Table of Contents

Exhibit 15.1

| |                                                 
| | ------------------------------------------------
| | Vivax S.A.                                      
| |                                                 
| | Consolidated Financial                          
| | Statements for the Years Ended                  
| | December 31, 2006 and 2005 and                  
| | Independent Auditors Report                    
| |                                                 
| |                                                 
| | Deloitte Touche Tohmatsu Auditores Independentes



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INDEPENDENT AUDITORS REPORT

To the Board of Directors and Shareholders of 
Vivax S.A. Americana - SP - Brazil

1. We have audited the accompanying consolidated balance sheets of Vivax S.A. and its subsidiaries (the Company) as of December 31, 2006 and 2005, and the related statements of operations and comprehensive income, changes in
shareholders equity, and cash flows for the years then ended, all expressed in U.S. dollars. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial
statements based on our audits.

2. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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.

3. In our opinion, the consolidated financial statements referred to in paragraph 1 present fairly, in all material respects, the financial position of Vivax S.A. and its subsidiaries as of December 31, 2006 and 2005, and the results of their
operations and comprehensive income and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte Touche Tohmatsu
São Paulo, January 19, 2007

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|                                                            
|------------------------------------------------------------
|VIVAX S.A.                                                  
|                                                            
|CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2006 AND 2005
|(In thousands of U.S. dollars - US$)                        
|                                                            

|                                |  |      |  |           |  |           |  |                                               |  |      |  |           |  |          
|------------------------------- |  | ---- |  | --------- |  | --------- |  | --------------------------------------------- |  | ---- |  | --------- |  | ---------
|ASSETS                          |  | Note |  | 2006      |  | 2005      |  | LIABILITIES AND SHAREHOLDERS' EQUITY          |  | Note |  | 2006      |  | 2005     
|                                |  |      |  |           |  |           |  |                                               |  |      |  |           |  |          
|                               
|CURRENT ASSETS                  |  |      |  |           |  |           |  | CURRENT LIABILITIES                           |  |      |  |           |  |          
|Cash and cash equivalents       |  | 4    |  | $ 45.088  |  | $ 2.334   |  | Trade accounts payable                        |  |      |  | $ 8.681   |  | $ 11.496 
|Trade accounts receivable       |  | 5    |  | 7.724     |  | 5.904     |  | Taxes payable                                 |  |      |  | 2.589     |  | 2.008    
|Allowance for doubtful accounts |  |      |  | (860)     |  | (642)     |  | Payroll and related charges                   |  |      |  | 6.893     |  | 4.700    
|Recoverable taxes               |  |      |  | 2.724     |  | 567       |  | Pole rental accrued and payables              |  |      |  | 823       |  | 3.144    
|Other receivables               |  |      |  | 618       |  | 579       |  | Loans and financing                           |  | 10   |  | 1.788     |  | 3.744    
|Prepaid expenses                |  |      |  | 873       |  | 517       |  | Other payables and accruals                   |  | 11   |  | 975       |  | 2.028    
|                                |  |      |  |           |  |           |  |                                               |  |      |  |           |  |          
|Deferred income tax asset       |  | 19   |  | 2.559     |  | -         |  | Total current liabilities                     |  |      |  | 21.749    |  | 27.120   
|                                |  |      |  |           |  |           |  |                                               |  |      |  |           |  |          
|Total current assets            |  |      |  | 58.726    |  | 9.259     |  |                                               |  |      |  |           |  |          
|                                |  |      |  |           |  |           |  |                                               |  |      |  |           |  |          
|                                |  |      |  |           |  |           |  | NONCURRENT LIABILITIES                        |  |      |  |           |  |          
|NONCURRENT ASSETS               |  |      |  |           |  |           |  | Loans and financing                           |  | 10   |  | 102.900   |  | 39.162   
|Escrow deposit                  |  |      |  | 413       |  | 257       |  | Deferred income tax liability                 |  |      |  | -         |  | 12.236   
|Recoverable taxes               |  |      |  | 704       |  | -         |  | Taxes payable                                 |  | 12   |  | 787       |  | 874      
|Deferred income tax asset       |  | 19   |  | 19.090    |  | -         |  | Accrual for contingencies                     |  | 13   |  | 11.873    |  | 8.606    
|Prepaid expenses                |  |      |  | -         |  | 935       |  | Intercompany payables                         |  | 6    |  | -         |  | 89.587   
|                                |  |      |  |           |  |           |  |                                               |  |      |  |           |  |          
|Other receivables               |  |      |  | -         |  | 3         |  | Total noncurrent liabilities                  |  |      |  | 115.560   |  | 150.465  
|                                |  |      |  |           |  |           |  |                                               |  |      |  |           |  |          
|Total noncurrent assets         |  |      |  | 20.207    |  | 1.195     |  |                                               |  |      |  |           |  |          
|                                |  |      |  |           |  |           |  |                                               |  |      |  |           |  |          
|                               
|OTHER ASSETS                    |  |      |  |           |  |           |  | SHAREHOLDERS' EQUITY                          |  |      |  |           |  |          
|Cable television concessions    |  | 7    |  | 74.943    |  | 80.762    |  | Capital                                       |  |      |  | 209.820   |  | 131.920  
|Property and equipment          |  | 8    |  | 119.519   |  | 107.224   |  | Accumulated deficit                           |  |      |  | (63.549)  |  | (93.460) 
|Deferred charges                |  | 9    |  | 2.248     |  | 2.713     |  | Accumulated other comprehensive income (loss) |  |      |  | (7.937)   |  | (14.892) 
|                                |  |      |  |           |  |           |  |                                               |  |      |  |           |  |          
|Total other assets              |  |      |  | 196.710   |  | 190.699   |  | Total shareholders' equity                    |  |      |  | 138.334   |  | 23.568   
|                               
|                                |  |      |  |           |  |           |  |                                               |  |      |  |           |  |          
|TOTAL ASSETS                    |  |      |  | $ 275.643 |  | $ 201.153 |  | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY    |  |      |  | $ 275.643 |  | $ 201.153
|                                |  |      |  |           |  |           |  |                                               |  |      |  |           |  |          

|                                                                                       
|---------------------------------------------------------------------------------------
|The accompanying notes are an integral part of these consolidated financial statements.
|                                                                                       

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|                                                              
|--------------------------------------------------------------
|VIVAX S.A.                                                    
|                                                              
|CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
|FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005                
|(In thousands of U.S. dollars - US$, except per share data)   
|                                                              

|                                                                                              |  |      |  |           |  |         
|--------------------------------------------------------------------------------------------- |  | ---- |  | --------- |  | --------
|                                                                                              |  | Note |  | 2006      |  | 2005    
|                                                                                              |  |      |  |           |  |         
|                                                                                              |  |      |  |           |  |         
|GROSS REVENUE                                                                                 |  |      |  |           |  |         
|Pay television subscription                                                                   |  |      |  | $ 109.018 |  | 85.063  
|High-speed data subscription                                                                  |  |      |  | 45.302    |  | 29.696  
|Wholesale carrier services                                                                    |  |      |  | 11.807    |  | 8.358   
|Media services                                                                                |  |      |  | 2.272     |  | 1.589   
|Installation services                                                                         |  |      |  | 3.915     |  | 4.149   
|                                                                                              |  |      |  |           |  |         
|Total gross revenue                                                                           |  |      |  | 172.314   |  | 128.855 
|                                                                                             
|DEDUCTIONS, PRINCIPALLY TAXES                                                                 |  |      |  | (24.637)  |  | (18.402)
|                                                                                             
|                                                                                              |  |      |  |           |  |         
|NET REVENUE                                                                                   |  |      |  | 147.677   |  | 110.453 
|                                                                                              |  |      |  |           |  |         
|                                                                                              |  |      |  |           |  |         
|OPERATING COSTS AND EXPENSES                                                                  |  |      |  |           |  |         
|Programming and other operating costs                                                         |  | 15   |  | (48.239)  |  | (35.371)
|Depreciation and amortization                                                                 |  |      |  | (40.870)  |  | (33.061)
|                                                                                              |  |      |  |           |  |         
|                                                                                              |  |      |  | (89.109)  |  | (68.432)
|                                                                                             
|                                                                                              |  |      |  |           |  |         
|GROSS PROFIT                                                                                  |  |      |  | 58.568    |  | 42.021  
|Selling, general and administrative expenses                                                  |  |      |  | (44.194)  |  | (34.754)
|Write-off and sale of network materials and other                                             |  |      |  | (156)     |  | (3.566) 
|Other income                                                                                  |  |      |  | 1.647     |  | 955     
|                                                                                             
|                                                                                              |  |      |  |           |  |         
|INCOME FROM OPERATIONS                                                                        |  |      |  | 15.865    |  | 4.656   
|                                                                                              |  |      |  |           |  |         
|                                                                                              |  |      |  |           |  |         
|Interest expense                                                                              |  |      |  | (16.757)  |  | (8.336) 
|Other financial expenses                                                                      |  |      |  | (3.886)   |  | (3.173) 
|Write-off of prepaid expenses from issuance of debentures and provision for debenture premium |  | 16   |  | (6.803)   |  | -       
|Interest income                                                                               |  |      |  | 5.593     |  | 1.563   
|Foreign currency and monetary variations gain, net                                            |  |      |  | 3.641     |  | 13.097  
|                                                                                             
|                                                                                              |  |      |  |           |  |         
|FINANCIAL (EXPENSES) INCOME                                                                   |  |      |  | (18.212)  |  | 3.151   
|                                                                                             
|                                                                                             
|                                                                                              |  |      |  |           |  |         
|INCOME (LOSS) BEFORE INCOME TAXES                                                             |  |      |  | (2.347)   |  | 7.807   
|                                                                                             
|INCOME TAXES                                                                                  |  |      |  |           |  |         
|Current                                                                                       |  | 19   |  | (2.160)   |  | 254     
|Deferred                                                                                      |  | 19   |  | 34.418    |  | -       
|                                                                                             
|                                                                                              |  |      |  |           |  |         
|NET INCOME                                                                                    |  |      |  | $ 29.911  |  | 8.061   
|                                                                                             
|Other comprehensive income-                                                                   |  |      |  |           |  |         
|Foreign currency translation adjustment                                                       |  |      |  | 6.955     |  | 1.342   
|                                                                                             
|                                                                                              |  |      |  |           |  |         
|COMPREHENSIVE INCOME                                                                          |  |      |  | $ 36.866  |  | 9.403   
|                                                                                              |  |      |  |           |  |         
|                                                                                              |  |      |  |           |  |         
|NET INCOME PER SHARE - BASIC AND DILUTED - US$                                                |  | 14.e |  | $ 0,27    |  | 0,19    
|                                                                                              |  |      |  |           |  |         

|                                                                                       
|---------------------------------------------------------------------------------------
|The accompanying notes are an integral part of these consolidated financial statements.
|                                                                                       

