---

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

| | REGISTRATION STATEMENT
PURSUANT TO SECTION 12(b)OR 12(g) OF THE SECURITIES EXCHANGE ACT OF
1934OR                                    | 
| | ------------------------------------------------------------------------------------------------------------------------------------ | 
| | ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2002OR  | 
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from_____ to _____ | 

Commission file number: 0-28860

---

NET SERVIÇOS DE COMUNICAÇÃO S.A.

(Exact name of registrant as specified in its charter)

|Net Communications Services Inc.(Translation of reguistrants name into English) | Federative Republic of Brazil(Jurisdiction of incorporation or organization)
|-------------------------------------------------------------------------------- | ----------------------------------------------------------------------------

Rua Verbo Divino, 1356
São Paulo-SP-04719-002 Brazil (Telephone:+55-11-5186-2606)(Adress of principal executive offices)

---

Securities registered or to be registered pursuant to Section 12(b) of the Act:

None
(Title of Class)

|Title of each class                                                                                                         | Name of each Exchange on which registered
|--------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------
|American Depositary Shares, evidenced by American Depositary
Receipts, each representing ten preferred shares, no par value | Nasdaq National Market                   
|Preferred shares, no par value                                                                                              | Nasdaq National Market*                  
|                                                                                                                           
|*Not for trading but only in connection with the registration of the American Depositary Shares.                           

Securities registered or to be registered
  pursuant to Section 12(g) of the Act:

None
(Title of Class)

Indicate the number of outstanding shares of each of the issuers classes of capital or common stock
as of the close of the period covered by the annual report.

828,371,343 Common Shares
1,200,484,187 Preferred Shares

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90
days.

Yes         
         No

Indicate by check mark which financial
statement item the registrant has elected to follow:

Item 17  
         Item 18

---



|ITEM 1.  | IDENTIFY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                                    | 
|-------- | ---------------------------------------------------------------------------------------- | 
|        
|ITEM 2.  | OFFER STATISTICS AND EXPECTED TIMETABLE                                                  | 
|        
|ITEM 3.  | KEY INFORMATION                                                                          | 
|         | Selected Financial Data                                                                  | 
|         | Exchange Rate Information                                                                | 
|         | Risk Factors                                                                             | 
|        
|ITEM 4.  | INFORMATION ON THE COMPANY                                                               | 
|         | Business Overview                                                                        | 
|         | Strategy                                                                                 | 
|         | History and Development of the Company                                                   | 
|         | Our Services                                                                             | 
|         | Operations                                                                               | 
|         | Network Technology                                                                       | 
|         | Pay-Television Customer Care                                                             | 
|         | Sales and Marketing                                                                      | 
|         | Competition                                                                              | 
|         | Licenses                                                                                 | 
|         | Description of Property                                                                  | 
|         | Legal Proceedings                                                                        | 
|         | Regulation                                                                               | 
|         | Corporate Structure                                                                      | 
|        
|ITEM 5.  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                             | 
|         | Overview                                                                                 | 
|         | Results of Operations                                                                    | 
|         | Liquidity and Capital Resources                                                          | 
|         | Brazilian Economic Environment                                                           | 
|        
|ITEM 6.  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                               | 
|         | Directors                                                                                | 
|         | Executive Officers                                                                       | 
|         | Compensation of Directors and Senior Management                                          | 
|         | Employees                                                                                | 
|         | Share Ownership                                                                          | 
|        
|ITEM 7.  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                                        | 
|         | Major Shareholders                                                                       | 
|         | Shareholders Agreement                                                                  | 
|         | Related Party Transactions                                                               | 
|        
|ITEM 8.  | FINANCIAL INFORMATION                                                                    | 
|        
|ITEM 9.  | THE OFFER AND LISTING                                                                    | 
|         | General                                                                                  | 
|         | Trading Markets                                                                          | 
|        
|ITEM 10. | ADDITIONAL INFORMATION                                                                   | 
|         | Memorandum and Articles of Association                                                   | 
|         | Material Contracts                                                                       | 
|         | Exchange Controls                                                                        | 
|         | Dividend Policy                                                                          | 
|         | Taxation                                                                                 | 
|         | Documents on Display                                                                     | 
|        
|ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                               | 
|        
|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                                   | 
|        
|ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                                          | 
|        
|ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS             | 
|        
|ITEM 15. | CONTROL AND PROCEDURES                                                                   | 
|        
|ITEM 16. | AUDIT COMMITTEE FINANCIAL EXPERT; CODE OF ETHICS; PRINCIPAL ACCOUNTING FEES AND SERVICES | 
|        
|ITEM 17. | FINANCIAL STATEMENTS                                                                     | 
|        
|ITEM 18. | FINANCIAL STATEMENTS                                                                     | 
|        
|ITEM 19. | EXHIBITS                                                                                 | 

Certain References and
Information

In this Form  20-F,  references  to Net  Serviços,  we, us and
our are to Net  Serviços  de Comunicação S.A. and, unless the context requires
 otherwise,  include the consolidated  subsidiaries of Net Serviços de  Comunicação  S.A.
 References  to our ADSs are to our  American  Depositary  Shares,  each of which
represents 10 of our preferred shares.

