablevision has recently
announced that it plans to deliver during 2005 a broad range of services
including enhanced television and other interactive programming services,
near-video-on-demand services, video-on-demand services, e-commerce applications
and IP telephony services. Cablevision continues rolling out digital set top
boxes to its subscriber base, allowing it to offer new pay television, digital
and interactive products and services, including video navigators, electronic
programming guides and television-based Internet access. In March 2005,
Cablevision launched its "CableAdvance" DVR service.

      Multivision, a MMDS operator in Mexico City, offers services in 9 other
cities, including Guadalajara, Monterrey, Leon, Tuxtla Gutierrez, Merida,
Villahermosa, San Luis Potosi, Toluca, and Queretaro. Multivision's customers
can currently receive up to 23 channels, excluding pay-per-view channels and
conventional "over-the-air" channels. During 2002, Multivision re-launched its
programming packages, offering only two packages, "MASTV" and a premium package,
which include 15 or 23 channels, respectively. Currently, Multivision's
subscribers pay an average initial one-time installation charge equal to Ps. 199
and a monthly fee of Ps. 95 for 15 channels of its "MASTV" programming package
or Ps. 285 for 23 channels in its premium package, which includes 8 channels of
movies (HBO, Cinecanal, Cinecanal 2, Movie City east, Movie City west, Cinemax
east, Cinemax west and The Film Zone). We believe that our programming content
has proven market appeal in comparison to our MMDS competitors. We distinguish
our service from MMDS by offering nationwide services, more channel capacity and
providing exclusive programming and specially produced channels. See "Item 3 --
Key Information -- Risk Factors -- Risk Factors Related to Our Business -- We
Face Intense Competition in the Pay Television Market in Mexico."

      C-band DTH

      Domestic pay television services utilizing C-band DTH technology are not
authorized by the Mexican government in Mexico. Accordingly, while there is a
C-band market in Mexico, there are no official statistics regarding the size of
this market. However, we have estimated in the past that there were some 1.0
million households that received C-band DTH signals on the gray market. However,
we believe Ku-band DTH services will decrease the size of any C-band market in
the long term.

      Ku-band DTH

      In October 2004, DIRECTV announced that it was shutting down its
operations in Mexico and as a result, after the shut down is completed, we will
be the only operator of DTH satellite services in Mexico. DTVLA provides service
in 28 countries throughout Latin America including Brazil, Mexico, Argentina,
Venezuela, Chile, Colombia, Ecuador, Guatemala, Puerto Rico and Trinidad and
Tobago. We believe that our programming content has proven market appeal, in
comparison to our pay-TV competitors. See " -- Cable Television and MMDS."

      While several companies such as Satcorp, S.A. de C.V., TVI Sat, S.A. de
C.V., Corporacion Medcom, S.A. de C.V. and MVS Multivision, S.A. de C.V. have
also received licenses to offer DTH services in Mexico, and the Mexican
government may grant additional licenses for DTH satellite operations in Mexico,
our management is not aware of any group preparing to launch DTH services in
Mexico in competition with Sky and DIRECTV.

      In addition to these DTH providers, the continued growth of our subscriber
base is subject to our continued efforts to reduce pirating of pay-TV signals.
See "Item 3 -- Key Information -- Risk Factors -- Risk Factors Related to Our
Business -- We Could Lose Subscribers and Revenue If Other Are Able to Steal Our
Signals." We also compete with unauthorized Ku-band DTH signals from the United
States. In addition, we may face increased competition for DTH subscribers in
Mexico from U.S. DTH satellite providers authorized to provide service under a
treaty and protocol. The Agreement Between the United States and Mexico
Concerning the Transmission and Reception of Signals from Satellites for the
Provision of Satellite Services to Users in the United States and Mexico, signed
on April 28, 1996, created a framework that enables entities utilizing
U.S.-licensed satellite facilities to provide services in Mexico and entities
utilizing Mexican-licensed satellites to provide services in the United States.
On November 8, 1996, pursuant to the U.S.-Mexico Satellite Agreement and the
North American Free Trade Agreement, the Protocol Concerning the Transmission
and Reception of Signals from Satellites for the Provision of Direct-To-Home
Satellite Services in the United States and Mexico was executed to facilitate
the provision of cross-border, direct-to-home satellite services. In the DTH
Protocol, the United States and Mexico each agreed to permit satellites licensed
by the other nation to be used to provide encrypted video or video/audio signals
for direct reception by subscribers to, from, and within its own territories,
subject to conditions set forth in the DTH Protocol.

                                      -34-
<PAGE>

MEXICAN REGULATION OF DTH SERVICES

      Concessions; Revocation; Expropriation

      In June 1995, a federal telecommunications law was enacted in Mexico (Ley
Federal de Telecomunicaciones), which regulates the telecommunications industry,
including concessions and permits granted in connection with the installation,
operation and exploitation of public and private telecommunications networks. In
order to install, operate or exploit a DTH broadcast satellite pay television
service in Mexico for which subscriber fees are charged (which is considered for
purposes of Mexican law a public telecommunications network), an applicant must
be an individual or entity deemed to be of Mexican nationality and must obtain a
concession from the SCT. Applications are submitted to the SCT, and after a
formal review process, a concession is granted to the applicant with an initial
term of up to 30 years, which may be renewed for terms of up to the length of
the initial term. Concessions are not exclusive and the SCT may grant other
concessions to third parties in the same geographical area or for the same type
of services. Any party rendering telecommunication services without a concession
from the SCT forfeits to the Mexican government all the goods, facilities and
equipment it may have used in providing such services.

      A concession may be revoked prior to its stated term in some
circumstances, such as:

         -  failure to use the concession within 180 days after it was granted,
            unless permitted by the SCT based on a justifiable cause;

         -  failure to comply with the material obligations or conditions
            specified in the concession;

         -  unlawful assignment, transfer or encumbrance of the concession, any
            rights or assets used for the exploitation of the concession;

         -  failure to pay to the Mexican government the required fees;

         -  interruption of service or operation of the general means of
            communication without authorization from the SCT, or interruption
            thereof without justifiable cause;

         -  change of the concessionaire's Mexican nationality; or

         -  performance of acts preventing other concessionaires or those with
            permission from the SCT from doing business.

      In addition, the Mexican government has the right to expropriate the
concession for reasons of public need or interest. In such a case, compensation
must be paid to the concessionaire in an amount equal to the amount determined
by designated appraisers. Although the North American Free Trade Agreement, or
NAFTA, includes rules that aim to add certainty to the expropriation process and
specify that compensation shall be equivalent to the fair market value
immediately prior to the expropriation, NAFTA rules may not generally apply to
the expropriation of our concessions.

      Consideration Payable to SCT

      The Mexican statute does not mandate the payment of fees as consideration
for the granting of a concession. However, the SCT has the discretion to require
the concessionaire to pay fees to the SCT as part of a concession as specified
in our concessions. Currently, such fees are calculated applying a 3.5% rate on
our programming revenues. See " -- Our Concessions."

      Rates; Cross-Subsidies

      Under Mexican law, DTH concessionaires may freely set customer rates, but
are required to file such rates in advance with the Telecommunications Registry
maintained by the SCT. The statute prohibits concessionaires from discriminating
when setting rates. The concessionaires may not cross-subsidize their services
directly or through a subsidiary or affiliate. The SCT may impose upon a
concessionaire having substantial market power specific obligations related to
rates, quality of service and information.

                                      -35-
<PAGE>

      Foreign Ownership

      Under Mexican law, non-Mexican investors may currently own up to 49% of
the outstanding voting equity of DTH system concessionaires. Foreign investors
may increase their economic participation in the equity of a concessionaire
through neutral investment mechanisms under the Ley de Inversion Extranjera, or
Foreign Investment Law, (e.g., non-voting equity), provided that Mexican
investors maintain control of the operation.

      Temporary Seizure; Preemptive Right of Government to Purchase Assets

      Under Mexican and other applicable laws, the Mexican government may
temporarily seize all assets related to a concession in the event of a natural
disaster, war, significant public disturbance or threats to internal peace and
for other reasons related to preserving public order or for economic reasons.
Under Mexican law, the Mexican government is obligated, except in the event of
war, to compensate the owner of such assets in the case of such temporary
seizure for damages at their actual value. If there is no agreement upon the
amount of the compensation, damages will be appraised by non-related experts
appointed by the parties; in the case of loss of profit, the net income of the
preceding year will be the basis for such calculation. Upon termination of a
concession, the Mexican government has the preemptive right to acquire the
assets of a DTH concessionaire.

      Monitoring and Information

      The SCT and COFETEL monitor compliance with Mexican law and other
applicable legislation through periodic inspections. Concessionaires must file
annual and quarterly reports with the SCT that include financial statements, and
provide any other information required by the SCT or COFETEL.

      Supervision of Operations

      Concessionaires, as a part of their agreement with the government and as
established in the relevant concession, are required to:

         -  develop training programs for their personnel;

         -  enter into contracts with their subscribers and file the forms of
            such contracts with the SCT;

         -  obtain SCT approval of their billing systems;

         -  observe the intellectual property rights of the programming
            providers;

         -  execute research and development activities in Mexico in
            coordination with COFETEL or other institutions dedicated to the
            research and development of technology; and

         -  appoint a person responsible for the technical operation of the
            network who has the appropriate administrative powers to represent
            the concessionaire before the SCT with respect to the network's
            technical operation.

In addition, concessionaires must comply with SCT guidelines with respect to
their operations, including billing, service calls and emergency plans for
service failure.

      Restrictions on Advertising

      Mexican law also regulates the type and content of advertising which may
be broadcast on television. Under the DTH protocol with the U.S.,
non-discriminatory restrictions on programming and advertising content can be
established. Under new rules enacted in February 2000, a concessionaire has the
exclusive responsibility to ensure that the commercial advertising it broadcasts
complies with any applicable regulations. See " -- Pay-TV and Audio Services
Rules."

      Programming

      Under Mexican law, television programming is not subject to judicial or
administrative censorship, except that programming is subject to various
regulations, including prohibitions on foul language, and programming that is
against good manners and customs or is against the national security or against
public order. Under rules enacted in

                                      -36-
<PAGE>

February 2000, a concessionaire has the exclusive responsibility to ensure that
the programming it broadcasts complies with any applicable regulations. See " --
Pay-TV and Audio Services Rules."

      Subscription and Sale of Equity Interests

      According to our concession, we must file with the SCT, no later than
April 30 of each year, a list of our ten principal equity owners and their
corresponding ownership percentages. In the event of any proposed new issuance
or sale of equity interests in a transaction or series of transactions
representing 10% or more of our equity:

         -  we must notify the SCT of the planned issuance or sale, including
            information relating to the purchasers;

         -  the SCT shall have a period of 90 calendar days from the date it is
            notified to object to the transaction in writing and state the
            reasons for the objection; and

         -  if the transaction has not been objected to by the SCT within such
            period, the transaction shall be deemed approved.

      In the event that the party interested in purchasing our social parts or
interests is a corporation, the notice must include information with respect to
the purchaser's shareholders who hold 10% or more of the purchaser's equity.

      Protection of Rights

      Under Mexican law, including the Codigo Penal Federal, or Federal Criminal
Code, and the Ley Federal del Derecho de Autor, or Federal Copyright Law, prison
sentences and fines may be imposed on any person who violates intellectual or
industrial property rights or copyright. Such violations may include the
manufacture, import, sale, or lease of any device or system, or any activity
that involves decoding a program carrier encrypted satellite signal without the
permission of the lawful distributor of such signal.

      Telecommunications Tax

      At the end of December 2001, the Mexican Congress passed a series of tax
reforms. As a result of these tax reforms, subject to some exceptions, revenues
from our pay television services were subject to a 10% excise tax. In February
2002, Cablevision, Innova, Skytel and a number of other companies in the
telecommunications and pay television industries filed amparo proceedings
challenging the constitutionality of this excise tax. Nonetheless, we
implemented rate increases on January 1, 2002 and took other actions, including
lay-offs and reduction of capital expenditures and expenses, in an effort to
mitigate, in part, the impact of this tax on our results of operations and
financial condition. We obtained a favorable ruling in this proceeding regarding
our 2002 liability for this tax and we continue proceedings to recover the
approximately U.S.$18.0 million paid for this excise tax during 2002; however,
we cannot assure you that we will be able to recover any portion of the amounts
paid for this excise tax during 2002.

      In December 2002, the Mexican Congress again acted to make this special
tax effective during fiscal year 2003, by adding or modifying some provisions
included in the original text of the law. In response, we filed a new amparo
proceeding challenging the constitutionality of the tax. We obtained a favorable
ruling in this proceeding; however, we were not able to obtain a final favorable
judgment. Therefore, we will not be able to recover the approximately U.S.$16.0
million paid for this excise tax during 2003. The 10% excise tax on
telecommunications was definitively eliminated as of January 2004. From this
date and going forward we do not have to pay this excise tax; therefore, we have
been and will be able to lower our overall tax exposure and retain a higher
proportion of our revenues, without any modification in prices to our
subscribers.

      Other Fees

      We are required by the Mexican Federal Rights of the Author Law to pay a
percentage of our programming revenues to the Sociedad de Autores y Compositores
de Musica, non-profit organization that support and protect Mexican artists. We
currently pay the standard rate of 1.15% of programming revenues. In addition,
under Mexican law, we are required to pay to the Mexican government a fee of Ps.
5,700 each time that government agents inspect Innova's facilities.

                                      -37-
<PAGE>

      Pay-TV and Audio Services Rules

      In February 2000, rules applicable to pay television and audio services
were enacted in Mexico (Reglamento del Servicio de Television y Audio
Restringidos). These rules imposed new requirements, such as the
concessionaires' obligations to:

         -  classify their programs according to their content and the
            specifications of the Internal Affairs Ministry (Secretaria de
            Gobernacion);

         -  create a database with subscriber information, including name,
            address, services equipment serial numbers and specific passwords
            selected in order to obtain pay-per-view, or PPV;

         -  comply with Mexican regulations regarding the content of programming
            and commercial advertising; and

         -  encrypt and promote restricted audience programs (i.e., adult
            programming) as premium channels or events.

      Our Concessions

      We have received two concessions authorizing the installation, operation,
and exploitation of our telecommunications and broadcast network. The
concessions deal with domestic and foreign source satellite signals,
respectively. Our first concession to install, operate and exploit a public
telecommunications network providing DTH services was granted on May 24, 1996 to
our subsidiary, Corporacion de Radio y Television del Norte de Mexico, S. de
R.L. de C.V., and expires in 2026. This concession authorizes the operation of a
DTH system using Mexican satellites, including Solidaridad 2. The concession
covers satellite television services, which consist of broadcasting video and
related audio codified signals by satellite and the direct receipt of these
signals at the domiciles of subscribers through terminal equipment that allows
access to the signals.

      We obtained the second concession from the SCT on November 27, 2000 in
order to use services over Mexican territory from PAS-9, which Mexican law
considers a foreign satellite. The SCT granted the concession to our subsidiary,
Corporacion de Radio y Television del Norte de Mexico, and it expires in 2020.
The concession covers satellite DTH television services, consisting of broadcast
video and related audio codified signals by satellite and the direct receipt of
these signals at the domiciles of subscribers through terminal equipment that
allows access to the signals. If we eventually desire to use PAS-9 for other
services, we must request an additional authorization from the SCT for those
purposes.

      Under both concessions, we and our foreign indirect owners, News and
Liberty Media, have agreed not to invoke or accept the diplomatic intervention
of any foreign country under penalty of forfeiting to the Mexican government all
the goods and rights we may have acquired for the installation, operation and
exploitation of our telecommunications public network and use of foreign
satellite services.

      Under our first concession, we were obliged to pay the Mexican government
a percentage of our revenues and fees on a monthly basis. We were required to
pay 1.5% and 2.5% of programming revenues and maintenance fees paid by
subscribers in 1997 and 1998 respectively. From 1999 through November 27, 2000,
we paid 3.5% of our programming revenues under our first concession. From
November 27, 2000, when our second concession was granted, and going forward, we
will continue to pay 3.5% of our programming revenues as a combined payment for
both concessions for the term of the concessions.

      Under both concessions, we will be able to broadcast up to six minutes of
commercial advertising per transmission hour on any of our produced channels. A
channel is considered a produced channel so long as the domestically produced
programming represents at least 20% of the total daily programming broadcasted
through such channel. We also need to consider if our agreements with our
programming providers allow us to broadcast such advertising.

      We were required to post a bond with an approved bonding institution in
the original amount of Ps. 1.5 million for the benefit of the Mexican Treasury
of the Federation (Tesoreria de la Federacion) to secure the payment of any
monetary sanctions imposed by the SCT in the event of any revocation of the
first concession. Under the new concession, we replaced the bond we posted under
the original concession with a Ps. 6.8 million bond posted with an approved
bonding institution to secure the payment of any monetary sanctions imposed by
the SCT in the event

                                      -38-
<PAGE>

of any revocation of either concession. The amount of the bond is adjusted
annually for inflation in accordance with the Mexican national consumer price
index.

      We are obliged to obtain authorization in advance to utilize those signals
that are transmitted from a country other than Mexico or the United States of
America. We must also prevent our subscribers from receiving signals from
countries where Mexican satellite services are not permitted, if the SCT so
requests.

      To use foreign satellite signals in Mexico, a concessionaire must be an
entity organized and existing under Mexican law, must hold a concession, and
there must be a reciprocity agreement between Mexico and the relevant country.
Under the satellite agreement and DTH protocol currently in force, if, during
our new concession, the SCT identifies a "lack of reciprocation" between Mexico
and the United States' satellites services practices, the SCT may terminate our
second concession by declaration. The SCT may find a lack of reciprocity:

         -  if the U.S. government denies "most favored nation" treatment to
            Mexican satellite services in the United States satellite market;

         -  if either the agreement or protocol mentioned above is partially
            restricted, suspended or terminated; or

         -  for any other reason that undermines the principle of reciprocity in
            the SCT's judgment.

      Under the second concession, we must provide our DTH broadcast satellite
pay television services by November 2003 to at least those areas of Mexico where
40% of the total population lives, according to the last available census
information. As of December 31, 2004, more than 57% of our subscriber base
resided in States that together constitute approximately 58% of total
population; therefore, we believe we are currently providing our DTH broadcast
satellite pay television services in accordance with our obligations.

                            ORGANIZATIONAL STRUCTURE

      Innova, S. de R.L. de C.V., is a joint venture indirectly owned by
Televisa, News Corporation and Liberty Media. For more information on our
owners, see "Item 4. Information on the Company -- History and Development of
the Company -- Strong Sponsorship."

      Effective as of September 9, 2003, our owners capitalized all loans made
by them or any of their affiliates to us. The amount of the loans and accrued
interest capitalized as of September 9, 2003 was approximately Ps. 4.5 billion.
The capitalization did not affect the direct and indirect percentage ownership
interests in us of our owners. The lenders contributed, assigned and transferred
to Innova Holdings, S. de R.L. de C.V., a then-newly incorporated limited
liability company with variable capital, all their loans and accrued interest
owing at the time of the capitalization in exchange for social parts in Innova
Holdings. Innova Holdings, in turn, contributed, assigned and transferred such
loans and accrued interest to us. In exchange for this capital contribution,
Innova issued to Innova Holdings new Series C limited-voting social parts. After
giving effect to the capitalization, Televisa continues to indirectly own 60%,
News Corporation continues to indirectly own 30% and Liberty Media continues to
indirectly own 10% of Innova. If the transactions contemplated by the agreements
with DIRECTV are consummated, Televisa would own approximately 57% of the equity
interest in Innova and DIRECTV and DTVLA would collectively own the remaining
43% equity interest in Innova. See "Item 4 - Information on the Company -
History and Development of the Company."

      We are a holding company and almost all of our operations occur in, and
almost all of our assets are held by, our six subsidiaries:

         -  Corporacion de Radio y Television del Norte de Mexico, S. de R.L. de
            C.V., which owns all of our transmission equipment, including the
            capital lease of the PAS-9 satellite, and holds our concession to
            operate our DTH system from the Mexican government;

         -  Corporacion Novavision, S. de R.L. de C.V., which is our operating
            company;

         -  Corporacion Novaimagen, S. de R.L. de C.V., which manages our
            administrative personnel and marketing department;

         -  Servicios Novasat, S. de R.L. de C.V., which manages our sales and
            installation personnel;

                                      -39-
<PAGE>

         -  Servicios Corporativos de Telefonia, S. de R.L. de C.V., which
            operates the call center we acquired from Merkatel in 2001; and

         -  Nova Call Center, S. de R.L. de C.V., which operates certain
            specialized areas of our call center.

      GROUP STRUCTURE OF INNOVA

      The diagram below illustrates the current corporate structure of Innova,
but does not reflect changes to our ownership that may occur as a result of the
transactions we entered into in October 2004. See "Item 4 - Information on the
Company - History and Development of the Company."

                                  [FLOW CHART]

                          PROPERTY, PLANT AND EQUIPMENT

      Our properties consist primarily of office and call center facilities
located in Mexico City, uplink facilities located in Mexico City, our DTH
concessions and rights to use satellite transponder capacity.

      We lease our principal corporate office space in Mexico City from an
unaffiliated third party, where our call center is also located. In addition to
corporate activities, we conduct several technical activities at our principal
corporate office, including downlink monitoring, "black box" recording and
subscription management. We also lease additional space from unaffiliated third
parties, from which our regional sales and other operations are conducted. We
lease all of these properties through wholly owned subsidiaries. These
properties consist of approximately 212,000 square feet in the aggregate and are
located throughout Mexico.

                                      -40-
<PAGE>

      We believe that the facilities we use in Mexico City and the United States
are currently adequate for our technical activities.

      We currently use transponder capacity on the PAS-9 satellite. For a
description of our agreements with respect to transponder capacity, see " --
Business Overview -- Operations -- Satellites."

                                      -41-
<PAGE>

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

      You should read the following discussion in conjunction with our audited
financial statements and the accompanying notes, which appear elsewhere in this
annual report. This discussion is qualified in its entirety by reference to our
financial statements. The following discussion includes forward-looking
statements. See "Item 3 -- Key Information -- Forward-Looking Statements" for a
discussion of important factors which could cause our actual results to differ
materially from the forward-looking statements contained in this discussion.
Unless otherwise stated, all amounts denominated in Mexican Pesos and U.S.
Dollars have been rounded to the nearest one hundred thousand Mexican Pesos or
U.S. Dollars.

                                    OVERVIEW

      We have operated a digital Ku-band DTH satellite pay television service in
Mexico since 1996. Since our inception, we have sustained substantial net losses
and, until 2002, substantial negative net operating cash flow. These losses have
been due primarily to start-up costs we incurred in developing our DTH service,
satellite transponder commitments, subscriber acquisition costs and financing
costs. While we began receiving revenues from subscriptions in 1997, our
operating costs, expenses and financing costs incurred exceeded these revenues
during each of our first seven full years of operations. Accordingly, we have
relied substantially upon proceeds from our senior notes, loans and capital
contributions by Televisa, News Corporation and Liberty Media to fund our
operations and more recently from a bank loan to refinance our debt. However, we
were able to generate positive net operating cash flow in 2003 and 2004 due to
substantial subscriber growth and we did not require additional funding from our
equity owners. In 2003 and 2004, we generated the necessary liquidity from our
operating cash flow to cover our operating costs and satellite transponder costs
as well as our interest payments to bondholders. In addition, in 2004 we
achieved net income for the first time. However, we may continue to experience
net losses for the next several years while we continue to improve and expand
our DTH service. Moreover, our expansion plans will continue to require
substantial capital expenditures and investments, and, although we expect to
generate sufficient cash flow for the expansion, we cannot assure you that our
business will generate the necessary profits or positive cash flow. See " --
Liquidity and Capital Resources."

      We believe five elements drive the growth in our subscriber base:

            -     our programming content and exclusive special events;

            -     our extensive distribution network and direct sales force;

            -     our high quality customer service;

            -     our competitive pricing policy; and

            -     our enhanced TV features and technology.

      Our DTH revenues are principally a function of the number of our
subscribers, the mix of programming packages selected by our subscribers and the
rates charged. We derive most of our revenues from DTH programming fees,
subscription fees, installation fees, rental fees and membership fees paid by
our subscribers, as well as SKY VIEW magazine and advertising sales. We
currently lease downconverters or IRDs to our subscribers, and since October
2000 we have retained title to the antennas and LNBs that we provide to our
subscribers to use as part of their subscriptions. Until we began retaining
title to this equipment in October 2000, the various fees were equivalent to our
SkyKit sales. IRD rental fees, subscription fees, membership fees, along with
SKY VIEW magazine and advertising sales revenue, accounted for approximately
41%, 37% and 36% of our revenues in the years ended December 31, 2004, 2003 and
2002, respectively. Programming fees, channel fees, pay-per-view fees, and
special events fees accounted for approximately 56%, 60% and 61% of our revenue
in the years ended December 31, 2004, 2003 and 2002, respectively. All of our
revenues are generated in Mexico, primarily from residential subscribers.

      Our principal operating costs and expenses originate from:

            -     programming costs;

            -     subscriber management expenses (including call center costs);

            -     costs relating to providing, replacing and refurbishing
                  equipment for subscribers;

                                      -42-
<PAGE>

            -     transmission and related functions, including uplink and
                  downlink services; and

            -     marketing and administrative expenses.

      Our programming includes Televisa's four over-the-air channels, which we
offer on a DTH exclusive basis, and pay-TV exclusive soccer games, reality shows
and special events. In addition to these basic programming costs, we incurred
further programming and free special events costs during the first five months
of 2005 in order to continue to offer exclusive events, such as the Big Brother
3R reality show, and high profile sporting events, including the Mexican soccer
tournaments, the Mexican baseball league, the NFL Sunday Ticket, the 2006 FIFA
World Cup and golf tournaments, to current and potential subscribers to
introduce them to our new product offerings.

CAPITAL RESTRUCTURING

      Effective as of September 9, 2003, our owners capitalized all loans made
by them or any of their affiliates to us. The amount of the loans and accrued
interest capitalized was approximately Ps. 4.5 billion as of September 9, 2003.
The capitalization did not affect the direct and indirect percentage ownership
interests of our owners. The lenders contributed, assigned and transferred to
Innova Holdings, S. de R.L. de C.V., or Innova Holdings, a newly incorporated
limited liability company with variable capital, all of their loans and accrued
interest owing at the time of the capitalization in exchange for social parts in
Innova Holdings. Innova Holdings in turn contributed, assigned and transferred
such loans and accrued interest to us. In exchange for this capital
contribution, Innova issued to Innova Holdings new Series C limited-voting
social parts. After giving effect to the capitalization, Televisa, News
Corporation and Liberty Media continue to indirectly own 60%, 30% and 10% of
Innova, respectively.

      On September 12, 2003, we sold U.S. $300.0 million in principal amount of
9.375% senior notes due 2013. On October 20, 2003, we used the net proceeds of
that offering together with available cash, to redeem U.S. $287.0 million in
principal amount of our 12 7/8% senior notes due 2007, including a redemption
premium, accrued interest, Mexican withholding taxes and related fees and
expenses. After redeeming this principal amount, U.S. $88.0 million in principal
amount of the 12 7/8% senior notes remained outstanding.

      In October 2004, DIRECTV announced the shut down of its operations in
Mexico. DIRECTV, through its indirect subsidiary Grupo Galaxy Mexicana S. de
R.L. de C.V. (Galaxy Mexico) sold its subscriber list to our subsidiary
Corporacion Novavision S. de R.L. de C.V (Novavision) in exchange for two notes
with an aggregate principal amount totaling approximately Ps. 621.1 million and
potential payments in the future depending on the number of subscribers that
successfully migrate to our service. In addition, we, Televisa, News Corp.,
Liberty Media and Globopar entered into a series of transactions with each other
and with The DIRECTV Group, Inc., or DIRECTV, relating to our DTH joint
ventures, which, if consummated, would result in DIRECTV and DTVLA owning
approximately 43% of our equity and Televisa owning the remaining 57% of our
equity. See "Item 4 -- Information on the Company -- History and Development of
the Company."

      In December 2004, we entered into a Ps. 1,012 million, 7-year bank loan
agreement with a fixed interest rate of 10.55%. Televisa and News Corporation
are guaranteeing this loan 51% and 49%, respectively. The net proceeds from the
loan were used on January 7, 2005 to redeem the remaining U.S. $88.0 million
principal amount of our outstanding 12 7/8% notes due 2007, plus accrued and
unpaid interest.

EXCISE TAX

      As described in "Item 4. Information on the Company -- Business Overview
-- Mexican Regulation of DTH Services -- Telecommunications Tax," the 10% excise
tax on revenues from telecommunications services was eliminated as of January
2004. As of this date we no longer have to pay this excise tax and we have
therefore been able to lower our overall tax exposure and retain a higher
proportion of our revenues without any modification in the prices we charge to
our subscribers.

TREND INFORMATION

      During the first quarter of 2005, we continued to increase our subscriber
base. As of March 31, 2005, we had approximately 1,107,500 subscribers,
including 63,400 commercial subscribers. This represents a 25.0% increase from
886,100, including 50,200 commercial subscribers as of March 31, 2004. We
believe the increase in subscriber activations is due to two components, which
include (i) our aggressive marketing campaigns, the high quality and variety of
our programming content, our unique exclusive events, and the high quality of
our customer

                                      -43-
<PAGE>

service and (ii) the migration of new subscribers from DIRECTV Mexico who have
elected to switch to our service. While we believe both components contributed
to the subscriber growth during the first quarter of 2005, most of the growth
was due to the migration of subscribers from DIRECTV Mexico. We cannot be
certain that the trend in subscriber growth will continue in the future.

      The increase in our subscriber base has been partially offset by
subscriber cancellations. However, we have been successful in reducing our
annual churn rate, which we define as (i) the number of subscribers who cancel
their subscriptions during the year, divided by (ii) the sum of the total number
of subscribers at the beginning of the year and the number of new subscribers
added during the year. For the year ended December 31, 2004, our churn rate was
approximately 15%.

      As a result of our first quarter subscriber growth, net sales increased to
Ps. 1,303.5 million for the three months ended March 31, 2005, a 14.2% increase
over our net sales for the same period in 2004. We also reported net income of
Ps. 204.3 million for the three months ended March 31, 2005 as compared to Ps.
153.4 million for the same period in 2004.

      We believe that the high quality of our programming, our exclusive events,
aggressive marketing campaigns and our customer service will continue aiding our
efforts to increase our subscriber base. However, although we anticipate
continued improvement in net sales, we remain concerned that various
macroeconomic effects, including continued anemic growth in the Mexican GDP or a
Peso devaluation as compared to the U.S. Dollar, could detrimentally affect our
future financial results.

                                OPERATING RESULTS

NET SALES

      Our net sales consist of fees paid by subscribers to receive one of our
programming packages and various pay-per-view services. We recorded net sales of
Ps. 4,769.0 million for the year ended December 31, 2004, an increase of Ps.
749.9 million, or 18.7%, as compared to Ps. 4,019.1 for the year ended December
31, 2003. This increase was primarily due to (i) the growth of our subscriber
base; (ii) the fact that from January 1, 2004 we no longer had to pay the 10%
excise tax on revenues from telecommunications services; (iii) the fact that we
have not had to modify the prices we charge to our subscribers; and (iv)
additional pay-per-view revenues.

      We recorded net sales of Ps. 4,019.1 million for the year ended December
31, 2003, an increased of Ps. 264.3 million, or 7.0%, as compared to Ps. 3,754.8
for the year ended December 31, 2002. This increase was primarily due to the
sustained growth of our subscriber base.

      We have not raised our subscriber fees since January 2002 when we
effectuated a fee increase to offset the 10% excise tax on telecommunications
services that was in existence at the time.

      We have experienced sustained and continued growth in the number of
subscribers each year since our inception, which generally increases our net
sales. Our subscriber base experienced a 17.0% increase during 2004, as compared
to 16.1% in 2003. In 2004, we increased our subscriber base from approximately
856,600 (including approximately 48,500 commercial subscribers) as of December
31, 2003 to approximately 1,002,500,(including approximately 60,700 commercial
subscribers) as of December 31, 2004. We believe that our subscriber growth
increased during 2004 due primarily to our offering of unique exclusive events,
including the Big Brother reality shows, the Mexican soccer tournaments, the
Copa Libertadores soccer tournament, boxing matches, golf tournaments and other
exclusive sporting events. We also believe that our aggressive marketing
campaigns, the lowering of our initial subscription fee and offering special
promotions helped draw more subscribers.

OPERATING EXPENSES

      Cost of Sales

      Cost of sales for the year ended December 31, 2004 was Ps. 1,394.5
million, an increase of Ps.153.0 million, or 12.3%, as compared to Ps. 1,241.5
million for the year ended December 31, 2003. This increase was mainly due to
higher programming costs associated with our larger subscriber base and
increased costs related to our higher number of service activations, but was
partially offset by the lower Peso amount for our U.S. dollar denominated costs,
resulting from the revaluation of the Peso against the US dollar which occurred
during the year.

                                      -44-
<PAGE>

      Cost of sales for the year ended December 31, 2003 was Ps. 1,241.5
million, an increase of Ps. 79.1 million, or 6.8%, as compared to Ps. 1,162.4
for the year ended December 31, 2002. This increase was due to higher subscriber
activations and related costs, as well as higher U.S. Dollar-denominated costs,
such as programming costs, resulting from the growth of our subscriber base and
the devaluation of the Peso against the U.S. Dollar which occurred during the
year.

      Our PAS-9 satellite transponder agreement with PanAmSat has been recorded
as a capital lease and consequently the amortization of the lease asset is
presented within the "depreciation and amortization" line item in the
consolidated income statement. We recognized total satellite costs of Ps. 281.7
million for the use of the PAS-9 satellite during the year ended December 31,
2004. Of this amount, Ps. 110.6 million was recognized as depreciation expense
and Ps. 171.1 was recognized as interest expense.

      We recognized total satellite costs of Ps. 291.7 million for the use of
the PAS-9 satellite during the year ended December 31, 2003. Of this amount, Ps.
113.0 million was recognized as depreciation expense and Ps. 178.7 was
recognized as interest expense.