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|                                                          
|----------------------------------------------------------
|VIVAX S.A.                                                
|                                                          
|CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
|FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005            
|(In thousands of U.S. dollars - US$)                      
|                                                          

|                                                                          |  |      |  |           |  |             |  |               |  |          
|------------------------------------------------------------------------- |  | ---- |  | --------- |  | ----------- |  | ------------- |  | ---------
|                                                                          |  |      |  |           |  |             |  | Accumulated   |  |          
|                                                                          |  |      |  |           |  |             |  | other         |  |          
|                                                                          |  |      |  |           |  | Accumulated |  | comprehensive |  |          
|                                                                          |  | Note |  | Capital   |  | deficit     |  | income (loss) |  | Total    
|                                                                          |  |      |  |           |  |             |  |               |  |          
|                                                                          |  |      |  |           |  |             |  |               |  |          
|BALANCES AS OF DECEMBER 31, 2004                                          |  |      |  | $ 127.284 |  | $ (101.521) |  | $ (16.234)    |  | $ 9.529  
|                                                                         
|Capital increase (conversion of amounts due to shareholders into capital) |  |      |  | 4.636     |  | -           |  | -             |  | 4.636    
|Foreign currency translation adjustment                                   |  |      |  | -         |  | -           |  | 1.342         |  | 1.342    
|Net income                                                                |  |      |  | -         |  | 8.061       |  | -             |  | 8.061    
|                                                                          |  |      |  |           |  |             |  |               |  |          
|                                                                          |  |      |  |           |  |             |  |               |  |          
|BALANCES AS OF DECEMBER 31, 2005                                          |  |      |  | 131.920   |  | (93.460)    |  | (14.892)      |  | 23.568   
|                                                                         
|Capital increase:                                                         |  |      |  |           |  |             |  |               |  |          
|Capital increase (conversion of amounts due to shareholders into capital) |  | 14.c |  | 52.216    |  | -           |  | -             |  | 52.216   
|Net proceeds on issuance of units                                         |  | 14.d |  | 25.684    |  | -           |  | -             |  | 25.684   
|Foreign currency translation adjustment                                   |  |      |  | -         |  | -           |  | 6.955         |  | 6.955    
|Net income                                                                |  |      |  | -         |  | 29.911      |  | -             |  | 29.911   
|                                                                         
|                                                                          |  |      |  |           |  |             |  |               |  |          
|BALANCES AS OF DECEMBER 31, 2006                                          |  |      |  | $ 209.820 |  | $ (63.549)  |  | $ (7.937)     |  | $ 138.334
|                                                                          |  |      |  |           |  |             |  |               |  |          

|                                                                                       
|---------------------------------------------------------------------------------------
|The accompanying notes are an integral part of these consolidated financial statements.
|                                                                                       

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|                                              
|----------------------------------------------
|VIVAX S.A.                                    
|                                              
|CONSOLIDATED STATEMENTS OF CASH FLOWS         
|FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
|(In thousands of U.S. dollars - US$)          
|                                              

|                                                                            |  |      |  |           |  |           
|--------------------------------------------------------------------------- |  | ---- |  | --------- |  | ----------
|                                                                            |  | Note |  | 2006      |  | 2005      
|                                                                            |  |      |  |           |  |           
|                                                                            |  |      |  |           |  |           
|CASH FLOWS FROM OPERATING ACTIVITIES                                        |  |      |  |           |  |           
|Net income                                                                  |  |      |  | $ 29.911  |  | $ 8.061   
|Adjustments to reconcile net income to net cash provided                    |  |      |  |           |  |           
|by operating activities:                                                    |  |      |  |           |  |           
|Depreciation and amortization                                               |  |      |  | 40.870    |  | 33.061    
|Allowance for doubtful accounts                                             |  |      |  | 154       |  | 617       
|Deferred income tax                                                         |  | 19   |  | (34.418)  |  | -         
|Write-off of prepaid expenses from issuance of debentures                   |  |      |  | 1.005     |  | -         
|Write-off and sale of network materials                                     |  |      |  | 448       |  | 3.104     
|Interest income and foreign currency and monetary variations, net           |  |      |  | (1.778)   |  | (6.442)   
|Reversal of pole rental accrual                                             |  |      |  | (2.067)   |  | -         
|Accrual for contingencies                                                   |  |      |  | 952       |  | 2.502     
|                                                                            |  |      |  |           |  |           
|                                                                            |  |      |  | 35.077    |  | 40.903    
|Decrease (increase) in operating assets:                                    |  |      |  |           |  |           
|Trade accounts receivable                                                   |  |      |  | (1.237)   |  | (3.797)   
|Other receivables, including recoverable taxes and other assets             |  |      |  | (5.062)   |  | 1.148     
|Prepaid expenses                                                            |  |      |  | (301)     |  | (48)      
|                                                                           
|Increase (decrease) in operating liabilities:                               |  |      |  |           |  |           
|Trade accounts payable                                                      |  |      |  | (3.835)   |  | 2.497     
|Taxes payable                                                               |  |      |  | 2.321     |  | (157)     
|Payroll and related charges                                                 |  |      |  | 1.716     |  | 1.465     
|Other payables and accruals                                                 |  |      |  | (1.729)   |  | (126)     
|                                                                            |  |      |  |           |  |           
|Net cash provided by operating activities                                   |  |      |  | 26.950    |  | 41.885    
|                                                                            |  |      |  |           |  |           
|                                                                            |  |      |  |           |  |           
|CASH FLOWS FROM INVESTING ACTIVITIES                                        |  |      |  |           |  |           
|Payment of accounts payable related to acquisiton of subsidiaries           |  |      |  | -         |  | (7.534)   
|Acquisition of property and equipment and deferred charges                  |  |      |  | (28.505)  |  | (24.815)  
|                                                                            |  |      |  |           |  |           
|Net cash used in investing activities                                       |  |      |  | (28.505)  |  | (32.349)  
|                                                                            |  |      |  |           |  |           
|                                                                            |  |      |  |           |  |           
|CASH FLOWS FROM FINANCING ACTIVITIES                                        |  |      |  |           |  |           
|Proceeds from loans and financing - third parties                           |  |      |  | 120.239   |  | 52.923    
|Proceeds from issuance of debentures                                        |  |      |  | 105.086   |  | -         
|Capital increase through issuance of units                                  |  | 14.d |  | 25.684    |  | -         
|Payment of debentures balance                                               |  |      |  | (106.658) |  | -         
|Payments of loans and financing                                             |  |      |  | (65.291)  |  | (77.258)  
|Intercompany loans - payments                                               |  |      |  | (37.059)  |  | -         
|                                                                            |  |      |  |           |  |           
|Net cash provided by (used in) financing activities                         |  |      |  | 42.001    |  | (24.335)  
|                                                                           
|Effect of currency exchange on cash and cash equivalents                    |  |      |  | 2.308     |  | 1.571     
|                                                                            |  |      |  |           |  |           
|                                                                            |  |      |  |           |  |           
|                                                                            |  |      |  |           |  |           
|INCREASE (DECREASE) IN CASH AND                                             |  |      |  |           |  |           
|CASH EQUIVALENTS                                                            |  |      |  | $ 42.754  |  | $ (13.228)
|                                                                            |  |      |  |           |  |           
|                                                                            |  |      |  |           |  |           
|CASH AND CASH EQUIVALENTS                                                   |  |      |  |           |  |           
|At the beginning of the year                                                |  |      |  | 2.334     |  | 15.562    
|At the end of the year                                                      |  |      |  | 45.088    |  | 2.334     
|                                                                            |  |      |  |           |  |           
|                                                                            |  |      |  |           |  |           
|INCREASE (DECREASE) IN CASH AND                                             |  |      |  |           |  |           
|CASH EQUIVALENTS                                                            |  |      |  | $ 42.754  |  | $ (13.228)
|                                                                            |  |      |  |           |  |           
|                                                                            |  |      |  |           |  |           
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                           |  |      |  |           |  |           
|Interest and debentures prepayment premium paid during the year             |  |      |  | $ 17.588  |  | $ 8.139   
|Reduction of goodwill - acquisition cost adjustment                         |  |      |  | -         |  | $ 1.960   
|Conversion of amounts due to shareholders into capital                      |  |      |  | $ 52.216  |  | $ 4.636   
|Offsetting of intercompany payables and receivables                         |  |      |  | -         |  | $ 11.738  
|Income tax and social contribution paid                                     |  |      |  | $ 4.033   |  | -         
|Trade accounts payable related to the acquisition of property and equipment |  |      |  | $ 1.319   |  | -         

|                                                                                       
|---------------------------------------------------------------------------------------
|The accompanying notes are an integral part of these consolidated financial statements.
|                                                                                       

5

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|                                                                                                 
|-------------------------------------------------------------------------------------------------
|VIVAX S.A.                                                                                       
|                                                                                                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                                   
|FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005                                                   
|(Amounts expressed in thousands of U.S. dollars - US$, and when applicable in thousands          
|of Brazilian reais - R$, and other currencies, unless otherwise stated, except amounts per units)
|                                                                                                 

1. OPERATIONS

Vivax S.A. (Vivax or Company) is a listed company registered at Level 2 on the São Paulo Stock Exchange (Bolsa de Valores de São Paulo - BOVESPA) since February 6, 2006, incorporated in 1996 and,
together with its subsidiaries, engaged in the provision of pay television and high-speed data services, as well as complementary activities, such as media and installation services and the leasing of excess network capacity.

Under Brazilian legislation, cable television concessions are granted by the Federal Government, through the Ministry of Communications. The Company obtained concessions on different dates, originally for a period of 15 years, renewable for
consecutive and equal periods, to operate in certain cities in the States of São Paulo, Rio de Janeiro and Amazonas. Renewal of cable television concessions by National Telecommunications Agency (Agência Nacional de
Telecomunicações - ANATEL) is assured if the cable television operator has: (a) complied with the terms of the concession; (b) complied with regulations from ANATEL; (c) agreed to meet certain technical and economic requirements for
the satisfaction of community needs, including system modernization standards; and (d) expressed interest in the renewal at least 24 months before the expiration date of the original concession term. Concession renewals may not be denied if the
licensee has not been notified of such noncompliance. ANATEL regulates the procedures for renewal of the concession, which may include public hearing.