All references in this Form 20-F to U.S.  dollars, $ or US$ are
to United States dollars, and all references to reais, real or R$ are to Brazilian
 reais.  The accounts of Net Serviços,  which are maintained in reais, were adjusted to
conform with accounting  principles  generally  accepted in the United States of America,
 or U.S. GAAP, and translated  into U.S.  dollars on the basis set forth in note 2 to our
consolidated  financial  statements as of and for each of the years ended December 31,
2000,  2001 and 2002. Unless  otherwise  specified,  certain  amounts stated in this Form
20-F in U.S.  dollars (other than as set forth in our  consolidated  financial
 statements  and financial  information  derived therefrom) have been translated,  for
the  convenience  of the reader,  from reais at the rate in effect on December  31, 2002
of R$3.5333 = US$1.00.  These  translations  should not be construed as a representation
 that reais could have been  converted  into U.S.  dollars at that rate on that date or
on any other date.  On June 24,  2003,  the rate of exchange was R$2.8616 = US$1.00.  See
Item 3. Key InformationExchange Rate Information.

Data  concerning  total cable  subscribers,  total  subscription
 television  subscribers and total penetration  rates in Brazil as of December  31,  2002
are based on Pay-TV  Survey No. 73,  published  in March 2003 by Pay-TV, a Brazilian
industry publication,  and also on our knowledge of the cable systems of Net Serviços and
 related  parties  as well as on claims by other  subscription  television  providers.
 While we believe these estimates to be reasonable,  we cannot assure you of their
accuracy.  Unless  otherwise  specified and other than with respect to historical
financial statement  information,  we present all operating statistics and subscriber
information concerning Net Serviços as of December 31, 2002.

Forward-Looking Statements

This Form 20-F  contains  forward-looking  statements,  within the
 meaning  of Section  21E of the Securities  Exchange  Act of 1934,  as amended,  or the
 Exchange  Act,  that are  intended to enhance  your ability  to assess  our  future
 financial  performance.  Forward-looking  statements  include,  but are not limited to,
 statements  that represent our beliefs  concerning  future  operations,  strategies,
 financial results and other  developments,  and contain words such as may, might,  should,  intend,  expect,anticipate,  plan  and
 similar  expressions.  Because  these  forward-looking  statements  are based on
estimates  and   assumptions   that  are  subject  to  significant   business,   economic
 and   competitive uncertainties,  many of which are beyond our control or are subject to
change,  our actual  results could be materially  different  from  the  beliefs  we
 express  in our  forward-looking  statements.  The  following uncertainties, among
others, may have such an impact:

- our  consolidated  financial  statements  included  elsewhere
in this Form 20-F have been  prepared under the assumption that we will continue as a going
 concern, even though there is substantial  doubt about our ability to
continue as a going  concern  due to the  uncertainties  as to the results of
 current negotiations with our various lenders and debt holders regarding,
 among other things, the reduction of our near-term  debt service
 obligations and therefore, as to the adequacy of our financial  resources
to meet our anticipated cash requirements for the second half of 2003 and
future periods;
- our large amount of debt, and our ability to refinance or repay
our debt;
- our ability to complete our proposed debt restructuring;
- adverse changes in our liquidity position;
- changes in Brazilian economic conditions,  including changes in
interest rates,  exchange rates and               the performance of financial markets;
- changes in governmental regulations applicable to our
activities;
- the advent of new communication technologies or distribution
systems that compete with our own;
- competitive  pressures on product  pricing and services,
 industry  consolidation  and the relative               success and timing of our
business strategies;
- our continued access to the capital we need to implement our
business plan; and
- the other matters discussed under Item 3.  Key InformationRisk
Factors.

ITEM 1.      IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable

ITEM 2.      OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable

ITEM 3.      KEY INFORMATION

Selected Financial Data

The selected  consolidated  statement of operations  data for each
of the three years in the period ended  December 31, 2002 and the selected  consolidated
 balance sheet data as of December 31, 2001 and 2002 set forth below are derived from our
audited  consolidated  financial  statements included elsewhere in this Form 20-F.
 Statement  of  operations  data for the years ended  December  31, 1998 and 1999 and the
balance sheet data as of  December  31,  1998,  1999 and 2000 are  derived  from our
 previously  published  audited consolidated  financial  statements,  which are not
 included  in this Form  20-F.  All of our  consolidated financial  statements have been
prepared in accordance with U.S. GAAP. The selected  consolidated  financial data set
forth below should be read in  conjunction  with,  and are qualified in their entirety by
reference to, Item 5. Operating and Financial  Review and Prospects, and our
consolidated  financial  statements and notes thereto included elsewhere in this Form
20-F.