      We recognized total satellite costs of Ps. 281.9 million for the use of
the PAS-9 satellite during the year ended December 31, 2002. Of this amount, Ps.
107.2 million was recognized as depreciation expense and Ps. 174.7 was
recognized as interest expense.

      For the years ended December 31, 2004, 2003 and 2002, we incurred a total
of Ps. 852.9 million, Ps. 767.5 million and Ps. 719.0 million in programming
fees, respectively, representing an increase of Ps. 85.4 million, or 11.1%, from
2003 to 2004, and Ps. 48.5 million, or 6.7%, from 2002 to 2003. These increases
resulted primarily from the growth in the number of our subscribers. Most of our
programming agreements require us to pay a fee based upon the number of
subscribers receiving the programming service. As our subscriber base increases,
we experience an overall increase in the programming fees we pay to our
programming providers; however, in some cases, we benefit from volume-based
discount rates. Programming fees are expected to increase in 2005 as the number
of subscribers and audience levels increase; however, we also expect to receive
the benefit of larger volume based discounts. In addition, programming fees are
expected to increase as a result of the additional new programming that we have
obtained, such as the NFL Sunday Ticket and the 2006 FIFA World Cup. In
connection with the transactions that took place in October 2004, we and
Televisa entered into two channel licensing agreements pursuant to which we will
pay Televisa a royalty fee to carry its over-the-air channels on our DTH
service. See "Item 4 -- Information on the Company -- History and Development of
the Company."

      We receive uplink and downlink services from DTH TechCo at its Florida
facilities and from Televisa at its Mexico City facility. In 2004, we expensed
approximately Ps. 139.3 million for these costs as compared to approximately Ps.
137.4 million for the year ended December 31, 2003 and Ps. 132.0 million for the
year ended December 31, 2002. Under the terms of our agreement with DTH TechCo,
we will pay DTH TechCo approximately Ps. 89.2 million (approximately U.S.$8.0
million) per year for uplink and downlink services over the ten-year life of the
agreement, which expires in December 2007. We have also entered into an
agreement with Televisa for the provision of uplink and downlink, play-out and
compression services relating to locally-sourced programming, at its Mexico City
facility. We estimate that our future annual commitments under these
arrangements with Televisa will be approximately Ps. 51.3 million (approximately
U.S.$4.6 million) per year. We negotiate these fees with Televisa at least once
a year and we believe that the fees we pay for these services are comparable to
what we would have paid an unaffiliated third party for similar services.

      Our payment of 3.5% of programming revenues each year to the Mexican
government under the terms of our concessions is included in our cost of sales.
These payments will continue through the remainder of the terms of our
concessions, which are expected to run through 2026 with respect to our
concession to use domestic satellites and through 2020 with respect to our
concession to use foreign satellites. See "Item 4 -- Information on the Company
-- Business Overview -- Mexican Regulation of DTH Services -- Our Concessions."

      Administrative Expenses

      Administrative expenses include all costs associated with our finance and
administrative functions. These costs include employee salaries and benefits,
insurance, and professional fees. Administrative expenses of Ps. 132.6 million
for the year ended December 31, 2004 remained flat as compared to Ps. 131.5
million for the year ended December 31, 2003, as we have improved our platform
and continued our strict budget control. In the year ended December 31, 2003,
our administrative expenses decreased Ps. 1.4 million or 1.0% to Ps. 131.5
million from

                                      -45-
<PAGE>

Ps. 132.9 million for the year ended December 31, 2002, primarily due to lower
salary and employment-related costs.

      Selling Expenses

      Selling expenses consist of direct and indirect personnel costs for our
sales force, commissions and bonuses we pay to distributors and independent
sales agents, advertising and marketing costs, bad debt expenses and expenses
associated with promotional materials. For the year ended December 31, 2004, our
selling expenses increased Ps. 85.0 million, or 9.5%, to Ps. 977.4 million from
Ps. 892.4 million for the year ended December 31, 2003. This increase was
principally due to (i) higher promotional costs and increased commissions we
paid; (ii) more free special events offered to subscribers, and (iii) an
increase in collections paid to banks.

      In the year ended December 31, 2003, our selling expenses decreased Ps.
18.4 million, or 2.0%, to Ps. 892.4 million from Ps. 910.8 million for the year
ended December 31, 2002. This decrease was primarily due to lower costs
associated with the free special events offered to subscribers in 2003.

      Other Operating Expenses

      Other operating expenses include direct and indirect customer service
costs, including call center and repair service personnel, equipment
maintenance, repairs and IRD refurbishment costs.

      For the years ended December 31, 2004, 2003 and 2002, we recorded Ps.
525.2 million, Ps. 500.4 million and Ps. 527.0 million, respectively, in other
operating expenses. Other operating expenses increased by Ps. 24.8 million, or
5.0%, in 2004, mainly due to higher call center costs and expenses related to
the repair of equipment. The decrease of Ps. 26.6 million, or 5.0%, in 2003 was
primarily due to lower operating personnel costs resulting from reduced
headcount and related expenses.

      We expect other operating expenses, including maintenance and repair of
equipment such as IRDs, to continue to increase as a result of growth in the
number of our subscribers and as a result of our increased success in recovering
and repairing IRDs, which, in some instances, enables us to avoid purchasing new
IRDs at higher costs.

DEPRECIATION AND AMORTIZATION

      Depreciation and amortization includes depreciation of property and
equipment and amortization of intangible assets.

      We recorded Ps. 764.5 million in depreciation and amortization for the
year ended December 31, 2004, as compared to Ps. 850.6 million for the year
ended December 31, 2003 and Ps. 1,011.8 million for the year ended December 31,
2002. The decrease of Ps. 86.1 million from 2003 to 2004 was primarily due to
lower asset depreciation charges based on the lower cost of replacement assets
and the cumulative depreciation of older equipment . The decrease of Ps. 161.2
million from 2002 to 2003 was primarily due to lower amortization charges during
2003 since some intangible assets were fully amortized in 2002, and a lower
asset depreciation charge. The lower asset depreciation charge is due to the
fixed assets (principally IRDs) we acquired, which cost less than the assets
they replaced.

      We capitalize and amortize the equipment we provide to subscribers,
including IRDs, antennas, LNBs, smart cards and remote controls. IRDs are
amortized over five years, while the rest of the equipment is amortized over
three years. Consequently, the overall amounts we amortize will continue to rise
over the next few years as we cumulatively amortize more IRDs, antennas, LNBs,
smart cards and accessories. Those amounts will also increase as the number of
our subscribers increases.

INTEGRAL RESULT OF FINANCING

      High inflation can have a significant detrimental impact on our financial
statements. Mexican GAAP requires us to present all financial effects of
operating and financing the business under inflationary conditions in our
consolidated statement of income (loss). Integral result of financing primarily
includes:

                                      -46-
<PAGE>

            -     interest earned on cash and temporary investments, interest
                  paid on borrowed funds and interest earned and paid on
                  accounts of affiliated companies;

            -     foreign exchange gains or losses associated with monetary
                  assets and liabilities denominated in foreign currencies;

            -     net gains or losses resulting from holding monetary assets and
                  liabilities exposed to inflation; and

            -     gains or losses on derivative financial instruments.

      Our foreign currency-denominated assets and liabilities affect our foreign
exchange position. We record a foreign exchange gain or loss if the exchange
rate of the Peso rises or falls compared to the other currencies in which our
monetary assets or liabilities are denominated. In addition, the reverse is also
true; if we have monetary liabilities that exceed our monetary assets during
periods of inflation, we will generate a monetary gain.

      We reported a integral cost of financing of Ps. 387.3 million, Ps. 1,258.3
million and Ps. 1,802.3 million for the years ended December 31, 2004, 2003 and
2002, respectively. The decrease in cost in the last two years has been
primarily due to (i) lower foreign exchange losses, principally due to the
capitalization of our loans from our equity owners; (ii) reducing our cost of
debt by redeeming our 12 7/8% senior notes, and (iii) reducing our overall
foreign exchange exposure. We generated monetary gains for the years ended
December 31, 2004, 2003 and 2002, of Ps. 308.3 million, Ps. 331.7 million and
Ps. 545.4 million, respectively. The decrease in the gain from monetary position
for 2004 as compared to 2003 was due to the decrease in net monetary liabilities
in Peso terms, and the decrease in the gain from monetary position for 2003 as
compared to 2002 was due to the decrease in net monetary liabilities in Peso
terms and a decrease in Mexican inflation.

CROSS CURRENCY SWAP

      On February 13, 2004, we entered into two separate derivative transactions
denominated "cross coupon swap" agreements to hedge a portion of our U.S. Dollar
foreign exchange exposure resulting from the issuance of our U.S. $300.0 million
9.375% senior notes that mature in 2013. Under the transactions, we receive
semi-annual payments calculated based on an aggregate notional amount of U.S.
$300.0 million at an annual rate of 9.375%, and we make monthly payments
calculated based on an aggregate notional amount of Ps. 3,282.2 million at an
annual rate of 10.25%. The transactions, both of which terminate in September
2008, will reduce our foreign exchange exposure on ten interest coupon payments
on the senior notes we issued in September 2003.

      Additionally, during the fourth quarter of 2004, we entered into several
forward contracts to reduce our exposure to depreciation of the peso in U.S.
dollar terms, reducing the risk when our obligations in U.S. dollars become
payable. We intend to continue to enter into similar transactions on a regular
basis in order to reduce our foreign exchange exposure.

PROVISION FOR TAXES

      Provision for taxes includes reserves for corporate income tax, asset tax,
deferred income tax and employees' statutory profit sharing. Due to operating
losses, we have not been required to make any provision for income taxes, and we
do not expect to make such provisions until we earn tax profits that exceed our
offsetting tax loss carry-forwards. As of December 31, 2004, we had total tax
loss carry-forwards of Ps. 7,902.6 million that we may, under some
circumstances, carry forward over ten years from the period in which they were
generated. See Note 16 to our financial statements.

      As a result of changes to the Mexican Income Tax Law which was enacted in
2004 but which became effective January 1, 2005, the corporate income tax rate
was reduced from 33% (effective in year 2004) to 28%. However by means of an
annual disposition the reduction is going to be gradual with rates of 30% for
year 2005, 29% for year 2006 and 28% for year 2007.

      We are also subject to an asset tax on the book value of some assets.
However, any income tax payments may be credited against asset tax payments. In
2001, 2002, 2003 and 2004 the asset tax rate has been 1.8%. Until December 31,
2004 taxpayers could not deduct from their asset tax bases debt contracted with
nonresident companies or financial intermediaries. We challenged these
provisions of Mexico's Ley del Impuesto al Activo, or Asset Tax Law, but at the
same time, and in order to avoid penalties and interest payments in the event we
lose the appeal, we paid approximately Ps. 43.2 million of asset tax for the
year ended December 31, 2001; approximately

                                      -47-
<PAGE>

Ps. 45.2 million for the year ended December 31, 2002; and approximately Ps. 7.5
million for January and February of 2003.

      On March 19, 2003, the court issued a resolution in our favor. Because the
declaratory judgment was favorable to us, we were be able to deduct debts
payable to nonresidents from the asset tax base. As of today, we have already
recovered the amounts paid as described above.

      As of January 1, 2005, the Assets Tax Law allows the subtraction from
taxable assets of debt contracted with entities that are part of the financial
system as well as debts contracted with nonresident entities.

      For more information on this proceeding, see "Item 10 -- Additional
Information -- Legal Proceedings."

      Mexican law requires Mexican entities to pay employees profit sharing in
an aggregate amount equal to 10% of taxable income (calculated without reference
to inflation adjustments or tax loss carry forwards). This profit sharing is in
addition to agreed compensation and benefits. We have not been required to pay
employee profit sharing because we have not generated taxable income.

U.S. GAAP RECONCILIATION -

      Our consolidated financial statements are prepared in accordance with
Mexican GAAP, which differs in significant respects from U.S. GAAP.

      Net income (loss) under U.S. GAAP for the years ended December 31, 2004,
2003 and 2002 was Ps. 599.3 million, (Ps. 822.1 million) and (Ps. 1,968.2
million), respectively. Equity owners' deficit under U.S. GAAP as of December
31, 2004 and 2003 was (Ps. 2,972.7 million) and (Ps. 3,751.8 million),
respectively. Differences between Mexican GAAP and U.S. GAAP for the years ended
December 31, 2004, 2003 and 2002 include, but are not limited to: revenue
recognition; the recognition of the derivative financial instruments;
adjustments to reflect differences in the restatement of property and equipment;
the provision for costs associated with re-pointing our subscribers' antennas
from Solidaridad 2 to PAS-9, and the reversal of other accruals recorded under
Mexican GAAP. Our most significant differences between Mexican GAAP and U.S.
GAAP are summarized below. For a detailed discussion of the principal
differences between Mexican GAAP and U.S. GAAP as they relate to us for each of
the years in the three year period ended December 31, 2004, see Note 20 to our
consolidated financial statements.

      Under U.S. GAAP, cash flows provided by operating activities were
Ps.960.3 million, Ps. 498.6 million and Ps. 334.4 million as compared to
resources provided by (used in) operating activities of Ps. 1,245.4 million,
(Ps. 596.7 million) and (Ps. 364.3 million) under Mexican GAAP for the years
ended December 31, 2004, 2003 and 2002, respectively. The differences in
determining resources provided by (used in) operating activities under Mexican
GAAP and cash flow provided by (used in) operating activities under U.S. GAAP,
as it relates to us, is primarily due to the requirement to exclude non-cash
items in presenting cash flows under U.S. GAAP, whereas the statement of changes
in financial position under Mexican GAAP is determined based upon differences
between beginning and ending financial statement balances in constant Pesos.
Among other differences, for U.S. GAAP purposes, we have excluded from operating
cash flows gains from monetary position of Ps. 308.3 million, Ps. 331.7 million
and Ps. 545.4 million for the years ended December 31, 2004, 2003 and 2002,
respectively, and unrealized foreign currency gains and (losses) of Ps. 39.0
million, (Ps. 243.6 million) and (Ps. 1,118.8 million), respectively.

      Cash flows provided by financing activities under U.S. GAAP were Ps. 936.7
million, Ps. 259.9 million and Ps. 288.3 million as compared to resources
provided by financing activities of Ps. 607.2 million, Ps. 1,295.3 million and
Ps. 953.8 million under Mexican GAAP for the years ended December 31, 2004, 2003
and 2002, respectively. U.S. GAAP financing activities primarily represent
actual cash inflows and outflows from our receipt of cash. Under Mexican GAAP,
resources provided by financing activities reflect changes in the balance sheet
accounts, which include gains or losses from foreign currency fluctuations and
gains from monetary position.

      Cash flows (used in) investing activities under U.S. GAAP were (Ps. 683.9
million), (Ps. 499.0 million) and (Ps. 368.7 million) as compared to resources
(used in) investing activities of (Ps. 674.9 million), (Ps. 471.1 million) and
(Ps. 347.3 million) under Mexican GAAP for the years ended December 31, 2004,
2003 and 2002, respectively.

                                      -48-
<PAGE>

                         LIQUIDITY AND CAPITAL RESOURCES

      Since our inception, we have sustained substantial net losses and, until
2002, substantial negative net operating cash flow. These losses have been due
primarily to start-up costs we incurred in developing our DTH service, satellite
transponder commitments, subscriber acquisition costs and financing costs. While
we began receiving revenues from subscriptions in 1997, our operating costs,
expenses and financing costs incurred exceeded these revenues during each of our
first seven full years of operations. Accordingly, we have relied substantially
upon proceeds from our senior notes, loans and capital contributions by
Televisa, News Corporation and Liberty Media and more recently from a bank loan
to fund our operations. In 2003 and 2004, we generated the necessary liquidity
from our operating cash flow to cover our operating costs and satellite
transponder costs as well as our interest payments to bondholders. However, we
may continue to experience net losses for the next few years while we continue
to improve and expand our DTH service and our expansion plans will continue to
require substantial capital expenditures and investments. Our current liquidity
needs arise from the continuing improvement and expansion of our Ku-band DTH pay
television service, including:

            -     satellite transponder capacity;

            -     uplink and downlink services;

            -     the construction of additional transmission facilities and
                  related equipment and acquisition of call center and
                  subscriber management assets;

            -     the acquisition of SkyKit components and the installation of
                  the equipment at subscribers' locations; and

            -     the funding of other operating losses and working capital
                  requirements.

      We incurred total capital expenditures of approximately Ps. 750.0 million,
Ps. 557.0 million and Ps. 520.4 million in fiscal years 2004, 2003 and 2002,
respectively, which included transmission equipment, IRDs, computers, motor
vehicles, LNBs and antennas and our SMS. See "Item 4 -- Information on the
Company -- History and Development of the Company -- Capital Expenditures."

      The amount of our capital expenditures in the long term will depend on
numerous factors beyond our control or ability to predict, including the
availability of financing, the nature of future expansion and acquisition
opportunities, economic conditions, subscriber demand, technological innovation,
competition and regulatory developments. The capital expenditures described
above do not include acquisitions. Although the indenture governing our senior
notes and our recently obtained bank loan restrict the types of assets or
securities we may acquire, we can make acquisitions to expand our business
and/or to enter into complementary businesses. In the future, we may consider
acquisitions of, investments in, or joint ventures with, other companies.

      In 2003, for the first time, we achieved positive net operating cash flow.
Since then, cash flow from operations has funded our operating needs and other
working capital requirements, including satellite transponder service costs,
interest payments to noteholders and costs to acquire SkyKit components and
other equipment. Based on our current business plan, we anticipate that our
capital expenditure requirements for the remainder of 2005, not including
potential acquisitions, will be approximately U.S.$ 85 million, but we cannot
provide assurance that this will be the case. We believe that our cash on hand,
together with cash from operations, will be sufficient for our cash
requirements, including our capital expenditures but excluding potential
acquisitions, through December 31, 2005.

      We hold our cash and cash equivalent assets in both Pesos and U.S.
Dollars. For the years ended December 31, 2004, 2003, and 2002 , resources
provided by (used in) operating activities amounted to Ps. 1,245.4 million, Ps.
(596.7 million) and Ps. (364.3 million), respectively. The increase in resources
provided by operating activities from 2003 to 2004 was primarily due to the net
income generated during 2004 as compared to a net loss during 2003. The positive
turn in resources used by operating activities in 2002 to resources provided by
operating activities in 2003 was primarily due to the lower net loss generated
during 2003 as compared to 2002. At the same time, net resources provided by
financing activities totaled Ps. 607.2 million, Ps. 1,295.3 million and Ps.
953.8 million, respectively, for the years ended December 31, 2004, 2003 and
2002. The net resources provided by financing activities in 2004 were primarily
attributable to the proceeds from the bank loan agreement we entered into, and
in 2003 the increase in net resources provided by financing activities was
primarily due to the combined effect of the capitalization of loans from our
equity owners, which reduced our overall debt levels and interest expenses.

                                      -49-
<PAGE>

      Resources used in investing activities represented Ps. 674.9 million for
the year ended December 31, 2004, as compared to Ps. 471.1 million for the year
ended December 31, 2003 and Ps. 347.3 million from the year ended December 31,
2002. The increases in both 2004 and 2003 were due to higher capital
expenditures due to increased SkyKit purchases due to higher subscriber
activations and the implementation of our SMS in 2003.

      Capital Restructuring

      Historically, our owners have made amounts in loans and equity available
to us, depending on our monthly funding requirements for capital expenditures
and operations. Our owners increased our equity capital by U.S.$49.0 million in
1999 pro rata, based on their respective equity interests in us. Our owners also
loaned us and, in one instance, our subsidiary Novavision, a total of U.S.$41.6
million in 1999. The owners lent us another U.S.$81.0 million in 2000,
U.S.$132.8 million in 2001 and U.S.$29.5 million in 2002. On July 22, 2002, we
entered into a credit agreement with our owners to memorialize the terms of some
of the loans described above. This credit agreement also required us to execute
promissory notes to evidence the loans we received from our owners from 2000 to
2002 as well as to evidence any new loans we may obtain from our owners. The
loans bore a fixed interest rate of 9% per annum and were payable at maturity,
including any applicable withholding taxes, and matured ten years from the date
of disbursement. Effective as of September 9, 2003, our owners capitalized all
loans made by them or any of their affiliates to us. The amount of the loans and
accrued interest capitalized as of September 9, 2003 was approximately Ps. 4.5
billion. We currently do not have any loans from our equity owners outstanding.

      Senior Notes

      We have accessed the debt capital markets to raise the necessary capital
to fund operations and capital expenditures and to refinance our debt. On April
1, 1997, we issued U.S.$375.0 million in principal amount of 12 7/8% senior
notes due 2007. In September 2003, we issued U.S.$300.0 million of senior notes
in a private offering at a price of 100%. The notes bear interest at a rate of
9.375% and mature on September 19, 2013. We received approximately U.S.$296.0
million in net proceeds from the sale of the 9.375% notes after deducting
estimated discounts and offering expenses. We used all of these net proceeds,
together with available cash, to redeem U.S.$287.0 million in principal amount
of our outstanding 12 7/8% senior notes due 2007, and to pay Mexican withholding
taxes, a redemption premium and accrued interest. This redemption was
consummated on October 20, 2003. In addition, we used the net proceeds from the
bank loan described below to redeem the remaining U.S.$88.0 in principal amount
of the 12 7/8% senior notes due 2007 plus accrued and unpaid interest.

      Bank Loan

      In December 2004, we entered into a Ps. 1,012 million, 7-year bank loan
agreement with a fixed interest rate of 10.55% per annum and a five-year grace
period for principal repayments with HSBC Mexico, S.A. This outstanding
principal is to be repaid in eight equal quarterly payments during 2010 and
2011. Interest payments are due on a monthly basis. Televisa and News
Corporation are guaranteeing this loan 51% and 49%, respectively. The net
proceeds from the loan were used on January 7, 2005 to redeem the remaining U.S.
$88.0 million principal amount of our outstanding 12 7/8% notes due 2007 plus
accrued and unpaid interest.

      We continue to have a substantial amount of indebtedness outstanding. At
December 31, 2004, our consolidated debt, net of cash, was U.S.$326.6 million.
In addition to our outstanding indebtedness due under the 9.375% senior notes
due 2013 and our bank loan agreement, as of December 31, 2004, we had
approximately U.S.$218.0 million in satellite transponder obligations. See " --
Contractual Obligations and Commercial Commitments."

      The indenture governing our 9.375% senior notes due 2013 and our recently
acquired bank loan significantly restrict and, in some cases, prohibit our
ability and the ability of our subsidiaries to:

      -     incur additional debt;

      -     create or incur liens;

      -     pay dividends or make other equity distributions;

      -     engage in or make some payments under inter-company arrangements;

      -     purchase or redeem shares or social parts;

                                      -50-
<PAGE>

      -     create restrictions on the payment of dividends or other amounts by
            our subsidiaries;

      -     make investments;

      -     sell assets;

      -     issue or sell shares or social parts of some subsidiaries;

      -     engage in transactions with affiliates; and

      -     effect a merger or consolidation, or sell all or substantially all
            of our assets.

      In addition, we are obligated to comply with various financial covenants
that require our subsidiaries and us to meet and maintain specified financial
performance measures and ratios. These covenants set targets related to, among
other things, liquidity, coverage and leverage ratios. At December 31, 2004, we
are in compliance with all covenants set forth in our senior note indentures.

      We expect to continue to meet our additional ordinary course financing
requirements principally through cash flow from operations. In the event of
significant expenditures or acquisitions, we could make use of other sources of
liquidity such as capital contributions or loans from our equity owners, public
or private offerings of equity and/or debt securities, and/or commercial bank
loans if they are available at a reasonable cost. Although we do not expect to
need additional financing from our equity owners in 2005, we cannot assure you
that we will not require such additional funding in future years. If the
transactions contemplated by the agreements with DIRECTV are consummated,
Televisa will own approximately a 57% equity interest in Innova and DIRECTV and
DTVLA will collectively own the remaining 43% equity interest in Innova. We
cannot assure you that our equity owners will provide us with additional
financing in the future or that other additional financing will be available to
us or, if available, that such financing can be obtained on terms acceptable to
us. Our ability to obtain future financing is limited by the terms of the
indenture governing our senior notes and may be further limited by the terms of
any future financing arrangements. Failure to obtain future financing could
delay or prevent our development and expansion plans, impair our ability to meet
our debt service requirements (including our obligations with respect to our
senior notes and our bank loan agreement) or other obligations (such as
transponder service commitments), and have a material adverse effect on our
business. See "Item 3 -- Key Information -- Risk Factors -- Risk Factors Related
to Our Business -- Our Significant Debt Levels Limit Our Ability to Fund Our
Operations, Affect Our Profitability and Could Lead to Difficulties in Obtaining
New Sources of Financing Required to Continue Operations."

              RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

      We do not have any significant internal research and development programs.
We generally purchase any new technologies used to upgrade our services from our
suppliers.

                         OFF-BALANCE SHEET ARRANGEMENTS

      As of December 31, 2004, we have no off-balance sheet arrangements that
have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material.

                                      -51-
<PAGE>

               CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

      Innova's contractual obligations and commercial commitments consist
primarily of credit facilities, as described above, and capital lease
obligations. The following table provides details regarding Innova's contractual
and commercial obligations subsequent to December 31, 2004:

                             PAYMENTS DUE BY PERIOD
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                               LESS THAN        12-36          36-60          AFTER 60
                                                 TOTAL         12 MONTHS        MONTHS         MONTHS          MONTHS
                                               --------        ---------       --------       -------         --------
                                                                                 2006-         2008-           BEYOND
                                                                2005             2007          2009             2009
<S>                                            <C>             <C>             <C>            <C>             <C>
LONG-TERM LOANS
   Senior Exchange Notes
        due 2007(1)....................        $ 88,000        $ 88,000               -                              -
   Senior Exchange Notes
        due 2013(2)....................        $300,000               -               -             -         $300,000
   Bank Loan
        due 2010(3)....................        $ 90,770               -               -             -         $ 90,770

CAPITAL (FINANCE) LEASE OBLIGATIONS
   Capital lease - satellite
     transponder(4)....................        $217,997        $ 20,400        $ 40,800       $40,800         $115,997

OTHER LONG-TERM OBLIGATIONS
   DTV Promissory Notes(8)                     $ 55,710                        $ 55,710
   Advertising agreement with
     Televisa(5).......................        $ 11,212        $ 11,212               -             -                -
   Advertising agreement with TV
     Azteca(6).........................        $  8,431        $  2,960        $  5,471             -                -
   Soccer games pay-TV exclusive
     rights from Televisa(7)...........        $  9,053        $  6,514        $  2,539             -                -
   Over-the-air channels agreements
     with Televisa(9) .................        $  4,500        $  4,500
   Soccer games pay  - TV exclusive
     rights from TV Azteca(6)..........        $  4,200        $  4,200               -             -                -
   Rights to rebroadcast TV
     Azteca channels(6)................        $    540        $    180        $    180       $   180                -
                                               --------        --------        --------       -------         --------
TOTAL CONTRACTUAL OBLIGATIONS                  $790,413        $137,966        $104,700       $40,980         $506,767
                                               --------        --------        --------       -------         --------
</TABLE>

(1)   In April 1997, Innova issued U.S. Dollar-denominated senior unsecured
      fixed rate notes in an aggregate principal amount of U.S.$375.0 million,
      with semi-annual interest payable at a rate of 12 7/8% per annum. On
      October 20, 2003, we used the net proceeds of the offering of the new
      senior notes due 2013 to redeem U.S.$287.0 million in principal amount of
      our 12 7/8% senior notes due 2007. In December 2004, we entered into a Ps.
      1,012 million, 7-year bank loan agreement with a fixed interest rate of
      10.55%. The net proceeds from the loan were used on January 7, 2005 to
      redeem the remaining U.S. $88.0 million principal amount of our
      outstanding 12 7/8% notes due 2007, plus accrued and unpaid interest. See
      "Item 5 -- Operating and Financial Review and Prospects -- Liquidity and
      Capital Resources."

(2)   In September 2003, Innova issued U.S. Dollar-denominated senior unsecured
      fixed rate notes in an aggregate principal amount of U.S.$300.0 million,
      with semi-annual interest payable at a rate of 9.375% per annum.

(3)   In December 2004, Innova entered into a Ps. 1,012 million, 7-year bank
      loan with a fixed interest rate of 10.55% per annum and a five-year grace
      period for principal. The net proceeds from the loan were used on January
      7, 2005 to redeem the remaining U.S. $88.0 million

                                      -52-
<PAGE>

      principal amount of our 12 7/8% senior notes due 2007 plus accrued and
      unpaid interest. See "Item 5 -- Operating and Financial Review and
      Prospects -- Liquidity and Capital Resources." For purposes of this table,
      we converted our Peso obligations into U.S. Dollars at the following
      exchange rate: Ps. 11.149 per U.S. $1.00.

(4)   In February 1999, Innova entered into a U.S. Dollar-denominated agreement
      with PanAmSat for the use of 12 transponders on the PAS-9 satellite. The
      term of the agreement is for the expected economic useful life of the
      satellite, which was approximately 15 years at launch. Accordingly, under
      generally accepted accounting principles, the agreement is accounted for
      as a capital lease, and we recognized on our balance sheet a satellite
      transponder asset and a corresponding liability equal to the net present
      value of the monthly payments of U.S.$1.7 million over the 15 year term of
      the agreement. See "Item 5 -- Operating and Financial Review and Prospects
      -- Operating Results -- Operating Expenses -- Cost of Sales."

(5)   See "Item 7. Major Shareholders and Related Party Transactions -- Related
      Party Transactions -- Ongoing Service Arrangements with Other Related
      Parties -- Advertising." Our contractual obligations under this contract
      are due in Pesos. For the purposes of this table, we converted our
      obligations into U.S. Dollars at the following exchange rate: Ps. 11.149
      per U.S. $1.00.

(6)   Our contractual obligations under this contract are due in Pesos. For the
      purposes of this table, we converted our obligations into U.S. Dollars at
      the following exchange rate: Ps. 11.149 per U.S. $1.00.

(7)   See "Item 7 -- Major Shareholders and Related Party Transactions --
      Related Party Transactions -- Programming Arrangements with Related
      Parties." Our contractual obligations under this contract are due both in
      Pesos and U.S. dollars. For the purposes of this table, we converted our
      Peso obligations into U.S. Dollars at the following exchange rate: Ps.
      11.149 per U.S. $1.00.

(8)   In connection with the transactions that took place in October 2004,
      DIRECTV Latin America acquired an option to acquire up to a 15% equity
      interest in each of Innova and Innova Holdings. The amount of equity to be
      received upon the exercise of the option depends on the successful
      migration and retention of DIRECTV Mexico's subscribers to Innova with a
      minimum migration of 175,000 subscribers required for the issuance of the
      full 15% equity interest. If the options become exercisable, the holder
      may exercise them by delivering to Innova and Innova Holdings the
      promissory notes for cancellation or by paying to Innova and Innova
      Holdings an amount in cash equal to the aggregate principal amount of the
      promissory notes. The options expire on October 8, 2009. If the options
      are terminated under certain limited circumstances related to regulatory
      challenges, or after a final determination that renders the options
      illegal, or expire unexercised, then within ten days of the expiration
      date, DIRECTV Mexico will be entitled to receive an aggregate cash payment
      (including any payments made under the notes described above) of up to
      approximately U.S.$137.7 million if 175,000 DIRECTV Mexico subscribers
      successfully migrate to Innova.

(9)   In connection with the transactions that took place in October 2004, we
      and Televisa entered into two channel licensing agreements pursuant to
      which we will pay Televisa a royalty fee to carry its over-the-air
      channels on our DTH service. See "Item 4 -- Information on the Company --
      History and Development of the Company."

                    AMOUNT OF COMMITMENTS EXPIRING BY PERIOD
                         (IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                  LESS THAN      12-36         36-60        AFTER 60
                                                      TOTAL       12 MONTHS      MONTHS        MONTHS        MONTHS
                                                     -------      ---------    ---------     ---------    -------------
                                                                    2005       2006-2007     2008-2009    SUBSEQUENT TO
                                                                                                               2009
<S>                                                  <C>          <C>          <C>           <C>          <C>
Systems agreement with NDS(1).................       $11,700       $11,700             -             -                -
Uplink and downlink services with DTH TechCo..         8,000         8,000
Uplink and downlink services with Televisa....         4,600         4,600
                                                     -------      ---------    ---------     ---------    -------------
                                                     $24,300       $24,300             -             -                -
                                                     -------      ---------    ---------     ---------    -------------
</TABLE>

----------
(1)   See "Item 7 -- Major Shareholders and Related Party Transactions --
      Related Party Transactions -- Ongoing Service Arrangements with Other
      Related Parties -- Systems Agreement Between Innova and NDS."

PREPARATION OF FINANCIAL STATEMENTS

      Our financial statements have been prepared in accordance with Mexican
GAAP, which differ in some significant respects from U.S. GAAP and generally
accepted accounting principles adopted in other countries. Note 20 to our
financial statements describes the principal differences between Mexican GAAP
and U.S. GAAP as they relate to us and reconciles net loss and total equity
owners' deficit to U.S. GAAP.

                                      -53-
<PAGE>

CRITICAL ACCOUNTING POLICIES

      We have identified some key accounting policies and estimates on which our
consolidated financial position and results of operations are dependent. The
application of these key accounting policies often involves complex
considerations and assumptions and the making of subjective judgments or
decisions on the part of our management. In our management's opinion, our most
critical accounting policies under both Mexican GAAP and U.S. GAAP are those
related to the allowance for doubtful accounts receivable, the carrying value
and valuation of long-lived assets, the recognition of some reserves and
accruals under Mexican GAAP, and the valuation allowances required for deferred
income tax assets. For a description of our principal accounting policies, see
Notes 2, 3 and 20 to our consolidated financial statements.

      Revenue Recognition

      We recognize programming service revenues on a monthly basis as DTH
service is provided. Programming service revenues paid in advance of the service
being provided are recorded as deferred revenue and recognized in the month the
DTH service is provided. Initial, non-refundable fees for subscriptions,
installation and activation, are recognized upon activation of the new
subscriber's DTH services. Customer acquisition costs are expensed as incurred.