The Companys principal activity consists of offering pay television and high-speed data services using its broadband network in certain cities in the States of São Paulo and Rio de Janeiro and the city of Manaus in the State of Amazonas.
The transmission of pay television signals and high-speed data through cable television systems is comprised of the following phases:

  Preoperating phase - begins with investments in the construction of cable television systems until the start-up of signal and/or data transmission. The preoperating phase ends when the first subscriber begins to receive the relevant
service. During 2006, there was no subsidiary in this phase.

  Prematurity phase - the period between the transmission of signals and/or data to the first subscriber and the earlier to occur of the achievement of a predetermined penetration rate for the mapped area or the second anniversary of
the start-up date. As mentioned in Note 3.(b), the only subsidiary in this phase is Jacareí Cabo S.A.

  Full operation phase - after the above-mentioned penetration rate has been attained or on the two-year anniversary of the start-up date, whichever occurs first. All the operations, except the subsidiary mentioned above, are in this
phase.

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The Company has invested significant sums of money in its operations by building and expanding its transmission network, as a result of efforts to increase its customer base in the areas where it has operating concessions. Funds invested in
operations were provided by shareholders and by third parties. Based on projections prepared by the Companys management, the payment of existing balance of loans and financing and new investments for expanding and digitalizing the network will
be made mainly with funds generated from operations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of presentation and principles of consolidation

The accompanying consolidated financial statements are prepared in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) and include the assets, liabilities,
revenues and expenses of all subsidiaries over which the Company exercises control. The Companys consolidated financial statements include the accounts of all majority-owned subsidiaries where ownership is more than 50% and effective control
is exercised. All consolidated subsidiaries are under same management control. All significant intercompany transactions and balances with consolidated subsidiaries are eliminated in the consolidated financial statements. No minority interest has
been reported on subsidiaries where less than 100% of the shares is owned directly or indirectly by the Company, since: (i) subsidiaries under this situation reported shareholders deficit and the minority shareholders are not responsible for
funding deficits from operations; (ii) the subsidiaries are fully financed by the Company; and (iii) minority interest has been acquired and/or committed to be acquired by the Company for a nominal amount.

b) Use of estimates

The accompanying
  consolidated financial statements are prepared in conformity with U.S. GAAP and require management to make certain estimates and assumptions. These may affect the reported amounts of assets and liabilities, the 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. Amounts affected include, but are not limited to, allowances for doubtful accounts, impairment and restructuring
  charges, useful lives of property and equipment and intangible assets, contingent liabilities and income tax valuation allowances. Actual amounts may vary from those estimates and assumptions used in the financial statements and related notes.

c)
  Translation of foreign currency financial statements

The Companys reporting currency is the U.S. dollar - US$. The functional currency of the operating subsidiaries is the Brazilian real - R$, which is the currency of the country where operations are generated. The translation from the
functional currency to the reporting currency is performed as follows: (i) amounts included in the consolidated statements of operations are translated at the weighted average exchange rates for the period; (ii) assets and liabilities are translated
at year-end exchange rates; and (iii) the balances of shareholders equity, including accumulated deficit, were translated using the exchange rate at the date of each transaction and any exchange differences are recorded in a separate component
of shareholders equity (accumulated other comprehensive income (loss)).

7

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d) Accounting for revenues, costs and expenses

Cable subscriber connection fees and costs are included in revenue and cost of services as the services are performed. Subsequent disconnection and reconnection costs are expensed as incurred. Revenues from the provision of pay television,
high-speed data access data and Internet Service Provider - ISP services are recognized as the services are rendered.

Installation and connection fees are recognized as revenue as of the date the equipment is installed at the subscribers household. Direct selling costs are charged to operations when incurred. Currently, direct selling costs exceed
installation and connection fees and, accordingly, no deferred income has been recorded for future amortization.

Initial subscriber installation costs, including material, labor and overhead costs, are capitalized and depreciated over a period no longer than the depreciation period used for cable television equipment.

e) Cash and cash equivalents and short and long-term investments

Cash and cash equivalents include unrestricted cash on hand, deposits in banks and short-term investments with maturities of three months or less, when purchased and which are readily convertible to cash. Cash and cash equivalents are stated at cost
plus accrued interest earned through the balance sheet date.

Short and long-term investments with maturities, when purchased, longer than three months are recorded as short and long-term investments and stated at cost plus accrued interest earned through the balance sheet date.
The underlying investments have been classified as held to maturity.

f) Trade accounts receivable

Trade accounts receivable are recorded based on the fees prevailing during the period the services are rendered. Amounts receivable, as well as the
  corresponding revenues, are both recorded on an accrual basis, when services are provided.

g) Allowance for doubtful accounts

The allowance for doubtful accounts is established in an amount deemed by management sufficient to cover probable losses on
  the realization of trade accounts receivable, based on factors such as the customer delinquency and aging statistics, economic considerations and historical loss percentages, among others.

h) Cable television concessions - licenses

Cable television
  concessions are stated at acquisition cost, plus: (i) financial charges incurred through the start-up of operations; and (ii) allocation of the fair value related to the excess of the cost of the acquired Canpars operations over the net of the
  amounts assigned to assets acquired and liabilities assumed, pursuant to Statement of Financial Accounting Standard - SFAS No. 141, Business Combination, less amortization. Amortization is calculated under the straight-line method over
  the period between the start-up of operations and the original expiration date of the concession, which is 15 years from the date of granting. For the areas in which the applicable infrastructure construction project has been discontinued, a
  provision for loss is recorded as a reduction of the acquisition cost of the corresponding concessions.

8

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i) Property and equipment

Stated at acquisition or construction cost, plus allocation of the fair value related to the excess of the cost of the acquired Canpars operations over the net of the amounts assigned to assets acquired and liabilities assumed, pursuant to
SFAS No. 141, less accumulated depreciation. Depreciation is calculated under the straight-line method, using the economic estimated useful lives stated in Note 8.

Costs of installation at customers premises are recorded in property and equipment (internal network) and depreciated over a period of ten years. Costs of disconnection and reconnection are charged to operations when incurred.

Purchases of materials for network and infrastructure construction are recorded as network material inventories under the caption Property and equipment. This balance is reduced, if applicable, by an obsolescence reserve.

The Companys broadband network consists of aerial cables (as opposed to buried cables), which requires the use of existing poles owned by local utility companies under pole rental agreements. Costs in connection with such agreements are
recognized as rental costs, under the caption Programming and other operating costs, as incurred.

j) Deferred charges

Deferred charges consist of expenditures incurred during the prematurity phase. The deferred charges are amortized over five years.

The prematurity phase begins on the start-up date of the operations and terminates at the moment the predefined market penetration rate for the mapped area is reached, or on the two-year anniversary of the start-up date, whichever occurs first. In
the prematurity phase, programming costs, equipment depreciation, concession amortization and other charges are deferred in proportion to the number of active subscribers to the estimated number of subscribers required to achieve the
operations break-even point. As the break-even point is reached, costs and expenses are no longer deferred and amortization is initiated using the straight-line method over a period of five years.

k) Valuation of long-lived assets

The Company periodically reviews the recoverability of the carrying amounts of its long-lived assets, consisting of property and equipment, cable television concessions and deferred charges by assessing the estimated future undiscounted cash-flows
attributable to such assets. If the carrying value of a long-lived asset is considered impaired, the Company recognizes a loss based on the difference between the carrying amount and the fair value of that asset in accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-lived Assets. No such impairment loss was recorded during the years ended December 31, 2006 and 2005.

l) Capitalization of interest

In accordance with SFAS No. 34, Capitalization of Interest Costs, interest incurred on loans and financing is capitalized during the construction in progress phase. During 2006 and 2005, the Company did not have significant qualified
construction in progress assets subject to capitalization of interest.

9

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m) Capital lease

Pursuant to SFAS No. 13, Accounting for Leases, a lease arrangement is classified as a capital lease if it transfers substantially all the benefits and risks incident to ownership. All other leases are classified as operating leases. In
a lease that transfers substantially all of the benefits and risks of ownership, the economic effect on the parties is similar, in many respects, to that of a purchase in installments.

Capital leases are recorded as an asset and a liability at the lower of the fair value of the asset and the present value of the minimum lease payments and depreciated consistently with the Companys own assets. If there is no reasonable
certainty that the Company will obtain ownership at the end of the lease, the asset is depreciated over the shorter of the lease term or the life of the asset.

Operating leases are charged to operations over the lease term on a straight-line basis.

n) Assets and liabilities denominated in foreign currency or subject to indexation

Since the functional currency of the Company is the Brazilian real - R$, foreign currency-denominated assets and liabilities are translated into Brazilian reais - R$ using the commercial exchange rates at the balance sheet date. Assets and
liabilities in Brazilian reais - R$ and subject to indexation are monetarily restated using the applicable indices prevailing on the balance sheet date. Exchange gains and losses and monetary variations are recorded to profit and loss accounts
as incurred, under the caption Foreign currency and monetary variations gain, net.

o) Accrual for contingencies

Accrual for contingencies is recorded in an amount considered by the Companys management sufficient to cover probable losses, based on assessments prepared by Companys management.

p) Income tax

The Company accounts for income taxes using the asset and liability method. Under this method, deferred income taxes are recorded for tax loss carryforwards and other temporary differences between the financial reporting basis and the tax basis of
each Companys assets and liabilities. Deferred tax assets are reduced by a valuation allowance if management believes it is more likely than not that some or all of the deferred tax assets will not be realized. The determination of the balance
of the valuation allowance also considers the Companys history of reported tax loss carryforwards as preliminary basis to ensure future realization.

q) Earnings per share

The Company calculates earnings per share in accordance with SFAS No. 128, Earnings Per Share. Basic earnings per share is calculated by dividing net earnings available to shares (common and preferred) by average shares outstanding.
Earnings (loss) per share is determined based upon the weighted average number of shares outstanding during the period, giving retroactive effect to stock dividends and stock splits.