The selected financial data below give effect to:

- the consolidation of Unicabo Participações e Comunicações S.A.,
or Unicabo, from January 1, 2000;
- the consolidation of Vicom S.A., or Vicom, from July 1, 2000;
and
- the consolidation of Net Sul Comunicações Ltda., or Net Sul,
from September 1, 2000.

The unaudited  selected pro forma statement of operations data for
the year ended December 31, 2000 are derived from our  consolidated  statements of
operations and adjusted to give effect to our acquisitions of Unicabo,  MDS  Telecomunicações
 Ltda.  (which  held 100%  ownership  of Vicom) and Net Sul Holding  S.A. (which held
99.99%  ownership of Net Sul) as if each of these three  acquisitions had occurred as of
January 1, 2000.  We accounted  for the  acquisitions  of Unicabo,  Vicom and Net Sul
using the  purchase  method in accordance with U.S. GAAP.

We  maintain  our  financial  records  in  reais.  However,  our
 audited  consolidated   financial statements  and the  selected  financial  data set
forth below are  presented in U.S.  dollars.  In order to prepare our consolidated
 financial  statements,  we translated our accounts from reais to U.S. dollars,  on the
basis  described  in note 2 to our  consolidated  financial  statements.  In  comparing
 amounts in U.S. dollars in different  periods,  you should  consider the  historical
 fluctuations  in the Brazilian rate of inflation  and  in  the  rate  of  exchange
 between  the  real  and  the  U.S.  dollar.  See  note 2 to our consolidated financial
statements.

|                                                                                  | Net Serviços de Comunicação S.A.
Consolidated Statements of Operations
For the Year Ended December 31,
|--------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------
|                                                                                  | 1998                                                                                                  
|                                                                                  | (U.S. dollars in thousands, except per share and per ADS data)                                        
|Revenues:                                                                         |                                                                                                       
|Subscriptions                                                                     | US$550,748                                                                                            
|Sign-on and hook-up fee revenues(2)                                               | 23,038                                                                                                
|Telecommunication service revenues                                                |                                                                                                      
|Other services                                                                    | 17,755                                                                                                
|Taxes and other deductions from revenues(3)                                       | (52,904)                                                                                              
|Net operating revenues                                                            | 538,637                                                                                               
|Operating cost and expenses:                                                     
|Programming and other direct operating costs                                      | (246,485)                                                                                             
|Selling, general and administrative expenses                                      | (169,100)                                                                                             
|Depreciation and amortization(4)                                                  | (240,996)                                                                                             
|Non-recurring severance charges                                                   |                                                                                                      
|Impairment of Goodwil                                                             |                                                                                                      
|Other                                                                             | (7,647)                                                                                               
|Total operating costs and expenses                                                | (664,228)                                                                                             
|Operating loss                                                                    | (125,591)                                                                                             
|Other income (expenses)                                                          
|Monetary indexation expense, net; Loss on exchange rate, net                      | (55,154)                                                                                              
|Loss on translation, net                                                          |                                                                                                      
|Financial expense, net                                                            | (83,351)                                                                                              
|Other                                                                             | (1,582)                                                                                               
|Total other expenses                                                              | (140,087)                                                                                             
|Equity loss of investees                                                          | (12,679)                                                                                              
|Minority interest                                                                 | 3,065                                                                                                 
|Income tax benefit (expense)                                                      | 5,140                                                                                                 
|Cumulative effect of accounting change(5)                                         |                                                                                                      
|Net loss                                                                          | US$(270,152)                                                                                          
|Loss per share, basic and diluted(6)                                              | (1.75)                                                                                                
|Weighted average number of common and preferred shares outstanding (thousands)(6) | 154,318                                                                                               
|Loss per ADS(6)                                                                   | (17.50)                                                                                               
|OTHER FINANCIAL DATA:                                                            
|Cash flows provided by (used in) operating activities                             | 71,335                                                                                                
|Cash flows provided by (used in) investing activities                             | (246,087)                                                                                             
|Cash flows provided by (used in) financing activities                             | 112,529                                                                                               

|                                                          | As of December 31,                                            
|--------------------------------------------------------- | --------------------------------------------------------------
|                                                          | 1998                                                          
|BALANCE SHEET DATA:                                       | (U.S. dollars in thousands, except per share and per ADS data)
|Assets:                                                  
|Current assets                                            | US$82,143                                                     
|Due from related companies                                | 6,770                                                         
|Property and equipment, net                               | 853,377                                                       
|Investments and advances to equity investees              | 14,881                                                        
|Goodwill on acquisition of consolidated subsidiaries, net | 235,789                                                       
|Other assets(7)                                           | 45,861                                                        
|Total assets                                              | US$1,238,821                                                  
|Liabilities:                                             
|Current liabilities                                       | 333,465                                                       
|Long-term debt, less current portion                      | 472,427                                                       
|Due to related companies                                  | 43,356                                                        
|Deferred sign-on and hook-up fee revenues                 | 55,896                                                        
|Other liabilities                                         | 49,562                                                        
|Total liabilities                                         | 954,706                                                       
|Advances for future capital:                              | -                                                             
|Stockholders Equity:                                     | US$284,115                                                    
|OPERATING DATA:                                          
|(at end of period, except for average)                   
|Total homes passed by cable                               | 4,477,800                                                     
|Total connected subscribers(8)                            | 976,000                                                       
|Cable penetration(9)                                      | 21.8%                                                         
|Average monthly revenue per cable subscriber(10)          | US$47                                                         