      We provide the DTH antenna, LNB and remote control to customers along with
the IRD, but we retain title to the equipment. The IRD is included in fixed
assets and is rented to customers under an operating lease. We recognize rental
revenues on a monthly basis.

      Allowance for Doubtful Accounts Receivable

      We create reserves for all accounts receivable longer than 90 days and
write off against the reserve all receivables greater than 120 days. This
accounting is based on our experience and internal trend analysis and such
analysis is reviewed on a monthly basis. After 90 days of delinquency, we
usually recover less than 2% of the accounts receivable. During the period from
90 days to 120 days we carry out a retention campaign as a final effort to keep
subscribers active; after 120 days, we proceed to cancel the delinquent
subscriber and recover the equipment. We assign any delinquent subscribers to
collection agencies and may start legal proceedings against the delinquent
subscriber. To aid our collection efforts, all subscribers execute a promissory
note when they execute the subscription agreement.

      A significant difference between the reserve amount that we establish
based on our estimates for doubtful accounts and actual amounts of unpaid
receivables could have a material adverse effect on our future operating
results.

      Carrying Value and Valuation of Long-Lived Assets

      Our balance sheet lists various long-lived assets including our satellite
transponder asset. We evaluate each long-lived asset for impairment when events
and circumstances indicate that the asset's carrying value may not be
recoverable. Under Mexican GAAP, we are required to recognize impairment losses
when we believe that the carrying value exceeds the anticipated estimated future
discounted net cash flows generated by the asset. Different assumptions
regarding such cash flows, including subscriber growth and various
macro-economic factors, could materially affect our analysis of recoverability.
In addition, due to various reasons, we also occasionally incur impairment
losses for equipment that is no longer technologically feasible to operate and
which we may need to dispose of. Further, as discussed in "Item 3 -- Key
Information -- Risk Factors -- Risk Factors Related to Our Business -- Our
Significant Debt Levels Limit Our Ability to Fund Our Operations, Affect Our
Profitability and Could Lead to Difficulties in Obtaining New Sources of
Financing Required to Continue Operations" and elsewhere, before 2003 we did not
generate positive cash flows from operations and therefore needed funding from
our equity owners. In the future, if we require and do not receive this funding,
or if our assumptions regarding future positive cash flows are not correct, we
may need to recognize significant impairment losses and accelerated depreciation
of the carrying value of these long-lived assets.

      During the years ended December 31, 2004 and December 31,2002 we recorded
impairment losses on transmission equipment and other equipment not in use equal
to Ps. 5.1 million and Ps. 33.7 million, respectively, (which were included in
the "Other operating expenses" and "Transponder services - Solidaridad 2 and
reorientation

                                      -54-
<PAGE>

cost" line items, respectively). We did not record any impairment charge for the
fiscal year ended December 31, 2003.

      Valuation Allowances on Deferred Income Tax Assets

      Under both Mexican and U.S. GAAP, we are required to record deferred
income tax assets and liabilities by using enacted tax rates in order to give
effect to temporary differences between the book and tax basis of assets and
liabilities. If enacted tax rates change, we adjust the deferred tax assets and
liabilities, through the provision for income taxes in the period of change, to
reflect the enacted tax rate expected to be in effect when the deferred tax
items reverse. We also record a valuation allowance to reduce our deferred tax
assets to the amount that is more likely than not to be realized. While we have
considered future taxable income and tax planning strategies in assessing the
need for the valuation allowance, if we were to determine that we would be able
to realize our deferred tax assets in the future in excess of the net recorded
amount, an adjustment to the deferred tax asset would increase income in the
period such determination was made. Should we determine that we would not be
able to realize all or part of our net deferred tax asset in the future, an
adjustment to the deferred tax asset would be charged to income in the period
such determination was made. Given that we have had a history of operating and
tax losses, we have determined that a prudent valuation allowance was required
against the majority of our tax loss carryforwards.

EFFECTS OF INFLATION, CURRENCY EXCHANGE FLUCTUATIONS AND TRANSLATION EFFECTS

      The following table sets forth, for the periods indicated:

            -     the percentage that the Peso devalued or appreciated against
                  the U.S. Dollar;

            -     the Mexican inflation rate;

            -     the U.S. inflation rate; and

            -     the percentage change in Mexican GDP compared to the prior
                  period.

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                        ------------------------------------
                                                        2000   2001     2002    2003    2004
                                                        ----   ----     ----    ----    ----
<S>                                                     <C>    <C>      <C>     <C>     <C>
Devaluation (appreciation)  of the Mexican Peso
     as compared to the U.S. Dollar(1)............      1.2%   (4.6)%   13.9%   7.3%    (0.7)%
Mexican inflation rate(2).........................      9.0     4.4      5.7    4.0      5.2
U.S. inflation rate(3)............................      3.4     1.6      2.5    1.9      3.3
Increase (decrease) in Mexican GDP(4).............      6.9    (0.1)     0.7    1.4      4.4
</TABLE>

(1)   Based on changes in the Interbank Rates reported by Banamex as follows:
      Ps. 9.62 per U.S. Dollar as of December 31, 2000; Ps. 9.18 per U.S. Dollar
      as of December 31, 2001; Ps. 10.46 per U.S. Dollar as of December 31,
      2002; Ps. 11.225 per U.S. Dollar as of December 31, 2003 and Ps. 11.149
      per U.S. Dollar as of December 31, 2004.

(2)   Based on changes in the Mexican National Consumer Price Index from the
      previous period, as reported by the Mexican Central Bank, as follows:
      93.248 in 2000; 97.354 in 2001; 102.904 in 2002; 106.996 in 2003 and
      112.550 in 2004.

(3)   As reported by the Federal Reserve Bank of New York.

(4)   As reported by the Instituto Nacional de Estadistica, Geografia e
      Informatica, or INEGI.

      Mexican GAAP requires that our financial statements recognize the effects
of inflation. Financial data for all periods presented in our financial
statements and this annual report have been restated in constant Pesos in
purchasing power as of December 31, 2004 in accordance with the third amendment
to Bulletin B-10 of the Mexican Public Accountants Institute. Accordingly, the
comparative increases set forth below are adjusted for the general effects of
inflation to permit period-to-period comparisons. See Note 3 to our financial
statements.

      In 2004, the rate of inflation in Mexico was 5.2% and the Peso appreciated
0.7% against the U.S. Dollar in nominal terms, reflecting slightly favorable
economic conditions during the year. In 2003 and 2002, the rate of inflation in
Mexico was 4.0% and 5.7%, respectively, and the Peso depreciated against the
U.S. Dollar in nominal terms by 7.3% and 13.9%, respectively. The rate of
inflation in Mexico has declined substantially during the last few years as
compared to historical rates. However, at approximately 4.4% per annum (as
measured from March 2004 to March 2005), Mexico's current level of inflation
remains higher than the annual inflation rates of its main

                                      -55-
<PAGE>

trading partners. See "Item 3 -- Key Information -- Risk Factors -- Risk Factors
Related to Mexico -- Mexico Has Experienced Adverse Economic Conditions."

      Inflation has led to high interest rates, devaluations of the Peso, and
during the 1980s, substantial government control over exchange rates and prices.
If Mexico were to experience high levels of inflation, our revenues and
financial condition could be impacted by the resultant decreases in effective
purchasing power among current and potential subscribers and the prospect of a
currency devaluation that could make it more difficult for us to repay our U.S.
Dollar-denominated debt and obligations as discussed below. Economic growth
slowed during the last three years, due in part to the recession in the United
States and instability in worldwide markets. Although the Mexican GDP expanded
by 4.4% in 2004 as compared to 2003, the higher increase in the last four years,
the average level of economic growth is relatively anemic when compared to our
major trading partners historical and average growth rate.

      Under Mexican GAAP, through December 31, 2004, U.S. Dollar-denominated
sales, costs and expenses are translated into Pesos at the exchange rate in
effect when the operations are recognized and are subsequently restated in
constant Pesos using the Mexican national consumer price index. If the
devaluation of the Mexican Peso against the U.S. Dollar is greater than
inflation in Mexico during a period, U.S. Dollar-denominated sales, costs and
expenses increase in relative terms when compared to prior periods. Conversely,
if inflation exceeds the devaluation rate during a period, U.S.
Dollar-denominated sales, costs and expenses decrease in relative terms when
compared to prior periods. In 2004, we had favorable effects due to Peso
appreciation and an inflation rate similar to previous years. In 2003 and 2002,
the translation effect and devaluation increased our cost of sales in comparison
to previous years.

      Any devaluation of the Peso will likely affect our liquidity and results
of operations because an important amount of our indebtedness, operating costs
and expenses are U.S. Dollar-denominated, while our revenues are primarily Peso
denominated. Any decrease in the value of the Peso against the U.S. Dollar could
also cause us to incur foreign exchange losses, which would reduce our net
income.

      Adverse economic conditions in Mexico, as well as social instability or
other adverse social, political or economic developments in or affecting Mexico,
would generally have an adverse effect on the Mexican economy and consumer
purchasing power, thereby potentially decreasing our revenues while increasing
our nominal Peso-denominated costs and expenses. See "Item 3 -- Key Information
-- Risk Factors -- Risk Factors Related to Mexico -- Mexico Has Experienced
Adverse Economic Conditions."

U.S. DOLLAR-DENOMINATED OBLIGATIONS, COSTS AND EXPENSES

      Any devaluation of the Peso will likely adversely affect our liquidity and
results of operations by increasing the Peso equivalent of U.S.
Dollar-denominated operating costs and expenses.

      We have incurred and expect to continue to incur more than 40% of our
obligations payable in U.S. Dollars, while our revenues will be generated
primarily in Mexican Pesos. Therefore, we are subject to currency exchange rate
risk. In addition to our obligations due under our senior notes, our U.S.
Dollar-denominated obligations will also continue to include satellite signal
reception and retransmission fees, programming commitments and equipment costs.
We did not have any U.S. Dollar-denominated revenues from 1998 through 2004
other than interest income on some restricted investments, while our U.S.
Dollar-denominated operating costs and expenses were significant and are
expected to continue to exceed U.S. Dollar-denominated revenues, if any. During
2004, 2003 and 2002, approximately 34.0%, 37.0% and 30.0% of our total operating
expenses, not considering interest expense of Ps. 673.0 million, Ps. 987.6
million and Ps. 1,075.3 million, respectively, were U.S. Dollar-denominated.

      During 2005, we have been and expect to continue entering into several
derivative transactions (forwards) in order to reduce our U.S. Dollar foreign
exchange exposure by taking advantage of market windows and increasing our U.S.
Dollar cash position.

      On February 13, 2004, we entered into two separate derivative transactions
denominated "coupon swap" agreements to hedge a portion of our U.S. Dollar
foreign exchange exposure resulting from the issuance of our U.S.$300.0 million
9.375% senior notes that mature in 2013. Under the transactions, we receive
semiannual payments calculated based on an aggregate notional amount of
U.S.$300.0 million at an annual rate of 9.375%, and we make monthly payments
calculated based on an aggregate notional amount of Ps. 3,282.2 million at an
annual rate of 10.25%. The transactions, both of which terminate in September
2008, will reduce our foreign exchange

                                      -56-
<PAGE>

exposure on 10 interest coupon payments on the senior notes we issued in
September 2003. Also, during the fourth quarter of 2004, we entered into several
forward contracts to obtain a certainty on the foreign exchange rate of the peso
vs. U.S. dollar, reducing the risk when our obligations in U.S. dollars become
payable. We used those forwards to redeem our U.S.$88.0 million in principal
amount outstanding under our 12 7/8% senior notes due 2007, which were paid in
January 7, 2005, and to fund normal operations.

      In 2003 and 2002, we did not engage in any hedging or other transactions
to manage the risks associated with foreign currency or interest rate
fluctuations.

      Nevertheless, shifts in currency exchange rates could decrease the value
of our revenues relative to our costs, resulting in a material adverse effect on
our financial position. See "Item 3 -- Key Information -- Risk Factors -- Risk
Factors Related to Mexico -- Currency Fluctuations or the Devaluation and
Depreciation of the Peso Could Limit the Ability of Our Company and Other to
Convert Pesos into U.S. Dollars or Other Currencies, Which Could Adversely
Affect Our Business, Financial Condition or Results of Operations."

NEW ACCOUNTING PRONOUNCEMENTS

      The following accounting standards, which were issued by the Mexican
Institute of Public Accountants (IMCP), went into effect on January 1, 2005.

      Bulletin B-7, "Acquisitions of Businesses", went into effect on January 1,
2005, which establishes, among other things, the purchase method as the only
method of accounting for the acquisition of a business, changes to the
accounting treatment of goodwill, eliminating the amortization of goodwill as
from the date on which that statement went into effect and making it subject
instead to annual impairment tests. The Bulletin also provides specific rules
for the acquisition of minority interests and the transfer of assets or the
exchange of shares between entities under common control. We are evaluating the
effect of the adoption of this Bulletin in 2005 in our consolidated financial
statements.

      The amendments to Bulletin C-2, "Financial Instruments", went into effect
on January 1, 2005. Its provisions require that the effects of valuing
investments available for sale be recorded in stockholders equity and not in
income for the year, and include rules for determining the effects of impairment
of financial instruments. We are evaluating the effect of the adoption of this
Bulletin in 2005 in our consolidated financial statements.

      Bulletin C-10 "Derivative Financial Instruments and Coverage Operations",
went into effect on January 2005. This Bulletin, besides detailing recording,
valuation and disclosure criteria applicable to all derivative financial
instruments, requires that the effectiveness of hedges of cash flows and of net
investment in subsidiaries located abroad be evaluated and that the effective
portion of the gains or losses on hedging instruments be recognized within
comprehensive income. We are evaluating the effect of the adoption of this
Bulletin in 2005 in our consolidated financial statements.

      The amendments to Bulletin D-3, Labor Obligations, went into effect on
January 1, 2005. These amendments provide additional valuation and disclosure
rules for recognizing severance payments due to causes other than restructuring.
We are evaluating the effect of the adoption of revised Bulletin D-3 in 2005 in
our consolidated financial statements.

RECENTLY ISSUED U.S. GAAP PRONOUNCEMENTS

      In December 2004, the Financial Accounting Standards Board ("FASB") issued
FASB Statement 123 (Revised), "Share-Based Payment" ("FAS 123R"). FAS 123R
requires all companies to measure compensation costs for all share-based
payments (including employee stock options) at fair value and recognize such
costs in the statement of operations. FAS 123R will become effective for Innova
on January 1, 2006. Innova has not issued any employee stock options and
accordingly, we do not expect the adoption of the revised standard to have a
significant impact on our financial statements.

      In December 2004, the FASB issued FASB Statement 153, "Exchanges of
Nonmonetary Assets -- an amendment of APB Opinion No. 29" ("FAS 153"). FAS 153
eliminates the exception to account for nonmonetary exchanges of similar
productive assets at carrying value and replaces it with a general exception for
exchanges of nonmonetary assets that do not have commercial substance;
otherwise, the exchange principal of fair value applies. A nonmonetary exchange
has commercial substance if the future cash flows of the entity are expected to
change

                                      -57-
<PAGE>

significantly as a result of the exchange. FAS 153 is effective for nonmonetary
asset exchanges occurring in fiscal periods beginning after June 15, 2005. We
believe the provisions of FAS 153 will not have a material impact on our
consolidated financial statements.

      In November 2004, the FASB issued FASB Statement 151, "Inventory Costs"
("FAS 151"). FAS 151 amends the guidance in Accounting Research Bulletin 43,
"Inventory Pricing" ("ARB 43") and requires abnormal amounts of idle facility
expense, freight handling costs and wasted material (spoilage) to be recognized
as current-period charges regardless of whether they meet the criterion of "so
abnormal" as previously defined in ARB 43. Furthermore, FAS 151 requires that
the allocation of fixed production overheads to the costs of conversion be based
on the normal capacity of the production facilities. FAS 151 is effective for
inventory costs incurred during fiscal years beginning after June 15, 2005. We
believe that the provisions of FAS 151 will not have a significant impact on our
financial statements.

                                      -58-
<PAGE>

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

                         DIRECTORS AND SENIOR MANAGEMENT

DIRECTORS

      The management of our business is vested in our Board of Directors. Under
our bylaws, our Board of Directors currently consists of eleven directors (and
up to ten alternate directors), including six directors (and up to six alternate
directors) selected by Televisa, four directors (and up to four alternate
directors) selected by News Corporation and one director selected by both,
Televisa and News Corporation, who shall be an independent member as determined
in our bylaws. Our directors serve until they are replaced.

      The following table sets forth the names of our current directors and
their alternates as of April 30, 2005, their dates of birth, their principal
occupation, their business experience, including other directorships, and their
years of service as directors or alternate directors.

<TABLE>
<CAPTION>
                                                                                                        FIRST
   NAME AND DATE OF BIRTH              PRINCIPAL OCCUPATION              BUSINESS EXPERIENCE           ELECTED
---------------------------       -------------------------------   ------------------------------     -------
<S>                               <C>                               <C>                                <C>
DIRECTORS APPOINTED BY TELEVISA:

Emilio Azcarraga Jean             Chairman of the Board,            Member of the Boards of             1996
  (02/21/68)                      President and Chief Executive     Telefonos de Mexico, S.A. de
                                  Officer and President of the      C.V. and Banco Nacional de
                                  Executive Committee of Televisa   Mexico, S.A. and former Vice
                                                                    Chairman of the Board of
                                                                    Univision

Alfonso de Angoitia Noriega       Executive Vice President and      Former Chief Financial Officer      1998
  (01/17/62)                      Member of the Executive           of Televisa and former
                                  Committee of Televisa             Alternate Member of the Board
                                                                    of Univision and Partner,
                                                                    Mijares, Angoitia, Cortes y
                                                                    Fuentes, S.C. (1994 - 1999)

Jose Antonio Baston Patino        Corporate Vice President of       Former Vice President of            2000
  (04/13/68)                      Television and Member of the      Operations of Televisa, former
                                  Executive Committee of Televisa   General Director of Programming
                                                                    of Televisa and former Member of
                                                                    the Board of Univision

Salvi Folch Viadero               Chief Financial Officer of        Former Vice President of            2002
  (08/16/67)                      Televisa                          Financial Planning of
                                                                    Televisa, former Chief
                                                                    Executive Officer of Comercio
                                                                    Mas, S.A. de C.V., Member of
                                                                    the Boards of Mexder, Mercado
                                                                    Mexicano de Derivados S.A.,
                                                                    Proveedor Integral de Precios,
                                                                    Miami Holdings, S.A. de C.V.,
                                                                    and FS Unit 3007 Inc. and
                                                                    Alternate Director of Televisa
</TABLE>

                                      -59-
<PAGE>

<TABLE>
<CAPTION>
                                                                                                        FIRST
   NAME AND DATE OF BIRTH              PRINCIPAL OCCUPATION              BUSINESS EXPERIENCE           ELECTED
---------------------------       -------------------------------   ------------------------------     -------
<S>                               <C>                               <C>                                <C>
 Jose Antonio Lara del Olmo       Vice President -- Tax of          Former Tax Director of              2002
(09/02/70)                        Televisa                          Televisa, Member or Alternate
                                                                    Member of the Board of various
                                                                    Innova subsidiaries and/or
                                                                    related entities and various
                                                                    Televisa subsidiaries,
                                                                    affiliates, and/or related
                                                                    entities

Juan Sebastian Mijares Ortega     Secretary of the Board,           Partner, Mijares, Angoitia,         2000
(10/04/59)                        Secretary of the Executive        Cortes y Fuentes, S.C. (1994
                                  Committee and Vice President --   - 2000), Member and Secretary
                                  Legal and Corporate General       of the Board of Bank of
                                  Counsel of Televisa               Tokyo-Mitsubishi Bank-Mexico
                                                                    and Member of the Boards of
                                                                    Afore Banamex, S.A. de C.V.,
                                                                    Union de Telecomunicaciones de
                                                                    Iberoamerica, A.C.,
                                                                    Organizacion de
                                                                    Telecomunicaciones de
                                                                    Iberoamerica (O.T.I.) A.C.,
                                                                    Member or Alternate Member of
                                                                    the Boards of Innova,
                                                                    Televisa, and various
                                                                    subsidiaries, affiliates,
                                                                    and/or related entities

DIRECTORS APPOINTED BY NEWS CORPORATION:

David Haslingden                  Chief Executive Officer,          Member of the Boards of             2004
  (08/21/61)                      National Geographic Channels      WildAir and Sky Brasil
                                  International; Chief Operating    Servicos Ltd.
                                  Officer, Fox International
                                  Channels

John Nallen                       Executive Vice                    Former Senior Vice President,       2004
  (05/13/57)                      President-Finance and Deputy      Finance of News Corporation,
                                  Chief Financial Officer of News   Former Partner, Arthur
                                  Corporation                       Andersen, Member of the Board
                                                                    of Sky Brasil Servicos Ltd.

Lawrence Jacobs                   Senior Executive Vice President   Former Executive Vice               2001
  (05/04/55)                      and Group General Counsel of      President and Deputy General
                                  News Corporation                  Counsel of News Corporation,
                                                                    Director of Sky Brasil
                                                                    Servicos Ltd. and various News
                                                                    Corporation subsidiaries,
                                                                    affiliates and/or related
                                                                    entities
</TABLE>

                                      -60-
<PAGE>

<TABLE>
<CAPTION>
                                                                                                        FIRST
   NAME AND DATE OF BIRTH              PRINCIPAL OCCUPATION              BUSINESS EXPERIENCE           ELECTED
----------------------------      -------------------------------   ------------------------------     -------
<S>                               <C>                               <C>                                <C>
Emilio Carrillo Gamboa            Senior Partner at Bufete          Chairman of the Board of            1997
  (10/16/37)                      Carrillo Gamboa, S.C.             Cementos Holcim-Apasco S.A. de
                                                                    C.V. and the Mexico Fund,
                                                                    Inc., Member of the Boards of
                                                                    Grupo Modelo, S.A. de C.V.,
                                                                    Kimberly-Clark de Mexico,
                                                                    S.A. de C.V., SANLUIS
                                                                    Corporacion, S.A. de C.V.,
                                                                    Empresas ICA, S.A. de C.V.,
                                                                    Grupo Mexico, S.A. de C.V.,
                                                                    Gasoductos de Chihuahua, S. de
                                                                    R.L. de C.V., Southern Peru
                                                                    Copper Corporation, and Bank
                                                                    of Tokyo Mitsubishi (Mexico)
                                                                    S.A., Member of the Boards of
                                                                    Innova Holdings, S. de R.L. de
                                                                    C.V., and Innova's
                                                                    subsidiaries

DIRECTORS APPOINTED BY TELEVISA AND NEWS CORPORATION:

Fernando Ruiz Sahagun             Partner at Chevez, Ruiz           Member of the Boards of Accel,      2004
  (10/23/43)                      Zamarripa y Cia, C.A.             S.A. de C.V, Grupo Industrial
                                                                    Camesa, S.A. de C.V., SANLUIS
                                                                    Corporacion, S.A. de C.V.,
                                                                    Grupo Mexico, S.A. de C.V.,
                                                                    Grupo Financiero Santander
                                                                    Serfin, S.A., Mexico D.F.,
                                                                    Tlalnepantla, Estado de Mexico
ALTERNATE DIRECTORS APPOINTED BY TELEVISA:

Alexandre Moreira Penna da        Chief Executive Officer of        Former Vice President of            2004
Silva                             Innova                            Corporate Finance of Televisa,
(12/25/54)                                                          former Managing Director of JP
                                                                    Morgan Chase, Member or
                                                                    Alternate Member of the
                                                                    Boards of various Televisa and
                                                                    Innova subsidiaries,
                                                                    affiliates, and/or related
                                                                    entities

Rafael Villasante Guzman          Director of Business              Former Vice President of JP         2004
(06/09/62)                        Development of Televisa           Morgan Chase, Member of the
                                                                    Boards of various Televisa
                                                                    subsidiaries, affiliates,
                                                                    and/or related entities

Jaime Esteban Pous Fernandez      Legal Director of Televisa        Member or Alternate Member of       2004
(05/19/69)                        affiliates                        the Boards of Innova Holdings,
                                                                    S. de R.L. de C.V., Innova
                                                                    subsidiaries, and various
                                                                    Televisa subsidiaries,
                                                                    affiliates, and/or related
                                                                    entities
</TABLE>

                                      -61-
<PAGE>

<TABLE>
<CAPTION>
                                                                                                        FIRST
   NAME AND DATE OF BIRTH              PRINCIPAL OCCUPATION              BUSINESS EXPERIENCE           ELECTED
---------------------------       -------------------------------   ------------------------------     -------
<S>                               <C>                               <C>                                <C>

Jorge Lutteroth Echegoyen         Controller and Vice President     Former Senior Partner of            2000
  (01/24/53)                      of Televisa                       Coopers & Lybrand Despacho
                                                                    Roberto Casas Alatriste, S.C.

Carlos Ferreiro Rivas             Chief Financial Officer of        Former Director of Corporate        2002
  (11/19/68)                      Innova                            Finance of Televisa, former
                                                                    Director of Credit Risk at
                                                                    Banco Santander Mexicano,
                                                                    former Manager in Corporate
                                                                    Banking of Grupo Financiero
                                                                    Inverlat, Alternate Member of
                                                                    the Boards of Innova's
                                                                    subsidiaries, Member of the
                                                                    Board of Mas Fondos, S.A.
                                                                    de C.V.

Maria Azucena Dominguez           Legal Corporate Director of       Member of the Board of Abastos      2000
Cobian                            Televisa                          de Oaxaca, S.A. de C.V.,
(07/30/57)                                                          Partner in Cobian Alumino,
                                                                    S.A. de C.V., Member or
                                                                    Alternate Member of the Boards
                                                                    of Televisa, Innova, and
                                                                    various subsidiaries,
                                                                    affiliates and/or related
                                                                    entities.

ALTERNATE DIRECTORS APPOINTED BY NEWS CORPORATION:

Paul Haggerty                     Executive Vice President,         Former acting Chief Financial       2000
  (11/03/59)                      Finance-Global Tax and            Officer of Gemstar-TV Guide
                                  Penalties of News Corporation     International.

Paula Wardynski                   Vice President-Treasurer of       Member of the Board of 55           1998
  (3/23/58)                       News America Incorporated         corporations.
</TABLE>

SENIOR MANAGEMENT

      Under our bylaws, our Chief Executive Officer and Chief Financial Officer
are appointed by Televisa, subject to the approval of News Corporation, and may
be removed by mutual agreement of Televisa and News Corporation without cause or
by either of them with reasonable cause. The Chief Executive Officer has broad
responsibility for the day-to-day operations of Innova. The Chief Financial
Officer or the Executive Director of Finance and Administration oversees all
budgetary, financial and cash management issues.

      On February 20, 2004, we announced the appointment of Mr. Alexandre
Moreira Penna as our Chief Executive Officer, effective March 1st, 2004, who
replaced outgoing Chief Executive Officer Mr. Pablo Vazquez Oria.

      The following table sets forth the names of our executive officers, their
dates of birth, their current position, their prior business experience and the
year in which they were appointed to their current positions:

                                      -62-
<PAGE>

<TABLE>
<CAPTION>
    NAME AND DATE OF BIRTH           PRINCIPAL OCCUPATION          BUSINESS EXPERIENCE      FIRST ELECTED
--------------------------------    -----------------------     ------------------------    -------------
<S>                                 <C>                         <C>                         <C>
Alexandre Moreira Penna da Silva    Chief Executive Officer     Former Vice President of        2004
(12/25/54)                                                      Corporate Finance of
                                                                Televisa; former
                                                                Managing Director of
                                                                JP Morgan Chase, Member
                                                                or Alternate Member of
                                                                the Boards of various
                                                                Televisa and Innova
                                                                subsidiaries,
                                                                affiliates, and/or
                                                                related entities

Carlos Ferreiro Rivas               Chief Financial Officer     Former Director of              2002
  (11/19/68)                                                    Corporate Finance of
                                                                Televisa, former
                                                                Director of Credit Risk
                                                                at Banco Santander
                                                                Mexicano, former Manager
                                                                in Corporate Banking of
                                                                Grupo Financiero
                                                                Inverlat, Alternate
                                                                Director of Innova's
                                                                subsidiaries, Member of
                                                                the Board of Mas Fondos,
                                                                S.A. de C.V.

Luis Jorge Todd Alvarez             Sales Vice President        Former Vice President of        1996
   (07/18/56)                                                   Sales and Distribution of
                                                                Innova, former Commercial
                                                                Director of Multivision
</TABLE>

                                  COMPENSATION

      For the year ended December 31, 2004, we paid Ps. 13.0 million in
aggregate compensation to our executive officers for their services in all
capacities. From October 8, 2004 and going forward, we also paid and will also
pay an emolument to our directors and alternate directors of the Board,
consisting of two gold-coins or "Centenarios"; this compensation is payable
during our quarterly board meetings. We did not issue any options to purchase
equity interests in us or provide any pension, retirement or similar benefits to
our directors, alternate directors and executive officers in 2004.

                                 BOARD PRACTICES

      Our directors and alternate directors do not serve on the Board for
limited terms. They generally serve until replaced. Our directors and alternate
directors are not entitled to receive any benefits from Innova or its
subsidiaries upon their termination.

EXECUTIVE COMMITTEE

      The Board has delegated some responsibilities to an Executive Committee
that consists of Messrs. Azcarraga Jean, de Angoitia N., Folch V., Penna,
Haslingden, Nallen and Jacobs. The alternate members of the committee are
Messrs. Mijares O., Villasante G., Ferreiro R., Lara del O., Haggerty, Carrillo
G. and Ms. Wardynski. The Executive Committee generally acts on matters in the
absence of the Board of Directors. As a company with no securities listed on a
national securities exchange or inter-dealer quotation system, we are not
required to establish either an audit committee or a compensation committee. Our
equity holders must approve our annual audited financial statements. Matters
regarding the retention of auditors are considered, reviewed and approved by the
entire Board of Directors. Matters regarding executive compensation are
considered, reviewed and approved by the entire Board of Directors.

                                      -63-
<PAGE>

                                    EMPLOYEES

      As of December 31, 2004, we employed 1,935 people in Mexico, including
full-time and part-time employees, with approximately 53 in transmission and
technology related functions, approximately 491 in marketing and sales,
approximately 1,105 in client services and subscriber handling and approximately
286 in management, finance, personnel and administration. This represents an
overall increase of 59 employees as compared to the end of December 2003. In
2004, we increased our headcount primarily due to the growth of our business and
to improve efficiency in our platform.

                                 SHARE OWNERSHIP

      All of our social parts are owned by subsidiaries of Televisa, News
Corporation, and Liberty Media. None of our directors, alternate directors or
officers own any direct equity interest in Innova, although they may own
indirect interests through their ownership of interests of Televisa, News
Corporation or Liberty Media. We do not sponsor any program whereby our
directors, alternate directors, officers, or employees may participate in our
capital.

                                      -64-
<PAGE>

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

                               MAJOR SHAREHOLDERS

      The following table sets forth information with respect to the current
beneficial ownership of our equity interests:

<TABLE>
<CAPTION>
                                                            AMOUNT AND NATURE                         PERCENTAGE
NAME OF BENEFICIAL OWNER                                      OF OWNERSHIP                             OWNERSHIP
------------------------                                  ----------------------                      ----------
<S>                                                       <C>                                         <C>
Innova Holdings, S. de R.L. de C.V...................     Series C Social Part                          76.8%
SKY DTH, S. de R.L. de C.V...........................     Series A-1 Social Part                        13.9%
News DTH (Mexico) Investment Ltd.....................     Series B-1 Social Part                         7.0%
Liberty Mexico DTH, Inc. ............................     Series B-2 Social Part                         2.3%
</TABLE>

      SKY DTH is an indirect, wholly owned subsidiary of Televisa. News DTH is
an indirect, wholly owned subsidiary of News Corporation. Liberty Mexico is an
indirect, wholly owned subsidiary of Liberty Media. Innova Holdings is a company
indirectly owned 60% by Televisa, 30% by News Corporation and 10% by Liberty
Media. Accordingly, Innova's total capital is indirectly owned 60% by Televisa,
30% by News Corporation and 10% by Liberty Media.

      The relations between our equity owners are governed by our bylaws and an
Amended and Restated Social Part Holders Agreement. Our amended bylaws,
notarized on December 22, 1998, provided for the conversion of Innova into a
limited liability company with variable capital and to reflect the sale of a ten
percent interest represented by the Series B-2 Social Parts to Liberty Mexico.
More recently, on September 4, 2003, we amended our bylaws to create and
authorize the new Series C limited voting Social Part issued to Innova Holdings
and on October 8, 2004 to limit the terms on which we and our shareholders and
their affiliates may enter into transactions without the approval of our Board
of Directors.

      Each ordinary Series A and B Social Part is entitled to one vote for each
Ps. 100 of capital that its social part represents. Each Series C Social Part is
also entitled to one vote for each Ps. 100 of capital that its social part
represents; however, each Series C Social Part may only be voted at a meeting of
members with respect to the following extraordinary matters: (i) extension of
the term of our company; (ii) our early dissolution; (iii) change of our
corporate purpose; (iv) change of our nationality; (v) transformation of our
corporate form; or (vi) our merger with another entity.

SECURITIES HELD IN HOST COUNTRY

      All of our senior notes are held of record in the United States by one
record holder, The Depository Trust Company, or DTC, which holds the notes for
their beneficial owners in accounts maintained within DTC.

CONTROL

      If the transactions contemplated by the agreements with DIRECTV are
consummated, Televisa would own approximately 57% of the equity interest in
Innova and DIRECTV and DTVLA would collectively own the remaining 43% equity
interest in Innova. See "Item 4 -- Information on the Company -- History and
Development of the Company." Our owners will only be able to take significant
actions with the affirmative vote of Televisa and DIRECTV and DTVLA under the
bylaws and the Amended and Restated Social Part Holders Agreements. For a
description, see "Item 10 -- Additional Information -- Bylaws." Pursuant to our
Amended and Restated Social Part Holders Agreement, Televisa and DIRECTV are not
permitted to engage in the DTH business in Mexico and Central America (subject
to certain listed exceptions), except through us. Televisa also owns interests
in businesses that compete with us for customers in the Mexican pay television
market. Specifically, Televisa controls and owns a majority interest in
Cablevision, the operator of Mexico's third largest cable television system. See
"Item 4 -- Information on the Company -- Business Overview -- Competition --
Cable Television and MMDS."