10

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r) Comprehensive income (loss)

Comprehensive income (loss) consists of net loss and other comprehensive income. Other comprehensive income refers to revenues, expenses, gains and losses that are not included in the net income (loss), but rather are recorded directly in
shareholders equity. For the years ended December 31, 2006 and 2005, comprehensive income consisted of net income and foreign currency translation adjustments on the balance of shareholders equity.

s) Fair value of financial instruments

The fair value of financial instruments classified as current assets and liabilities approximates their carrying values due to their relative short-term maturities and related variable interest rate components. The fair value of long-term loans and
financing approximates book value since conditions for this type of financing have not changed significantly from the time of issuance.

t) Recently issued accounting pronouncements

In February 2006, the Financial Accounting Standards Board - FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments. SFAS No. 155 amends FASB Statements No. 133, Accounting for Derivative Instruments and
Hedging Activities, and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 155 resolves issues addressed in Statement No. 133 Implementation Issue No. D1,
Application of Statement No. 133 to Beneficial Interests in Securitized Financial Assets. SFAS No. 155: (a) permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would
require bifurcation; (b) clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement No. 133; (c) establishes a requirement to evaluate interests in securitized financial assets to identify
interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; (d) clarifies that concentrations of credit risk in the form of subordination are not embedded
derivatives; and (e) amends Statement No. 140 to eliminate the prohibition on a qualifying special purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial
instrument. This Statement is effective for all financial instruments acquired or issued after the beginning of an entitys first fiscal year that begins after September 15, 2006. The impact of adopting this Statement is dependent on events
that could occur in future periods, and, as such, an estimate of the impact cannot be determined until the event occurs in future periods.

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets. SFAS No. 156 amends Statement No. 140, that establishes, among other things, the accounting for all separately recognized servicing assets and
servicing liabilities. SFAS No. 156 amends Statement No. 140 to require that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. SFAS No. 156 permits, but does not require, the
subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value. An entity that uses derivative instruments to mitigate the risks inherent in servicing assets and

11

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servicing liabilities is required to account for those derivative instruments at fair value. Under this Statement, an entity can elect subsequent fair value measurement to account for its separately recognized servicing assets and servicing
liabilities. By electing that option, an entity may simplify its accounting because this Statement permits income statement recognition of the potential offsetting changes in fair value of those servicing assets and servicing liabilities and
derivative instruments in the same accounting period. An entity shall adopt this Statement as of the beginning of its first fiscal year that begins after September 15, 2006. Earlier adoption is permitted as of the beginning of an entitys
fiscal year, provided the entity has not yet issued financial statements, including interim financial statements, for any period of that fiscal year. The impact of adopting this Statement is dependent on events that could occur in future periods,
and, as such, an estimate of the impact cannot be determined until the event occurs in future periods.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Tax Positions (FIN No. 48), to provide guidance on the recognition and measurement in financial statements of uncertain tax positions taken or
expected to be taken on tax returns. FIN No. 48 also provides for new disclosures with respect to unrecognized tax benefits. FIN No. 48 is effective for 2007 and a cumulative effect adjustment will be recognized in opening retained earnings for the
impact of applying the guidance as of January 1, 2007. The Company is not presently able to determine the impact of applying FIN No. 48.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to
measure assets and liabilities. It also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active markets. This Statement
is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, and is to be applied prospectively as of the beginning of the year in which it is initially applied. The
Company is currently assessing the impact, if any, of applying SFAS No. 157.

In September 2006, the FASB also issued FSP No. AUG AIR-1, Accounting for Planned Major Maintenance Activities, which prohibits the use of the accrue-in- -advance method of accounting for planned major maintenance activities in annual
and interim reporting periods. The FSP permits the application of three alternative methods of accounting for planned major maintenance activities: the direct expense, built-in- -overhaul, and deferral methods. The FSP is effective for the first
fiscal year beginning after December 15, 2006. The Company does not presently expect that there will be a material impact on shareholders equity from applying FSP No. AUG AIR-1.

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3. CONSOLIDATION PRINCIPLES

In consolidation, all significant intercompany balances and transactions have been eliminated.

The subsidiaries included in the consolidated financial statements are listed below:

|                                                          |  |     |  |                    |  |         
|--------------------------------------------------------- |  | --- |  | ------------------ |  | --------
|                                                          |  |     |  | Ownership interest
|Subsidiaries                                              |  |     |  | (%)               
|                                                          |  |     |  |                   
|                                                          |  |     |  | 12/31/06           |  | 12/31/05
|                                                          |  |     |  |                    |  |         
|                                                         
|Horizon Comercial Importação e Exportação Ltda. (HCIAL) |  | (a) |  | -                  |  | 100.00  
|Horizon Line Brasil Ltda. (HLB)                         |  | (a) |  | 91.80              |  | -       
|Jacareí Cabo S.A.                                         |  | (b) |  | 83.00              |  | 83.00   
|Canbras TVA Cabo Ltda.                                    |  | (c) |  | 100.00             |  | 100.00  
|TV Mogno Ltda.                                            |  | (c) |  | 100.00             |  | 100.00  
|TV Eucalipto Ltda.                                        |  | (c) |  | 100.00             |  | 100.00  
|614 TVH Vale S.A. (TVH)                                 |  | (d) |  | 79.28              |  | 79.28   

(a) In May 2006, HCIAL was merged into HLB and since then the Company has held 91.8% of HLB (company without operations, and is a related party of the Companys shareholders). 8.2% of HLBs capital is held by Horizon Telecom International,
LLC (HTI), a shareholder of the Company.

(b) This subsidiary has a license to provide cable television services in the city of Jacareí, in the State of São Paulo, and presently is in the prematurity phase; its transmission of signals started in December 2005. The Company has
agreed to purchase 100% of the outstanding shares of this subsidiary and already paid 100% of the purchase price to the former shareholder. In June 2006, after six months of operations of Jacareí Cabo S.A., a letter was filed with ANATEL
requesting the transfer of shares (representing 17% of Jacareí Cabo S.A.s capital) from the former shareholder to the Company. There will be no cash disbursement. Jacareí Cabo S.A. has been fully consolidated into the Companys
financial statements. As of December 31, 2006, the total assets of this subsidiary were US$2.8 million, basically represented by the acquisition of concessions and property and equipment in the amounts of US$0.3 million and US$2.0
million, respectively.

(c) Due to the corporate restructuring initiated in the second quarter of 2005, through the partial spin-off and/or merger of the subsidiaries, on July 1, 2005, the operating assets and liabilities were transferred to Vivax at their book value.
Currently, these companies are dormant.

(d) The Company holds 79.28% of the shares of TVH and the remaining shares are held by companies belonging to Companhia Técnica de Engenharia Elétrica (Alusa). The Company also holds 78.16% of 614 TVG Guarulhos S.A.
(TVG) and the remaining shares are also owned by Alusa. In December 2003, the former Canbras management concluded negotiations with Alusa to acquire the shares that Alusa holds in TVH (20.72%) and sell to Alusa all shares it has in
TVG (78.16%) in a transaction that, in the net amount of payment and receipt, is not expected to have a significant net cash disbursement by any of the parties involved. The parties agreed with the terms of the transaction, which is pending approval
by ANATEL, for consummation. 51% of the
common shares of TVG and TVH belong to Alusa. As agreed upon between the parties, since 2004 TVGs management has been the responsibility of Alusa and TVHs management has been the responsibility of the Company. The loss on this
transaction was fully recorded in 2003. The financial statements of TVG are not consolidated into the financial statements of the Company and the financial statements of TVH have been fully consolidated since January 2004.

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4. CASH AND CASH EQUIVALENTS

|                                                                    |  |          |  |        
|------------------------------------------------------------------- |  | -------- |  | -------
|                                                                    |  | 2006     |  | 2005   
|                                                                    |  |          |  |        
|                                                                   
|Cash and cash equivalents:                                          |  |          |  |        
|Cash and bank balances                                              |  | $ 2,937  |  | $ 1,192
|Short-term investments readily convertible to cash:                 |  |          |  |        
|Denominated in Brazilian reais - R$, with yield based on the CDI    |  |          |  |        
|(interbank deposit rate - currently equivalent to 13.1% p.y. (16.5% |  |          |  |        
|p.y. in 2005))                                                      |  | 42,151   |  | 1,142  
|                                                                    |  |          |  |        
|Total                                                               |  | $ 45,088 |  | $ 2,334
|                                                                    |  |          |  |        

5. TRADE ACCOUNTS RECEIVABLE

|                   |  |         |  |        
|------------------ |  | ------- |  | -------
|                   |  | 2006    |  | 2005   
|                   |  |         |  |        
|                  
|Maturity:          |  |         |  |        
|Up to 30 days      |  | $ 2,913 |  | $ 1,431
|From 31 to 60 days |  | 321     |  | 234    
|Over 60 days (*)   |  | 225     |  | 775    
|                   |  |         |  |        
|                   |  | $ 3,459 |  | $ 2,440
|                   |  |         |  |        
|Past due:          |  |         |  |        
|Up to 30 days      |  | $ 2,466 |  | $ 1,791
|From 31 to 60 days |  | 659     |  | 541    
|From 61 to 90 days |  | 280     |  | 283    
|Over 90 days       |  | 860     |  | 849    
|                   |  |         |  |        
|                   |  | 4,265   |  | 3,464  
|                   |  |         |  |        
|Total              |  | $ 7,724 |  | $ 5,904
|                   |  |         |  |        

(*) Resulting from the installment payment plan for installation services for new customers.

6. INTERCOMPANY ACCOUNTS

|                                                      |  |     |  |           |  |         
|----------------------------------------------------- |  | --- |  | --------- |  | --------
|                                                      |  |     |  | 2006      |  | 2005    
|                                                      |  |     |  |           |  |         
|                                                     
|Noncurrent liabilities (denominated in U.S. dollars)- |  |     |  |           |  |         
|Horizon Telecom International, LLC                    |  | (a) |  | -         |  | $ 89,587
|                                                      |  |     |  |           |  |         
|                                                     
|Transactions-                                         |  |     |  |           |  |         
|Foreign currency and monetary variations gain - HTI   |  | (b) |  | $ $ 4,067 |  | $ 12,676
|                                                      |  |     |  |           |  |         

(a) Loans obtained from Horizon Telecom International, LLC (HTI). Since December 2003, no interest is charged on the balance of such loans. Amounts denominated in U.S. dollars.