|(1) | The unaudited selected pro forma data give effect to
the acquisitions of Unicabo, Vicom and Net Sul as if each acquisition had occurred as of January 1,
 2000 and reflect the following assumptions:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- fair market value of US$37.9 million for the assets and
liabilities acquired,  consisting mainly of                            property and
equipment held by Net Sul;
- goodwill of US$738.9  million related to the acquisition of Net
Sul, based on the fair market value                            of the shares we issued as
 acquisition  consideration  and the fair market value                            of
assets and liabilities acquired;
- an increase of US$822.9  million in  stockholders  equity,
 based on the fair market  value of the                            shares we issued as
 acquisition  consideration  at the date of each  transaction
                           (relates to acquisitions of Unicabo, Vicom and Net Sul);
- depreciation  charges  of US$6.8  million in 2000 to reflect
 additional  depreciation  on the fair                            market value of
property acquired; and
- amortization  charges of US$49.3 million in 2000 to reflect the
 amortization of the goodwill as if                            the acquisitions had been
completed on January 1, 1999.

| | In the opinion of our management, all
adjustments necessary to present fairly this pro forma financial data have been made. The pro forma combined condensed statement of operations data are presented for
informational purposes only and may not be indicative of either the results that actually would have
occurred if the three acquisitions had occurred as of January 1, 2000, or our future results. In
particular, the pro forma adjustments are not intended to reflect any operating efficiencies, cost
savings or other synergies that may be achieved with respect to the combined operations. See note 1
to our consolidated financial statements.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Pursuant to Statement of Financial Accounting Standards, or SFAS,
No. 51, Financial Reporting by Cable Television Companies, sign-on and hook-up fee revenues are recognized currently up to the
amount of related direct selling expenses, with the excess deferred and recognized as revenue ratably
over ten years (the estimated average period that subscribers will remain connected to the network).
As of December 31, 1998, 1999, 2000, 2001 and 2002, accumulated sign-on and hook-up fee revenues
deferred for future recognition aggregated US$55,896, US$38,913, US$39,448, US$29,890 and US$19,980,
respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | ICMS, which is the value-added tax levied by the
various Brazilian states on our subscription revenues and sign-on and hook-up fees, generally increased to 10% in 2001 from 7.5% in 2000 and 5% in 1999 and
previous periods.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | From April 1, 1997 through December 31, 1999 we
depreciated our cable plant on a straight-line basis at a 20% annual rate. From January 1, 2000 through December 31, 2001, we depreciated our
cable plant at a rate of 12.5% to 20.0% a year. Since January 1, 2002, we have depreciated our
cable plant at 6.7% to 8.3% a year because of the recent upgrades made to our cable plant in
connection with building a two-way communication system that allowed us to introduce our broadband
Internet services. Based on external independent analysis, we concluded that this upward revision
to the estimated useful life of our cable plant was appropriate. The decrease in depreciation
rate reduced our depreciation expense by US$8.1 million in 2002. In addition, the adoption of
SFAS, No. 142, Goodwill and Other Intagible Assets, in January 2002 decreased amortization
expenses by US$63.7 million in 2002 when compared to 2001.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Upon adoption of SFAS, No. 142, we recorded this non-cash charge to
reduce the carrying value of goodwill. Since this charge was recorded for the first time in 2002, reflecting a change in
accounting principles, the impairment losses were recognized as non-operational.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Reflects the ten-for-one reverse split of our preferred shares,  common shares and ADSs, which occurred
     on June 17, 2002.
|--- | ------------------------------------------------------------------------------------------------------------------------------

|(7) | Includes judicial deposits, deferred income tax, income tax recoverable and other assets.
|--- | -----------------------------------------------------------------------------------------

|(8) | Includes  temporarily  blocked  subscribers of 34,487 on December 31, 2000,  18,878 on December 31, 2001
      and 7,144 on December 31,  2002,  for a total number of actively  paying  subscribers  of 1,470,046 on
      December 31,  2000,  1,428,373  on December  31, 2001 and  1,323,264 on December 31, 2002.  We did not
      collect data on the total number of blocked subscribers prior to 2000.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Period-end connected subscribers divided by homes passed.
|--- | ---------------------------------------------------------

|(10) | Average  monthly revenue per subscriber is calculated by dividing our  subscription  revenues for the
       period presented by the average number of connected subscribers for that period.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Exchange Rate Information

The  information  set forth below with respect to exchange rates is
based on the official  exchange rate of the  Central  Bank of  Brazil,  or the  Central
 Bank.  These  rates  are  provided  solely  for the convenience of the reader and are
not the exchange rates used by us in the  preparation of our  consolidated financial
statements included in this Form 20-F.