                           RELATED PARTY TRANSACTIONS

      We have engaged in, and expect to continue to engage in, a significant
number and variety of related party transactions, including, but not limited to,
the transactions summarized in Note 8 of our financial statements. Note 8

                                      -65-
<PAGE>

to the financial statements provides other information required to be made
publicly available in Mexico with regard to the interest of management in some
transactions. Several other related party transactions not required to be listed
here are included as Exhibits to this document. Although we believe that
transactions with our affiliates are generally conducted on an arms' length
basis and at market prices, conflicts of interest are inherent in such
transactions. See "Item 3 -- Key Information -- Risk Factors -- Risk Factors
Related to Our Business -- Our Equity Holders Have, or May Acquire, Interests in
Businesses Which Compete with Us for Customers and Business Opportunities"; and
" -- We Have Significant Transactions With Our Owners, Who Are Involved in
Related Businesses, Which Creates the Potential for Conflicts of Interest."

DIRECTV MEXICO SUBSCRIBER BASE TRANSACTION

      In October 2004, DIRECTV announced the shut down of its operations in
Mexico. To ease its subscribers' transition, and in an effort to provide an
alternative, DIRECTV, through its indirect subsidiary Galaxy Mexico sold its
subscriber list to our subsidiary Novavision, in exchange for two notes with an
aggregate principal amount totaling approximately Ps. 621.1 million and
potential payments in the future depending on the number of subscribers that
successfully migrate to our service. See "Item 4 -- Information on the Company
-- History and Development of the Company."

LOANS AND CAPITAL CONTRIBUTIONS FROM OUR OWNERS

      During the period from 1996 to 1999, we received capital contributions
from our owners in proportion to their respective equity interests in Innova in
an aggregate amount equal to U.S.$149.0 million. This amount included
forgiveness of debt amounting to Ps. 463.8 million.

      Additionally, from December 1998 through March 2002, our equity owners
contributed a total of U.S.$390.9 million in loans and accrued interest to us
and our subsidiaries. The loans were made by our owners in proportion to each of
their respective equity interests in Innova and bore a fixed interest rate of 9%
per annum payable at maturity, including any applicable withholding taxes, and
matured between 2008 and 2012. In June 2002, we entered into a credit agreement
with our owners to memorialize the terms of some of these loans. This credit
agreement also required us to execute promissory notes to evidence the loans we
received from our owners between 2000 to 2002, as well as to evidence any new
loans we obtained from our owners.

      Our owners did not loan us any money from March 2002 through September 9,
2003, on which date our owners capitalized all loans made by them or any of
their affiliates to us. The amount of the loans and accrued interest capitalized
as of September 9, 2003 was approximately Ps. 4.5 billion. The capitalization
did not affect the percentage ownership interests of our owners. See "Item 5.
Operating and Financial Review and Prospects -- Liquidity and Capital
Resources." We, and our subsidiaries, do not currently have any outstanding
loans from our equity owners. However, we can not assure you that we will not
require such funding in the future.

      In May 2004, we and our equity owners entered into the following
transactions, which had the net effect of increasing our net worth by $15
million but did not affect the relative ownership interests of our equity
owners:

            -     News Corporation contributed to us an account receivable of
                  U.S.$15 million owed to them by Sky DTH;

            -     Televisa assigned to Sky DTH an account receivable of U.S.$15
                  million owed to it by Innova; and

            -     Innova, Innova Holdings, News, Liberty Media and Sky DTH
                  agreed that the obligation owed by Innova to Sky DTH and the
                  obligation owed by Sky DTH to Innova would be set off against
                  each other and cancelled.

      In connection with this transaction, our equity owners also increased our
capital by a de minimis amount; Historically, Televisa, News Corporation and
Liberty Media indirectly owned 60%, 30% and 10%, respectively, of our equity
interests. If the transactions contemplated by the agreements with DIRECTV are
consummated, Televisa would own approximately 57% of the equity interest in
Innova and DIRECTV and DTVLA would collectively own the remaining 43% equity
interest in Innova. See "Item 4 -- Information on the Company -- History and
Development of the Company."

                                      -66-
<PAGE>

PROGRAMMING ARRANGEMENTS WITH RELATED PARTIES

      We obtain, and anticipate that we will continue to obtain, significant
programming on a DTH exclusive basis from Televisa and News Corporation under
our Social Part Holders Agreement. We compete, in part, based on this exclusive
programming. In 2004, 2003 and 2002, we paid Ps. 249.6 million, Ps. 215.5
million and Ps. 195.8 million, respectively, to News Corporation and Televisa
affiliates for the exclusive and non-exclusive programming provided to us. For a
description of the risks associated with our programming arrangements, see "Item
3 -- Key Information -- Risk Factors -- Risk Factors Related to Our Business --
Our Ability To Attract Subscribers Depends on the Availability of Desirable
Programming from Third Party Programmers" and "Item 4 -- Information on the
Company -- Business Overview -- Programming and Services."

      In addition, we had the exclusive rights to rebroadcast and distribute
Mexican Soccer League programming from the 2003 Mexican Soccer Tournaments and
2002 Mexican Soccer Tournaments; these include the exclusive transmission rights
with respect to all TV media of 20 soccer matches during each season. Pursuant
to a separate license agreement with Televisa, we acquired the exclusive live
broadcast and local black-out rights, limited to the relevant territory
(Monterrey, Guadalajara, Puebla, San Luis Potosi and Aguascalientes), with
respect to all TV media for all soccer matches where any of the Monterrey,
Tigres, Chivas, Atlas, Puebla, San Luis or Necaxa teams play.

      We recently entered in to a license agreement with Televisa to acquire the
exclusive rights to rebroadcast and distribute Mexican Soccer League programming
from the 2004 Opening Soccer Tournament and 2005 Closing Soccer Tournament
seasons; these include the exclusive transmission rights with respect to all TV
media of 20 soccer matches during each season. In addition, pursuant to separate
license agreements with Televisa, we acquired the exclusive live broadcast and
local black-out rights, limited to the relevant territory (Monterrey,
Guadalajara, Puebla and Aguascalientes), with respect to all TV media for all
soccer matches where any of the Monterrey, Tigres, Chivas, Atlas, Puebla or
Necaxa teams play. The agreements' terms range from July 2004 to June 2005 or
June 2007, depending on the soccer team. We paid and will pay Televisa a total
of approximately U.S.$ 13.5 million for these licenses during the term of our
agreements.

      During 2003, we acquired the exclusive pay-TV transmission rights for the
reality shows Big Brother 2 and Big Brother VIP2 from Televisa for a total
amount of Ps. 30.6 million. In 2004, we acquired from Televisa the exclusive
pay-TV transmission rights for the first and second parts of the reality show
Big Brother VIP3, for an aggregate of Ps. 28.3 million. We broadcast these
reality shows through our interactive channels 24 hours per day. In 2005 we
entered into a new agreement with Televisa for the exclusive pay-TV transmission
rights for the reality show Big Brother 3R.

      In connection with the transactions that took place in October 2004, we
and Televisa entered into two channel licensing agreements pursuant to which we
will pay Televisa a royalty fee to carry its over-the-air channels on our DTH
service. See "Item 4 -- Information on the Company -- History and Development of
the Company." In addition, pursuant to the terms of our Amended and Restated
Social Part Holders Agreement, our sponsors have agreed to make available to us
their existing and future program services and channels on a DTH-exclusive
basis.

      In addition, we have reached an agreement with Televisa to acquire the
rights to broadcast 34 matches, or more than 50%, of the 2006 FIFA World Cup
soccer tournament matches on an exclusive basis, with respect to all TV media.
We paid Televisa U.S. $15.0 million for these rights. As part of this agreement,
we will be able to rebroadcast, on an exclusive basis, the non-exclusive matches
under certain conditions and after a certain delay period. We believe this
exclusive content will strongly improve our ability to attract and retain
subscribers and is a key factor in our strategy to offer the highest quality and
variety sports programming in Mexico.

COMPETITIVE ACTIVITIES

      Under our Amended and Restated Social Part Holders Agreement, subject to
exceptions, Televisa and News Corporation have agreed not to directly or
indirectly own, manage, operate, control or finance a business or enterprise
that operates a competing DTH service in Mexico and Central America (subject to
certain exceptions).See "Item 4 -- Information on the Company -- History and
Development of the Company."

                                      -67-
<PAGE>

ONGOING SERVICE ARRANGEMENTS WITH OTHER RELATED PARTIES

      Uplink Services Agreement

      DTH TechCo Partners, or DTH TechCo, provides us with play-out and uplink
functions and related services such as head-end operation from two sites in the
United States: a main uplink facility in Miami Lakes, Florida and a redundancy
site in Port St. Lucie, Florida. In 2004, we paid Ps. 93.7 million to DTH TechCo
for their services. DTH TechCo is a partnership formed by Televisa, News
Corporation, Globopar and Liberty Media. As a result of the transactions among
Televisa, News Corporation, Globopar, Liberty Media and DIRECTV in October 2004,
DTH TechCo is owned 70% by DIRECTV and 30% by Televisa. See "Item 3 -- Key
Information -- Risk Factors -- Risk Factors Related to Our Business -- If Our
Affiliate DTH TechCo Is Unable to Obtain Funding, It May Not Be Able to Provide
a Necessary Service for our Operations, Which Could Adversely Affect Our
Business, Financial Condition and Results of Operations."

      In addition, Televisa provides us with uplink, downlink, playout and
compression services relating to locally-sourced programming from its Mexico
City facility. In 2004, we paid Ps. 45.6 million for these services.

      Systems Agreements Between Innova and NDS

      We have ongoing agreements with NDS, a public company and majority-owned
subsidiary of News Corporation, to provide us with various key systems. Under a
September 1996 agreement, NDS provides us the conditional access system,
including the Smart Cards necessary to decode the signal at a subscriber's home,
and equipment needed to digitize, compress, encrypt and multiplex the signals
transmitted to the satellite by our uplink facilities. This agreement was
amended in February 2000 to settle a dispute over payment for some of the
software and to include new interactive television technology. Further, in 2003,
NDS stopped supplying its services with respect to digitizing and compressing
the satellite signals. See "Item 4 -- Information on the Company -- Business
Overview -- Operations -- Broadcast and Conditional Access Systems." We estimate
that our 2005 commitment for the conditional access system, security services
and Smart Card purchases will be approximately U.S.$11.7 million.

      NDS also provided us with our previous subscriber management system under
agreements dated October 29, 1996 and August 3, 1998. In November 2003, we
successfully implemented a new SMS by using the software "Kenan" from CSG
Software, Inc. to support the growth of our subscriber base. Currently this
system is in service and is fully operational. Our agreement with NDS related to
the maintenance of the Provider II subscriber management software has been
terminated.

      In 2004, we paid NDS U.S.$8.7 million for these systems and related
services under our various agreements with them.

      Guarantees

      In October 2004, Televisa entered into an amended and restated guaranty
with PanAmSat pursuant to which the proportionate share of our transponder lease
obligation guaranteed by Televisa was reduced from 60% to 51%, with News Corp.
guaranteeing the remaining 49%. See "Item 4 -- Information on the Company --
History and Development of the Company." Corporacion de Radio y Television del
Norte, S. de R.L. de C.V., our subsidiary, entered a satellite services
agreement with PanAmSat on February 8, 1999. Under that agreement, we are
obligated to pay a monthly service fee of U.S.$1.7 million to PanAmSat for
satellite signal reception and retransmission service from transponders on their
PAS-9 satellite through September 2015. The largest amount of this obligation
outstanding through December 31, 2004 was U.S.$197.6 million and the amount
outstanding as of June 1, 2005 was U.S. $189.1 million. If we do not pay these
fees in a timely manner, our owners will be required to pay these fees. For more
information about our satellite operations, see "Item 4 -- Information on the
Company -- Business Overview -- Operations -- Satellites."

      In December 2004, we entered into a Ps. 1,012 million, 7-year bank loan
with a fixed interest rate of 10.55% per annum and a five-year grace period for
principal. Televisa and News Corporation are guaranteeing this loan 51% and 49%,
respectively. See "Item 5. Operating and Financial Review and Prospects --
Liquidity and Capital Resources."

                                      -68-
<PAGE>

      Advertising

      We engage the services of VISAT, a wholly owned subsidiary of Televisa,
for some advertising and promotional efforts and to pool advertising time with
channels broadcast commonly among Televisa, Cablevision and Innova. VISAT
negotiates most of our advertising contracts with third party advertisers. Under
our agreement with VISAT, we receive from VISAT the amount of the advertising
sold on our behalf net of a commission of 12% for their promotion, selling and
collection services. In 2004, we paid VISAT an aggregate of U.S.$0.5 million in
commissions on advertising sales of approximately U.S.$3.8 million. We also
purchase magazine advertising space and television and radio advertising time
from Televisa in connection with the promotion of our DTH satellite services and
expect to continue to do so in the future. We paid Ps. 125.0 million for these
services in 2004 and expect to pay Ps. 125.0 million for similar services in
2005.

      W Radio Channel

      In 2005, we amended our agreement with Televisa Radio, a subsidiary of
Televisa, to broadcast, on a pay-TV exclusive basis, W Radio Channel, a news and
entertainment radio station channel.

INTERESTS OF COUNSEL

      We have engaged the law firm of Mijares, Angoitia, Cortes y Fuentes, S.C.,
to advise us on various legal issues. Two of their partners, who are currently
on leave from the partnership, Alfonso de Angoitia Noriega and Juan Sebastian
Mijares Ortega, serve as members of our Board. Mr. de Angoitia is also a member
of our Executive Committee and the Executive Vice President of our 60% owner,
Televisa. Mr. Mijares is also the Vice President and Corporate General Counsel
of Televisa. Neither Alfonso de Angoitia Noriega nor Juan Mijares Ortega
currently receives any form of compensation from, or participate in any way in
the profits of, Mijares, Angoitia, Cortes y Fuentes, S.C. We believe that the
fees we paid for these services were comparable to those that we would have paid
another law firm for similar services.

      We have engaged the law firm of Chevez, Ruiz, Zamarripa y Cia., S.C., to
advise us on various tax issues during the 2001 fiscal year and 2003 fiscal
year. One of their partners, Fernando Ruiz Sahagun, serves as a member of our
Board. We believe that the fees we paid for these services were comparable to
those that we would have paid another law firm for similar services.

TAX SHARING AGREEMENT BETWEEN INNOVA AND TELEVISA

      Innova and Televisa are parties to a Tax Sharing Agreement, dated March 6,
1997, which sets forth the rights and obligations of Innova and Televisa in
respect of Innova's liability for taxes imposed pursuant to Mexico's Ley del
Impuesto sobre la Renta, or Income Tax Law, and Asset Tax Law. Televisa received
authorization from Mexican tax authorities to include Innova's results in the
consolidated tax return of Televisa and its consolidated subsidiaries for
purposes of determining income tax and asset tax beginning January 1, 1997. The
tax profits or losses obtained by Innova are consolidated with the tax profits
or losses of Televisa up to 100% of Televisa's percentage ownership of Innova.
Pursuant to the Tax Sharing Agreement, in no event shall Innova be required to
remit to Televisa an amount in respect of its federal income and assets taxes
that is in excess of the product of (x) the amount that Innova would be required
to pay on an individual basis, as if Innova had filed a separate tax return, and
(y) with respect to asset and income taxes, Televisa's direct or indirect
percentage ownership of Innova's social parts.

                                      -69-
<PAGE>

ITEM 8. FINANCIAL INFORMATION

      See "Item 18 -- Financial Statements" and pages F-1 through F-44, which
are incorporated herein by reference.

ITEM 9. THE OFFER AND LISTING

      Although our senior notes are listed on the Luxembourg Stock Exchange,
there is no active trading market for the senior notes. We believe there is a
limited over-the-counter trading market for the senior notes in the United
States. We also believe that more than one brokerage firm currently makes a
market in the senior notes in the over-the-counter trading market, although both
bid and ask quotations may be limited at times. Only limited trading data for
our notes is publicly available.

ITEM 10. ADDITIONAL INFORMATION

                                     BYLAWS

      Set forth below is a brief summary of some significant provisions of our
bylaws and of Mexican law. This description does not purport to be complete, and
is qualified by reference in its entirety to our bylaws, which have been filed
as an exhibit to this annual report.

PURPOSE

      We are registered with the Public Registry of Commerce in Mexico City
under the commercial File (folio mercantile) No. 213223. Our corporate purposes
are enumerated in Article second of our bylaws. These include the installation,
operation and commercial exploitation of public telecommunications networks that
provide any type of public services, among them DTH television services. Our
corporate purposes also include general corporate actions such as investing in
other companies, acquiring securities, issuing bonds, contracting loans, leasing
or acquiring property, representing other entities as an agent, providing or
receiving technical services, producing works that may be subject to
intellectual property right protection, acquiring and granting permits and
concessions and executing agreements and contracts.

EQUITY AND VOTING RIGHTS

      Our equity consists of three series of partes sociales or social parts:
Series A (consisting of sub-series A-1 and A-2), Series B (consisting of
sub-series B-1 and B-2) and Series C. Only Mexican investors may acquire the
Series A Social Parts, whereas Mexican and foreign investors may acquire the
Series B Social Parts. The Series C Social Parts may only be acquired by Mexican
individuals or by Mexican companies whose social parts is majority owned by
Mexicans, provided that such Mexican companies shall not be controlled by a
foreign entity. The Series A must always represent at least the percentage of
full voting capital required to be held by Mexican investors under Mexican law.
Each social part must represent Ps. 100.00 of capital or a multiple thereof.
Each member or social part holder is entitled to one vote per Ps. 100.00 of
capital represented by its social part. However, each Series C Social Part may
only be voted at a meeting of members with respect to the following
extraordinary matters: (i) the extension of the term of our Company; (ii) our
early dissolution; (iii) a change in our corporate purpose; (iv) a change in our
nationality; (v) the transformation of our corporate form; or (vi) our merger
with another entity. Our owners are identified as social part holders in our
bylaws, which are publicly filed in Mexico.

      In accordance with the authorization of the Secretary of Economy, dated as
of November 30, 2001, we may issue Series N quotas representing up to 80% of our
social, Series N quotas are considered a neutral investment for purposes of the
Foreign Investment Law. Series N bidders have various economic rights combined
with the right to vote at social part holders' meetings only with regard to the
following matters:

            -     to extend our corporate existence;

            -     to dissolve our company;

            -     to change our corporate purposes or nationality; and

            -     to approve any transformation or merger involving us.

                                      -70-
<PAGE>

      Afterwards, on July 30, 2002, our social part holders resolved to modify
the Article Sixth of the corporate by-laws of the company (Capital, Series and
Classes), adding the Series N, integrated by special quotas that may be issued
and considered as neutral investment for purposes of the Foreign Investment Law.
As of today no Series N Social Parts have been issued.

      Generally, a vote of the majority of the social parts is sufficient to
adopt a resolution of our company's equity holders. However, the approval of
both the Sub-series A-1 and Sub-series B-1 social part holders is required:

            -     to approve the audited financial statements;

            -     to declare and pay dividends;

            -     to name and remove Directors from the Board of Directors and
                  establish, appoint, remove or dissolve the Executive
                  Committee;

            -     to divide or redeem any social part interest;

            -     to require contributions or payments outside the Annual Budget
                  or Business Plan;

            -     to issue warrants or other equity equivalents;

            -     to admit new members and assign any capital interests;

            -     to amend the bylaws;

            -     to approve capital increases and decreases or sales of capital
                  interests;

            -     to dissolve our company;

            -     to appoint liquidators;

            -     to issue bonds; and

            -     to approve any transformation, merger or spin-off involving
                  us.

      The majority of the social part holders are entitled to determine how
earnings may be distributed, after legal reserves and capital reserves are
established. Any surplus left over after liquidation shall be distributed among
our members in proportion to their capital interest. Any changes in capital and
the admission of new members must be approved by both the Sub-series A-1 and
Sub-series B-1 social part holders. Each member is entitled to subscribe for any
increase in capital in the same proportion as their percentage ownership
interest prior to the capital call.

      The rights of social part holders as defined in our bylaws may not be
changed without the approval of both the Sub-series A-1 and Sub-series B-1
members. Additionally, an equity owner may not transfer its equity stake without
the consent of the Sub-series A-1 and Sub-series B-1 members. For additional
information on regulatory matters that could affect the rights of social part
holders, see "Item 4 -- Information on the Company -- Business Overview --
Mexican Regulation of DTH Services."

MEETINGS

      Our members must meet at least once a year within four months of the close
of the fiscal year. Other meetings may be held at any time. Meetings are
convened after a notice has been issued by any of our Directors pursuant to the
provisions of Mexico's General Law of Commercial Corporations. At least 15 days'
notice is required, unless waived by all members.

BOARD OF DIRECTORS

      The holders of Sub-series A-1 social parts are entitled to appoint six
members of the Board of Directors, the holders of Sub-series B-1 social parts
are entitled to appoint four members of the Board of Directors and the holders
of Sub-series A-1 and B-1 social parts are entitled to appoint one member of the
Board of Directors who shall be an independent member pursuant to our bylaws.
Directors serve until they are replaced; our directors do not stand for
re-election in staggered terms. Pursuant to our bylaws, a majority vote of our
Board of Directors is generally sufficient for our Board of Directors to act.
However, the approval of a majority, including at least two directors selected
by the holders of Sub-series A-1 social parts and two directors selected by the
holders of Sub-series B-1

                                      -71-
<PAGE>

social parts, is currently required in order to authorize a number of
significant actions, including the following, subject to some exceptions:

            -     the appointment of the Chief Executive Officer;

            -     the appointment of the Chief Financial Officer;

            -     the selection of local distributors and the terms of the
                  agreements executed in connection therewith;

            -     the acceptance of pricing, tiering and other material terms
                  relating to the distribution of programming services;

            -     entering into agreements having a term in excess of three
                  years or involving amounts in excess of U.S.$1 million;

            -     the incurrence of indebtedness for borrowed money, the
                  granting of loans and the incurrence or allowance of
                  encumbrances on our assets involving amounts in excess of
                  U.S.$1 million;

            -     the sale of assets outside the ordinary course of business;

            -     the purchase, lease or acquisition of assets involving amounts
                  in excess of U.S.$1 million;

            -     the acquisition of, investment in, or merger or joint venture
                  with, any other entity other than a wholly owned subsidiary;

            -     the commencement or settlement of any suit, action or
                  proceeding involving amounts in excess of U.S.$1 million;

            -     the appointment or dismissal of Innova's auditors or the
                  adoption or modification of any material accounting or tax
                  principle or practice;

            -     settling or contesting of proposed tax audit adjustments
                  involving amounts in excess of U.S.$100,000;

            -     the approval of the location of our principal offices and our
                  subsidiaries;

            -     the entering into agreements or transactions between the
                  company and the holders of its social parts;

            -     the approval of some of our actions in our capacity as social
                  part holder of our subsidiaries;

            -     the approval of the business plan and any material amendments
                  thereto;

            -     the approval of the annual budget and any amendments thereto;

            -     the approval of any material waiver or amendment of an
                  agreement otherwise subject to supermajority approval;

            -     the incorporation, formation or organization of subsidiaries;

            -     the filing of a voluntary petition in bankruptcy; and

            -     the entering into of consulting agreements which are not on
                  arms' length terms, have a term in excess of two years or
                  provide for payments in excess of U.S.$500,000.

ENFORCEABILITY OF CIVIL LIABILITIES

      We are organized under the laws of Mexico. Substantially all of our
directors, executive officers and controlling persons reside outside of the
United States, all or a significant portion of the assets of our directors,
executive officers and controlling persons, and substantially all of our assets,
are located outside of the United States and some of the experts named in this
annual report also reside outside of the United States. As a result, it may not
be possible for you to effect service of process within the United States upon
these persons or to enforce against them or us in U.S. courts judgments
predicated upon the civil liability provisions of the federal securities laws of
the United States. We have been advised by our Mexican counsel, Mijares,
Angoitia, Cortes y Fuentes, S.C., that there is doubt as to the enforceability,
in original actions in Mexican courts, of liabilities predicated solely on U.S.
federal securities laws and as to the enforceability in Mexican courts of
judgments of U.S. courts obtained in actions predicated upon the civil liability
provisions of U.S. federal securities laws. See "Item 4 -- Key Information --
Risk Factors -- Risks Factors Related to Our Business -- It May Be Difficult to
Enforce Civil Liabilities Against Us or Our Directors, Executive Officers and
Controlling Persons."

                                      -72-
<PAGE>

                               MATERIAL CONTRACTS

      Our agreements with related parties are described in "Item 7 -- Major
Shareholders and Related Party Transactions -- Related Party Transactions."

SATELLITE TRANSPONDER SERVICES AGREEMENTS

      We currently receive satellite signal reception and retransmission
services from 12 Ku-band transponders on the PAS-9 satellite. We entered an
agreement with PanAmSat on February 8, 1999 for signal reception and
retransmission services from PAS-9. PAS-9 was launched on July 28, 2000 and
became operational on September 8, 2000. The term of the PAS-9 agreement ends on
the earlier of (a) September 2015 and (b) the date PAS-9 is taken out of
service. We must pay a monthly service fee of U.S.$1.7 million for service from
all 12 transponders. We received a credit against the first U.S.$11.7 million of
service fees otherwise payable under the PAS-9 agreement. Televisa, News
Corporation and Liberty Media have historically guaranteed Innova's payments to
PanAmSat in proportion to their respective beneficial interests in Innova.
Recently, Televisa and PanAmSat agreed to reduce Televisa's proportionate share
of the guarantee from 60% to 51% until the full exercise of the options to News
Corporation granted to Innova and Innova Holdings, at which point Televisa's
guarantee will be adjusted to cover a percentage of the transponder lease
obligations equal to its percentage ownership of us at that time. News
Corporation's proportionate share of the guarantee was increased from 30% to 49%
and Liberty Media was released of its guarantee. PAS-9 was manufactured by
DIRECTV (formerly Hughes Electronics Corporation) and its useful life is
estimated to be approximately 15 years. We do not expect the sale of DIRECTV's
interests in PanAmSat to KKR to have a material effect on our operations or use
of the PAS-9 satellite under our current agreement. See "Item 3 -- Risk Factors
-- Risk Factors Related to Our Business -- We Have Significant Transactions with
Our Owners, Who Are Involved in Related Businesses, Which Creates the Potential
for Conflicts of Interest." Our service on PAS-9 is not subject to pre-emption,
except in limited instances with respect to spare transponder capacity. We have
migrated our subscribers to PAS-9 for service by re-pointing their antennas to
this satellite. For more information about our satellite operations, see "Item 4
-- Information on the Company -- Business Overview -- Operations -- Satellites."

CONCESSIONS

      We have been granted two concessions by the Mexican government that
authorize us to operate our DTH systems. These concessions are described under
the caption "Item 4 -- Information on the Company -- Business Overview --
Mexican Regulation of DTH Services -- Our Concessions." If we are unable to
renew, or if the Mexican government revokes either concession, we would not be
able to deliver our services. See "Item 3 -- Key Information -- Risk Factors --
Risk Factors Related to Our Business -- The Operation of Our Business May Be
Terminated or Interrupted If the Mexican government Does Not Renew or Revokes
Our Concessions."

                                LEGAL PROCEEDINGS

      In 2001, we decided to settle our suit for declaratory judgment regarding
the withholding tax on the interest paid to our bondholders, given the
complexity of the subject matter and the potential tax liability if the amparos
were not resolved in our favor. As a result, we withdrew the amparos and paid
U.S.$4.1 million of surcharges and penalties in order to obtain a favorable
resolution to apply the reduced rate of 4.9% withholding tax on interest paid to
bondholders. On January 24, 2001, tax authorities officially confirmed our right
to apply the reduced rate of 4.9% withholding tax on interest paid to
bondholders. For more information, see " -- Taxation -- Mexican Taxation."

      We challenged some of the provisions of Mexico's Asset Tax Law that
prohibited us from deducting loans from non-Mexican sources from our asset tax
basis. In order to avoid penalties and interest payments in the event we lost
the appeal, we paid approximately Ps. 43.2 million of tax on assets for the year
ended December 31, 2001 in March of 2002; approximately Ps. 45.2 million in the
aggregate for the year ended December 31, 2002; and approximately Ps. 7.5
million for the months of January and February of 2003. All of these payments
were made in constant pesos in purchasing power as of the date they were paid.
On March 19, 2003, the court ruled in our favor. Due to the favorable ruling, we
were able to deduct debts payable to nonresidents from the asset tax basis. In
July 2003, we recovered a total amount of Ps. 102.9 million, inclusive of
interest and inflation, due to such reimbursements. As of January 1st, 2005 the
Asset Tax Law allows the subtraction from taxable assets, of debt contracted
with entities that are part of the financial system as well as debts contracted
with nonresident entities.

                                      -73-
<PAGE>

      At the end of December 2001, the Mexican Congress passed a series of tax
reforms. As a result of these tax reforms, subject to some exceptions, revenues
from our pay television services were subject to a 10% excise tax. In February
2002, Cablevision, Innova, Skytel and a number of other companies in the
telecommunications and pay television industries filed declaratory judgments, or
amparos, challenging the constitutionality of this excise tax. Nonetheless, we
implemented rate increases on January 1, 2002 and took other actions, including
layoffs and reduction of capital expenditures and expenses, in an effort to
mitigate, in part, the impact of this tax on our results of operations and
financial condition. We obtained a favorable ruling in this proceeding regarding
our 2002 liability for this tax and we continue proceedings to recover the
approximately U.S.$18.0 million paid for this excise tax during 2002, however we
cannot assure you that we will be able to recover any portion of the amounts
paid for this excise tax during 2002.

      In December 2002 the Congress again acted to make this special tax
effective during fiscal year 2003, by adding or modifying some provisions
included in the original text of the law. In response, we filed a new amparo
proceeding challenging the constitutionality of the tax. We obtained a favorable
ruling in this proceeding; however, we were not able to obtain a final favorable
judgment, therefore, we will not be able to recover the approximately U.S.$16.0
million paid for this excise tax during 2003. The 10% excise tax on
telecommunications was definitively eliminated as of January 2004. From this
date and going forward we do not have to pay this excise tax; therefore, we are
able to lower our overall tax exposure and retain a higher proportion of our
revenues, without any modification in prices to our subscribers. See "Item 4 --
Information on the Company -- Business Overview -- Mexican Regulation of DTH
Services -- Telecommunications Tax."

      On October 18, 2004, Darlene Investments, LLC, or Darlene, a minority
owner of DTVLA, filed an action in the Circuit Court of the 11th Judicial
District in and for Miami-Dade County, Florida against DTVLA, DIRECTV, DIRECTV
International, Inc., DIRECTV Latin America Holdings, Inc. (together, the
"DIRECTV Defendants"); News Corp. Ltd.; Televisa; Globopar; MCOP; and us. The
complaint seeks an injunction based on allegations that the DIRECTV Defendants
breached fiduciary and contractual duties to Darlene by entering into
transactions with MCOP, Sky Brasil Servicos Ltda. and us in respect of their
respective direct-to-home satellite services and that the remaining defendants
aided and abetted the DIRECTV Defendant's alleged breaches of their contractual
and fiduciary duties. The complaint also asserts claims for monetary damages
against the DIRECTV Defendants and News Corp. based on fraud and tortious
interference with contract. The action was removed to federal court by the
DIRECTV Defendants. Darlene has moved to remand the case to state court; the
DIRECTV Defendants have, in addition to opposing Darlene's motion, moved to stay
the action pending arbitration on the grounds that disputes between the DIRECTV
Defendants and Darlene are subject to arbitration under the relevant contracts.
Darlene has recently purported to serve Televisa and us with the complaint by
registered mail, although neither Televisa nor we concede such service is
proper. We believe Darlene's claims against Televisa and us are without merit
and intend to vigorously defend against these claims.

      There are other various legal actions and other claims pending against us
that are incidental to our ordinary course of our business. Our management does
not consider these actions or claims to be material.

                                EXCHANGE CONTROLS

      For a description of exchange controls and exchange rate information, see
"Item 3 -- Key Information -- Exchange Rate Information."

                                    TAXATION

      The following is a general summary of some of the anticipated U.S. federal
income and Mexican federal tax consequences of the ownership and disposition of
the senior notes, but it does not purport to be a comprehensive description of
all the tax considerations that may be relevant to a decision to own and dispose
of the senior notes. This summary does not describe any tax consequences arising
under the laws of any state, locality or taxing jurisdiction other than the
United States and Mexico.

      This summary is based on the federal tax laws of the United States and
Mexico as in effect on the date of this Annual Report, as well as regulations,
rulings and decisions of the United States and rules and regulations of Mexico
available on or before such date and now in effect. All of the foregoing are
subject to change, possibly with retroactive effect, which could affect the
continued validity of this summary.

                                      -74-
<PAGE>

      This summary is for general information only and does not constitute, and
should not be considered as, legal or tax advice to beneficial owners of the
senior notes. Tax consequences of each individual beneficial owner of the senior
notes will depend upon the particular facts and circumstances of each such
beneficial owner. Accordingly, each person should consult with his or her own
professional advisor with respect to the tax consequences of his or her
ownership and disposition of the senior notes.

UNITED STATES/MEXICO TAX TREATY

      A convention for the Avoidance of Double Taxation between Mexico and the
United States and protocols to that convention, collectively referred to herein
as the Tax Treaty, are in effect. However, as discussed below under " -- Mexican
Taxation," as of the date of this Annual Report, the Tax Treaty is not generally
expected to have any material effect on the Mexican income tax consequences
described in this Annual Report. The United States and Mexico have also entered
into an agreement that covers the exchange of information with respect to tax
matters.

      Mexico has also entered into and is negotiating several other, tax
treaties with various countries that also, as of the date of this Annual Report,
are not generally expected to have any material effect on the Mexican income tax
consequences described in this Annual Report.