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On January 2, 2006, the Companys shareholders decided to liquidate the balance of intercompany payables to HTI, being a portion through a conversion into capital with issuance of new shares and the other portion through a cash payment by using
the proceeds of the debentures mentioned in Note 10. On January 2, 2006, Brasil TV a Cabo (another shareholder of the Company) assumed a portion of the debt with HTI under the Companys responsibility in the amount of R$37.3 million
(equivalent to US$16.1 million). Due to this assumption, Brasil TV a Cabo became the holder of a receivable from the Company in the same amount and converted said receivable into interest in the Companys capital, with the issuance of
124,436,372 common shares, a transaction approved by the Extraordinary Shareholders Meeting held on January 2, 2006. On the same date, HTI subscribed and paid up 90,732,987 common shares and 185,169,360 preferred shares of the Company through
conversion of receivables held against the Company in the amount of R$82.7 million (equivalent to US$36.1 million). The remaining balance of this debt, in the amount of R$80.7 million (equivalent to US$37.4 million), was paid to HTI
on February 10, 2006, with funds from the issuance of debentures.

(b) Refers mainly to the exchange variation incurred in the period on the amounts then due to HTI, denominated in U.S. dollars, which were settled during the first quarter of 2006. These amounts were fully credited to the statement of operations and comprehensive income.

In addition to such intercompany loans with shareholders and affiliated companies, there also exist purchases from a company owned by two directors of Vivax. In 1999, through a competitive process, Vivax hired Teledesign Serviços e
Comércio de Telecomunicações Ltda. (Teledesign) to build the optical and coaxial cable network. Two Vivaxs directors are the shareholders of Teledesign. Vivax continues to purchase software and services from
Teledesign and it is Vivaxs management opinion that such purchases are arm-length transactions. During 2006, purchases from Teledesign totaled approximately US$1.3 million (US$1.2 million, during 2005).

7. CABLE TELEVISION CONCESSIONS

|                                             |  |     |  |          |  |         
|-------------------------------------------- |  | --- |  | -------- |  | --------
|                                             |  |     |  | 2006     |  | 2005    
|                                             |  |     |  |          |  |         
|                                            
|Cost                                         |  | (a) |  | $ 38,406 |  | $ 35,081
|Purchase accounting adjustment               |  | (b) |  | 86,352   |  | 78,874  
|Accumulated amortization                     |  |     |  | (49,815) |  | (33,193)
|                                             |  |     |  |          |  |         
|                                             |  |     |  | $ 74,943 |  | $ 80,762
|                                             |  |     |  |          |  |         
|Weighted-average amortization period - years |  |     |  | 5.5      |  | 6.5     
|                                             |  |     |  |          |  |         

(a) This cost is net of an amount of US$2.0 million, represented by the write-off, recorded in 2004, of the net book value of the licenses that were not in use and it is not the Companys management intention to initiate construction on the
areas covered by such licenses.

(b) On December 19, 2003, the Company acquired 100% of the outstanding shares of Canpar. The Company has recorded such acquisition based on the fair value of the assets acquired and liabilities assumed and determined goodwill in accordance with the
purchase method of accounting prescribed by SFAS No. 141.

15

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As described in Note 1, the concessions were acquired on different dates, originally for a period of 15 years, renewable for consecutive and equal periods. The acquisition cost has been fully paid, and no additional amounts are due. As per the cable
TV regulation, beginning the date concessions are granted, the Company has 18 months (can be extended to additional 12 months) to initiate the infrastructure installation and provide services to subscribers. Substantive requirements to maintain
concessions have been met.

Amortization of licenses is calculated under the straight-line method over the period between the start-up of operations and the original expiration date of the concessions, which is 15 years from the date of granting.

The Companys broadband network is built on the existing poles owned by local utility companies under pole rental agreements.

The aggregated amortization expense for the above intangible assets amounted approximately to US$13,200 and US$11,700 for the years ended December 31, 2006 and 2005, respectively.

The estimated aggregated amortization expense for the next five years is as follows:

|           |  |  |  |         
|---------- |  |  |  | --------
|2007       |  |  |  | $ 13,550
|2008       |  |  |  | 13,550  
|2009       |  |  |  | 13,550  
|2010       |  |  |  | 13,550  
|2011       |  |  |  | 13,550  
|Thereafter |  |  |  | 7,193   
|           |  |  |  |         
|Total      |  |  |  | $ 74,943
|           |  |  |  |         

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8. PROPERTY AND EQUIPMENT

|                                    |  |              |  |           |  |              |  |           |  |          
|----------------------------------- |  | ------------ |  | --------- |  | ------------ |  | --------- |  | ---------
|                                    |  | Estimated    |  | 2006      |  | 2005        
|                                    |  |              |  |           |  |             
|                                    |  | useful       |  |           |  | Accumulated  |  |           |  |          
|                                    |  | life - years |  | Cost      |  | depreciation |  | Net       |  | Net      
|                                    |  |              |  |           |  |              |  |           |  |          
|                                   
|External network infrastructure (a) |  | 10           |  | $100,303  |  | $ (51,182)   |  | $ 49,121  |  | $ 51,011 
|Internal network infrastructure (a) |  | 10           |  | 69,555    |  | (28,638)     |  | 40,917    |  | 32,730   
|Computers and software              |  | 2.5          |  | 13,263    |  | (9,888)      |  | 3,375     |  | 3,009    
|Equipment                           |  | 10           |  | 3,342     |  | (1,734)      |  | 1,608     |  | 1,223    
|Furniture and fixtures              |  | 10           |  | 1,957     |  | (962)        |  | 995       |  | 737      
|Fleet vehicles                      |  | 5            |  | 601       |  | (189)        |  | 412       |  | 25       
|Buildings                           |  | 25           |  | 3,074     |  | (732)        |  | 2,342     |  | 2,199    
|Headend and antennas                |  | 10           |  | 10,036    |  | (5,121)      |  | 4,915     |  | 3,402    
|Cable modem                         |  | 2.5          |  | 16,993    |  | (9,741)      |  | 7,252     |  | 4,793    
|Internet material                   |  | 5            |  | 12,056    |  | (8,567)      |  | 3,489     |  | 1,626    
|Telephone network construction      |  | 10           |  | 842       |  | (214)        |  | 628       |  | 556      
|Building improvements               |  | 25           |  | 2,255     |  | (486)        |  | 1,769     |  | 510      
|Other                               |  |              |  | 8         |  | -            |  | 8         |  | 70       
|                                    |  |              |  |           |  |              |  |           |  |          
|                                    |  |              |  | 234,285   |  | (117,454)    |  | 116,831   |  | 101,891  
|Land                                |  |              |  | 423       |  | -            |  | 423       |  | 387      
|Construction in progress and        |  |              |  |           |  |              |  |           |  |          
|advances to suppliers               |  |              |  | 87        |  | -            |  | 87        |  | 779      
|Network material inventories (b)    |  |              |  | 2,178     |  | -            |  | 2,178     |  | 4,167    
|                                    |  |              |  |           |  |              |  |           |  |          
|                                    |  |              |  | $ 236,973 |  | $ (117,454)  |  | $ 119,519 |  | $ 107,224
|                                    |  |              |  |           |  |              |  |           |  |          

(a) In connection with the acquisition of Canbras operations occurred in December 2003, it is included in this caption as of December 31, 2006 the fair value adjustment balance in the amount of US$4,803, net of accumulated depreciation
(US$7,737, in 2005).

(b) This represents materials acquired for the construction of the infrastructure, which have not yet been applied to the corresponding items. Upon the utilization and completion of the construction, such materials are then classified to external
and internal network infrastructure.

A portion of the properties used by the administrative and technical areas is rented from third parties. Rental expenses for the year ended December 31, 2006, recorded as a charge to operations, were approximately US$890 (US$700, in 2005).
Lease contracts are made for periods ranging from two to five years. Estimated annual rental expense for 2007 onward is approximately US$900, plus inflation adjustments.

9. DEFERRED CHARGES

|                             |  |          |  |         
|---------------------------- |  | -------- |  | --------
|                             |  | 2006     |  | 2005    
|                             |  |          |  |         
|                            
|During the prematurity phase |  | $ 12,329 |  | $ 11,079
|Accumulated amortization     |  | (10,081) |  | (8,366) 
|                             |  |          |  |         
|                             |  | $ 2,248  |  | $ 2,713 
|                             |  |          |  |         

17

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##### 

10. LOANS AND FINANCING

|                                                  |  |     |  |           |  |         
|------------------------------------------------- |  | --- |  | --------- |  | --------
|                                                  |  |     |  | 2006      |  | 2005    
|                                                  |  |     |  |           |  |         
|                                                 
|Current portion, recorded as current liabilities: |  |     |  |           |  |         
|Banco ABC Brasil                                  |  | (a) |  | -         |  | $ 889   
|Banco Itaú BBA                                    |  | (b) |  | $ 1,788   |  | 166     
|Banco ABC/Unibanco                                |  | (c) |  | -         |  | 2,666   
|Capital lease                                     |  |     |  | -         |  | 23      
|                                                  |  |     |  |           |  |         
|                                                  |  |     |  | $ 1,788   |  | $ 3,744 
|                                                  |  |     |  |           |  |         
|                                                 
|Long-term portion:                                |  |     |  |           |  |         
|Banco ABC Brasil                                  |  | (a) |  | -         |  | $ 3,062 
|Banco Itaú BBA                                    |  | (b) |  | 102,900   |  | 27,342  
|Banco ABC/Unibanco                                |  | (c) |  | -         |  | 8,758   
|                                                  |  |     |  |           |  |         
|                                                  |  |     |  | $ 102,900 |  | $ 39,162
|                                                  |  |     |  |           |  |         

Maturities of long-term portion of the consolidated debt are as follows:

|     |  |          
|---- |  | ---------
|2009 |  | $ 34,300 
|2010 |  | 34,300   
|2011 |  | 34,300   
|     |  |          
|     |  | $ 102,900
|     |  |          

(a) This balance referred to the sum of loan obtained in July 2005, from Banco ABC Brasil (ABC), in the amount of R$10 million (equivalent to US$4.7 million), solely to pay the remaining amounts owed to the former shareholder of
Canbras companies. According to the original agreement, the balance was due in 60 monthly installments, beginning August 2005. Interest was equivalent to the CDI plus 4% per year. This loan was paid in advance, on January 17, 2006, with funds
obtained from the bridge loan mentioned in item (b) below, and the guarantee represented by a second pledge of receivables from cable television and high-speed data customers from certain cities, in a guaranteed minimum monthly amount of R$7.3
million (equivalent to US$3.4 million), was released.