The following table shows the commercial  selling rate in reais per
U.S. dollar for the periods and dates indicated:

Exchange Rate of Brazilian Currency per U.S. Dollar

|                       | Low                 | High   | Average(1) | Period-end
|---------------------- | ------------------- | ------ | ---------- | ----------
|                       | (Reais per US$1.00)
|Year                  
|1998                   | 1.1165              | 1.2087 | 1.1644     | 1.2087    
|1999                   | 1.2078              | 2.1647 | 1.8514     | 1.7890    
|2000                   | 1.7234              | 1.9847 | 1.8348     | 1.9554    
|2001                   | 1.9357              | 2.8007 | 2.3532     | 2.3204    
|2002                   | 2.2709              | 3.9552 | 2.9183     | 3.5333    
|2003 (through June 24) | 2.8491              | 3.6623 | 3.1932     | 2.8616    

|                            | Low                 | High  
|--------------------------- | ------------------- | ------
|                            | (Reais per US$1.00)
|Month                      
|December 2002               | 3.4278              | 3.7980
|January 2003                | 3.2758              | 3.6623
|February 2003               | 3.4930              | 3.6580
|March 2003                  | 3.3531              | 3.5637
|April 2003                  | 2.8898              | 3.3359
|May 2003                    | 2.8653              | 3.0277
|June 2003 (through June 24) | 2.8491              | 2.9780

|Source: | Central Bank                                                                                                    
|------- | ----------------------------------------------------------------------------------------------------------------
|(1)     | Calculated by using the average of the exchange rates on the last day of each
month during the relevant periods.

On December 31, 2002, the commercial  selling rate was R$3.5333 per
U.S. dollar. On June 24,  2003, the commercial selling rate was R$2.8616 per U.S. dollar.

Fluctuations  in the exchange rate between the real and the U.S.
dollar will affect the U.S. dollar equivalent of the  real-denominated  prices of our
shares and, as a result, will affect the market prices of our ADS in the United States.

Risk Factors

You  should  carefully  consider  the  risks  and  uncertainties
 described  below  and  the  other information in this Form 20-F,  including the
discussions set forth in Item 4. Information on the Companyand  Item 5.  Operating
 and  Financial  Review  and  Prospects,  as  well as our  consolidated  financial
statements  and related notes  included  elsewhere in this Form 20-F.  See Item 5.
 Operating and Financial Review and  ProspectsLiquidity  and Capital  Resources for a
discussion of the proposed debt restructuring plan
 and for a description of our debt.

Risks Related to the Proposed Debt Restructuring Plan

We and our various  lenders and debt holders are currently  engaged
in  negotiations  with regard to a restructuring  of our  debt  facilities  and
 instruments.  If  these  negotiations  are not  satisfactorily resolved,  we would
continue to be left with negative  working  capital.  This could result in our inability
to operate as a going concern.

In the second half of 2002,  we and our various  lenders and debt
 holders  commenced  negotiations with regard to a restructuring  of our debt facilities
and  instruments,  and these  negotiations  are still taking  place.  The goal of these
 negotiations  are to,  among  other  things,  reduce our  near-term  debt service
 obligations to levels that can be serviced with  operating  cash flows,  limit the
impact of future exchange rate volatility by converting a portion of our
 dollar-denominated  debt to real-denominated  debt, amend  certain  financial  and other
 covenants  in our debt  facilities  and  instruments  and  establish a fully-funded
 business  plan for the medium  term.  Although  the terms of such  restructuring  remain
under negotiation,  we expect that this  restructuring  will result in either: (i) an
exchange of a portion of our debt by our lenders and debt holders for an equity ownership
 position in Net Serviços;  (ii) an exchange of a portion of our debt by our lenders and
debt  holders  for new debt of Net  Serviços;  or (iii) an exchange of a portion of our
debt by our lenders and debt  holders  for a  combination  of new debt and equity of Net
Serviços.  Any debt for equity  exchange would dilute  holders of our common and
preferred  shares and ADSs. We can give no  assurance  that the  restructuring  will be
 consummated  or our  outstanding  debt  will be renegotiated in full or in part. If the
 restructuring  is not concluded in a satisfactory  manner,  we will not be able to make
the  required  payments on our debt that have come due since  December  2002,  and which
have not been paid, or meet  scheduled  principal  and interests  payments on our debt
that comes due in the second half of 2003,  with our own  resources  or without  further
 (a)  financing  by third  parties or (b) capitalization  by our major  shareholders,
 unless we sell assets or otherwise  raise  capital.  This would result in a liquidity
 crisis for us and would have a material  adverse  impact on our financial  condition.
Such an event would  continue to leave us with  negative  working  capital and could
result in our inability to operate as a going  concern.  If we are unable to  continue
as a going  concern,  we may be forced to pursue a sale or liquidation  of assets to
satisfy our creditors.  This would  materially  adversely  affect holders of our
preferred shares and ADSs.