UNITED STATES FEDERAL INCOME TAXATION

      This summary of the principal U.S. federal income tax consequences of the
ownership and disposition of the senior notes is limited to beneficial owners of
senior notes that:

            -     are U.S. holders (as defined below); and

            -     hold the senior as capital assets.

      As used herein, a "U.S. holder" means a beneficial owner of senior notes
that is, for U.S. federal income tax purposes:

            -     a citizen or individual resident of the United States;

            -     a corporation (or entity treated as a corporation for such
                  purposes) created or organized in or under the laws of the
                  United States, or any State thereof or the District of
                  Columbia;

            -     an estate the income of which is includible in its gross
                  income for U.S. federal income tax purposes without regard to
                  its source; or

            -     a trust, if either (x) it is subject to the primary
                  supervision of a court within the United States and one or
                  more "United States persons" has the authority to control all
                  substantial decisions of the trust or (y) it has a valid
                  election in effect under applicable treasury regulations to be
                  treated as a "United States person";

      but excludes persons subject to special provisions of U.S. federal income
tax law, such as:

            -     entities that are tax-exempt for U.S. federal income tax
                  purposes and retirement plans, individual retirement accounts
                  and tax-deferred accounts;

            -     pass-through entities (including partnerships and entities and
                  arrangements classified as partnerships for U.S. federal
                  income tax purposes) and beneficial owners of pass-through
                  entities;

            -     certain U.S. expatriates;

            -     persons that are subject to the alternative minimum tax;

            -     financial institutions, insurance companies, and dealers or
                  traders in securities or currencies;

            -     persons having a "functional currency" other than the U.S.
                  Dollar; and

            -     persons that hold the senior notes as part of a constructive
                  sale, wash sale, conversion transaction or other integrated
                  transaction or a straddle, hedge or synthetic security.

                                      -75-
<PAGE>

      If a partnership (or an entity or arrangement classified as a partnership
for U.S. federal income tax purposes) holds the senior notes, the U.S. federal
income tax treatment of a partner in the partnership generally will depend on
the status of the partner and the activities of the partnership, and
partnerships holding the senior notes should consult their own tax advisors
regarding the U.S. federal income tax consequences of owning and disposing of
the senior notes.

      Further, the discussion below does not address the effect of any U.S.
state or local tax law on a beneficial owner of the senior notes. This
discussion assumes that each beneficial owner of the senior notes will comply
with the certification procedures described below as may be necessary to obtain
a reduced rate of withholding under Mexican law. Each beneficial owner of a
senior note should consult a tax advisor as to the particular tax consequences
to such beneficial owner of the ownership and disposition of the senior note,
including the applicability and effect of any state, local or foreign tax laws.

      Interest and Additional Amounts

      Interest on the senior notes and additional amounts paid in respect of
Mexican withholding taxes imposed on interest payments on the senior notes, or
Additional Amounts, will be taxable to a U.S. holder as ordinary interest income
at the time they are paid or accrued in accordance with the U.S. holder's usual
method of accounting for U.S. federal income tax purposes . The amount of income
taxable to a U.S. holder will include the amount of all Mexican taxes we
withhold (as described below under " -- Mexican Taxation") from these payments
made on the senior notes. Thus, a U.S. holder will be required to report income
in an amount that is greater than the amount of cash it receives from these
payments on its senior note.

      However, a U.S. holder may, subject to certain limitations, be eligible to
claim the Mexican taxes withheld as a credit or deduction for purposes of
computing its U.S. federal income tax liability, even though the payment of
these taxes will be remitted by us. Interest and Additional Amounts paid on the
senior notes will constitute income from sources without the United States for
foreign tax credit purposes. For taxable years beginning on or before December
31, 2006, such income generally will constitute "high withholding tax interest"
for foreign tax credit purposes, unless the Mexican withholding tax rate
applicable to the U.S. holder is less than 5% (such as during any period in
which the 4.9% Mexican withholding tax rate, as discussed in " -- Mexican
Taxation," applies), in which case such income generally will constitute
"passive income" or, in the case of certain U.S. holders, "financial services
income." For taxable years beginning after December 31, 2006, such income
generally will constitute "passive category income" or, in the case of certain
U.S. holders, "general category income," for foreign tax credit purposes. The
rules relating to the calculation and timing of foreign tax credits and, in the
case of a U.S. holder that elects to deduct foreign taxes, the availability of
deductions, involves the application of complex rules that depend upon a U.S.
holder's particular circumstances. In addition, foreign tax credits generally
will not be allowed for Mexican taxes withheld from interest on certain
short-term or hedge positions in the senior notes. U.S. holders should consult
with their own tax advisors with regard to the availability of a credit or
deduction in respect of foreign taxes and, in particular, the application of the
foreign tax credit rules to their particular situations.

      Market Discount and Bond Premium

      If a U.S. holder purchases a senior note at a price that is less than its
principal amount, the excess of the principal amount over the U.S. holder's
purchase price will be treated as "market discount." However, such market
discount will be considered to be zero if it is less than 1/4 of 1% of the
principal amount multiplied by the number of complete years to maturity from the
date the U.S. holder purchased the senior note.

      Under the market discount rules of the U.S. Internal Revenue Code, a U.S.
holder generally will be required to treat any partial principal payment on, and
any gain realized on the sale, exchange, retirement or other disposition of, a
senior note as ordinary income (generally treated as interest income) to the
extent of the market discount which accrued but was not previously included in
income during the period the U.S. holder held such senior note. In addition, the
U.S. holder may be required to defer, until the maturity of the senior note or
its earlier disposition in a taxable transaction, the deduction of all or a
portion of the interest expense on any indebtedness incurred or continued to
purchase or carry such senior note. In general, market discount will be
considered to accrue ratably during the period from the date of acquisition to
the maturity date of the senior note, unless the U.S. holder makes an
irrevocable election (on an instrument-by-instrument basis) to accrue market
discount under a constant yield method. A U.S. holder of a senior note may elect
to include market discount in income currently as it accrues (under either a
ratable or constant yield method), in which case the rules described above
regarding the treatment as ordinary income of gain upon the disposition of the
senior note and upon the receipt of certain payments and the

                                      -76-
<PAGE>

deferral of interest deductions will not apply. The election to include market
discount in income currently, once made, applies to all market discount
obligations acquired on or after the first day of the first taxable year to
which the election applies, and may not be revoked without the consent of the
Internal Revenue Service. Such currently included market discount will increase
the U.S. holder's tax basis in the senior note and generally is treated as
ordinary interest income for U.S. federal income tax purposes.

      A U.S. holder that purchases a senior note for an amount in excess of the
amount payable at maturity of the senior note will be considered to purchase the
senior note with "bond premium" equal to the excess of the U.S. holder's
purchase price over the amount payable at maturity (or on an earlier call date
if it results in a smaller amortizable bond premium). It may be possible for a
U.S. holder of a senior note to elect to amortize such premium using a constant
yield method over the remaining term of the senior note (or until an earlier
call date, as applicable). The amortized amount of the premium for a taxable
year generally will be treated first as a reduction of interest on the senior
note included in such taxable year to the extent thereof, then as a deduction
allowed in that taxable year to the extent of the U.S. holder's prior interest
inclusions on the senior note, and finally as a carryforward allowable against
the U.S. holder's future interest inclusions on the senior note. Such election,
once made, is irrevocable without the consent of the Internal Revenue Service
and applies to all taxable bonds held during the taxable year for which the
election is made or subsequently acquired. U.S. holders should consult their own
tax advisors concerning the computation and amortization of any bond premium on
the senior notes. A U.S. holder which does not make this election will be
required to include in gross income the full amount of interest on the senior
note in accordance with its regular method of tax accounting, and will include
the premium in its tax basis for the senior note for purposes of computing the
amount of its gain or loss recognized on the sale, exchange or retirement of the
senior note.

      A U.S. holder may elect to include in gross income under a constant yield
method all amounts that accrue on a senior note that are treated as interest for
tax purposes (i.e., stated interest, market discount and de minimis market
discount, as adjusted by any amortizable bond premium). U.S. holders should
consult their tax advisors as to the desirability, mechanics and collateral
consequences of making this election.

      Dispositions

      Unless a non-recognition provision of the U.S. Internal Revenue Code
applies, upon the sale, exchange, redemption, retirement or other taxable
disposition of a senior note, a U.S. holder will recognize taxable gain or loss
in an amount equal to the difference, if any, between the amount realized on
such sale, exchange, redemption, retirement or other taxable disposition of the
senior note (other than amounts attributable to accrued interest, which will be
taxable as described above) and such U.S. holder's adjusted tax basis in the
senior note. A U.S. holder's adjusted tax basis in a senior note will generally
equal the cost of such note, increased by the amount of any market discount
previously included in the U.S. holder's gross income, and reduced by the amount
of any amortizable bond premium applied to reduce, or allowed as a deduction
against, interest on the new note. Gain or loss recognized by a U.S. holder on
the sale, exchange, redemption, retirement or other taxable disposition of a
senior note generally will be a capital gain or loss, except with respect to
accrued market discount not previously included in income, which will be taxable
as ordinary income.

      The gain or loss recognized by a U.S. holder will be a long-term capital
gain or loss if the senior note has been held for more than one year at the time
of the disposition. Any gain recognized by a non-corporate U.S. holder on the
sale, exchange, redemption, retirement or other disposition of a note generally
will be subject to a maximum tax rate of 15%, which maximum tax rate will
increase under current law to 20% for dispositions occurring during taxable
years beginning on or after January 1, 2009. The deductibility of capital losses
is subject to limitations. Capital gain or loss recognized by a U.S. holder
generally will be U.S. source gain or loss. U.S. holders should consult their
own tax advisors as to the foreign tax credit implications of a disposition of
the new notes.

      Backup Withholding

      In general, "backup withholding" at a rate of 28% (which rate will
increase under current law to 31% for taxable years beginning on or after
January 1, 2011) may apply to payments of principal and interest made on a
senior note, and to the proceeds of a disposition of a senior note before
maturity within the United States, that are made to a non-corporate beneficial
owner if such beneficial owner fails to provide a correct taxpayer
identification number or otherwise comply with applicable requirements of the
backup withholding rules. The backup withholding tax is not an additional tax
and may be credited against a beneficial owner's U.S. federal income tax
liability, provided that correct information is provided to the Internal Revenue
Service.

                                      -77-
<PAGE>

      Non-U.S. Holders

      For purposes of the following discussion a "non-U.S. holder" means a
beneficial owner of the senior notes that is not, for U.S. federal income tax
purposes, a U.S. holder or a partnership (or an entity or arrangement classified
as a partnership for such purposes). A non-U.S. holder generally will not be
subject to U.S. federal income or withholding tax on:

            -     interest and Additional Amounts received in respect of the
                  senior notes, unless such payments are effectively connected
                  with the conduct by the non-U.S. holder of a trade or business
                  in the United States, or

      gain realized on the sale, exchange, redemption or retirement of the
senior notes, unless: (i) such gain is effectively connected with the conduct by
the non-U.S. holder of a trade or business in the United States or (ii) in the
case of a gain realized by an individual non-U.S. holder, the non-U.S. holder is
present in the United States for 183 days or more in the taxable year of the
disposition and certain other conditions are met.

MEXICAN TAXATION

      The following is a general summary of the principal consequences, under
Mexican Income Tax Law, or the Law, and rules as currently in effect, and under
the Tax Treaty, of the ownership and disposition of the senior notes by a
foreign holder. As used in this summary, "foreign holder" means a beneficial
owner of the senior notes that:

            -     is not a resident of Mexico for tax purposes;

            -     does not hold the senior notes or a beneficial interest in the
                  senior notes in connection with the conduct of a trade or
                  business through a permanent establishment in Mexico; and

            -     is not (a) a holder of more than 10% of our voting stock,
                  directly or indirectly, jointly with persons related to us or
                  individually, or (b) a corporation or other entity, more than
                  20% of whose stock is owned, directly or indirectly, jointly
                  by persons related to us or individually; that in the case of
                  either (a) or (b), is the effective beneficiary, directly or
                  indirectly, jointly with persons related to us or
                  individually, of more than 5% of the aggregate amount of any
                  interest payment on the senior notes. For these purposes,
                  persons will be related if:

                        -     one person holds an interest in the business of
                              the other person;

                        -     both persons have common interest; or

                        -     a third party has an interest in the business or
                              assets of both persons.

      For purposes of Mexican taxation:

            -     an individual is treated as a resident of Mexico if the
                  individual has established his home in Mexico. When an
                  individual, in addition to his home in Mexico, has a home in
                  another country, the individual will be a resident of Mexico
                  if his center of vital interests is located in Mexico. This
                  will be deemed to occur if, among others, either (i) more than
                  50% of the total income obtained by the individual in the
                  calendar year is Mexican source; or (ii) when the individual's
                  center of professional activities is located in Mexico. Unless
                  otherwise proven, a Mexican national is considered a Mexican
                  resident;

            -     a legal entity is considered a resident of Mexico if it is
                  incorporated under Mexican law or if it maintains the main
                  administration of its head office or business or the effective
                  location of its management in Mexico; and

            -     a permanent establishment of a foreign person will be treated
                  as a resident of Mexico, and that permanent establishment will
                  be required to pay taxes in Mexico in accordance with
                  applicable law for income attributable to such permanent
                  establishment.

      Each foreign holder should consult a tax advisor as to the particular
Mexican or other tax consequences to that foreign holder of owning and disposing
of the senior notes, including the applicability and effect of any state, local
or foreign tax laws.

                                      -78-
<PAGE>

      This summary is based upon the tax laws of Mexico as in effect on the date
of this Annual Report, as well as judicial and administrative interpretations
thereof available on or before such date. All of the foregoing are subject to
interpretations and to change, possibly with retroactive effect, and could
affect the continued validity of this summary.

      Interest and Principal

      Under the Law, payments of interest (including amounts paid by Innova in
excess of the issue price of the senior notes which, under the Law, are deemed
to be interest) made by Innova in respect of the senior notes to a Foreign
Holder will be subject to a Mexican withholding tax assessed at a rate of 4.9%
since Innova has satisfied, and expects to continue to satisfy, all of the
following requirements:

            -     the senior notes were placed outside of Mexico through banks
                  or brokerage houses, in a country with which Mexico has
                  entered into a treaty for the avoidance of double taxation and
                  such treaty is in effect;

            -     the senior notes are registered in the Special Section of the
                  Mexican National Registry of Securities, and copies of such
                  registration were provided to the Mexican Ministry of Finance
                  and Public Credit;

            -     Innova timely filed with the Mexican Ministry of Finance and
                  Public Credit, certain information relating to the original
                  issuance of the senior notes and the related prospectus; and

            -     Innova timely files with the Mexican Ministry of Finance and
                  Public Credit, on a quarterly basis, information representing
                  that no parties related to Innova are, directly or indirectly,
                  individually or jointly, the effective beneficiaries of more
                  than 5% of the aggregate amount of each interest payment, and
                  Innova maintains records that evidence compliance with this
                  requirement.

      In the event that any of the foregoing requirements are not met, under the
law, payments of interest on senior notes made by us to a foreign holder will be
subject to Mexican tax assessed at a rate of 10%.

      As of the date of this Annual Report, neither the Tax Treaty nor any other
tax treaty entered into by Mexico is expected generally to have any material
effect on the Mexican income tax consequences described in this Annual Report,
because, as discussed above, we expect that the 4.9% rate will apply in the
future and, therefore, that Innova will continue to be entitled to withhold
taxes in connection with interest payments under the senior notes at the 4.9%
rate.

      Foreign holders residing in the United States should nonetheless be aware
that under the Tax Treaty, the Mexican withholding tax rate applicable to
interest payments made to U.S. holders which are eligible for benefits under the
Tax Treaty will be limited to either:

            -     15% generally; or

            -     4.9% in the event that the senior notes are considered to be
                  "regularly and substantially traded on a recognized securities
                  market".

      Other Foreign Holders should consult tax advisors regarding whether they
reside in a country that has entered into a treaty for avoidance of double
taxation with Mexico which is effective, and, if so, the conditions and
requirements for obtaining benefits under such treaty. The Mexican income tax
law provides that in order for a Foreign Holder to be entitled to the benefits
under a treaty entered into by Mexico, it is necessary for the Foreign Holder to
meet the procedural requirements established in the law.

      Foreign Holders or beneficial owners of the senior notes may be requested,
subject to specified exceptions and limitations, to provide certain information
or documentation necessary to enable Innova to apply the appropriate Mexican
withholding tax rate applicable to such Foreign Holders or beneficial owners. In
the event that the specified information or documentation concerning the Foreign
Holder or beneficial owner, if requested, is not provided prior to the payment
of any interest to that Foreign Holder or beneficial owner, Innova may withhold
Mexican tax from that interest payment to that Foreign Holder or beneficial
owner at the maximum applicable rate, but Innova's obligation to pay Additional
Amounts relating to those withholding taxes will be limited.

                                      -79-
<PAGE>

      Under the Law, payments of interest made by Innova with respect to the
senior notes to non-Mexican pension or retirement funds will be exempt from
Mexican withholding taxes, provided that the fund:

            -     is duly organized pursuant to the laws of its country of
                  origin;

            -     is the effective beneficiary of each interest payment;

            -     is exempt from income in that country on such interest
                  payment, and

            -     is registered with the Mexican Ministry of Finance and Public
                  Credit for that purpose.

      Innova has agreed, subject to certain exceptions and limitations, to pay
Additional Amounts in respect of the above-mentioned Mexican withholding taxes
to Foreign Holders.

      Under the Law and applicable rules, a Foreign Holder will not be subject
to any Mexican withholding or similar taxes on payments of principal on the
senior notes made by Innova (except for payments of principal in excess of the
issue price of the senior notes, which under the Mexican Income Tax Law are
deemed to be interest subject to the Mexican withholding taxes described above).

      Dispositions

      As of January 1, 2005 gains resulting from the sale of senior notes by a
Foreign Holder to a Mexican resident will be treated as interest and therefore
will be subject to Mexican withholding tax rules discussed above.

      Other Taxes

      A Foreign Holder will not be liable for Mexican estate, gift, inheritance
or similar taxes with respect to its holding, nor will it be liable for Mexican
stamp, registration or similar taxes.

                              DOCUMENTS ON DISPLAY

      We submit and file reports, including annual reports on Form 20-F and
other information, with the SEC. These reports and other information, as well as
any related exhibits and schedules, may be inspected, without charge, at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the SEC's regional offices located at the Woolworth Building, 233
Broadway, 13th Floor, New York, New York, 10007, and the Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet site that contains reports,
proxy and information statements, and other information regarding companies that
file electronically with the SEC at http://www.sec.gov.

      We furnish the Bank of New York, as the trustee for our 9.375% senior
notes, with annual reports in English. These reports contain audited
consolidated financial statements that have been prepared in accordance with
Mexican GAAP and reconciled as to net income and equity owners' deficit to U.S.
GAAP. These reports have been examined and reported on, with an opinion
expressed by, an independent auditor. The trustee is required to mail our annual
reports to all holders of record of our senior notes. The indenture for the
senior notes also requires us to furnish the depositary with English
translations of all other reports and communications that we send to holders of
our senior notes. The trustee is required to mail these notices, reports and
communications to holders of record of our senior notes. We also furnish the
Luxembourg Stock Exchange with a copy of our annual report as required by their
rules.

      Statements contained in this annual report concerning the contents of any
contract or any other document are not necessarily complete. If a contract or
document has been filed as an exhibit to any filing we have made with the SEC,
we refer you to the copy of the contract or document that has been filed. Each
statement in this annual report relating to a contract or document filed as an
exhibit is qualified in its entirety by the filed exhibit.

                                      -80-
<PAGE>

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      Market risk is the exposure to an adverse change in the value of financial
instruments caused by interest rate changes, foreign currency fluctuations and
changes in the market value of investments. See "Item 3 -- Key Information --
Forward-Looking Statements." The following information includes "forward-looking
statements" that involve risks and uncertainties. Actual results could differ
from those presented. Unless otherwise indicated, all information below is
presented on a Mexican GAAP basis in constant Pesos in purchasing power as of
December 31, 2004.

FOREIGN EXCHANGE RATE RISK

      The devaluation of the Peso adversely affects our liquidity and results of
operations by increasing the Peso equivalent of our U.S. Dollar-denominated
indebtedness, operating costs and expenses. Our ability to meet our U.S.
Dollar-denominated obligations is affected by changes in the relative values of
the Peso against the U.S. Dollar. To the extent that we are not able to obtain
U.S. Dollars from our operations, capital contributions or borrowings in order
to meet our U.S. Dollar-denominated obligations, we would be required to
purchase U.S. Dollars on foreign exchange markets with Pesos.

      We have substantial indebtedness and operating costs denominated in U.S.
Dollars. As of December 31, 2004 and 2003, we had approximately U.S.$524.0
million and U.S.$574.0 million of liabilities denominated in U.S. Dollars,
respectively. Each percentile point devaluation of the Peso against the U.S.
Dollar would increase our current costs in Pesos by an amount equivalent to
approximately Ps. 12.7 million. Also, under this scenario, the exchange loss in
Pesos for our total U.S. Dollar-denominated indebtedness would amount to
approximately Ps. 58.4 million and Ps. 67.8 million for the years ended December
31, 2004 and 2003, respectively. It would be unlikely that we would be able to
fully recover the negative impact in the costs and expenses by increasing prices
for our services when a devaluation of the Peso exceeds the annual rate of
inflation. Based on this, we have been reducing our foreign exchange exposure
through derivative instruments and refinancing debt, as well as negotiating our
commercial obligations in Pesos whenever possible. Our exposure to changes in
exchange rates for currencies other than the U.S. Dollar is not material.

INTEREST RATE RISK

      We currently believe that any increase in interest rates in international
money markets is not likely to have a direct adverse impact on our financial
results or cash flows because our total debt, including the senior notes (U.S.
Dollar-denominated) and the bank loan (Peso-denominated) bears fixed rates of
interest. Our results and cash flow could be affected if additional financing is
required in the future, if interest rates are high in relation to current market
conditions. As of December 31, 2004 and 2003, we were not a party to any
interest rate risk management transactions. We will evaluate from time to time
specific actions to cover our exposure to interest rate risk on commercially
acceptable terms.

                                      -81-
<PAGE>

CURRENCY HEDGING

      During 2005, we have been and expect to continue entering into several
derivative transactions (forwards) in order to reduce our U.S. Dollar foreign
exchange exposure by taking advantage of market windows and increasing our U.S.
Dollar cash position.

      On February 13, 2004, we entered into two separate derivative transactions
denominated "cross coupon swap" agreements to hedge a portion of our U.S. Dollar
foreign exchange exposure resulting from the issuance of our U.S.$300.0 million
9.375% senior notes that mature in 2013. Under the transactions, we receive
semiannual payments calculated based on an aggregate notional amount of
U.S.$300.0 million at an annual rate of 9.375%, and we make monthly payments
calculated based on an aggregate notional amount of Ps. 3,282.2 million at an
annual rate of 10.25%. The transactions, both of which terminate in September
2008, will reduce our foreign exchange exposure on 10 interest coupon payments
on the senior notes we issued in September 2003.

      Additionally, during the fourth quarter of 2004, we entered into several
forward contracts to obtain a certainty on the foreign exchange rate of the peso
vs. U.S. dollar, reducing the risk when our obligations in U.S. dollars become
payable. We used those forwards to redeem our U.S.$88.0 million in principal
amount outstanding under our 12 7/8% senior notes due 2007, which were paid in
January 7, 2005, and to fund normal operations. We believe these transactions
considerably reduce our foreign exchange exposure at a reasonable cost.

      In 2003 and 2002, we did not engage in any hedging or other transactions
to manage the risks associated with foreign currency or interest rate
fluctuations.

      We may continue to enter into transactions to hedge the risk of exchange
rate fluctuations in the future if we are able to obtain hedging arrangements on
commercially satisfactory terms.

INFLATION RISKS

      In general, the purchasing power of consumers tends to decrease during
high inflation periods, since wages and salaries tend to rise less quickly than
the cost of living. This could adversely impact our revenues and cash flow as a
result of lower purchasing power of current or future potential subscribers and
decreased advertising revenues. In addition, we, like most companies in our
sector, may not be able to fully recover our rising costs and compensate for
increases in interest rates during high inflationary periods through raising our
prices. The potential adverse impact of a hyper-inflationary environment on our
results has not been evaluated in light of the success of the Mexican
government's current anti-inflationary policy.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

      Not applicable.

                                      -82-
<PAGE>

                                     PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

      Not applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
         PROCEEDS

      Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

      (a) As of the end of the period covered by this Form 20-F, we carried out
an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures as defined in Rules 13a-14(c) and 15d-14(c) of the Exchange Act.
Based on this evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures are effective to
ensure that information required to be disclosed in our periodic filings under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms.

      (b) There have been no significant changes in our internal controls or
other factors that could significantly affect these controls subsequent to the
date of their evaluation, including any significant deficiencies or material
weaknesses of internal controls that would require corrective action.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

      At this time, we are not required to have and do not have an audit
committee. Other than approving of our audited financial statements, which our
equity owners do, our full board of directors performs the functions an audit
committee is charged with performing under the SEC rules. Our board of directors
has concluded that it does not have (and it is not required to have) a financial
expert meeting the requirements of Item 16A.

ITEM 16B. CODE OF ETHICS

      We have adopted a code of ethics applicable to all of our managers and
employees, including our principal executive officer, principal financial
officer, and principal accounting officer. You may obtain a copy of this code of
ethics, without charge, upon written request to Innova, S. de R.L. de C.V.,
Attn: Investor Relations, Insurgentes Sur 694, Piso 8, Colonia Del Valle, 03100
Mexico, D.F. Mexico.

                                      -83-
<PAGE>

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

      The aggregate fees billed by PricewaterhouseCoopers S.C. (PwC), our
independent auditor, for professional services in 2004 and 2003 were as follows:

<TABLE>
<CAPTION>
                        (In thousands of Pesos)
                         2004            2003
                     ------------     -----------
<S>                  <C>              <C>
Audit Fees           Ps.  3,508.9     Ps. 6,792.0
Audit-Related Fees              -           189.3
Tax Fees                    917.9           598.7
All Other Fees                  -               -
                          -------         -------
TOTAL                Ps.  4,426.8     Ps. 7,580.0
</TABLE>

AUDIT FEES

      Included within this category for both years are recurring fees related to
the audit of the consolidated and separate subsidiary financial statements under
Mexican GAAP as well as the required information for the annual report filings
with the SEC on Form 20-F. In 2003, amounts also include fees related to the
private placement and subsequent registration on Form F-4 of the 9.375% senior
notes.

AUDIT-RELATED FEES

      Included within this category are the fees associated with various
assistance and consultations related to Sarbanes-Oxley Act of 2002 compliance
other than attestation services.

TAX FEES

      Included within this category for both years are the fees associated with
the statutory, federal and social security tax audits as required by the Mexican
tax authorities.

PRE-APPROVAL POLICIES AND PROCEDURES

      Our Board of Directors meets once a year to consider and approve an annual
budget. At this meeting, our Chief Financial Officer provides the Board of
Directors with information regarding all expected audit services and all
permissible non-audit services to be performed by our auditors. Matters
regarding the retention of auditors are then considered, reviewed and approved
by the entire Board of Directors. Any extraordinary service to be performed by
our auditors not specifically considered at that meeting must be presented to
and approved by our Board at its next scheduled meeting.

                                      -84-
<PAGE>

                                    PART III

ITEM 17. FINANCIAL STATEMENTS

      We have responded to Item 18 in lieu of Item 17.

ITEM 18. FINANCIAL STATEMENTS

      See pages F-1 through F-44, which are incorporated by reference herein.

ITEM 19. EXHIBITS

      Documents filed as exhibits to this annual report appear on the Exhibit
Index beginning on the following page.

      All financial statement schedules relating to us are omitted, either
because they are not required or because the required information, if material,
is contained in the audited year-end financial statement or the notes thereto.

                                      -85-
<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                         DESCRIPTION OF EXHIBIT
-------                        ----------------------
<S>         <C>
1.1         English translation of the Amended and Restated Bylaws (Estatutos
            Sociales) of Innova, dated as of October 8, 2004. (14)

2.1         Indenture relating to the 9.375% Senior Notes due 2013, among
            Innova, as Issuer, The Bank of New York, as Trustee, and The Bank of
            New York (Luxembourg), as the Luxembourg Paying Agent and Transfer
            Agent, as amended or supplemented from time to time. (12)

2.2         Form of 9.375% Senior Exchange Note. (13)

4.1         Form of Indemnity Agreement between Innova and its Directors and
            Executive Officers. (2)

4.2         Memorandum of Understanding as of February 29, 1996, among PanAmSat,
            Televisa, Globo Participacoes, Ltda., and News Corporation. (1)

4.3         System Implementation and License Agreement between Innova and News
            Digital Systems Limited ("NDS"), dated September 20, 1996 (the
            "System Implementation Agreement"). (2)

4.4         Agreement by and among Telecomunicaciones de Mexico and Corporacion
            de Radio y Television Norte de Mexico, dated October 1, 1996. (2)

4.5         Agreement between Telecomunicaciones de Mexico and Corporacion
            Medcom, dated November 1, 1996. (2)

4.6         Amended and Restated Social Part Holders Agreement among Innova,
            Televisa, News Corporation, and Liberty Media, dated October 8,
            2004. (14)

4.7         Tax-Sharing Agreement, effective as of March 6, 1997, between
            Televisa and Innova. (2)

4.8         Trademark License Agreement between News America Publishing
            Incorporated and Innova, dated March 6, 1997. (2)

4.9         Agreement among Telecomunicaciones de Mexico and Corporacion de
            Radio y Television Norte de Mexico, dated September 9, 1997 (No.
            TVDP-1191/97). (6)

4.10        Agreement among Telecomunicaciones de Mexico and Corporacion de
            Radio y Television Norte de Mexico, dated September 9, 1997 (No.
            TVDP-007/96). (6)

4.11        Transponder Service Agreement among PanAmSat International Systems
            and Corporacion de Radio y Television del Norte, dated February 8,
            1999. (5)

4.12        Agreement among Innova, Televisa, Galavision, DTH, News America,
            Inc., News DTH (Mexico) Investment Ltd., and TCI DTH Mexico, dated
            December 3, 1998. (7)

4.13        Amendment Letter to the Interim Agreement dated December 3, 1998
            among Innova, Televisa, Galavision, DTH, News America, Inc., News
            DTH (Mexico) Investment Ltd., and TCI DTH Mexico, dated as of
            December 22, 1998. (8)

4.14        Second Amendment Letter to the Interim Agreement dated December 3,
            1998 among Innova, Televisa, Galavision, DTH, News America, Inc.,
            News DTH (Mexico) Investment Ltd., and TCI DTH Mexico, dated May 8,
            2000. (8)
</TABLE>

                                      -86-
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                         DESCRIPTION OF EXHIBIT
-------                        ----------------------
<S>         <C>
4.15        Amendment to the System Implementation and License Agreement between
            Innova and NDS, dated February 29, 2000 (the "NDS SILA
            Amendment").(9)

4.16        DTH Concession granted to Corporacion de Radio y Television del
            Norte de Mexico by the Mexican Secretary of Communications and
            Transport, dated November 27, 2000, along with an English language
            translation of the agreement. (9)

4.17        Advertising Agreement, dated October 31, 2001, between Televimex and
            Novavision, along with an English language summary. (10)

4.18        Advertising Agreement, dated November 15, 2001, between Televimex
            and Novavision, along with an English language summary. (10)

4.19        Credit Agreement, dated as of July 22, 2002, among Innova, as
            Borrower, and Televisa, Sky DTH, News America Incorporated and
            Liberty Mexico DTH, as Lenders, News DTH (Mexico) Investment
            Limited, as partner at Borrower, and Novavision, as Issuer. (11)

4.20        Technical Services Agreement, dated as of January 1, 1998, between
            DTH TechCo Partners and Novavision. (11)

4.21        Contribution Agreement among Innova, Novavision, Televisa, Sky DTH,
            News Corporation, News America Incorporated, News (Mexico)
            Investment DTH Limited, and Liberty Mexico DTH, dated as of
            September 3, 2003. (12)

4.22        Brazil Business Combination Agreement, dated as October 8, 2004, by
            and among Globo Comunicacoes e Participacoes S.A., The News
            Corporation Limited, The DIRECTV Group, Inc., DIRECTV Latin America,
            LLC and GLA Brasil Ltda. [Previously filed with the Securities and
            Exchange Commission on October 15, 2004 as Exhibit 10.1 to The
            DIRECTV Group, Inc.'s Current Report on Form 8-K (File No.
            000-26035).]

4.23        Participation Agreement, dated as of October 8, 2004, by and among
            Globo Comunicacoes e Participacoes S.A., The News Corporation
            Limited and The DIRECTV Group, Inc. [Previously filed with the
            Securities and Exchange Commission on October 15, 2004 as Exhibit
            10.2 to The DIRECTV Group, Inc.'s Current Report on Form 8-K (File
            No. 000-26035).]

4.24        Latin America Purchase Agreement, dated as of October 8, 2004, by
            and between The News Corporation Limited and The DIRECTV Group, Inc.
            [Previously filed with the Securities and Exchange Commission on
            October 15, 2004 as Exhibit 10.3 to The DIRECTV Group, Inc.'s
            Current Report on Form 8-K (File No. 000-26035).]

4.25        Latin America Purchase Agreement, dated as of October 8, 2004, by
            and between Liberty Media International, Inc. and The DIRECTV Group,
            Inc. [Previously filed with the Securities and Exchange Commission
            on October 15, 2004 as Exhibit 10.4 to The DIRECTV Group, Inc.'s
            Current Report on Form 8-K (File No. 000-26035).]