(b) The balance as of December 31, 2005 referred to the initial partial release of the bridge loan, which was used for prepayment of certain loans existing in December 2005. On January 17, 2006, an additional amount of R$42 million (equivalent
to US$19.6 million) was received.

This bridge loan was obtained through an agreement signed on December 5, 2005 with a Brazilian bank, Banco Itaú BBA, under which: (i) the Company would obtain a bridge loan in the amount of R$220 million (equivalent to US$102.9 million)
for a period of 180 days, to be liquidated with the proceeds from the issuance of debentures in the same amount. As per the provisions of such agreement, maturity can be extended for additional consecutive 180 days to the maximum of 5 years, or to
the collection of the proceeds on the issuance of the debentures; and (ii) the Company hired Banco Itaú BBA as coordinator for the issuance of debentures by the total amount of R$220 million (equivalent to US$102.9 million). The
interest rate of this loan was CDI plus 3% per year. The bridge loan had the following guarantees: (i) letter of credit provided by
Brasil TV a Cabo (a Companys shareholder) and by Canbras TVA (subsidiary); (ii) guarantee on 51% of the Companys shares held by Brasil TV a Cabo; (iii) pledge of certain receivables held by the Company and by TVH; and (iv) letter of
guarantee of HTI (a Companys shareholder).

18

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##### 

Pursuant to the aforementioned agreement, on February 10, 2006 the Company fully settled this bridge loan with proceeds from the issuance of the 22,000 nonconvertible debentures, with unit par value of R$10.00 (equivalent to US$4.63),
totaling R$220 million (equivalent to US$102.9 million). These debentures were subscribed on February 10, 2006 in the amount of R$228.8 million (equivalent to US$106 million). Interest was equivalent to the CDI plus a spread of 3%
per year, paid semiannually, during the grace period of the principal, and monthly together with the principal, after the end of this grace period.

These debentures were earlier liquidated with the proceeds from another financing agreement signed with Banco Itaú BBA in November 2006 in the amount of R$220 million in the form of Bank Credit Notes, with yield equivalent to the CDI plus
2% per year, due semiannually. The proceeds were exclusively used to prepay, on November 16, 2006, the 22,000 nonconvertible debentures issued on December 1, 2005, totaling R$220 million. Even though the principal amount of those debentures was
scheduled to be paid off during 48 monthly installments, in October 2006, the Companys management decided for the earlier redemption, searching to reduce its costs and release the guarantees represented by the shares of the Company held by
Brasil TV a Cabo and HTI. As a result: (i) following the provisions of the agreements of such debentures, a premium for earlier redemption equivalent to 2.38% on the outstanding balance was paid to the holders and charged to profit and loss account;
and (ii) the remaining balance of prepaid capitalized expenses in connection with the issuance of such debentures was fully written off and charged to profit and loss account.

The principal amount of the outstanding loan due to Banco Itaú BBA, existing on December 31, 2006, will be due in five years, with a three-year grace period, and repayment of the principal at the end of the 3rd, 4th and
5th years and will be pledged by the receivables of the Company and its subsidiaries (TVH and Jacareí Cabo S.A.) from cable television, high-speed data customers and other services rendered, in the monthly minimum amount of
approximately R$24 million (equivalent to US$11 million). During November and December 2006, the monthly average total amount of receivables that passed through the corresponding bank account totaled approximately R$30.7 million
(equivalent to US$14 million), presenting a performance 28% greater than the minimum amount.

Additionally, the Company undertook to maintain, on a quarterly basis, certain financial ratios, such as bank debt/EBITDA ratio, net interest expense to EBITDA ratio, current and long-term indebtedness/shareholders equity ratio. In case of
nonperformance, the payment of the outstanding balance may be called on demand. Presently, the Company is in compliance with such commitments.

In the event of early redemption, the Company will pay a premium on the outstanding balance of 0.75% proportionate to the days remaining to the maturity date, in relation to the total days of the financing.

19

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##### 

(c) Loan obtained by the Company in May 2005 from two banks, in order to extend the payment term of its debt, including the long-term portion, improve investment flow and eliminate certain restrictive covenants of previous financing agreements.
There was R$100 million (equivalent to US$40.8 million) available under this loan agreement, of which R$30 million (equivalent to US$14 million) was received in May 2005. Interest at a rate of CDI plus 4% per year was due monthly
together with amortization of the principal in 60 monthly installments beginning June 2005.

On January 17, 2006, this loan was fully settled with proceeds obtained from the bridge loan mentioned in item (b) above and, on the same date, the Company obtained the statement of earlier settlement of the debt, discharging it from all guarantees
in favor of Banco ABC and Unibanco.

11. OTHER PAYABLES AND ACCRUALS

|                                              |  |       |  |        
|--------------------------------------------- |  | ----- |  | -------
|                                              |  | 2006  |  | 2005   
|                                              |  |       |  |        
|                                             
|Accrual for contingencies - TST (see Note 13) |  | $ 277 |  | $ 677  
|Accrual for refund of installation fees       |  | -     |  | 720    
|Escrow deposit from service suppliers         |  | 526   |  | 386    
|Other                                         |  | 172   |  | 245    
|                                              |  |       |  |        
|                                              |  | $ 975 |  | $ 2,028
|                                              |  |       |  |        

12. TAXES PAYABLE - TAX DEBT REFINANCING PROGRAM

|                                                           |  |       |  |      
|---------------------------------------------------------- |  | ----- |  | -----
|                                                           |  | 2006  |  | 2005 
|                                                           |  |       |  |      
|                                                          
|Current portion (included in the balance of taxes payable) |  | $ 75  |  | $ 76 
|                                                           |  |       |  |      
|Noncurrent portion                                         |  | $ 787 |  | $ 874
|                                                           |  |       |  |      

According to Law No. 10,684, of May 30, 2003, that reestablished the Tax Debt Refinancing Program (Programa de Recuperação Fiscal - Refis), certain subsidiaries opted, in July 2003, to consolidate their outstanding judicial
disputes, overdue and unpaid taxes and prior periods taxes (Refis) balances payable, into payments in 180 monthly installments starting in August 2003. The total amount outstanding is subject to interest equivalent to long-term interest rate
(TJLP), which currently is 6.85% per year (9.75%, in 2005). The adjusted fair value of this obligation, using current interest rate prevailing in the market condition (based on CDI interest rate), totals approximately US$0.5 million. The
accounting balance remained recorded based on the original amount due, plus accrued interest as per TJLP, and no adjustment has been recorded to reduce the outstanding balance to the fair value.

20

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##### 

13. ACCRUAL FOR CONTINGENCIES

|                |  |          |  |        
|--------------- |  | -------- |  | -------
|                |  | 2006     |  | 2005   
|                |  |          |  |        
|               
|Labor           |  | $ 1,327  |  | $ 951  
|Civil           |  | 199      |  | 164    
|Taxes           |  | 6,092    |  | 4,052  
|Other  ECAD    |  | 4,852    |  | 3,631  
|Escrow deposits |  | (597)    |  | (192)  
|                |  |          |  |        
|                |  | $ 11,873 |  | $ 8,606
|                |  |          |  |        

The Company is involved in various legal actions arising in the normal course of business. Accruals have been recorded based on the understanding that losses are probable or that there are uncertainties as to the final outcome of the legal actions.
Management believes that the recorded accruals are sufficient to cover any losses and that no material loss in excess of the accrued balance will be incurred.

Since the start-up of operations, the Company and its subsidiaries have not made any payment to ECAD (Escritório de Arrecadação e Distribuição), the regulatory agency that controls royalty payments, for the
granting to pay television companies of the right to distribute music through their cable channels. Although management still does not agree with the applicability of such payment, a provision for loss has been recorded. There is no lawsuit filed by
or against the Company. Said accruals will be maintained until the parties reach an agreement or this matter is definitively resolved.

Additionally, there is a contingency recorded under the caption Other payables and accruals, in the amount of US$277, relating to the assumption by Canpar (a subsidiary merged by the Company in November 2005) of certain commitments
and contingencies of Telemínio Serviços de Telemática Ltda. (TST), an entity that belonged to Canpars former controlling shareholder, CCC. In 2002, CCC sold to third parties the totality of its interest in TST and,
pursuant to the sale agreement, Canpar became liable for the commitments and contingencies of TST existing through February 28, 2002.

Other contingencies, for which no accrual has been recorded, since the Companys management and its legal advisors assess the risk of loss as remote, are as follows:

a)  Beginning in 2002, certain municipal governments created a law for the taxation of the underground, ground and overhead space used by cable television companies. The Companys legal advisors consider the risk of loss in this case as remote
and, therefore, no accrual for contingencies has been recorded.

b)  Tax assessment notices issued by tax authorities for State value-added tax (VAT - Imposto sobre Circulação de Mercadorias e Serviços - ICMS) on cable modems, in the amount of approximately US$1,870, which, in the
opinion of Companys management and its legal advisors, is not applicable. The processes are at the administrative phase.

21

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##### 

c)  In August 2004, Canbras TVA was assessed by the municipal government of Santo André (the city where the former Canbras TVA headoffice was located) demanding the payment of service tax (Imposto Sobre Serviços - ISS) on cable
TV revenues for the last five years. The amount of the tax assessment is approximately R$47 million (equivalent to US$22 million). The Company, through its legal advisors, is defending against this assessment, since ICMS (State VAT), which
must be levied on cable TV services as established by the applicable legislation in force, was paid on the revenue earned in the corresponding period. Therefore, no provision for losses has been recorded. The process is at the administrative phase.