We have engaged The Blackstone  Group, an investment  bank, to
assist us with the  restructuring of our debt facilities and instruments.  The
 implementation  of the debt  restructuring is subject to a number of uncertainties and
factors,  many of which are not within our control,  such as the state of Brazilian and
international capital markets and our ability to reach agreements with our lenders and
debt holders.

Risks Related to Net Serviços

Our financial statements were prepared under the assumption that we
will continue as a going        concern even though there is substantial doubt in this
regard.

Our  consolidated  financial  statements  included  elsewhere in
this Form 20-F have been  prepared under the assumption that we will  continue as a going  concern.  Continuing
 adverse  conditions  in the general  economic environment  and the effect of those
 conditions  on our  business  have had a  negative  impact on our cash flows and results
from  operations  and  therefore on our ability to make  scheduled  principal and
interest payments on our debt and on our ability to comply with certain financial
 covenants  previously  established under our debt  facilities  and  instruments.
 Because  of the  uncertainties  as to the  results of current negotiations  with our
lenders and debt holders  regarding the restructuring of our debt and therefore as to the
adequacy of our financial  resources to meet our anticipated  cash  requirements  for the
second half of 2003 and future  periods,  there is  substantial  doubt about our ability
to continue as a going  concern.Our  ability to continue as a going  concern is
 dependent  upon,  among other  things,  the  satisfactory conclusion  of our debt
 restructuring  and our  ability to generate  sufficient  cash from  operations  and
financing  arrangements  to meet our  obligations.  If the going concern basis was not
appropriate for our consolidated  financial  statements,  then significant  adjustments
might be necessary in the carrying value of assets and liabilities, the revenues and
expenses reported, and the balance sheet classifications used.

We have not made payments of principal or interest  under our debt
 facilities  and  instruments  and        cannot  assure you that our lenders or debt
holders will not seek to  accelerate  payment on our debt        facilities or
instruments  or seek to exercise  legal remedies to enforce their rights  thereunder or
       in accordance with Brazilian law.

We have not made  scheduled  principal  or interest  payments on any
of our debt since  December 2, 2002, and we have not  maintained  specified  financial
 ratios nor met specified  financial  tests required under certain debt facilities and
 instruments.  Our  non-payment of these scheduled  principal and interest payments and
our  inability to maintain or comply with ratios or financial  tests under our debt
 facilities and instruments  have resulted in violations  under a number of our debt
facilities and  instruments.  These violations  enable our various lenders and debt
holders to accelerate  amounts due under their respective debt  facilities  and
 instruments.  As a result,  various of our lenders  and debt  holders may declare all
amounts  outstanding under their respective debt facilities and instruments,  including
accrued interest and other  obligations,  to be due and  payable.  In  December  2002,
 União  de  Bancos  Brasileiros  S.A.,  or Unibanco,  filed a  collection  suit against
us in the Central  Court of São Paulo to recover  approximately R$72.2  million  (US$20.4
 million)  relating to amounts  outstanding on a loan made to us. We cannot assure you
that our other  lenders or debt holders will not seek to  accelerate  amounts
 outstanding  under any of our debt  facilities or instruments  or seek to exercise
 legal remedies to enforce their rights  thereunder or in accordance with Brazilian law.

A  significant  amount of debt has to be  restructured  or  repaid,
 but we cannot  assure  you that a       restructuring or repayment will occur.

As a result of our  non-payment  of  scheduled  principal  or
 interest  payments on our debt since December 2, 2002,  and as a result of not
 maintaining  specified  financial  ratios nor  meeting  specified financial  tests
 required  under our debt  facilities  and  instruments,  at December 31, 2002,  all of
our indebtedness,  except  leasing,  had been  classified as  current. As of December
31, 2002,  and March 31, 2003,   scheduled   principal   payments  on  our  debt  totaled
 US$323.7  million  and  US$330.3  million, respectively.  Our high level of debt
 maturities  has  contributed  to our large working  capital  deficit. After  taking
 into  consideration  the range of  projections  of cash  flows from  operations,
 anticipated capital  expenditures  and debt  principal and interest  repayment
 requirements,  we will not have adequate financial  resources  to meet our  anticipated
 cash  requirements  for the  second  half of 2003 and future periods unless we
restructure our debt,  obtain financing from third parties,  capital from our
shareholders or unless we sell assets or  otherwise  raise  capital.  If we and our
various  lenders and debt holders are unable  to  successfully  negotiate,  among  other
 things,  a  reduction  in  our  near-term  debt  service obligations,  we would have to
consider pursuing alternative  restructuring  options,  which could include a sale or
liquidation of assets.  This would  materially  adversely affect holders of our preferred
shares and ADSs.