4.26        Purchase and Sale Agreement, dated as of October 8, 2004, by and
            between Grupo Galaxy Mexicana S. de R.L. de C.V. and Corporacion
            Novavision, S. de R.L. de C.V. [Previously filed with the Securities
            and Exchange Commission on October 15, 2004 as Exhibit 10.5 to The
            DIRECTV Group, Inc.'s Current Report on Form 8-K (File No.
            000-26035).]
</TABLE>

                                      -87-
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                         DESCRIPTION OF EXHIBIT
-------                        ----------------------
<S>         <C>
4.27        Option Agreement Letter, dated as of October 8, 2004, among Innova,
            S. de R.L. de C.V., Innova Holdings, S. de R.L. de C.V., Novavision,
            S. de R.L. de C.V., Grupo Televisa, S.A., The News Corporation
            Limited, The DIRECTV Group, Inc. and DIRECTV Latin America, LLC.
            [Previously filed with the Securities and Exchange Commission on
            October 15, 2004 as Exhibit 10.6 to The DIRECTV Group, Inc.'s
            Current Report on Form 8-K (File No. 000-26035).]

4.28        Post-Migration Payment Letter Agreement, dated as of October 8,
            2004, by and between Grupo Galaxy Mexicana S. de R.L. de C.V. and
            Corporacion Novavision, S. de R.L. de C.V. [Previously filed with
            the Securities and Exchange Commission on October 15, 2004 as
            Exhibit 10.7 to The DIRECTV Group, Inc.'s Current Report on Form 8-K
            (File No. 000-26035).]

4.29        DTH Agreement, dated as of October 8, 2004, by and among Grupo
            Televisa, S.A., The News Corporation Limited, Innova, S. de R.L. de
            C.V., The DIRECTV Group, Inc. and DIRECTV Latin America, LLC
            [Previously filed with the Securities and Exchange Commission on
            October 15, 2004 as Exhibit 10.8 to The DIRECTV Group, Inc.'s
            Current Report on Form 8-K (File No. 000-26035).]

4.30        Televisa Letter Agreement, dated as of October 8, 2004, by and
            between Grupo Televisa, S.A. and The DIRECTV Group, Inc. [Previously
            filed with the Securities and Exchange Commission on October 15,
            2004 as Exhibit 10.9 to The DIRECTV Group, Inc.'s Current Report on
            Form 8-K (File No. 000-26035).]

4.31        Purchase and Sale Agreement (Multi-Country Platform), dated as of
            October 8, 2004, by and among Grupo Televisa, S.A. and The DIRECTV
            Group, Inc. [Previously filed with the Securities and Exchange
            Commission on October 15, 2004 as Exhibit 10.10 to The DIRECTV
            Group, Inc.'s Current Report on Form 8-K (File No. 000-26035).]

4.32        English translation of Loan Agreement, dated December 6, 2004, by
            and among, Innova, S. de R.L. de C.V., as Borrower, Grupo Televisa,
            S.A. and News Corporation, as Guarantors, and HSBC Mexico, S.A.,
            Institucion de Banca Multiple, Grupo Financiero HSBC, as Lender (14)

4.33        Guarantees, dated December 6, 2004, by Grupo Televisa, S.A. and News
            Corporation relating to Loan Agreement dated December 6, 2004, by
            and among, Innova, S. de R.L. de C.V., as Borrower, Grupo Televisa,
            S.A. and News Corporation, as Guarantors, and HSBC Mexico, S.A.,
            Institucion de Banca Multiple, Grupo Financiero HSBC, as Lender.
            (14)

4.34        Channel Licensing Agreement with Televisa - with regard to Channel
            2. (14)

4.35        Channel Licensing Agreement with Televisa - with regard to Channel
            4, 5 and 9. (14)

4.36        Option Agreement dated as of October 8, 2004, by and among Innova,
            S. de R.L. de C.V., Innova Holdings, S. de R.L. de C.V. and News
            Corporation. (14)

8.1         List of Subsidiaries of Innova (included as part of "Item 4 --
            Information on the Company -- Organizational Structure").

12.1        Certification of Alexandre Moreira Penna da Silva, Chief Executive
            Officer of Innova, pursuant to Section 302 of the Sarbanes-Oxley Act
            of 2002, dated June 13, 2005. (14)

12.2        Certification of Carlos Ferreiro Rivas, Chief Financial Officer of
            Innova, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
            dated June 13, 2005. (14)
</TABLE>

                                      -88-
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                         DESCRIPTION OF EXHIBIT
-------                        ----------------------
<S>         <C>
13.1        Certification of Alexandre Moreira Penna da Silva, pursuant to
            Section 906 of the Sarbanes-Oxley Act of 2002, dated June 13,
            2005. (14)

13.2        Certification of Carlos Ferreiro Rivas, pursuant to Section 906 of
            the Sarbanes-Oxley Act of 2002, dated June 13, 2005. (14)
</TABLE>

----------
(1)   Previously filed with the Securities and Exchange Commission on May 3,
      1996 as Exhibit 10.15 to PanAmSat Corporation's 10-Q (File No. 000-26712)
      for the quarterly period ended March 31, 1996.

(2)   Previously filed with the Securities and Exchange Commission on August 22,
      1997 as an Exhibit to Innova's Registration Statement on Form F-4 (File
      No. 333-7484).

(3)   (Blank)

(4)   Previously filed with the Securities and Exchange Commission on June 24,
      1998 as Exhibit 10.52 to PanAmSat International Systems' Registration
      Statement on Form S-4 (File No. 333-56227). Portions of this exhibit have
      been omitted pursuant to an application for confidential treatment filed
      with the Securities and Exchange Commission by PanAmSat.

(5)   Previously filed with the Securities and Exchange Commission on May 17,
      1999 as Exhibit 10.56 to PanAmSat Corporation's Quarterly Report on Form
      10-Q, (File No. 000-22531). Portions of this exhibit have been omitted
      pursuant to an application for confidential treatment filed with the
      Securities and Exchange Commission by PanAmSat.

(6)   Previously filed with the Securities and Exchange Commission on June 30,
      1998 as an Exhibit to Innova's Annual Report on Form 20-F (the "1997
      Annual Report").

(7)   Previously filed with the Securities and Exchange Commission on June 30,
      1999 as an Exhibit to Innova's Annual Report on Form 20-F (the "1998
      Annual Report").

(8)   Previously filed with the Securities and Exchange Commission on June 28,
      2000 as an Exhibit to Innova's Annual Report on Form 20-F (the "1999
      Annual Report").

(9)   Previously filed with the Securities and Exchange Commission on August 28,
      2001 as an Exhibit to Amendment One to Innova's Annual Report for the year
      ended Dec. 31, 2000 on Form 20-F/A. Portions of this exhibit have been
      omitted pursuant to an application for confidential treatment filed with
      the Securities and Exchange Commission by Innova and which was granted by
      an Order on May 3, 2002.

(10)  Previously filed with the Securities and Exchange Commission on June 13,
      2002 as an Exhibit to Innova's Annual Report on Form 20-F (the "2001
      Annual Report").

(11)  Previously filed with the Securities and Exchange Commission on June 30,
      2003 as an Exhibit to Innova's Annual Report on Form 20-F (the "2002
      Annual Report").

(12)  Previously filed with the Securities and Exchange Commission on December
      8, 2003 as an Exhibit to the Company's Registration Statement on Form F-4
      (File No. 333-110997).

(13)  Previously filed with the Securities and Exchange Commission on February
      11, 2004 as an Exhibit to the Company's Registration Statement on Form
      F-4/A (File No. 333-110997).

(14)  Filed herewith.

                                      -89-
<PAGE>

                                   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.

                                       INNOVA, S. DE R.L. DE C.V.
                                       (Registrant)

                                       By:  /s/ Alexandre Moreira Penna da Silva
                                       -----------------------------------------
                                       Name: Alexandre Moreira Penna da Silva
                                       Title: Chief Executive Officer

                                       By: /s/ Carlos Ferreiro Rivas
                                       -----------------------------------------
                                       Name: Carlos Ferreiro Rivas
                                       Title: Chief Financial Officer

Dated: June 13, 2005

                                      -90-
<PAGE>

                           FORM 20-F -- ITEMS 8 AND 18

                   INNOVA, S. DE R.L. DE C.V. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                              Page
                                                                                              ----
<S>                                                                                           <C>
Report of Independent Registered Public Accounting Firm....................................    F-2

Consolidated Balance Sheets as of December 31, 2004 and 2003...............................    F-3

Consolidated Statements of Income (Loss) for the years ended
      December 31, 2004, 2003 and 2002.....................................................    F-4

Consolidated Statements of Changes in Equity Owners' Deficit
      for the years ended December 31, 2004, 2003 and 2002.................................    F-5

Consolidated Statements of Changes in Financial Position for
      the years ended December 31, 2004, 2003 and 2002.....................................    F-6

Notes to the Consolidated Financial Statements.............................................    F-7
</TABLE>

Schedules other than those listed above are omitted for the reason that they are
not required or are not applicable, or the required information is shown in the
respective financial statements or notes thereto.
<PAGE>

                  INNOVA, S. DE R. L. DE C. V. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2004 AND 2003

<PAGE>

                  INNOVA, S. DE R. L. DE C. V. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2004 AND 2003

                                      INDEX

<TABLE>
<CAPTION>
Contents                                                               Page
--------                                                              -------
<S>                                                                   <C>
Report of Independent Registered Public Accounting Firm               1 and 2

Financial statements:

Consolidated balance sheets                                              3

Consolidated statements of income (loss)                                 4

Consolidated statements of changes in equity owner's deficit             5

Consolidated statements of changes in financial position                 6

 Notes to the consolidated financial statements                        7 to 44
</TABLE>

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Mexico, D. F., March 18, 2005

To the Equity Owner's of
Innova, S. de R. L. de C. V.:

We have audited the accompanying consolidated balance sheets of Innova, S. de R.
L. de C. V. and its subsidiaries (collectively the "Group") as of December 31,
2004 and 2003, and the related consolidated statements of income (loss), of
changes in equity owners'deficit and of changes in financial position for each
of the three years in the period ended December 31, 2004 all expressed in
Mexican pesos. These financial statements are the responsibility of the Group's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
in Mexico and 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Innova, S. de R. L.
de C. V. and its subsidiaries at December 31, 2004 and 2003, and the results of
their operations, the changes in their equity owner's deficit and the changes in
their financial position for each of the three years in the period ended
December 31, 2004, in conformity with accounting principles generally accepted
in Mexico.

<PAGE>

Accounting principles generally accepted in Mexico vary in certain significant
respects from accounting principles generally accepted in the United States of
America. The application of the latter would have affected the determination of
the consolidated net income (loss) for each of the three years in the period
ended December 31, 2004, and the determination of consolidated equity owner's
deficit at December 31, 2004 and 2003 to the extent summarized in Note 20 to the
consolidated financial statements.

PricewaterhouseCoopers

By: /s/ Miguel Angel Olvera Ibbott
    ------------------------------
    Miguel Angel Olvera Ibbott

                                       F-2

<PAGE>

                  INNOVA, S. DE R. L. DE C. V. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                   (Expressed in thousands of Mexican Pesos in
                    purchasing power as of December 31, 2004)

<TABLE>
<CAPTION>
                                                                              December 31,
                                                                    -------------------------------
Assets                                                                   2004              2003
------                                                              -------------     -------------
<S>                                                                 <C>               <C>
CURRENT ASSETS:
Cash and cash equivalents                                           Ps. 1,696,793     Ps.   519,189
Trade accounts receivable, net (Note 4)                                    83,103           104,566
Other accounts receivable (Note 11)                                        76,631                 -
Inventory and spare parts                                                  16,749            10,602
Prepaid advertising (Note 8)                                              125,000           131,489
Other current assets                                                       18,300            16,732
                                                                    -------------     -------------

Total current assets                                                    2,016,576           782,578

Property and equipment, net (Note 5)                                    1,487,834         1,470,230
Satellite transponders, net (Note 6)                                    1,179,979         1,318,503
Deferred costs, net (Note 7)                                               41,498            61,228
Other non-current assets                                                        -             8,674
                                                                    -------------     -------------
Total assets                                                        Ps. 4,725,887     Ps. 3,641,213
                                                                    =============     =============

Liabilities and Equity Owners' Deficit

CURRENT LIABILITIES:
Senior notes (Note 9)                                               Ps.   981,112     Ps.         -
Trade accounts payable                                                    162,248           155,267
Accrued expenses                                                          248,661           252,067
Satellite transponders obligation (Note 6)                                 70,743            66,820
Due to affiliated companies and other related parties (Note 8)            184,740           448,408
Accrued interest                                                          131,940           126,615
Accrued taxes                                                             111,354           102,734
Deferred income                                                           152,413           145,118
                                                                    -------------     -------------

Total current liabilities                                               2,043,211         1,297,029

NON-CURRENT LIABILITIES:
Senior notes (Note 9)                                                   3,344,700         4,581,377
Bank loan (Note 10)                                                     1,012,000                 -
Satellite transponders obligation (Note 6)                              1,324,615         1,477,795
Other liabilities                                                           2,181             1,726
                                                                    -------------     -------------

Total liabilities                                                       7,726,707         7,357,927
                                                                    -------------     -------------

Commitments and contingencies (Note 12)                                         -                 -

EQUITY OWNERS' DEFICIT:
Contributed capital:
Social parts (Note 13)                                                  6,655,679         6,655,668
                                                                    -------------     -------------

Earned capital:
Additional paid in capital                                                179,784                 -
Accumulated losses (Note 15)                                          (10,451,611)       (9,611,501)
Net income (loss) for the period                                          576,287          (840,110)
Excess from restatement                                                    42,087            82,136
                                                                    -------------     -------------

                                                                       (9,653,453)      (10,369,475)
                                                                    -------------     -------------

Supplementary liability for labor obligations                                (107)             (104)
                                                                    -------------     -------------

Minority interest                                                          (2,939)           (2,803)
                                                                    -------------     -------------

Total equity owners' deficit                                           (3,000,820)       (3,716,714)
                                                                    -------------     -------------

Total liabilities and equity owners' deficit                        Ps. 4,725,887     Ps. 3,641,213
                                                                    =============     =============
</TABLE>

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

                                       F-3

<PAGE>

                  INNOVA, S. DE R. L. DE C. V. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF INCOME (LOSS)

                   (Expressed in thousands of Mexican Pesos in
                    purchasing power as of December 31, 2004)

<TABLE>
<CAPTION>
                                                                       Years ended December 31,
                                                        -----------------------------------------------------
                                                            2004               2003                2002
                                                        -------------     ---------------     ---------------
<S>                                                     <C>               <C>                 <C>
Net sales                                               Ps. 4,769,027     Ps.   4,019,067     Ps.   3,754,787

Operating expenses:
Cost of sales                                               1,394,507           1,241,478           1,162,421
Administrative expenses                                       132,554             131,485             132,866
Selling expenses                                              977,350             892,395             910,841
Other operating expenses                                      525,168             500,356             526,966
                                                        -------------     ---------------     ---------------

Total operating expenses                                    3,029,579           2,765,714           2,733,094

Depreciation and amortization                                 764,499             850,603           1,011,827
                                                        -------------     ---------------     ---------------

Operating profit                                              974,949             402,750               9,866
                                                        -------------     ---------------     ---------------

Integral cost of financing (Note 3):
Interest expense                                             (672,973)           (987,638)         (1,075,243)
Interest income                                                18,678              15,959              12,101
Foreign exchange losses, net                                  (41,329)           (618,268)         (1,284,553)
Gain from monetary position                                   308,289             331,661             545,372
                                                        -------------     ---------------     ---------------

Total integral cost of financing                             (387,335)         (1,258,286)         (1,802,323)

Other income (expenses), net                                        -               3,659             (23,854)

Restructuring and non-recurring items
(Note 14)                                                     (10,958)           (112,445)            (35,468)
                                                        --------------    ---------------     ---------------

Income (loss) before taxes and
 minority interest                                            576,656            (964,322)         (1,851,779)

Provision for income and asset taxes
(Note 16)                                                        (198)            123,125             (82,613)
Minority interest                                                (171)              1,087                 (22)
                                                        --------------    ---------------     ---------------

Net income (loss)                                       Ps.   576,287    (Ps.     840,110)   (Ps.   1,934,414)
                                                        =============     ===============     ===============
</TABLE>

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

                                       F-4

<PAGE>

                  INNOVA, S. DE R. L. DE C. V. AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY OWNERS' DEFICIT
              FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

                   (Expressed in thousands of Mexican Pesos in
                    purchasing power as of December 31, 2004)

<TABLE>
<CAPTION>
                                                                 Excess                 Supplementary
                                                               (deficit)    Additional    liability
                                                 Capital          from       paid in      for labor      Accumulated     Net income
                                                  stock       restatement    capital     obligations       losses          (loss)
                                                ------------ ------------  -----------  -------------  --------------  ------------
<S>                                             <C>          <C>           <C>          <C>            <C>             <C>
Balance at December 31, 2001                    Ps.2,092,516 (Ps. 213,659) (Ps.      -)    (Ps. 17)    (Ps. 7,229,246) (Ps. 447,841)

Transfer of net loss to accumulated losses                                                                   (447,841)      447,841

Comprehensive loss (Note 17)                                      179,692                     (129)                      (1,934,414)
                                                ------------  -----------  -----------     -------     --------------  ------------
Balance at December 31, 2002                       2,092,516      (33,967)           -        (146)        (7,677,087)   (1,934,414)

Capitalization of stockholder's loans (Note 13)    4,563,152

Transfer of net loss to accumulated losses                                                                 (1,934,414)    1,934,414

Comprehensive loss (Note 17)                                      116,103                       42                         (840,110)
                                                ------------  -----------  -----------     -------     --------------  ------------
Balance at December 31, 2003                       6,655,668       82,136            -        (104)        (9,611,501)     (840,110)

Capital contribution (Note 13)                            11                   179,784

Transfer of net loss to accumulated losses                                                                   (840,110)      840,110

Comprehensive income (Note 17)                                    (40,049)                      (3)                         576,287
                                                ------------  -----------  -----------     -------     --------------  ------------
Balance at December 31, 2004                    Ps.6,655,679  Ps.  42,087  Ps. 179,784     (Ps.107)    (Ps.10,451,611) Ps.  576,287
                                                ============  ===========  ===========     =======     ==============  ============
<CAPTION>
                                                                 Total
                                                 Minority    stockholders'
                                                 interest      deficit
                                                 --------    -------------
<S>                                             <C>         <C>
Balance at December 31, 2001                    (Ps.   47)  (Ps. 5,798,294)

Transfer of net loss to accumulated losses                               -

Comprehensive loss (Note 17)                          (22)      (1,754,873)
                                                ---------    -------------
Balance at December 31, 2002                          (69)      (7,553,167)

Capitalization of stockholder's loans (Note 13)                  4,563,152

Transfer of net loss to accumulated losses                               -

Comprehensive loss (Note 17)                       (2,734)        (726,699)
                                                ---------    -------------
Balance at December 31, 2003                       (2,803)      (3,716,714)

Capital contribution (Note 13)                                     179,795

Transfer of net loss to accumulated losses                               -

Comprehensive income (Note 17)                       (136)         536,099
                                                ---------    -------------
Balance at December 31, 2004                    (Ps.2,939)  (Ps. 3,000,820)
                                                =========    =============
</TABLE>

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

                                       F-5

<PAGE>

                  INNOVA, S. DE R. L. DE C. V. AND SUBSIDIARIES

            CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION

                   (Expressed in thousands of Mexican Pesos in
                    purchasing power as of December 31, 2004)

<TABLE>
<CAPTION>
                                                                   Years ended December 31,
                                                        ------------------------------------------------
                                                             2004             2003              2002
                                                        --------------    -------------    -------------
<S>                                                     <C>               <C>              <C>
Operating activities:
Net income (loss)                                       Ps.    576,287    (Ps.  840,110)   (Ps.1,934,414)
Adjustments to reconcile net income (loss) to
resources provided by (used in) operating activities:
   Depreciation and amortization                               764,499          850,603        1,011,827
   Maintenance reserve                                           6,437            4,876            7,749
   Impairments and write downs                                   5,174                -           33,661
                                                        --------------    -------------     ------------

                                                             1,352,397           15,369         (881,177)
                                                        --------------    -------------     ------------

Changes in operating assets and liabilities:

Trade accounts receivable                                       21,463           (4,622)          26,624
Other accounts receivable                                      (76,631)               -                -
Inventory and spare parts                                      (11,321)           3,637           (5,007)
Prepaid advertising and other current assets                     4,921           32,537           43,545
Deferred costs                                                  17,366           25,038           16,098
Other non current assets                                         2,232           12,083            6,412
Trade accounts payable                                           6,981           46,344           14,582
Accrued expenses and Satellite reorientation reserve            (1,223)          37,844          (63,185)
Due to affiliated companies and other related parties          (83,884)         (25,656)          91,652
Accrued interest                                                 5,325         (765,099)         384,592
Deferred income                                                  7,295           25,352            1,189
Supplementary liability for labor obligations                       (3)              42             (130)
Other liabilities                                                  455              437              493
                                                        --------------    -------------     ------------

Resources provided by (used in) operating activities         1,245,373         (596,694)        (364,312)
                                                        --------------    -------------     ------------

Financing activities:

Capital contributions                                               11        4,563,152                -
Equity owner's loans                                                 -       (3,546,884)         571,597
Senior notes                                                  (255,565)         289,406          312,897
Bank loan                                                    1,012,000                -                -
Satellite transponders obligation                             (149,257)         (10,355)          69,320
                                                        --------------    -------------     ------------

Resources provided by financing activities                     607,189        1,295,319          953,814
                                                        --------------    -------------     ------------

Investing activities:

Investment in property and equipment, net                     (674,958)        (471,070)        (347,285)
                                                        --------------    -------------     ------------

Resources used in investing activities                        (674,958)        (471,070)        (347,285)
                                                        --------------    -------------     ------------

Cash and cash equivalents:
Increase for the period                                      1,177,604          227,555          242,217
At the beginning of the period                                 519,189          291,634           49,417
                                                        --------------    -------------     ------------

At the end of the period                                Ps.  1,696,793    Ps.   519,189     Ps.  291,634
                                                        ==============    =============     ============
</TABLE>

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

                                       F-6

<PAGE>

                   INNOVA, S. DE R.L. DE C.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of Mexican Pesos in purchasing power as of December 31,
                                      2004)

NOTE 1 - THE COMPANY AND ITS PRINCIPAL OPERATIONS:

Innova, S. de R.L. de C.V. ("Innova" or the "Company"), a Mexican company with
limited liability and variable capital, provides direct-to-home ("DTH")
broadcast satellite pay television services in Mexico under the SKY brand name.
Innova is a joint venture indirectly owned by Grupo Televisa, S. A. ("Televisa")
(60%), News Corporation (30%) and Liberty Media International, Inc. ("LMI")
(10%). The Company and its subsidiaries are collectively referred to as the
Group.

The Group's business requires a concession (license granted by the Mexican
federal government) to operate. On May 24, 1996, the Ministry of Communications
and Transportation (the "SCT") ratified the concession granted to a wholly-owned
subsidiary of the Company to offer DTH satellite broadcasting services in Mexico
using domestic satellites. The concession is for a period of thirty years,
beginning May 24, 1996, and renewable in accordance with Mexican Communications
Law. On November 27, 2000, the SCT, granted to a wholly-owned subsidiary of the
Company a concession to provide its broadcasting services using foreign
satellites. The concession is for a 20-year period, effective November 27, 2000
and may be extended in accordance with Mexican Communications Law.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in Mexico ("Mexican GAAP") as
promulgated by the Mexican Institute of Public Accountants ("MIPA"). A
reconciliation from Mexican GAAP to United States generally accepted accounting
principles ("U.S. GAAP") is included in Note 20.

The principal accounting policies followed by the Group are as follows:

a. Basis of presentation -

The financial statements of the Group are presented on a consolidated basis. All
significant intercompany balances and transactions have been eliminated.

                                       F-7

<PAGE>

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

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

b. Members of the Group -

At December 31, 2004, the Group consists of the Company and the following
wholly-owned subsidiaries:

-     Corporacion de Radio y Television del Norte de Mexico, S. de R.L. de C.V.

-     Corporacion Novavision, S. de R. L. de C.V.

-     Corporacion Novaimagen, S. de R. L. de C.V.

-     Servicios Novasat, S. de R.L. de C.V.

-     Servicios Corporativos de Telefonia, S. de R. L. de C.V. ("SECOTEL")

-     Nova Call-Center, S. de R. L. de C. V.

Nova Call-Center was formed in July 2004, when some employees were transferred
from Coporacion Novaimagen to Nova Call-Center.

c. Cash and cash equivalents -

The Group considers all highly liquid temporary cash investments with original
maturities of three months or less, consisting primarily of overnight deposits,
Mexican government obligations, deposits and bonds in U.S. financial
institutions to be cash equivalents.

d. Property and equipment -

Property and equipment are recorded at acquisition cost and thereafter are
restated using the National Consumer Price Index ("NCPI"), except for equipment
of a non-Mexican origin, which are restated using an index which reflects the
inflation in the respective country of origin and the exchange rate of the
Mexican peso against the currency of such country at the balance sheet date
("Specific Index").

                                       F-8
<PAGE>

Installation costs of antennas, low noise blocks ("LNBs") and accessories in
subscribers' homes or businesses are capitalized and amortized over the
estimated useful life of the asset, which is three years.

Maintenance costs for technical equipment are reserved based on management
estimates. Actual costs are applied against the applicable reserve when
incurred. Repair and maintenance costs for computer equipment and integrated
receiver decoder ("IRDS") are expensed as incurred.

When assets are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the appropriate accounts and any gain
or loss is included in results of operations.

External costs incurred for internal use software are capitalized in computer
equipment and depreciated over three years.

e. Inventories and Spare parts -

Inventories and spare parts are recorded at the lower of cost or net realizable
value. The cost of spare parts utilized is charged to income when utilized.

f. Depreciation -

Depreciation of property and equipment is based upon the restated carrying value
of the assets and is recognized using the straight-line method over the
estimated useful lives of the assets, which range from 3 to 10 years. Land,
equipment in progress and advances to suppliers are not depreciated.

g. Seniority premiums and indemnities -

Seniority premiums to which employees are entitled upon termination of
employment after 15 years of service, as well as the obligations under the
Company's noncontributory retirement plan for its employees, are recognized as
expenses in the years in which the services are rendered, based on actuarial
studies using the projected unit credit method. The amounts were not significant
for any of the periods presented.

Other compensation based on length of service to which employees may be entitled
in the event of dismissal or death, in accordance with the Federal Labor Law, is
charged to income in the year in which it becomes payable.

In January 2004, the MIPA issued a revised Bulletin D-3 "Labor Obligations",
which requires, among other amendments, that severance obligations to dismissed
personnel, other than those arising from restructurings, are recognized based
upon actuarial calculations. This revised Bulletin is effective for periods
beginning on January 1, 2005. The Group is evaluating the effect of the adoption
of revised Bulletin D-3 in 2005 in its consolidated financial statements.

                                      F-9
<PAGE>

h. Foreign currency -

Monetary assets and liabilities denominated in foreign currencies are reported
at the prevailing exchange rate at the balance sheet date. Exchange differences
on monetary assets and liabilities are included in income for the period and
reflected in the integral result of financing. Revenues and expenses denominated
in foreign currencies are reported at the exchange rates in effect when
recognized.

i. Revenue recognition -

Program service revenues are recognized on a monthly basis as DTH service is
provided. Program service revenues paid in advance of the service being provided
is recorded as deferred revenue and recognized in the month the DTH service is
provided.

Initial, non-refundable fees for subscriptions, installation and activation are
recognized upon activation of the new subscriber's DTH services. Customer
acquisition costs are expensed as incurred.

The Group provides the DTH antenna, LNB and remote control to customers along
with the IRD, but has retained title to the equipment. The IRD is included in
fixed assets and is rented to customers under an operating lease. Rental
revenues are recognized on a monthly basis.

Advertising revenues are recognized at the time the advertising services are
rendered.

j. Advertising costs -

Advertising expenses are expensed as the advertisements are aired and amounted
to Ps.209,581, Ps.211,637 and Ps.223,134 during the years ended December 31,
2004, 2003 and 2002 respectively.

k. Risk concentrations -

Financial instruments which potentially subject the Group to significant
concentrations of credit risk consist primarily of cash and cash equivalents and
trade accounts receivable. The Group maintains its cash and cash equivalents
with various major financial institutions and are principally invested in
obligations of the U.S. and Mexican governments. Concentration of credit risk
with respect to trade accounts receivable is limited due to the large number of
customers throughout Mexico. The Group's policy is to require one month's
payment in advance, to reserve for all accounts receivable greater than ninety
days and to write off against the reserve all receivables greater than 120 days.
Bad debt expense was Ps.118,332 in 2004, Ps.101,762 in 2003 and Ps.121,219 in
2002 (Note 4).

In order to provide DTH service to customers, the Group relies on the use of 12
KU-band transponders on the PAS 9 satellite. The Group has not secured an
alternative satellite or service

                                      F-10
<PAGE>

provider and therefore, any long term disruption to one or more of the
transmission signals could have a material adverse effect on the Group's
financial position or results of operations.

l. Derivative financial instruments -

The Group uses derivative financial instruments for the purpose of reducing its
exposure to adverse fluctuations in foreign exchange rates and interest rates.
Under Bulletin C-2, which is effective through December 31, 2004, derivative
financial instruments that qualify for hedge accounting are recorded in the
balance sheet, on the same basis of the hedged assets or liabilities, and
changes in value are recorded in each period in the income statement. Derivative
financial instruments that do not qualify for hedge accounting are recorded in
the balance sheet at their fair value and changes in the fair value are recorded
in each period in the income statement.

In April 2004, the MIPA issued Bulletin C-10, "Derivative Financial Instruments
and Hedge Operations". Bulletin C-10 establishes accounting and reporting
standards requiring that all derivative instruments, including certain
derivative instruments embedded in other contracts, be recorded in the balance
sheet as either an asset or a liability measured at its fair value. Bulletin
C-10 also requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria is met. Special
accounting for qualifying hedges allows a derivative's gain or loss to offset
related results on the hedged item in the income statement and requires that a
company formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. Bulletin C-10 is effective for
periods beginning on January 1, 2005, with early adoption recommended. The Group
is evaluating the effect of the adoption of Bulletin C-10 in 2005 in its
consolidated financial statements.

m. Comprehensive income (loss) -

Comprehensive income (loss) represents the net income (loss) for the period
presented in the income statement plus other results for the period reflected in
equity owners' deficit which are from non-owner sources (Note 17).

n. Impairment of long-lived assets

Through December 31, 2003, the Group evaluated the recoverability of its
long-lived assets to determine whether current events or circumstances warranted
adjustment to the carrying value. Such evaluation was based on current and
projected income and cash flows from operations as well as other economic and
market variables.

Effective January 1, 2004, the Group adopted Bulletin C-15, "Impairment in the
Value of Long-Lived Assets and their Disposal", issued by the MIPA, which
establishes, among other things, the general criteria for the identification,
and, when applicable, the recording of impairment losses or decrease in the
value of long-lived assets, tangible and intangible, including goodwill. The
adoption of Bulletin C-15 in 2004 did not have a significant impact on the
Group's financial position or results of operations.

                                      F-11
<PAGE>

o. Income tax -

The recognition of deferred income tax is made by using the comprehensive asset
and liability method. Under this method, deferred income taxes are calculated by
applying the respective income tax rate to the temporary differences between the
accounting and tax values of assets and liabilities at the date of the financial
statements. Changes in income tax rates are recognized at the enactment date.

The recognition of a valuation allowance for certain deferred tax assets is
established when available evidence does not indicate that there is a highly
probable of future taxable income to realize the deferred tax asset. Subsequent
changes in deferred tax assets and liabilities and valuation allowances are
recognized in income.

NOTE 3 - EFFECTS OF INFLATION ON THE FINANCIAL STATEMENTS:

The consolidated financial statements of the Group have been prepared in
accordance with Bulletin B-10, "Recognition of the Effects of Inflation on
Financial Information", as amended, ("Bulletin B-10"), which provides guidance
for recognizing the effects of inflation. The financial statements of the Group
are presented in Mexican Pesos in purchasing power as of December 31, 2004 in
order to be comparable to financial information as of that date, as follows:

-  The balance sheets have been restated in Mexican Pesos in purchasing power as
   of December 31, 2004 using the NCPI as of December 31, 2004.

-  The statements of income (loss) and changes in equity owners' deficit have
   been restated in Mexican Pesos in purchasing power as of December 31, 2004
   using the NCPI for the month in which the transactions occurred.

The restatement of the financial statements has been applied in accordance with
Bulletin B-10 guidelines as described below:

Restatement of non-monetary assets -

Property and equipment, except for equipment of non-Mexican origin, are restated
using the NCPI. Equipment of non-Mexican origin, primarily satellite
transponders, are restated using a Specific Index. The Specific Index is derived
from inflation in the country of the assets' origin and the foreign currency
exchange rate of the Mexican Peso against the currency of such country.

                                      F-12
<PAGE>

Property and equipment in use at the beginning of the year is depreciated based
upon the restated carrying value of the assets and is recognized using the
straight-line method over the estimated useful lives of the assets. Additions
during the year are depreciated based on the restated value.

Restatement of equity owners' deficit -

Capital stock and other equity owners' deficit accounts (other than the excess /
deficit from restatement) include the effect of restatement, determined by
applying the NCPI factor to the applicable period. The restatement represents
the amount required to maintain the contributions and the accumulated results in
Mexican Pesos in purchasing power as of December 31, 2004. The deficit / excess
from restatement includes the result from holding non-monetary assets and is the
cumulative difference between the cost of the non-monetary assets restated using
NCPI and the restatement of such assets using the Specific Index.

Integral cost of financing -

The gain or loss from monetary position represents the effects of inflation, as
measured by the NCPI, on the monetary assets and liabilities of the Group at the
beginning of each month. For the years ended December 31, 2004, 2003 and 2002,
monetary liabilities exceeded monetary assets, resulting in gains from monetary
position during the periods.