14. CAPITAL

a) Subscribed and paid-up capital

Subscribed and paid-up capital as of December 31, 2006 is represented by 110,398,323 (322,049,544, in 2005) shares, of which 56,142,018 (161,024,772, in 2005) are registered common shares and 54,256,305 (161,024,772, in 2005) are registered
preferred shares, without par value, as follows:

|                                      |  |                  |  |            |  |            
|------------------------------------- |  | ---------------- |  | ---------- |  | -----------
|                                      |  | Number of shares
|                                      |  |                 
|                                      |  | Common           |  | Preferred  |  | Total      
|                                      |  |                  |  |            |  |            
|                                     
|Brasil TV a Cabo Participações S.A.   |  | 29,508,429       |  | -          |  | 29,508,429 
|Net Serviços de Comunicação S.A.      |  |                  |  |            |  |            
|(previously held by Horizon Telecom   |  |                  |  |            |  |            
|International, LLC - foreign company) |  | 5,033,588        |  | 11,056,300 |  | 16,089,888 
|Public offering - February 2006       |  | 21,600,000       |  | 43,200,000 |  | 64,800,000 
|Individuals  directors               |  | 1                |  | 5          |  | 6          
|                                      |  |                  |  |            |  |            
|Total                                 |  | 56,142,018       |  | 54,256,305 |  | 110,398,323
|                                      |  |                  |  |            |  |            

Each common share entitles its holder to one vote at the Annual Shareholders Meeting.

Preferred shares do not carry voting rights, except as specified below, and are entitled to priority in the following cases: (i) payment of dividends at least equal to those paid on common shares; (ii) priority in capital reimbursement, without
premium; and (iii) right to be included in a public offering for sale of controlling ownership interest, pursuant to the Companys bylaws.

With the Company reaching the São Paulo Stock Exchanges (BOVESPA) Level 2 of Corporate Governance, preferred shares will have the right to vote at any Shareholders Meeting on: (i) the Companys merger or spin-off; (ii) the
approval of agreements between the Company and the controlling shareholder, directly or through third parties, as well as through other companies in which the controlling shareholder has an interest, whenever by legal or statutory provision such
agreements are submitted to the Shareholders Meeting; (iii) the valuation of assets used for the Companys capital increase; (iv) the choice of a specialized company to determine the equity value of shares issued by the Company, in the
cases provided for in the bylaws; and (v) amendment or revocation of the provisions thereof that may change or alter any of the requirements set forth in the Regulation for Differentiated Corporate Governance Practices - Level 2, provided that this
voting right is granted while the agreement for the Adoption of Corporate Governance Practices - Level 2 remains in effect.

22

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##### 

The Companys shares may be converted from one type to another, at the shareholders discretion, in the proportion of one common share for each preferred share and vice versa, provided that the legal limitation for issuance of preferred
shares and any and all regulations applicable to cable television services are observed, and the process is ratified by the Shareholders Meeting.

Always observing the legal limitation for issuance of preferred shares, that is 50% of the total shares issued, the Company is authorized to increase capital up to the limit of 100,000,000 additional shares, in the maximum amount of 50,000,000
common shares and preferred shares.

The holders of any type of shares will be entitled, in every year, to a minimum dividend of 25% of the net income, calculated according to Brazilian corporate law.

b) Acquisition of Horizon Telecom International, LLCs (HTI) minority interest in the Company by Net Serviços de Comunicação S.A. (NET)

On October 12, 2006, the Company released a Significant Event Notice
  (press release) disclosing the signing of agreements between certain shareholders of the Company and NET with the initial purpose of acquisition of minority interest in the Company by NET, and subsequent acquisition of control of the Company. In this transaction, HTI and NET entered into an Agreement for Purchase and Sale of Shares and Other Covenants for sale of equity interest directly held by HTI, both in the Company and in
Brasil TV a Cabo Participações S.A. (BTVC) (Sale of Minority Interest). On that same date, an Agreement for Purchase and Sale of Shares and Other Covenants was signed between Mr. Fernando Norbert (shareholder of
BTVC), BTVC and NET for sale of control of the Company by BTVC to NET (Sale of Control). These two transactions must be implemented in two distinct stages, since the second one involves the change of control and requires prior approval
by ANATEL.

Both stages of this transaction will be conducted with the same share exchange ratio, and all the Companys shareholders will be offered the possibility of exchanging each common or preferred share held for 0.5678 preferred share issued by NET.

On November 30, 2006, NET acquired all the shares held by HTI, becoming the holder of 36.7% of the Companys capital, 14.6% directly and 22.1% indirectly, through a minority interest in BTVC.

As mentioned above, the implementation of the Companys acquisition of control by NET is subject to the approval of ANATEL.

c) Capital increase with conversion of amounts due to shareholders into capital

On January 2, 2006, the Companys shareholders decided to liquidate the balance of intercompany payables to HTI, being a portion through a conversion into capital with issuance of new shares and the other portion through a cash payment by using
the proceeds of the bridge loan/debentures received on that date. As mentioned at the Extraordinary General Meeting held on January 2, 2006, the following was approved: (i) conversion into capital of a portion of intercompany payables due to HTI, in
the amount of R$82.7 million (equivalent to US$36.1 million), with the issuance of 90.7 million common shares and 185.2 million new shares to HTI; and (ii) assignment of a
portion of the balance owed to HTI, in the amount of R$37.3 million (equivalent to US$16.1 million), to the shareholder Brasil TV a Cabo, which was simultaneously converted into capital, by issuing 124.4 million preferred shares to Brasil TV
a Cabo. The remaining balance, in the amount of R$80.7 million (equivalent to US$34.5 million), was paid on February 10, 2006, with the proceeds from the issuance of debentures.

23

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##### 

d) Capital increase with issuance of units

On February 7, 2006, the Company conducted a initial and secondary public offering of 19,200,000 units issued by the Company, equivalent to 57,600,000 shares, all registered and without par value, free and exempt from any encumbrance or lien,
representing 1 common share and 2 preferred shares of the Company, all registered and without par value, free and exempt from any encumbrance or lien (shares), at R$24.50 per unit, totaling R$470.4 million. The initial and
primary public offering totaled 2,400,000 units (R$58.8 million, equivalent to US$27.2 million) representing new shares issued by the Company (initial public offering) and the secondary public offering totaled 16,800,000 units
(R$411.6 million, equivalent to US$190.4 million) held by HTI (Selling Shareholder). The initial public offering generated net proceeds in the amount of R$55.4 million (equivalent to US$25.6 million), net of expenses
directly related to this offering, in the amount of US$1.6 million.

On February 10, 2006, HTI granted an offering of an additional 2,400,000 units held by it (supplementary option), in the amount of R$58.8 million (equivalent to US$27.2 million). The total public
offering was 21,600,000 units, in the amount of R$529.2 million (equivalent to US$244.8 million).

e) Changes in the number of shares

The following table presents changes in the number of shares issued and outstanding at each year ended:

|                                                  |  |                                 |  |           |  |          
|------------------------------------------------- |  | ------------------------------- |  | --------- |  | ---------
|                                                  |  | Number of shares (in thousands)
|                                                  |  |                                
|                                                  |  | Common                          |  | Preferred |  | Total    
|                                                  |  |                                 |  |           |  |          
|                                                 
|Shares at December 31, 2005                       |  | 161,025                         |  | 161,024   |  | 322,049  
|Conversion of amounts due to shareholders equity |  | 215,169                         |  | 185,169   |  | 400,338  
|Reverse stock split (7 to 1 share)                |  | (322,452)                       |  | (296,737) |  | (619,189)
|Initial public offering - primary shares          |  | 2,400                           |  | 4,800     |  | 7,200    
|                                                  |  |                                 |  |           |  |          
|Shares at December 31, 2006                       |  | 56,142                          |  | 54,256    |  | 110,398  
|                                                  |  |                                 |  |           |  |          

The Extraordinary Shareholders Meeting held on January 2, 2006 approved a reverse stock split of the Companys shares, attributing 1 share in substitution for every 7 existing shares.

24

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##### 

The following table provides a reconciliation of the numerators and denominators used in computing earnings per share as required by SFAS No. 128. Basic earnings (loss) per share is equal to diluted earnings (loss) per share for all periods
presented since the Company did not have any potentially dilutive securities:

|                                                           |  |          |  |        
|---------------------------------------------------------- |  | -------- |  | -------
|                                                           |  | 2006     |  | 2005   
|                                                           |  |          |  |        
|                                                          
|Net income                                                 |  | $ 29,911 |  | $ 8,061
|Weighted average shares outstanding - basic and diluted    |  |          |  |        
|(in thousands), after the reverse of stock split described |  |          |  |        
|above                                                      |  | 109,798  |  | 41,688 
|Basic and diluted earnings per share - US$:                |  |          |  |        
|Common shares                                              |  | $ 0.27   |  | $ 0.19 
|Preferred shares                                           |  | 0.27     |  | 0.19   

15. PROGRAMMING AND OTHER OPERATING COSTS

|                                         |  |          |  |         
|---------------------------------------- |  | -------- |  | --------
|                                         |  | 2006     |  | 2005    
|                                         |  |          |  |         
|                                        
|Programming costs                        |  | $ 24,933 |  | $ 17,778
|Costs associated with broadband/EMBRATEL |  | 6,773    |  | 4,438   
|Consumption of electricity               |  | 1,682    |  | 1,453   
|Pole rentals                             |  | 2,148    |  | 3,688   
|Other                                    |  | 12,703   |  | 8,014   
|                                         |  |          |  |         
|                                         |  | $ 48,239 |  | $ 35,371
|                                         |  |          |  |         

16. WRITE-OFF OF PREPAID EXPENSES IN CONNECTION WITH THE ISSUANCE OF DEBENTURES AND DEBENTURE PREMIUM RELATED OT EARLY REDEMPTION

In October 2006, the Company announced its decision for the earlier redemption of its debentures (the principal amount of such debentures was originally scheduled to be repaid during 48 monthly installments, beginning December 2006) and, as a result
of the aforementioned prepayment: (a) according to the Indenture of the 2nd Issue of Simple Debentures for Public Offering with a Floating Charge and Additional Guarantees (Indenture), the earlier redemption was made at the
unamortized unit par value plus yield calculated on a pro rata basis from the payment date of the last yield to the earlier redemption date, and a premium equivalent to 2.38%, calculated on the outstanding balance of debentures, in the amount of
US$2.6 million; and (b) the remaining balance of prepaid expenses in connection with the debentures issuance was written off in the amount of US$4.2 million, totaling US$6.8 million charged to the operations in the caption of
Write- -off of prepaid expenses from issuance of debentures and provision for debenture premium.

17. MANAGEMENT COMPENSATION

During 2006, management compensation expenses totaled US$2,496 (US$2,258, in 2005).

25

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18. COMMITMENTS

a) Rental of poles of electric power concessionaires

As mentioned in Note 2.i), the Companys broadband network is almost entirely comprised of aerial cables (as opposed to buried cables), which requires the use of existing poles owned by local utility entities under pole rental agreements. The
current agreements are effective for periods varying from two to five years, renewable for additional terms. The contract value is determined by the number of poles to be used, and, therefore, the total cost varies according to the size of the
network.