We have a large amount of debt, which increases our vulnerability to
adverse economic and market      conditions and adversely affects our business, liquidity
and results of operations.

We  have  a  large  amount  of  debt.  As of  March  31,  2003,  on
a  consolidated  basis,  we had approximately  US$330.3  million in principal amount of
debt  outstanding,  with  approximately  66% of that debt denominated in U.S. dollars.
All of our debt is classified as current.

During 2002,  Standard & Poors lowered our foreign and local
currency  corporate credit and senior      unsecured  debt  ratings  and placed us on
credit  watch  with  negative  implications.  Our rating was      lowered (i) to B+ from
BB-, on February 8, 2002,  (ii) to CCC+ from B+, on June 28, 2002,  and (iii) to      D
from CCC+, on December 3, 2002.

These  announcements (and related  announcements)  could adversely
affect our ability to access the capital markets and raise debt financing on acceptable
terms and restructure our debt.

Our large amount of debt has important  consequences  to holders of
our preferred  shares and ADSs, including:

- exposing  holders to dilution in the event of  debt-for-equity
 exchanges  with our lenders or debt               holders;
- increasing  our  vulnerability  to  adverse  general  economic
 and cable and  television  industry               conditions;
- affecting our ability to obtain additional financing to fund
our debt service requirements,  future               working capital requirements,
 capital  expenditures,  acquisitions or other general corporate               purposes;
- requiring the dedication of a substantial  portion of our cash
flow from  operations to the payment               of principal of and interest on
indebtedness, thus reducing future business opportunities;
- increasing our  vulnerability to fluctuating  interest rates,
 since certain of our borrowings bear               variable interest rates; and
- exposing us to the risk of depreciation of the real against the
U.S. dollar.

We might not have sufficient liquidity to fund our capital spending
requirements and to conduct our      ongoing operations.

In addition to our significant  debt service  requirements,  we need
 significant  cash to fund our capital   expenditures  and  to  conduct  our  ongoing
 operations.   We  expect  that  our  annual  capital expenditures  will  total
 approximately  US$30  million in 2003.  If we are  unable to obtain  the  capital
necessary  to fund these  capital  expenditures  from  operating  cash flow,  we may not
be able to fund our planned  capital  expenditures.  This could adversely  impact our
future revenues and cash flows,  and delay plans to introduce  digital  cable  services,
 which is currently  scheduled  for 2004.  We may also need to fund additional  capital
 expenditures to keep pace with  technological  developments,  and we cannot assure you
that we will be able to fund such capital expenditures.

We have had to implement a number of steps to address our weaker
than expected  operating  results, our weak  liquidity  position,  the  downturn  in the
 Brazilian  economy and the  depreciation  of the real against the U.S.  dollar.  These
 include the  non-payment  of our debt that has come due since  December 2, 2002,
 reductions  in  capital  expenditures,  cost-cutting  initiatives,  negotiated
 deferrals  of amounts payable to equipment  suppliers and  deferrals of  programming
 fees. As of December 31, 2002,  our accounts payable to programmers  totaled US$51.1
million,  and the amount of deferred payments to equipment suppliers totaled  US$12.4
 million.  During 2002, we reached  agreements  with our  equipment  suppliers to defer
the entire  US$12.4  million  to be paid over 2003 and with our  programmers  to defer
 US$39.8  million  of the US$51.1  million to be paid over 2004 and 2005.  As of March
31,  2003,  the amount of deferred  payments to equipment  suppliers  totaled  US$9.6
 million,  and our accounts  payable to  programmers  totaled  US$57.7 million.  During
2003,  we have paid  approximately  US$3.1  million of the  deferred  payments to
equipment suppliers.  Our operating cash flows could be adversely  impacted by a number
of factors,  many of which are not within our  control,  such as  continued  weakness or
 worsening  of the  Brazilian  economy and further depreciation of the real against the
dollar.

Agreements  governing our debt contain restrictions and limitations
that could significantly impact our      ability to operate our business and adversely
affect holders of the preferred shares and the ADSs.

The  agreements  that  govern  our debt  and the  debt of our
 subsidiaries  contain  a  number  of significant  covenants  that  could  adversely
 impact  our  business.  In  particular,  the  terms of these agreements restrict our
ability and the ability of our subsidiaries to:

- pay dividends or make other distributions;
- make certain investments or acquisitions;
- dispose of assets or merge;
- incur additional debt;
- issue equity;
- repurchase or redeem equity interests and debt;
- grant liens; and
- pledge assets.