Statement of changes in financial position -

Bulletin B-12, "Statements of Changes in Financial Position" ("Bulletin B-12"),
issued by the MIPA, specifies the appropriate presentation of the statement of
changes in financial position when the financial statements have been restated
in constant monetary units in accordance with the Third Amendment to Bulletin
B-10. Bulletin B-12 identifies the generation and application of resources as
the differences between beginning and ending financial statement balances in
constant monetary units. The Bulletin also requires that monetary and foreign
exchange gains and losses not be treated as non-cash items in the determination
of resources provided by operations. The translation effects of operating assets
and liabilities are included in the stated change of the related item.

Other accounts -

The following accounts are restated using the NCPI:

Debt issuance costs and related amortization

Leasehold improvements and related amortization

Intangible assets and related amortization

                                      F-13
<PAGE>

National Consumer Price Index (NCPI) -

Restatement of the financial statements to Mexican pesos in purchasing power as
of December 31, 2004, in accordance with the Third Amendment to Bulletin B-10,
requires restatement of the results for each month during each year using a
factor derived from the change in the NCPI. The NCPI as of December 31, 2004,
2003 and 2002 was 112.550, 106.996 and 102.904 respectively.

NOTE 4 - TRADE ACCOUNTS RECEIVABLE, NET:

Trade accounts receivable, net includes the receivables from DTH services
provided to subscribers, from the rental of IRD's and from the sale of
advertising. Balances as of December 31, consist of:

<TABLE>
<CAPTION>
                                        2004          2003
                                    -----------    -----------
<S>                                 <C>            <C>
Trade accounts receivable           Ps. 170,255    Ps. 178,474
Allowance for doubtful accounts         (87,152)       (73,908)
                                    -----------    -----------

                                    Ps.  83,103    Ps. 104,566
                                    ===========    ===========
</TABLE>

The allowance for doubtful accounts for the years ended December 31, 2004, 2003
and 2002, was as follows:

<TABLE>
<CAPTION>
                                       2004           2003          2002
                                    -----------    -----------   ----------
<S>                                 <C>            <C>           <C>
Beginning balance                   Ps.  73,908    Ps.  79,993   Ps. 92,724
Additions (bad debt expense)            118,332        101,762      121,219
Write offs                             (105,088)      (107,847)    (133,950)
                                    -----------    -----------   ----------

Ending balance                      Ps.  87,152    Ps.  73,908   Ps. 79,993
                                    ===========    ===========   ==========
</TABLE>

                                      F-14
<PAGE>

NOTE 5 - PROPERTY AND EQUIPMENT, NET:

Property and equipment, net as of December 31, consists of:

<TABLE>
<CAPTION>
                                         2004               2003
                                    -------------      -------------
<S>                                 <C>                <C>
Integrated receiver/decoders        Ps. 2,925,745      Ps. 2,790,422
Transmission equipment                    430,607            399,440
Antennas, LNBs and accessories          1,047,429            842,567
Computer equipment                        544,362            513,189
Furniture                                  21,913             21,382
Transportation equipment                   25,376             21,498
Buildings                                       -                895
                                    -------------      -------------

                                        4,995,432          4,589,393
Accumulated depreciation               (3,619,949)        (3,167,005)
                                    -------------      -------------

                                        1,375,483          1,422,388
Land                                            -              1,420
Equipment in progress                      92,947             34,108
Advances to suppliers                      19,404             12,314
                                    -------------      -------------

                                    Ps. 1,487,834      Ps. 1,470,230
                                    =============      =============
</TABLE>

Depreciation expense for the years ended December 31, 2004, 2003 and 2002 was
Ps.645,070, Ps.729,841 and Ps.803,642, respectively.

The Group recorded an impairment loss on certain transmission equipment and
other equipment not in use of Ps.33,661 (which was included in "Restructuring
and non-recurring items" line item) during the year ended December 31, 2002. As
of April 2002, the Group ceased utilizing the service of the Solidaridad 2
satellite. At that date, transmission equipment with a net book value of
Ps.41,937 associated with Solidaridad 2 was maintained by the Group and for
which it decided to recognize such impairment charge for the equipment that it
concluded could not be utilized by the PAS-9 satellite, and to create a
spare-part inventory for the remaining Ps.8,276 of transmission equipment that
could be utilized by the PAS-9 satellite. In 2004, the Group made a new
evaluation of the use of said spare-part inventory and recognized an impairment
charge amounting to Ps.5,174.

At December 31, 2004 and 2003, IRDs, transmission equipment, computer equipment
and transportation equipment include assets restated with the Specific Index and
which are of a non-Mexican origin of Ps.478,174 and Ps.341,150, respectively,
net of accumulated depreciation. Computer equipment includes Ps.202,406 and
Ps.188,043 of capitalized software costs as of December 31, 2004 and 2003,
respectively.

                                      F-15
<PAGE>

NOTE 6 - SATELLITE TRANSPONDERS:

On February 8, 1999, the Group and PanAmSat Corporation ("PanAmSat") entered
into a new agreement for satellite signal reception and retransmission service
from 12 KU-band transponders on a new satellite ("PAS-9"), which became
operational in September 2000. The service term for PAS-9 will end at the
earlier of (a) the end of 15 years or (b) the date PAS-9 is taken out of
service. The Group is committed to pay a monthly fee of U.S.$1.7 million.

The concession authorizing the use of PAS-9 was granted by the federal
government through the SCT in November 2000. The process of migrating customers
from Solidaridad 2 to PAS-9 started in November 2000 and ended in March 2002.
The Group stopped using the services of Solidaridad 2 in early April 2002.

The balance of the satellite transponders as of December 31, is as follows:

<TABLE>
<CAPTION>
                                    2004              2003
                               -------------     -------------
<S>                            <C>               <C>
Satellite transponders         Ps. 1,659,346     Ps. 1,695,219
Accumulated depreciation            (479,367)         (376,716)
                               -------------     -------------

                               Ps. 1,179,979     Ps. 1,318,503
                               =============     =============
</TABLE>

Amortization of satellite transponders in 2004, 2003 and 2002 was Ps.110,623,
Ps.113,014 and Ps.107,160, respectively.

The Group's future obligation from the PAS-9 agreement, determined using the
Group's incremental borrowing rate at the lease commencement date of 11.5%, is
as follows:

<TABLE>
<CAPTION>
                                          Total
                                      -------------
<S>                                   <C>
2005                                  Ps.   227,440
2006                                        227,440
2007                                        227,440
2008                                        227,440
2009                                        227,440
Thereafter                                1,293,245
                                      -------------

                                          2,430,445

Less: amount representing interest       (1,035,087)
                                      -------------

                                      Ps. 1,395,358
                                      =============
</TABLE>

                                      F-16
<PAGE>

Interest expense recognized during the years ended December 31, 2004, 2003 and
2002 was Ps.171,100, Ps.178,682 and Ps.174,740, respectively.

The obligation is reflected on the consolidated balance sheet as of December 31,
as follows:

<TABLE>
<CAPTION>
                                 December 31,
                       ---------------------------------
                           2004                 2003
                       -------------       -------------
<S>                    <C>                 <C>
Current portion        Ps.    70,743       Ps.    66,820
Long-term portion          1,324,615           1,477,795
                       -------------       -------------

                       Ps. 1,395,358       Ps. 1,544,615
                       =============       =============
</TABLE>

The obligations of the Group under the PAS-9 agreement are proportionately
guaranteed by the Group's equity owner's in relation to their respective
ownership interests.

NOTE 7 - DEFERRED COSTS, NET:

Deferred costs, net as of December 31, consist of:

<TABLE>
<CAPTION>
                                       2004           2003
                                    ----------     ----------
<S>                                 <C>            <C>
Debt issuance costs, net (a)        Ps. 36,284     Ps. 53,941
Leasehold improvements, net (b)          5,214          7,287
                                    ----------     ----------

                                    Ps. 41,498     Ps. 61,228
                                    ==========     ==========
</TABLE>

a. Debt issuance costs

<TABLE>
<CAPTION>
                                       2004           2003
                                    ----------     ----------
<S>                                 <C>            <C>
Old Senior Notes (1)                Ps.      -     Ps. 44,468
New Senior Notes (2)                    41,467         41,467
                                    ----------     ----------

                                        41,467         85,935
Less: Accumulated amortization          (5,183)       (31,994)
                                    ----------     ----------

Total capitalized expenses, net     Ps. 36,284     Ps. 53,941
                                    ==========     ==========
</TABLE>

(1) During 2003, the Group expensed as a non-recurring item, Ps.48,052
    corresponding to the unamortized debt issuance costs in respect of
    noteholders that accepted to exchange their Old Senior Notes for the New
    Senior Notes (Note 9). The remaining Ps.44,468 related to the proportional
    debt issuance cost of the Old Senior Notes which were not exchanged, which
    would continue to be amortized over the remaining term of the Old Senior
    Notes.

                                      F-17
<PAGE>

    In December 2004, the Group expensed as a non-recurring item Ps.9,750
    relating to the remainder of the Old Senior Notes since the Group obtained a
    bank loan to pay in advance the remaining Old Senior Notes (Note 9).

(2) Fees and expenses incurred for the issuance of the New Senior Notes (Note
    9), will be amortized over the term of the New Senior Notes.

    Amortization of debt issuance costs was Ps.8,397, Ps.17,248 and Ps.18,867 in
    2004, 2003 and 2002, respectively.

b.  Leasehold improvements

Amortization of leasehold improvements was Ps.2,364, Ps.3,858 and Ps.10,410 in
2004, 2003 and 2002, respectively.

NOTE 8 - TRANSACTIONS WITH AFFILIATED COMPANIES AND OTHER RELATED PARTIES:

The principal transactions of the Group with affiliated companies and related
parties are:

<TABLE>
<CAPTION>
                                              2004        2003          2002
                                           ----------   ---------   ------------
<S>                                        <C>          <C>         <C>
Borrowings and accrued interest from
Equity owners                              Ps.      -   Ps.     -   Ps.4,293,332
Broadcasting services, Florida (a)             93,692      89,632         89,807
Programming (b)                               249,618     215,479        195,756
Special events programming (c)                148,236     130,317        200,381
Advertising costs (d)                         129,509     132,551        140,003
Royalties (e)                                  85,696      65,878         48,370
Broadcasting services, Mexico City (f)         45,583      47,767         42,146
Fixed asset acquisitions                        3,715           -         12,840
Acquisition of smart cards                     70,467      12,314         11,030
Finance costs                                       -     224,904        312,006
Management and administrative services          6,618       2,278          7,921
Maintenance services                            1,580       4,120         13,785
Advertising revenue                            50,257      27,240         31,404
Transmission services, income                   6,505       6,423          7,844
Other                                           1,615         696          8,564
</TABLE>

(a) The Group has an agreement with DTH TechCo Partners, an affiliate of both
    Televisa and News Corporation, for play-out, uplink and downlink of signals
    and compression services. Costs for these services are anticipated to be
    approximately U.S.$8.0 million per year.

(b) The Group purchases the rights to broadcast certain popular channels through
    affiliates of Televisa and News Corporation. Fees for this programming are
    based upon the number of subscribers.

                                      F-18
<PAGE>

(c)   The Group purchases, on occasion, the rights to broadcast certain special
      events programming from Televisa and its affiliates.

(d)   The Group purchases advertising time from Televisa on an as needed basis
      and creative services from DTH TechCo Partners.

(e)   Royalties paid to an affiliate of News Corporation consist of license,
      security and access fees and charges for the use of certain technology.
      The monthly fees and charges are based on the total number of smart cards,
      new subscribers during the period and the number of IRD's purchased.

(f)   The Group purchases uplink and downlink, playout and compression services
      from an affiliate of Televisa for operations conducted in the Mexico City
      broadcast facility.

(g)   The Group has engaged the law firm of Mijares, Angoitia, Cortes y Fuentes,
      S. C. to advise them on various legal issues. Two of their partners,
      currently on leave from the partnership, serve as members of the Group's
      Board. The fees paid to such law firm during 2004 and 2003 were Ps.1,149
      and Ps.460, respectively. In 2002 no legal fees were paid.

The outstanding balances due to affiliates and other related parties, are as
follows:

<TABLE>
<CAPTION>
                                         2004            2003
                                     -------------  -------------
<S>                                  <C>            <C>
Televisa and subsidiaries (h)        Ps.   127,450  Ps.   384,817
News Corporation and subsidiaries           57,290         63,591
                                     -------------  -------------

                                     Ps.   184,740  Ps.   448,408
                                     =============  =============
</TABLE>

(h)   Amount includes the remaining liability for the prepaid advertising to
      Televisa. On December, 2004, the Group entered into one-year advertising
      agreements with Televisa and subsidiaries for Ps.125,000, covering the
      period January 1, 2005 to December 31, 2005. In December 2003, the Group
      entered into one-year advertising agreement amounting to Ps.131,489,
      covering the period January 1, 2004 to December 31, 2004.

      The liability amounting U.S.$15 million that the Group had in 2003 with
      Televisa for the purchase of exclusive rights to exhibit and distribute
      through SKY certain of the professional Mexican Soccer League programming
      and Mexican Boxing programming during the 2001 through 2003 seasons was
      contributed as an additional paid in capital in May 2004. (Note 13).

                                      F-19
<PAGE>

NOTE 9 - SENIOR NOTES:

The Senior Notes consist of the following balances as of December 31:

<TABLE>
<CAPTION>
                              2004              2003
                        ----------------  ----------------
<S>                     <C>               <C>
New Senior Notes (a)    Ps.    3,344,700  Ps.    3,542,302
Old Senior Notes (b)             981,112         1,039,075
                        ----------------  ----------------

                        Ps.    4,325,812  Ps.    4,581,377

Less: short term
Old Senior Notes                 981,112                 -
                        ----------------  ----------------

Senior Notes long term  Ps.    3,344,700  Ps.    4,581,377
                        ================  ================
</TABLE>

(a)   On September 19, 2003 the Group completed the offering of U.S.$300 million
      of its Senior Notes due 2013 ("New Senior Notes"). The New Senior Notes
      bear interest at a coupon rate of 9.375%, payable semiannually on March 19
      and September 19 of each year, commencing March 19, 2004. Interest will be
      computed on the basis of a 360-day year or twelve 30-day months. The New
      Senior Notes are unsecured and unsubordinated indebtedness of the Group
      and contain certain covenants relating to the Group, including covenants
      with respect to: (i) limitations on additional indebtedness; (ii)
      limitations on liens; (iii) limitations on sales and leasebacks; (iv)
      limitations on restricted payments; (v) limitations on asset sales; and
      (vi) limitations on certain mergers, consolidations and similar
      transactions.

      The Group may, at its own option, redeem the New Senior Notes, in whole or
      in part, at any time on or after September 19, 2008 at the following
      redemption prices (expressed in percentages of the principal amount), plus
      accrued and unpaid interest, if any:

<TABLE>
<CAPTION>
If redeemed during
 the twelve-month
period commencing   Redemption
 September 19,      percentage
------------------  ------------
<S>                 <C>
       2008          104.6875
       2009          103.1250
       2010          101.5625
       2011          100.0000
</TABLE>

      In addition, on or before September 19, 2006, the Group may, at its own
      option and subject to certain requirements, use the proceeds from one or
      more qualified equity offerings to redeem up to 35% of the aggregate
      principal amount of the New Senior Notes at 109.375% of their principal
      amount, plus accrued and unpaid interest.

                                      F-20
<PAGE>

      The net proceeds from the offering of the New Senior Notes were used to
      redeem on October 20, 2003 U.S.$287.0 million in principal amount of the
      Group's 12 7/8% Old Senior Notes due 2007 (see below), and to pay a
      redemption premium of US$9.2 million, and fees and expenses relating to
      the transaction of US$3.8 million (Note 7-a).

(b)   In 1997, the Group concluded an offering of U.S.$375 million of its Senior
      Notes due 2007 ("Old Senior Notes"). The Old Senior Notes bear interest at
      a rate of 12 7/8% and are redeemable at the option of the Group, in whole
      or in part, at any time on or after April 1, 2002, initially at 106.4375%
      of their principal amount, plus accrued interest, declining ratably to
      100% of their principal amount, plus accrued interest, on or after April
      1, 2004. Interest on the Old Senior Notes is payable semi-annually on
      April 1 and October 1 of each year and commenced on October 1, 1997. The
      Old Senior Notes are uncollateralized, unsubordinated indebtedness of the
      Group and contain certain covenants similar to the New Senior Notes.

      The U.S.$88 million in Old Senior Notes that were not exchanged continued
      to accrue interest at 12 7/8% per annum, and remained outstanding in
      accordance with their original terms until January 7, 2005 when these
      Senior Notes were paid (Note 19).

NOTE 10 - BANK LOAN:

On December 10, 2004, the Group entered into a Ps1,012 million, 7-year bank loan
with a fixed interest rate of 10.55% per annum and an initial five-year grace
period for principal repayments with HSBC Mexico, S. A. a Mexican financial
institution. This loan will be paid in eight equal quarterly payments during
2010 and 2011. Interest payments are due on a monthly basis. The loan is
guaranteed by Televisa in 51% and News Corporation in 49%.

The new proceeds from the loan were used on January 7, 2005 to pay the remaining
US$88 million principal amount of the 12 7/8% notes due 2007 plus accrued and
unpaid interest.

NOTE 11 - FINANCIAL INSTRUMENTS:

a. Fair value:

The Group's financial instruments include cash and cash equivalents, trade
accounts receivables, trade accounts payable, due to affiliated companies and
other related parties, and debt. For cash and cash equivalents, trade accounts
receivables, other accounts receivable, trade accounts payable, and due to
affiliated companies and other related parties, the carrying amounts approximate
fair value due to the short maturity of these instruments.

                                      F-21
<PAGE>

The fair value of the Senior Notes is based on quoted market prices. The
estimated fair value of these instruments at December 31, 2004 and 2003 is as
follows (amounts in thousands):

<TABLE>
<CAPTION>
                                                Carrying value                   Fair value
                                         ----------------------------  ----------------------------
                                                              (1)                          (1)
<S>                <C>                   <C>             <C>           <C>             <C>
December 31, 2004  New Senior Notes      U.S.$  300,000  Ps.3,344,700  U.S.$  340,500  Ps.3,796,235
                   Old Senior Notes      U.S.$   88,000  Ps.  981,112  U.S.$   88,000  Ps.  981,112

                   Cross currency swaps  U.S.$        -  Ps.        -  U.S.$    1,059  Ps.   11,807

                   Foreign exchange
                   contracts             U.S.$        -  Ps         -  U.S.$       19  Ps       212

                   Loan facility (HSBC)                  Ps.1,012,000                  Ps.1,012,000

December 31, 2003  New Senior Notes      U.S.$  300,000  Ps.3,367,500  U.S.$  307,890  Ps.3,456,065
                   Old Senior Notes      U.S.$   88,000  Ps.  987,800  U.S.$   89,100  Ps.1,000,148
</TABLE>

(1) The exchange rate used to convert pesos to dollars was $1 to 11.149 ($1 to
11.225 in 2003).

The Senior Notes are thinly traded financial instruments. Accordingly, their
market price at any balance sheet date may not be representative of the price
which would be obtained in a more active market.

b. Derivative financial instruments:

Cross currency swap

In February 2004, Innova entered into two separate derivative transactions
denominated "cross currency swap" agreements to hedge a portion of its U.S.
dollar foreign exchange exposure resulting from the issuance of the U.S.$300
million 9.375% New Senior Notes that mature in 2013. Under the transactions,
Innova receives semi-annual payments calculated based on an aggregate notional
amount of U.S.$300 million at an annual rate of 9.375% and makes monthly
payments calculated based on an aggregate notional amount of Ps.3,282 million at
an annual rate of 10.25%. The transactions, both of which terminate in September
2008, are designed to reduce the Group's foreign exchange exposure on the
interest coupon payments on the New Senior Notes.

As a result of the timing difference in payments between the Bank and the Group,
the Group has an account receivable from the Bank amounting to Ps.76,631 which
is included in other accounts receivables.

Foreign exchange contracts

At December 31, 2004, Innova has U.S.$15 million in forward exchange contracts.
These forward exchange contracts have various termination dates (January,
February and March 2005).

                                      F-22
<PAGE>

NOTE 12 - COMMITMENTS AND CONTINGENCIES:

a.    In 1996, the Group signed an agreement with an affiliate of News
      Corporation to acquire and implement a conditional access system. This
      system includes Smart Cards which decode satellite signals and control
      access by subscribers. In 1999, the Group acquired a subscriber management
      system (SMS) designed specifically for DTH services. Under these
      arrangements, the Group estimates that the 2005 commitment will
      approximate U.S.$11.7 million for royalties, licenses and maintenance of
      the foregoing systems. In 2004, 2003, and 2002, the Group incurred
      expenses of US$8.7 million, US$7.2 million and US$5.9 million,
      respectively.

      The Group has entered into agreements with Televisa and an affiliate of
      Televisa to provide uplink and downlink, playout and compression services
      at the Mexico City station. The annual commitments are estimated to be
      approximately U.S.$4.6 million per year. The Group incurred expenses of
      US$4.9 million in 2004, US$4.1 million in 2003 and US$3.9 million in 2002.

      The Group entered into several contracts with programming providers,
      establishing that the amounts payable to the programmers will be based on
      the number of subscribers. These charges totaled Ps.852,852, Ps.767,480
      and Ps.718,899 for the years ended December 31, 2004, 2003 and 2002,
      respectively.

b.    The Group entered into two related agreements with CSG Software, Inc.
      (CSG), on June 12, 2002 under which CSG provides: a) A non-exclusive,
      perpetual license for the use of the software "Kenan" to provide billing
      and order management to licensed subscribers, besides installation and
      implementation of the system, training and support services and, b)
      consulting services.

      Under the Software License and Service Agreement, the Group paid US$2.9
      million to CSG for a license capacity of up to 1,125,000 subscribers.
      However, the Group can purchase additional capacity according to the
      subscriber base growth at an additional cost per every 100,000
      subscribers. Technical support in Mexico will be available for the first
      24 months following the date on which live production of the system
      begins, the annual cost for this service will be US$585,600. It is
      possible in accordance with the agreement to use the Kenan system for
      other DTH platform in case of merger, acquisition or combination of
      platforms. The new SMS was placed in service on November 2003.

      Under the Consulting Services agreement, CSG provided management and
      technology consulting, advisory and integration services related to the
      implementation of the Kenan end-to-end integrated solution, as well as the
      required interfaces with the Group's Siebel and NDS software currently in
      operation, in accordance with a Implementation Planning and Analysis
      process (IPA), previously agreed with the Group. The total cost of these
      services is US$4.4 million. As of December 31, 2004, US$4.2 million were
      paid and the US$0.2 million remaining were paid in January 2005.

                                      F-23
<PAGE>

c.    Since January 1, 2002, a 10% federal excise tax was imposed on the
      collected revenues from the Group's pay television services. In February
      2002, the Group filed a petition for constitutional relief against the
      Legislative Decree, which contains the amendments to the law regarding the
      excise tax. In August 15, 2003, the Group received a favorable resolution
      for the excise tax paid in 2002; however, the tax authorities have not
      returned the tax paid by the Group due to said authorities continue
      requesting supportive documentary information. The Group continues
      proceeding to recover the excise tax paid in 2002 but, it can not assure
      that it will be able to recover it. The resolution for the excise tax paid
      in 2003 was unfavorable for the Group; therefore, the excise tax paid in
      that year will not be recovered. The 10% excise tax on telecommunications
      was definitely eliminated as of January 2004.

d.    On October 8, 2004, Grupo Galaxy Mexicana, S. de R. L. de C. V. "DIRECTV
      Mexico" and the Group signed an agreement, where by DIRECTV Mexico sold
      its subscriber list to the Group upon its decision to discontinue its
      operations in Mexico. The purchase price payable by the Group to DIRECTV
      Mexico for the subscriber list shall be payable by delivering to DIRECTV
      Mexico two duly executed promissory notes "the Notes" in the original
      principal amount of Ps.144,112, and Ps.477,000, respectively. The Notes
      will be paid on the earlier of (i) the fifth business day following the
      date on which the Group and DIRECTV Mexico have finally determined the
      number of good subscribers or (ii) October 9, 2009, as such earlier date
      may be extended by DIRECTV Mexico in its sole discretion. These Notes may
      not be prepaid in whole or in part at any time.

      If the number of good subscribers is greater than 180,000, then the Group
      shall pay to DIRECTV an additional cash amount, but if it is less than
      70,000, and DIRECTV Mexico fails to surrender the Notes for cancellation
      and exchange as provided in the agreement, then DIRECTV Mexico shall pay
      to the Group a cash amount equal to the subscriber deficit, multiplied by
      U.S.$787.

      A good subscriber is any active subscriber that: (i) becomes a subscriber
      of the Group after October 8, 2004 (whether or not pursuant to the active
      migration efforts of the Group) and signs a subscription agreement in
      accordance with the Group's policies, and (ii) between the date hereof and
      the measurement date (seven months after the migration date), pays in full
      all up-front subscription charges (all subscription fees, and other
      charges, including, without limitation, those relating to IRD rentals,
      membership, insurance, reactivation, smarts cards, magazines, pay-per-view
      and special events) and six monthly subscription charges for the Group's
      residential subscription programming covering at least six consecutive
      months of paid service (or at least four monthly subscription charges for
      Group's residential subscription programming covering at least four
      consecutive months of paid service if all payments are made using an
      automatic charge to the subscriber's credit card but not to the
      subscriber's debit card).

      The Group, Innova Holdings and News Corp. entered into an option
      agreement, pursuant to which News Corp. was granted an option to acquire
      up to a 15% equity interest in each of Innova and Innova Holdings. The
      amount of equity to be received upon the exercise of the

                                      F-24
<PAGE>

      option depends on the successful migration and retention of DIRECTV
      Mexico's subscribers to Innova with a minimum migration of 175,000
      subscribers required for the issuance of the full 15% equity interest. The
      options become exercisable when the DTH business operations of DIRECTV
      Mexico have finally ceased, the Group and DIRECTV Mexico have finally
      determined the number of subscribers that successfully migrated from
      DIRECTV Mexico to the Group, and certain other conditions have been
      satisfied. If the options become exercisable, the holder may exercise them
      by delivering to Innova and Innova Holdings the promissory notes for
      cancellation or by paying to Innova and Innova Holdings an amount in cash
      equal to the aggregate principal amount of the promissory notes. The
      options expire on October 8, 2009. If the options are terminated under
      certain limited circumstances related to regulatory challenges, or after a
      final determination that renders the options illegal, or expire
      unexercised, then within ten days of the expiration date, DIRECTV Mexico
      will be entitled to receive an aggregate cash payment (including any
      payments made under the notes described above) of up to approximately
      U.S.$137.7 million if 175,000 DIRECTV Mexico subscribers successfully
      migrate to Innova. Termination of the option is limited to certain limited
      events;

      DIRECTV and News Corp. entered into a purchase agreement pursuant to which
      DIRECTV acquired (i) the right (which DIRECTV concurrently assigned to
      DIRECTV Latin America LLC (DTVLA)) to purchase from News Corp. the options
      granted to News Corp. by Innova and Innova Holdings to purchase up to an
      additional 15% of the outstanding equity of each of such entities pursuant
      to the option agreement described above, and (ii) the right to acquire
      News Corp.'s 30% interest in Innova;

      DIRECTV and Liberty Media, entered into a purchase agreement pursuant to
      which DIRECTV agreed to purchase all of Liberty Media's 10% interest in
      Innova for U.S. $88.0 million in cash, subject to customary closing
      conditions. DIRECTV has agreed that Televisa may purchase two-thirds (2/3)
      of any equity interest in Innova sold by Liberty Media, on the terms and
      subject to the conditions set forth in the purchase agreement between
      DIRECTV and Liberty Media;

      Televisa entered into an amended and restated guaranty with PanAmSat
      pursuant to which the proportionate share of our transponder lease
      obligation guaranteed by Televisa was reduced from 60% to 51%, until the
      full exercise of the options to News Corp. granted by Innova and Innova
      Holdings, at which point Televisa's guarantee will be adjusted to cover a
      percentage of the transponder lease obligations equal to its percentage
      ownership of Innova at that time. News Corporation's proportionate share
      of the guarantee was increased from 30% to 49% and Liberty Media was
      released of its guarantee; and

      The Group, Televisa, News Corp., DIRECTV and DTVLA entered into a DTH
      agreement that, among other things, governs the rights of the parties with
      respect to DTVLA's announced shut down of its Mexican DTH business,
      planned shut down of its existing DTH business in certain countries in
      Central America and the Caribbean, the carriage of certain of Televisa's
      programming channels by the Group and other DTH platforms of DIRECTV,
      DTVLA, News Corp. and their respective affiliates, and the waiver and
      potential release of certain claims between certain of the parties.

e.    The Group and Televisa entered into a channel licensing agreements
      pursuant to which the Group will pay Televisa a royalty fee to carry its
      over-the-air channels on its DTH service.

                                      F-25
<PAGE>

f.    The Company is in the process to enter into a new 3-year agreements with
      TV Azteca to continue broadcasting its over-the air channels 7 and 13, the
      annual fee will be $2 million; additionally, there will be another
      agreement where the Group will acquire from TV Azteca $94 million in
      advertising over three years. On the other hand, the Group is negotiating
      to have the pay-TV exclusive rights of various soccer matches, the fee has
      not been determined.

NOTE 13 - SOCIAL PARTS:

The social parts as of December 31, 2004 and 2003, is represented by four
partnership interests, of unequal value distributed as follows:

December 31, 2004:

<TABLE>
<CAPTION>
Partnership
 interest    Subseries      Amount
-----------  ---------  --------------
<S>          <C>        <C>
     1          A-1     Ps.    926,570
     1          B-1            463,285
     1          B-2            154,428
     1           C           5,111,396
</TABLE>

December 31, 2003:

<TABLE>
<CAPTION>
Partnership
 interest    Subseries      Amount
-----------  ---------  --------------
<S>          <C>        <C>
     1          A-1     Ps.    926,563
     1          B-1            463,282
     1          B-2            154,427
     1           C           5,111,396
</TABLE>

Effective September 9, 2003, the Group's equity owners capitalized all
outstanding principal amounts of the loans made by them to the Group totaling
Ps.3,617,469 as well as the portion of accrued interest as of such date which
amounted to Ps.945,683. These loans were capitalized in exchange for a
proportionate interest in Innova Holdings, S. de R. L. de C. V. ("Innova
Holdings"), a newly created company. Innova Holdings is the holder of a 100% of
Series "C" partnership interest, described below. After giving effect to the
capitalization, the Group's equity owners Televisa, News Corporation and Liberty
Media, continue to indirectly own 60%, 30% and 10% of Innova, respectively.

Series "A" is composed of a partnership interest representing 13.92% of the
total social parts. The Series "A" partnership interest may be subscribed to
only by persons of Mexican nationality.

                                      F-26
<PAGE>

Series "B" is composed of a partnership interest representing 9.28% of the total
social parts. The Series "B" partnership interest is unrestricted as to
ownership and therefore, may be acquired by Mexican investors and foreign
natural and legal persons or by persons, companies or entities that are included
in Article 2, Section III of the Foreign Investments Law.

Series "C" is composed of a partnership interest representing 76.80% of the
social parts. The Series C interest are owned by Innova Holdings and have
limited voting rights.

On May 24, 2004 the Group capitalized the existing liability in the amount of
Ps.179,784 (U.S.$15 million) arising from the use of rights to air the Mexican
Soccer games corresponding to the 2001, 2002 and 2003 winter-summer seasons.
This amount was recorded as an additional paid in capital not affecting the
relative ownership interest of its equity owners.

Dividends paid are not subject to income tax if paid from the Net Tax Profit
Account and will be taxed at a rate that fluctuates between 4.62% and 7.69% if
they arise from the reinvested Net Tax Profit Account. Any excess over this
account is subject to a tax equivalent to 49.25% and 47.06% depending on whether
paid in 2004 and 2005 respectively. The tax is payable by the company and may be
credited against its income tax in the same year or the following two years.
Dividends paid are not subject to tax withholding.

The ability of the Group to declare dividends is restricted by the New and Old
Senior Notes indentures.

In the event of a capital reduction, any excess of the equity owners over
capital contributions, the latter restated in accordance with the provisions of
the Income Tax Law, is accorded the same tax treatment as dividends.

NOTE 14 - RESTRUCTURING AND NON-RECURRING ITEMS:

a.    The restructuring charges recognized in 2004, 2003 and 2002 consisted of
      severance costs in connection with employee terminations. There are no
      provisions set aside at December 31, 2003 and 2004.

b.    In 2004, the Group recognized a nonrecurring loss in the amount of
      Ps.9,750, which is composed of the write-off of the remaining unamortized
      debt issuance cost related to the $88 million Old Senior Notes. (Note 7).

c.    In 2003, as a result of the restructuring of the Senior Notes, the Group
      recognized a nonrecurring loss in the amount of Ps.152,687 (net), which is
      mainly composed of the premium on redemption payment, and the unamortized
      debt issuance cost of corresponding to the Old Senior Notes that were
      exchanged for the New Senior Notes (Note 7).

d.    On October 30, 2003, the Federal Executive approved a temporary tax
      incentive equal to 100% of the 10% excise tax on telecommunications,
      effective November 1, 2003 and applicable only to the tax triggered from
      this date through December 31, 2003. Therefore,

                                      F-27
<PAGE>

during the months of November and December 2003, the Group recorded, the effects
of the tax incentive above mentioned amounting Ps.42,053, as a non-recurring
charge.

e.    As explained in Note 6 the process of migrating customers from Solidaridad
      2 to PAS-9 started in November 2000 and finally ended in March 2002. As
      explained in Note 5, the Group recorded an impairment charge of Ps.33,661
      in April 2002 that related to certain transmission equipment associated
      with Solidaridad 2. This impairment loss, together with the payments for
      the use of Solidaridad 2 in the first quarter of 2002 amounting to
      Ps.15,512, was offset by the reversal of unutilized reserve amounts
      initially established in 2000 amounting to Ps.20,809, and reflected as a
      nonrecurring charge of Ps.28,364 in 2002.

NOTE 15 - ACCUMULATED LOSSES:

Under Mexican Corporate Law, interested third parties can request the
dissolution of the Group if accumulated losses exceed two-thirds of social
parts. At December 31, 2004, the Group's accumulated losses exceeded its social
parts. Although the Group believes it is unlikely such action will occur, the
Group, obtained from Televisa and News Corporation, a commitment to provide
financial support to the Group for a period of one year from the balance sheet
date, in proportion to their respective ownership interests, if required, to
avoid such action.