Relying on regulations governing infrastructure sharing in Brazil, the Companys management has initiated legal actions against certain local utility entities seeking to reduce the pole rental charges imposed by them. While this litigation
remains, provisions representing the difference of the amounts actually paid and the amounts claimed by the utility entities will continue to be charged to operations under the caption Programming and other operating costs and the
cumulative accrued balance recorded under the caption Other payables and accruals in current liabilities. In 2004, 2005 and 2006, the Company entered into agreements with certain utility entities, and only two legal actions are still
outstanding for which there is a recorded accrual in the amount of US$0.1 million. During 2006, the Companys management completed negotiations with certain utility entities and, as a result of such negotiations, released a portion of the
accrued balance to credit in the caption of Programming and other operating costs, in the amount of approximately US$2.1 million.

In future years, the annual minimum amount of utility pole rental is estimated at US$4.7 million, adjustable for inflation.

b) Property rental and other rentals

The Company and its subsidiaries rent properties for varying periods of time. They expect to continue renewing their existing lease contracts, and annual rental expenses are estimated at approximately US$900, plus inflation adjustments.

The Company also has lease agreements for vehicles for an indefinite period, with monthly payments in the amount of approximately US$0.1 million. The agreements can be canceled by either party at any time upon prior notice to the other party,
without fine, and the Company is not committed to acquire such vehicles.

c) Commitments to ANATEL (unaudited information)

The Company and its subsidiaries have commitments to ANATEL with respect to targets for the infrastructure implementation and provision of cable television services in certain cities of the States of São Paulo, Rio de Janeiro and Amazonas. The
Companys management believes that, except for a delay in the start-up of the cable system in Jacareí, the substantive requirements of the above-described commitments are being met.

26

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d) Commitments to suppliers

On October 11, 2006, the Company signed an equipment acquisition request to expand its network infrastructure and, consequently, its customer base, through nodes segmentation/digital return transmitter, in the amount of approximately US$3.5
million. The equipment will be received through April 2007.

19. DEFERRED INCOME AND SOCIAL CONTRIBUTION TAXES

Income and social contribution taxes (income taxes) are calculated based on taxable income adjusted under prevailing legislation. Income tax is calculated at the rate of 15%, plus a 10% surtax on taxable income exceeding R$240.
Social contribution tax is calculated at the rate of 9% on income adjusted under prevailing legislation. The combined income tax rate is 34%.

a) Reconciliation of income and social contribution taxes

|                                                       |  |           |  |        
|------------------------------------------------------ |  | --------- |  | -------
|                                                       |  | 2006      |  | 2005   
|                                                       |  |           |  |        
|                                                      
|Income (loss) before income taxes                      |  | $ (2,347) |  | $ 7,807
|Combined income tax rate                               |  | 34%       |  | 34%    
|                                                       |  |           |  |        
|Tax benefit (provision) at statutory combined tax rate |  | 798       |  | (2,654)
|Change in valuation allowance adjustment               |  | 32,264    |  | 3,498  
|Tax effect on permanent differences                    |  | (804)     |  | (590)  
|                                                       |  |           |  |        
|Income tax benefit (expense)                           |  | $ 32,258  |  | $ 254  
|                                                       |  |           |  |        

b) Deferred income taxes

|                                                            |  |            |  |           
|----------------------------------------------------------- |  | ---------- |  | ----------
|                                                            |  | 2006       |  | 2005      
|                                                            |  |            |  |           
|                                                           
|Tax loss carryforwards and temporary differences as of      |  |            |  |           
|December 31 (computation basis):                            |  |            |  |           
|Tax loss carryforwards                                      |  | $ 127,723  |  | $ 119,686 
|Deductible temporary differences - asset                    |  | 26,800     |  | 36,854    
|                                                            |  |            |  |           
|Total tax basis                                             |  | $ 154,523  |  | $ 156,540 
|                                                            |  |            |  |           
|                                                           
|Effect of deferred income tax on total deductible temporary |  |            |  |           
|differences and tax loss carryforwards                      |  | $ 52,538   |  | $ 53,220  
|Valuation allowance                                         |  | $ (14,814) |  | $ (48,264)
|                                                            |  |            |  |           
|Deferred income tax asset, net of valuation allowance       |  | $ 37,724   |  | $ 4,956   
|                                                            |  |            |  |           
|                                                           
|Taxable temporary differences - liability                   |  | $ (47,280) |  | $ (50,564)
|                                                            |  |            |  |           
|                                                           
|Balance of deferred income tax liability                    |  | $ (16,075) |  | $ (17,192)
|                                                            |  |            |  |           
|                                                           
|Balance of deferred income tax asset (liability), net       |  | $ 21,649   |  | $ (12,236)
|                                                            |  |            |  |           

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|                                                             |  |          |  |         
|------------------------------------------------------------ |  | -------- |  | --------
|Temporary differences are composed of:                       |  |          |  |         
|                                                            
|                                                             |  | 2006     |  | 2005    
|                                                             |  |          |  |         
|Assets-                                                      |  |          |  |         
|Arising from provisions, accruals, reserves and valuation    |  |          |  |         
|allowances that will be deductible for income tax purposes   |  |          |  |         
|only upon realization:                                       |  |          |  |         
|Concessions                                                  |  | $ 2,068  |  | $ 7,350 
|Allowance for doubtful accounts                              |  | 853      |  | 642     
|Investments - loss on sale of investment                     |  | 7,016    |  | 6,408   
|Fixed assets obsolescence                                    |  | -        |  | 3,261   
|Bonus/profit sharing                                         |  | -        |  | 2,308   
|Accrual for refund of installation fees                      |  | -        |  | 720     
|Contingencies                                                |  | 9,171    |  | 6,847   
|Depreciation over a period shorter than that accepted by tax |  |          |  |         
|legislation and other reserves                               |  | 6,251    |  | 4,467   
|Utility entities pole rental - under litigation             |  | 109      |  | 2,239   
|Other accruals                                               |  | 1,332    |  | 2,612   
|                                                             |  |          |  |         
|Total deductible temporary differences                       |  | $ 26,800 |  | $ 36,854
|                                                             |  |          |  |         
|                                                            
|Liability:                                                   |  |          |  |         
|Business combination - gross-up license                      |  | $ 47,280 |  | $ 35,996
|Exchange variation - cash basis for tax purposes             |  | -        |  | 14,568  
|                                                             |  |          |  |         
|Total taxable temporary differences                          |  | $ 47,280 |  | $ 50,564
|                                                             |  |          |  |         

The projections of future earnings concluded by the Companys management confirm that the current taxable income is likely to continue, in line with the development process and profitability growth that is currently experienced by the Company.
Thus, during 2006, the Company recorded a tax credit in the amount of US$32.2 million, represented by the full reversal of the valuation allowance previously recorded. At the parent company, however, full valuation allowance remained recorded on
the tax loss and temporary differences of the subsidiary.

The balances of tax loss carryforwards and deductible temporary differences are maintained in Brazilian reais - R$ and are not subject to any restatement by interest and/or inflation. For the purposes of preparing this table, the Brazilian reais
- R$ amounts were converted into U.S. dollars - US$ using the exchange rate prevailing on December 31, 2006 and 2005. Brazilian tax law allows for tax losses to be carried forward indefinitely to be offset against future taxable income. Tax
legislation limits the utilization of tax loss carryforwards in a given year to 30% of taxable income.

Under the Brazilian tax regulations, each legal entity has to prepare and file its tax return as a separate legal entity since a consolidated tax return of any nature is not allowed; therefore, taxable income of certain subsidiaries cannot be offset
against the tax losses of others. Each entity is a stand-alone taxpayer. There are certain subsidiaries that have balances of tax loss carryforwards and other temporary differences which results in potential income taxes benefit in the amount of
US$14.8 million; however, it was reduced by a valuation allowance due to the fact that, presently, there is no sufficient assurance about its realization.

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The balance of deferred income tax liability (current and long-term portion) is determined on the allocation of the fair value of licenses, as part of the purchase account allocation of the Canbras companies, on the portion that will not be
deductible for income tax purposes. Realization is associated to the amortization of such fair value allocation which is connected with the amortization of the corresponding licenses.

Based on current projections, it is estimated by Companys management that the tax credits recorded will be fully realized within six years. Estimated realization of the amounts recorded is as follows:

|      |  |  |  |         
|----- |  |  |  | --------
|2007  |  |  |  | $ 2,559 
|2008  |  |  |  | 1,244   
|2009  |  |  |  | 2,316   
|2010  |  |  |  | 4,100   
|2011  |  |  |  | 7,100   
|2012  |  |  |  | 4,330   
|      |  |  |  |         
|Total |  |  |  | $ 21,649
|      |  |  |  |         

20. FINANCIAL INSTRUMENTS

a) Fair value of financial instruments

The fair value of cash and cash equivalents, trade accounts receivable and current liabilities approximates carrying amounts, since their maturity is close to the balance sheet date. The fair value of the long-term loans and financing approximates
book value since market conditions for this type of financing has not changed significantly from issuance.

Financial instruments which potentially subject the Company to a concentration of credit risk principally consist of cash equivalents, foreign currency exchange contracts and trade receivables. Trade receivables are denominated in Brazilian reais -
R$. Accounts receivable are substantially spread over individual customers with no customer representing concentration of 10% or more of total revenues and accounts receivable. To reduce credit risk, the Company performs individual credit
evaluations of its customers, but, as an industry practice, does not require advance payment or collateral. Companys management has established certain credit requirements that its customers must meet before sales credit is extended. The
Company monitors its risks on receivables by recording valuation allowances.

Intercompany payables are derived from transactions whose conditions could be different had such transactions been conducted with unrelated parties and, therefore, they may represent an investment and not necessarily the fair value of the financial
transactions.

It is the Companys policy not to enter into derivative financial instruments for speculative purposes.

As of December 31, 2006 and 2005, there were no outstanding derivative instruments.

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b) Interest rate

The Company and its subsidiaries are exposed to normal market risks of changes in interest rates charged on its noncurrent liabilities.

21. INSURANCE

The Company has an insurance coverage for its assets against fire, theft and civil liability, in an amount considered sufficient by management to cover potential losses. It is not the Companys or the markets practice to have insurance
for the external network infrastructure, since the risk involved is considered low by management.

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