The recoverability of the Group's investment in DTH infrastructure and product
development is dependent upon future events, including, but not limited to, the
stability of the Mexican economic environment, obtaining adequate financing for
the Group's development program, the continued operation of satellites owned by
third parties, the competitive and market environment for pay television
services in Mexico, and the achievement of a level of operating revenues that is
sufficient to support the Group's cost structure.

NOTE 16 - PROVISION FOR INCOME TAX ("IT"), ASSETS TAX ("AT") AND EMPLOYEES'
STATUTORY PROFIT SHARING:

Tax losses can be carried forward for up to ten years and offset against any
profits that the Group or Televisa may generate during that period in accordance
with the Income Tax Law.

                                      F-28
<PAGE>

At December 31, 2004, the Group had total tax loss carryforwards of
Ps.7,902,560, which will under certain circumstances, be carried forward over
ten years from the period that the respective tax loss was generated in:

<TABLE>
<CAPTION>
 Year of
expiration                Amount
----------            -------------
<S>                   <C>
   2005               Ps.         9
   2006                       2,035
   2007                     660,951
   2008                   2,062,242
   2009                     736,429
   2010                     983,794
   2011                     769,016
   2012                   1,416,911
   2013                     717,890
   2014                     553,283
                      -------------

                      Ps. 7,902,560
                      =============
</TABLE>

The following items represent the principal differences between income taxes
computed at the statutory rate and the Group's provision for income taxes:

<TABLE>
<CAPTION>
                                                    2004            2003            2002
                                                ------------    -------------   -------------
<S>                                             <C>             <C>             <C>
Tax at the statutory rate 33% in 2004 (34% in
2003 and 35% in 2002) on income (loss)
    before taxes                                Ps.  190,294    (Ps.  327,869)  (Ps.  648,130)
Differences in restatement                            51,963          134,044          98,258
Valuation allowance                                        -          238,040         636,383
Tax loss carryforwards                              (162,762)               -               -
Deferred advertising                                 (16,185)          (4,198)        (14,576)
Depreciation and amortization                         (4,710)         (10,504)        (47,110)
Debt issuance costs                                    1,989            8,236           3,817
Provisions                                           (42,526)         (30,111)        (12,103)
Deferred income                                        8,069           16,840          (8,002)
Other                                                (26,132)         (24,478)         (8,537)
                                                ------------     ------------    ------------

Provision for income tax                                   -                -               -
Assets tax                                              (198)         123,125         (82,613)
                                               -------------    -------------   -------------

Total                                           Ps.     (198)    Ps.  123,125    (Ps.  82,163)
                                                ============    =============   =============
</TABLE>

                                      F-29
<PAGE>

Deferred taxes at December 31, 2004 and 2003, were generated by the following
temporary differences and tax loss carryforwards:

<TABLE>
<CAPTION>
                                     2004             2003
                                --------------   --------------
<S>                             <C>              <C>
Prepaid expenses                (Ps.    39,523)  (Ps.    18,591)
Other deferred costs                     6,454            5,899
Property and equipment                 120,745           97,092
Deferred income                         42,306           47,889
Accrued expenses                       121,826          115,998
Satellite transponders, net             64,614           74,617
Debt issuance costs                    (10,182)         (13,812)
Tax loss carryforwards               2,370,768        2,841,769
                                --------------   --------------

                                     2,677,008        3,150,861

Valuation allowance                 (2,677,008)      (3,150,861)
                                --------------   --------------

Deferred income tax             Ps.          -   Ps.          -
                                ==============   ==============
</TABLE>

Employees' statutory profit sharing in Mexico is determined for each subsidiary
individually, not on a consolidated basis. There is no employees' statutory
profit sharing deferred tax as of December 31, 2004 and 2003.

Pursuant to the tax legislation in force, the Company must pay annually the
greater of the IT or the AT, which is determined on the average value of assets
less certain liabilities. When the AT payments are greater than IT, they are
recoverable against the IT in excess of the AT from the three prior years and
the ten subsequent years. In 2004, 2003 and 2002 the asset tax rate was 1.8%.
Under Mexican law, taxpayers cannot deduct from their asset tax basis debt
contracted with nonresident companies or financial intermediaries. The Group
challenged these provisions of Mexico's asset tax law but at the same time, and
in order to avoid penalties and interest payments in the event the Group could
lose the appeal, the Group paid Ps.43,284 of tax on assets for the year ended
December 31, 2001, Ps.45,189 for the year ended December 31, 2002, and Ps.7,531
for the months of January and February 2003. On March 19, 2003, the court issued
a resolution in the Group's favor, allowing the Group to deduct debts payable to
nonresidents from the asset tax basis. In addition, subsequent to March 19,
2003, the Group has recovered the amounts previously paid as described above.

The Group is also included in the consolidated tax return of Televisa and its
consolidated subsidiaries for purposes of determining its income taxes and
assets tax. Beginning January 1, 1999, 60% of the tax profit or loss obtained by
the Group will be consolidated with the tax profit or loss of Televisa to the
extent of Televisa's percentage ownership of the Group. Through December 31,
1998, Televisa recognized the total taxable loss of the Group to the extent of
its percentage ownership. Effective January 1, 2005, with the recent changes in
the tax law, Televisa will once again consolidate at 100% of its ownership
interest for tax purposes.

                                      F-30
<PAGE>

The Group entered into a tax sharing agreement with Televisa under which the
Group will, during the periods that the Group is a part of Televisa's
consolidated tax group, pay Televisa the amount of income and asset taxes that
Televisa is required to pay on behalf of the Group. No such amount will be
payable until the Group's profit exceeds its tax loss carryforwards. Conversely,
Televisa shall pay to the Group the portion of any tax refund allocable to the
Group.

NOTE 17 - COMPREHENSIVE INCOME (LOSS):

Comprehensive income (loss) for the years ended December 31, 2004, 2003 and
2002, was as follows:

<TABLE>
<CAPTION>
                                                     2004              2003           2002
                                                 ------------    ------------   ----------------
<S>                                              <C>             <C>            <C>
Net income (loss) per consolidated statements
of income (loss)                                 Ps.  576,287    (Ps. 840,110)  (Ps.   1,934,414)
Result from holding non-monetary assets
for the year                                          (40,049)        116,103            179,692
Minority interest                                        (136)         (2,734)               (22)
Supplementary liability for labor obligations              (3)             42               (129)
                                                 ------------    ------------   ----------------

Comprehensive income (loss) for the year         Ps.  536,099    (Ps. 726,699)  (Ps.   1,754,873)
                                                 ============    ============   ================
</TABLE>

NOTE 18 - FOREIGN CURRENCY POSITION:

a.  The foreign currency position of monetary items of the Group at December 31,
    2004 and 2003, were as follows:

    2004:

<TABLE>
<CAPTION>
                 Foreign currency          Year-end          Mexican pesos
Currency        amounts (thousands)    Exchange rate (1)    (thousands) (1)
--------        -------------------    -----------------    ---------------
<S>             <C>                    <C>                  <C>
Assets:
U.S. Dollars           152,121             11.149           Ps.   1,695,997

Liabilities:
U.S. Dollars           546,913             11.149                 6,097,533
</TABLE>

2003:

<TABLE>
<CAPTION>
                 Foreign currency          Year-end          Mexican pesos
Currency        amounts (thousands)    Exchange rate (1)    (thousands) (1)
--------        -------------------    -----------------    ---------------
<S>             <C>                    <C>                  <C>
Assets:
U.S. Dollars            42,331             11.225           Ps.     475,165

Liabilities:
U.S. Dollars           574,056             11.225                 6,443,779
</TABLE>

                                      F-31
<PAGE>

b.    The foreign currency position of non-monetary items of the Group at
      December 31, 2004 and 2003, were as follows:

2004:

<TABLE>
<CAPTION>
                                           Foreign currency                Year-end            Mexican pesos
       Currency                           amounts (thousands)          Exchange rate (1)      (thousands)(1)
-----------------------                   -------------------          -----------------      --------------
<S>                                       <C>                          <C>                    <C>
Property and equipment:
U.S. Dollars                                    36,718                      11.149                 409,369
Pounds Sterling                                  1,730                      21.52                   37,230
Yen                                             27,422                       0.1090                  2,989
Canadian dollar                                    422                       9.38                    3,958
French France                                       63                      15.25                      960

Satellite transponders:
U.S. Dollars                                    95,447                      11.149               1,064,138
</TABLE>

2003:

<TABLE>
<CAPTION>
                                           Foreign currency                Year-end            Mexican Pesos
       Currency                           amounts (thousands)          exchange rate (1)      (thousands)(1)
-----------------------                   -------------------          -----------------      --------------
<S>                                       <C>                          <C>                    <C>
Property and equipment:
U.S. Dollars                                    22,755                      11.225            Ps.    255,425
Pounds Sterling                                  2,210                      20.32                     44,907
Yen                                             37,031                       0.1070                    3,962
Canadian dollar                                    277                       8.91                      2,468

Satellite transponders:
U.S. Dollars                                   104,396                      11.225                 1,171,845
</TABLE>

                                      F-32

<PAGE>

c.    Transactions during 2004, 2003 and 2002 in foreign currencies included in
      the consolidated statements of income (loss) were as follows:

2004:

<TABLE>
<CAPTION>
                                                  Foreign
                                                  currency     Year-end
                                                  amounts      exchange     Mexican Pesos
                                  Currency      (thousands)    rate (1)    (thousands) (1)
                                ------------    -----------    --------    ---------------
<S>                             <C>             <C>            <C>         <C>
Interest income                 U.S. Dollars          848       11.149           9,454
Costs and expenses:
Transponder expense             U.S. Dollars       20,400       11.149         227,440
Broadcasting                    U.S. Dollars        8,284       11.149          92,358
Programming                     U.S. Dollars       66,616       11.149         742,702
Royalty fees                    U.S. Dollars        5,606       11.149          62,501
Other expenses                  U.S. Dollars       13,034       11.149         145,316
Interest expense                U.S. Dollars       41,488       11.149         462,550
</TABLE>

2003:

<TABLE>
<CAPTION>
                                                  Foreign
                                                  currency     Year-end
                                                  amounts      exchange    Mexican Pesos
                                  Currency      (thousands)    rate (1)    (thousands) (1)
                                ------------    -----------    --------    ---------------
<S>                             <C>             <C>            <C>         <C>
Interest income                 U.S. Dollars        1,079       11.225       Ps. 12,112
Costs and expenses:
Transponder expense             U.S. Dollars       20,400       11.225          228,990
Broadcasting                    U.S. Dollars       12,536       11.225          140,717
Programming                     U.S. Dollars       64,300       11.225          721,768
Royalty fees                    U.S. Dollars        5,769       11.225           64,757
Other expenses                  U.S. Dollars        9,163       11.225          102,855
Interest expense                U.S. Dollars       76,643       11.225          860,318
</TABLE>

                                      F-33

<PAGE>

2002:

<TABLE>
<CAPTION>
                                                    Foreign
                                                    currency    Year-end
                                                    amounts     exchange    Mexican Pesos
                                   Currency       (thousands)   rate (1)   (thousands) (1)
                                ------------      -----------   --------   ---------------
<S>                             <C>               <C>           <C>        <C>
Interest income                 U.S. Dollars            74       10.464      Ps.     774
Costs and expenses:
Transponder expense             U.S. Dollars        21,900       10.464          229,162
Broadcasting                    U.S. Dollars        12,663       10.464          132,506
Programming                     U.S. Dollars        58,800       10.464          615,283
Royalty fees                    Pounds Sterling        652       17.00            11,084
Royalty fees                    U.S. Dollars         3,605       10.464           37,723
Other expenses                  U.S. Dollars         3,552       10.464           37,168
Interest expense                U.S. Dollars        79,974       10.464          836,848
</TABLE>

(1)   For reference purposes only. Does not indicate the actual amounts
      presented in the consolidated statement of income (loss).

Paragraphs b) and c) are disclosed in accordance with the Fourth Amendment to
Bulletin B-10 issued by the MIPA, which also provides that liabilities
denominated in a foreign currency are translated using exchange rates in effect
at the balance sheet date.

As of December 31, 2004 and 2003, the exchange rate between the Mexican Peso and
the U.S. Dollar was Ps.11.149 and Ps.11.225 per U.S. dollar, respectively, which
represents the interbank free market exchange rate as of those dates as
published by Banco de Mexico, S.A. As of March 18, 2005, the exchange rate was
Ps.11.2193 per U.S. dollar, which represents the interbank free market exchange
rate as of that date as published by Banco de Mexico, S.A.

NOTE 19 - SUBSEQUENT EVENT:

The new proceeds from a bank loan (Note 10) were used on January 7, 2005 to pay
the remaining US$88 million principal amount of the 12 7/8% notes due 2007 plus
accrued and unpaid interest.

NOTE 20 - DIFFERENCES BETWEEN MEXICAN GAAP AND U.S. GAAP:

The Group's consolidated financial statements are prepared in accordance with
Mexican GAAP, which differs in certain significant respects from U.S. GAAP.

The reconciliation to U.S. GAAP includes a reconciling item for the effect of
applying the option provided by the Modified Fifth Amendment to Bulletin B-10
for the restatement of equipment of non-Mexican origin because, as described
below, this provision of inflation accounting under Mexican GAAP does not meet
the consistent currency requirement of Regulation S-X of the Securities and
Exchange Commission ("SEC").

                                      F-34

<PAGE>

The reconciliation to U.S. GAAP does not include the reversal of the other
adjustments to the financial statements for the effects of inflation required
under Mexican GAAP Bulletin B-10, because the application of Bulletin B-10
represents a comprehensive measure of the effects of price level changes in the
inflationary Mexican economy and, as such, is considered a more meaningful
presentation than historical, cost-based financial reporting for both Mexican
and U.S. accounting purposes.

The principal differences between Mexican GAAP and U.S. GAAP that affect net
income (loss) and total equity owners' deficit are described below:

Derivative financial instruments

The Group's activities expose it to a variety of market risks, including risks
related to the effects of changes in foreign-currency exchange rates and
interest rates. The Group uses forward currency agreements to protect its
exposure to changes in the exchange rates created by its U.S. dollar-denominated
debt. The Group also uses derivative instruments to minimize significant,
unanticipated earnings fluctuations that may arise from volatility in interest
rates.

Under Mexican GAAP and following the guidelines of Bulletin C-2, the Group
recorded these derivative instruments, which qualify for hedge accounting, in
the balance sheet, on the same basis of the hedged liabilities, and changes in
value were recorded in each period in the income statement. However, for U.S.
GAAP purposes, the Group has not undertaken to qualify these contracts as
hedges, and as such, these derivative instruments should be recorded on the
balance sheet at their fair value with changes in fair values taken directly to
the income statement.

Maintenance reserve and smart cards replacement

Under Mexican GAAP, it is acceptable to accrue for certain expenses which
management believes will be incurred in subsequent periods. Under U.S. GAAP,
these costs are expensed as incurred.

Restatement of property and equipment

Effective January 1, 1997, the Group adopted the Fifth Amendment to Bulletin
B-10 which eliminated the use of replacement costs for the restatement of
property and equipment and instead, included an option of using the Specific
Index for the restatement of equipment of non-Mexican origin. The Group has
elected to apply the Specific Index option for determining the restated balances
of equipment of non-Mexican origin under Mexican GAAP. For U.S. GAAP purposes,
the use of an index that contemplates currency exchange movements is not in
accordance with the historical cost concept nor does it present financial
information in a constant currency. Hence for U.S. GAAP purposes, property and
equipment are restated by the NCPI and the difference in depreciation expense
and carrying value are recognized in the net income (loss) and equity owners'
deficit adjustments, respectively.

                                      F-35
<PAGE>

Revenue recognition

The Group provides the antenna, LNB and accessories to new subscribers, together
with the IRD, for a set monthly rental fee, retaining title and ownership of all
the equipment. The Group also uses intermediate parties to perform certain
customer acquisition and installation services on its behalf. Under Mexican
GAAP, the Group records as revenue amounts received from these intermediate
parties. Under U.S. GAAP, the Group follows the guidance of Emerging Issues Task
Force Summary No. 99-19, "Reporting Revenue Gross as a Principal versus Net as
an Agent", pursuant to which it has determined that it serves as principal in
these transactions and that it should record as revenue amounts billed to the
subscriber, as the ultimate customer. The accompanying condensed consolidated
statement of income (loss) under U.S. GAAP for the years ended December 31,
2004, 2003 and 2002 therefore include an adjustment to reflect as revenue the
amounts billed to subscribers and not the amounts received from intermediate
parties.

In addition, under Mexican GAAP, initial non-refundable subscription fees are
recognized upon activation of the new subscriber's DTH services. Under U.S.
GAAP, initial non-refundable subscription fees are recognized over the period
that a new subscriber is expected to remain a customer. Customer acquisition
costs directly attributable to the income are recognized over the same period
under U.S. GAAP. Those customer acquisition costs in excess of the initial
non-refundable subscription fee revenues, are expensed as incurred.

Initial non-refundable subscription fees for the year ended December 31, 2004,
2003 and 2002 amounted to Ps.102,490, Ps.127,762 and Ps.158,500, respectively.
Under U.S. GAAP, deferred initial non-refundable subscription fee revenues of
approximately Ps.170,305, Ps.209,463 and Ps.213,334 were recorded as of December
31, 2004, 2003 and 2002, respectively. In addition, customer acquisition costs,
have been deferred to match and equal initial non-refundable subscription
revenues; therefore at December 31, 2004, 2003 and 2002, deferred costs under
U.S. GAAP also amounted to Ps.170,305, Ps.209,463 and Ps.213,334, respectively.
Initial non-refundable subscription revenues (which are matched by customer
acquisition costs) that have been recognized during the year amount to
Ps.141,646 (Ps.136,383 and Ps.85,842 in 2003 and 2002, respectively).

These U.S. GAAP adjustments did not have any impact on operating or net income
(loss) in 2004, 2003 or 2002.

                                      F-36
<PAGE>

Presentation in the financial statements - Restructuring and non-recurring items

Under Mexican GAAP, the Group recognizes various cost as "Restructuring and
non-recurring items", which would be considered operating expenses under U.S.
GAAP. Such cost primarily include severance costs in connection with employee
termination, the derived effects of the 10% excise tax on telecommunications,
costs related to the redundant use of the Solidaridad 2 satellite and the
increased costs to reorientate customer's antennas to PAS 9 in a short period of
time (Note 14).

In addition, during the year ended December 31, 2003 the provisions of Statement
of Financial Accounting Standard ("SFAS") No. 145, "Rescission of FASB Statement
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections"
became effective for the Group. As a result, the Group is not allowed to
classify the loss on the restructuring of the Senior Notes as an extraordinary
item, since the restructuring of the Senior Notes did not meet the criteria of
Accounting Principles Board Opinion No. 30. Accordingly, the loss on
restructuring of Senior Notes, which is comprised of the redemption premium on
the Old Senior Notes (Note 9) and the unamortized cost of debt issuance costs
corresponding to the Old Senior Notes that were exchanged for the New Senior
Notes (Note 7), are classified as part of income from continuing operations
under U.S. GAAP.

Deferred income taxes

Under Mexican GAAP, the Group follows the guidelines of amended Bulletin D-4 in
accounting for income taxes. Bulletin D-4 is similar to U.S. GAAP, Statement of
Financial Accounting Standards No. 109 ("SFAS 109") "Accounting for Income
Taxes", in many respects.

SFAS 109 requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the financial
statements and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. Deferred
tax assets including benefits from tax loss carryforwards are recognized to the
extent their realization is more likely than not.

                                      F-37
<PAGE>

The tax effects of temporary differences that give rise to significant deferred
tax assets and liabilities, applying SFAS 109 at December 31, 2004 and 2003, are
as follows:

<TABLE>
<CAPTION>
                                                     2004                  2003
                                               ----------------       ---------------
<S>                                            <C>                    <C>
Deferred income tax liabilities:
Current:
Prepaid expenses and other                     (Ps.      44,547)      (Ps.     18,591)
                                               ----------------       ---------------

Total current                                           (44,547)              (18,591)

Non-current:
Derivate financial instrument                            (3,306)                    -
Debt issuance costs                                     (10,182)              (13,813)
                                               ----------------       ---------------

Total deferred income tax liabilities                   (58,035)              (32,404)
                                               ----------------       ---------------

Deferred income tax assets:
Current:
Satellite transponders, net                              83,955                74,617
Accrued expenses                                        116,605               110,736
Deferred income                                          42,306                47,889
                                               ----------------       ---------------

Total current                                           242,866               233,242

Non-current:
Other deferred costs                                      6,454                 5,899
Property and equipment                                  106,750                97,093
Tax loss carryforwards                                2,370,768             2,841,790
                                               ----------------       ---------------

Total deferred income tax assets                      2,726,838             3,178,024

Less: Valuation allowance                            (2,668,803)           (3,145,620)
                                               ----------------       ---------------

Net deferred income tax assets                           58,035                32,404
                                               ----------------       ---------------

Deferred income taxes                          Ps.            -       Ps.           -
                                               ================       ===============
</TABLE>

In conformity with the Income Tax Law, the Group restates the tax basis of
property and equipment in a form similar to the restatement for financial
reporting purposes, however based on a different date criteria.

                                      F-38
<PAGE>

Summary

Net income (loss) for the years ended December 31, 2004, 2003 and 2002, adjusted
to take into account the principal differences between Mexican GAAP and U.S.
GAAP, as they relate to the Group, are as follows:

<TABLE>
<CAPTION>
                                                                 2004             2003                2002
                                                             ------------      -----------       --------------
<S>                                                          <C>               <C>               <C>
Net income (loss) as reported under Mexican GAAP             Ps.  576,287      (Ps.840,110)      (Ps. 1,934,414)
Derivative financial instruments                                   11,807                -                    -
Satellite reorientation costs                                           -                -              (35,344)
Maintenance reserve                                                 1,448            2,862                7,746
Restatement  of property and equipment                              9,768           15,116               (1,085)
Restructuring charge                                                    -                -               (5,153)
                                                             ------------      -----------       --------------

Net income (loss) in accordance with U.S. GAAP               Ps.  599,310      (Ps.822,132)      (Ps. 1,968,250)
                                                             ============      ===========       ==============
</TABLE>

Equity owners' deficit as of December 31, 2004 and 2003, adjusted to take into
account the principal differences between Mexican GAAP and U.S. GAAP, as they
relate to the Group, are as follows:

<TABLE>
<CAPTION>
                                                                                2004                  2003
                                                                          ----------------      ----------------
<S>                                                                       <C>                   <C>
Total equity owners' deficit under Mexican GAAP                           (Ps.   3,000,820)     (Ps.   3,716,714)
U.S. GAAP adjustments:
Derivative financial instruments                                                    11,807                     -
Maintenance reserve                                                                 17,400                15,952
Restatement of property and equipment                                               (1,073)              (51,026)
                                                                          ----------------      ----------------

Total U.S. GAAP adjustments                                                         28,134               (35,074)
                                                                          ----------------      ----------------

Total equity owners' deficit under U.S. GAAP                              (Ps.   2,972,686)     (Ps.   3,751,788)
                                                                          ================      ================
</TABLE>

A summary of the Group's statement of changes in equity owners' deficit with
balances determined under U.S. GAAP is as follows:

<TABLE>
<S>                                                                <C>
Balance at December 31, 2002                                       ($     7,492,848)
Capitalization of equity owners' loans                                    4,563,150
Supplementary liability for labor obligations                                    42
Net loss for the year                                                      (822,132)
                                                                   ----------------

Balance at December 31, 2003                                             (3,751,788)

Capital contribution                                                        179,795
Supplementary liability for labor obligations                                    (3)
Net income for the year                                                     599,310
                                                                   ----------------

Balance at December 31, 2004                                       (Ps.   2,972,686)
                                                                   ================
</TABLE>

                                      F-39
<PAGE>

A summary of the Group's equity owners' deficit after the U.S. GAAP adjustments
described above, as of December 31, is as follows:

<TABLE>
<CAPTION>
                                                                                 2004                  2003
                                                                          ----------------      ----------------
<S>                                                                       <C>                   <C>
Social parts                                                               Ps.   6,655,679       Ps.   6,655,668
Additional paid in capital                                                         179,784                     -
Accumulated losses                                                              (9,820,988)          (10,420,298)
Other comprehensive income:
        Excess from restatement                                                     12,946                12,946
        Supplementary liability for labor obligations                                 (107)                 (104)
                                                                          ----------------      ----------------

Total equity owners' deficit under U.S. GAAP                              (Ps.   2,972,686)     (Ps.   3,751,788)
                                                                          ================      ================
</TABLE>

Included below are condensed consolidated financial statements of the Group as
of December 31, 2004 and 2003 and for the years ended December 31, 2004, 2003
and 2002, after giving effect to the U.S. GAAP adjustments.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of Mexican Pesos in purchasing power as of December 31,
2004)

<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                          -------------------------------------
                                                                               2004                  2003
                                                                          ---------------       ---------------
<S>                                                                       <C>                   <C>
ASSETS
Current assets:
Cash and cash equivalents                                                 Ps.   1,696,793       Ps.     519,189
Trade accounts receivables, net                                                    83,103               104,566
Other accounts receivables                                                         76,631                     -
Prepaid advertising                                                               125,000               131,489
Other current assets                                                               35,049                27,334
                                                                          ---------------       ---------------

Total current assets                                                            2,016,576               782,578

Property and equipment, net                                                     1,551,232             1,517,512
Satellite transponders, net                                                     1,115,508             1,220,088
Deferred costs, net                                                               211,803               270,692
Derivative financial instruments                                                   11,807                     -
Other non-currents assets                                                               -                 8,674
                                                                          ---------------       ---------------

Total assets                                                              Ps.   4,906,926       Ps.   3,799,544
                                                                          ===============       ===============
</TABLE>

                                      F-40
<PAGE>

<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                          -------------------------------------
                                                                               2004                  2003
                                                                          ---------------       ---------------
<S>                                                                       <C>                   <C>
LIABILITIES
Current liabilities:
Senior notes                                                              Ps.     981,112       Ps.           -
Trade accounts payable                                                            162,248               155,267
Accrued expenses                                                                  231,261               236,115
Satellite transponders obligation                                                  70,743                66,820
Due to affiliated companies and other related parties                             184,740               448,408
Other current liabilities                                                         566,012               583,824
                                                                          ---------------       ---------------

Total current liabilities                                                       2,196,116             1,490,434

Non-current liabilities:
Senior notes                                                                    3,344,700             4,581,377
Bank loan                                                                       1,012,000                     -
Satellite transponders obligation                                               1,324,615             1,477,795
Other non-current liabilities                                                       2,181                 1,726
                                                                          ---------------       ---------------

Total liabilities                                                               7,879,612             7,551,332
                                                                          ---------------       ---------------

Commitments and contingencies                                                           -                     -
Equity owners' deficit                                                         (2,972,686)           (3,751,788)
                                                                          ---------------       ---------------

Total liabilities and equity owners' deficit                              Ps.   4,906,926       Ps.   3,799,544
                                                                          ===============       ===============
</TABLE>

                                      F-41
<PAGE>

CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)

(Expressed in thousands of Mexican Pesos in purchasing power as of December 31,
2004)

<TABLE>
<CAPTION>
                                                                      Years ended December 31,
                                                    ------------------------------------------------------------
                                                         2004                  2003                   2002
                                                    ---------------       ---------------        ---------------
<S>                                                 <C>                   <C>                    <C>
Revenues from programming services                  Ps.   2,591,730       Ps.   2,231,904        Ps.   2,083,111
Revenues from rental of IRDs                              1,333,274             1,031,785                880,298
Other revenues                                              796,913               676,600                663,521
                                                    ---------------       ---------------        ---------------

Net revenues                                              4,721,917             3,940,289              3,626,930
                                                    ---------------       ---------------        ---------------

Operating expenses:
Cost of sales - programming services                        874,720               704,724                610,143
Cost of sales - other                                       472,677               457,977                424,421
Administrative expenses                                     132,554               131,485                145,125
Selling expenses                                            977,350               892,395                910,841
Other operating expenses                                    534,678               453,591                606,782
Depreciation and amortization                               754,731               835,488              1,012,912
                                                    ---------------       ---------------        ---------------

Total operating expenses                                  3,746,710             3,475,660              3,710,224
                                                    ---------------       ---------------        ---------------

Operating profit (loss)                                     975,207               464,629                (83,294)

Loss on debt restructuring                                        -              (161,394)                     -

Integral results of financing                              (375,528)           (1,249,580)            (1,802,321)
                                                    ---------------       ---------------        ---------------

Income (loss) before tax                                    599,679              (946,345)            (1,885,615)

Provision for income and asset taxes                           (198)              123,126                (82,613)
                                                    ---------------       ---------------        ---------------

Minority interest                                              (171)                1,087                    (22)
                                                    ---------------       ---------------        ---------------

Net income (loss)                                   Ps.     599,310      (Ps.     822,132)       (Ps.  1,968,250)
                                                    ===============      ================        ===============


</TABLE>

Cash Flows

Mexican GAAP Bulletin B-12, specifies the appropriate presentation of the
statements of changes in financial position. Under Bulletin B-12, the sources
and uses of resources are determined based upon differences between beginning
and ending financial statement balances in constant pesos. Under U.S. GAAP, a
statement of cash flows is required, which presents only cash movements and
excludes non-cash items.

                                      F-42
<PAGE>

Presented below are statements of cash flow for the years ended December 31,
2004, 2003 and 2002, prepared after considering the impact of U.S. GAAP
adjustments. The cash flow statements present nominal cash flows during the
period, adjusted to December 31, 2004, purchasing power.

<TABLE>
<CAPTION>
                                                           2004                 2003                  2002
                                                     ----------------     ----------------      ----------------
<S>                                                  <C>                  <C>                   <C>
Operating activities:
Net income (loss)                                    Ps.      599,310     (Ps.     822,132)     (Ps.   1,968,250)
Adjustments to reconcile net income (loss)
to cash flows (used in)
operating activities:
Gain from monetary position                                  (308,289)            (331,661)             (545,372)
Unrealized exchange losses (gains)                            (39,000)             243,641             1,118,821
Allowance for doubtful accounts                               118,332              101,763               121,220
Depreciation and amortization                                 754,731              835,488             1,012,912
Impairments and write downs                                     5,174                    -                33,661

Changes in operating assets and liabilities:
Assets                                                       (138,537)             (42,479)             (127,305)
Liabilities                                                   (31,393)             513,959               688,708
                                                     ----------------     ----------------      ----------------

Cash flows provided by
operating activities                                          960,328              498,579               334,395
                                                     ----------------     ----------------      ----------------

Financing activities:
Bank loan                                                   1,012,000                    -                     -
Derivative financial instruments                              (11,807)                   -                     -
Capital contribution                                               11                    -                     -
Equity owners' loans                                                -                    -               337,635
Satellite transponders obligation                             (63,524)             (54,858)              (49,318)
Payments of Old Senior notes                                        -           (3,159,058)                    -
Proceeds from New Senior notes                                      -            3,473,823                     -
                                                     ----------------     ----------------      ----------------

Cash flows provided by financing
activities                                                    936,680              259,907               288,317
                                                     ----------------     ----------------      ----------------

Investing activities:
Investment in property and equipment                         (683,871)            (499,024)             (368,691)
                                                     ----------------     ----------------      ----------------

Cash flows used in investing activities                      (683,871)            (499,024)             (368,691)
                                                     ----------------     ----------------      ----------------

Effects of inflation                                          (35,533)             (31,907)              (11,804)
                                                     ----------------     ----------------      ----------------

Increase in cash and cash
equivalents                                                 1,177,604              227,555               242,217

Cash and cash equivalents, beginning
of period                                                     519,189              291,634                49,417
                                                     ----------------     ----------------      ----------------

Cash and cash equivalents, end of period             Ps.    1,696,793      Ps.     519,189       Ps.     291,634
                                                     ================     ================      ================

Interest and taxes paid:
Interest paid                                        Ps.      445,835     Ps.      569,378      Ps.      541,554
Income and asset taxes paid                                       216                  423                97,202
</TABLE>

                                      F-43
<PAGE>

Non-cash Investing and Financing Activities

Excluded from the Cash Flows Statement for 2003, is the capitalization of the
equity owners loans.

Recently Issued Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board ("FASB") issued FASB
Statement 123 (Revised), "Share-Based Payment" ("FAS 123R"). FAS 123R requires
all companies to measure compensation costs for all share-based payments
(including employee stock options) at fair value and recognize such costs in the
statement of operations. FAS 123R will become effective for Innova on January 1,
2006. The Company has not issued any employee stock options and accordingly,
does not expect the adoption of the revised standard to have a significant
impact on its financial statements.

In December 2004, the FASB issued FASB Statement 153, "Exchanges of Nonmonetary
Assets an amendment of APB Opinion No. 29" ("FAS 153"). FAS 153 eliminates the
exception to account for nonmonetary exchanges of similar productive assets at
carrying value and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance; otherwise, the
exchange principal of fair value applies. A nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. FAS 153 is effective for nonmonetary
asset exchanges occurring in fiscal periods beginning after June 15, 2005. The
provisions of FAS 153 are not expected to have a material impact on the
Company's consolidated financial statements.

In November 2004, the FASB issued FASB Statement 151, "Inventory Costs" ("FAS
151"). FAS 151 amends the guidance in Accounting Research Bulletin 43,
"Inventory Pricing" ("ARB 43") and requires abnormal amounts of idle facility
expense, freight handling costs and wasted material (spoilage) to be recognized
as current-period charges regardless of whether they meet the criterion of "so
abnormal" as previously defined in ARB 43. Furthermore, FAS 151 requires that
the allocation of fixed production overheads to the costs of conversion be based
on the normal capacity of the production facilities. FAS 151 is effective for
inventory costs incurred during fiscal years beginning after June 15, 2005. The
provisions of FAS 151 will not have a significant impact on the Company's
financial statements.

                                      F-44