Furthermore,  in  accordance  with a number of our debt  agreements,
 we are  required  to maintain specified  financial ratios,  including  consolidated indebtedness
to consolidated  operating cash flow, or adjusted EBITDA and adjusted EBITDA to  consolidated  net  interest
 expense.  As of December 31, 2002,  we were not in  compliance  with these ratios.  Our
non-compliance  with these financial  covenants has resulted in violations under a number
of our debt  facilities and  instruments.  As a result,  various of our lenders and debt
holders may declare all amounts  outstanding under their respective debt facilities and
instruments,  including accrued interest and other  obligations,  to be due and payable.
 As part of our debt  restructuring  plan, we are seeking to negotiate  appropriate
  amendments  to  the  covenants  contained  in  the  relevant  debt  facilities  and
instruments.

We expect to continue recording net losses for the foreseeable
future.

We reported  operating  losses of  approximately  US$109.1  million
and US$8.2  million in 2001 and 2002,  respectively,   and  net  losses  of  US$349.5
 million  and  US$701.0  million  in  2001  and  2002, respectively.  Due to our large
depreciation and amortization  expenses,  planned network upgrades and other capital
 expenditures,  and anticipated continued weakness in the Brazilian economy, we recorded
significant operating  losses until 2001.  In 2002,  we revised the useful  lives of
assets such as  headends,  external network decoders and cable modems,  resulting in a
US$147.5 million  reduction in depreciation expenses, and a  US$100.9 million  reduction
in  operating  losses  compared to 2001.  We expect to continue to record net losses for
the foreseeable  future due to our financial  expenses.  We cannot predict what impact
 continued losses  might have on our  ability to finance  our  operations  in the future
or on the market  value of our preferred shares and ADSs.

Due to our  losses  so far,  we have  never  declared  or paid any
cash  dividends  on our  shares, including  the  preferred  shares  underlying  our ADSs.
 We do not expect to pay any cash  dividends in the foreseeable future.

We have historically  relied on our major  shareholders for
financing,  but do not expect that any such      financing will be available in the
future.

We have historically  received  significant amounts of funding and
other financial support from our major  shareholders in raising capital.  These include
 shareholder  guarantees for loans taken out in 1995, 1997 and 1998,  purchases by major
shareholders of debentures issued by us and major  shareholders  granting loans and
 advancing  capital  in 2000,  2001 and  2002.  We do not  expect  that  funds or other
 financial support will be available in the future from our major shareholders.

Negative  developments or changes in our relationship  with Globopar
and its affiliates could adversely      affect our access to programming.

We obtain all of our programming from Brazilian and international
 sources through Net Brasil S.A., or Net Brasil,  60% of which is indirectly  owned by
Globopar and 40% of which is owned by us.  Accordingly, we have  no  direct  contracts
 with  any  programming  providers.  Although  Net  Brasil  provides  us with exclusive
 cable-television  rights in our licensed areas, it also provides  programming to cable
television companies  outside our licensed areas and to Sky Brasil  Serviços Ltda.
 (formerly Net Sat Serviços  Ltda.), or Sky Brasil,  a  satellite-television  provider
 that  competes  directly with us and that Globopar owns a significant  interest in. Net
Brasil  provides  programming to us and Sky Brasil on  substantially  the same terms  and
 conditions.  In  addition,  much of the  programming  that we  purchase  through  Net
 Brasil is produced by Globosat Programadora Ltda., or Globosat, which is wholly owned by
Globopar.

Continued  negative  financial  or business  developments  at
 Globopar  (for  example,  Globopars inability to obtain  necessary  financing) or
changes in our  relationship  with Globopar and its affiliates (for example,  if Globopar
were no longer a controlling  or significant  shareholder of Net Serviços)  could
adversely  affect  our  current  programming  arrangements  with  Net  Brasil  and  our
 ability  to  obtain programming  whether from within the Globo group of companies or
 elsewhere.  This could lead to the loss of our current  exclusive cable television
rights to Globosats  popular  Brazilian  programming or to the loss of  access  to all
or  some  of  such  programming  if  another  pay-television  provider,  such  as a cable
television or direct broadcast  satellite,  or DBS,  competitor,  were to negotiate
exclusive rights to such programming.  In addition,  this could result in  increases in
our  programming  costs to the extent we lose the benefit of Net Brasils  market scale
in  negotiating  programming  fees on our behalf and to the extent our programming  fees
have been  historically  lower than other cable  competitors  due to our  relationship
with Globopar and its  affiliates.  Increases in  programming  costs would  adversely
 affect our cash flows and operating margins.

As described above, during 2002, due to our negative liquidity
situation,  we had to defer payments on a  significant  amount of  programming  fees
 payable to Net Brasil  for both  third  party and  Globosat programming.  Our access to
 programming  could be negatively  impacted if we continue to defer  payments to
programming  providers  because  of  lack  of  liquidity,  access  to  financing  or if
 our  proposed  debt restructuring does not occur.

We depend on key members of our senior  management.  Any  difficulty
 in retaining  our current  senior      management or in hiring new employees could
adversely affect our ability to operate our business.

Our  business  is  managed  by a small  number  of key  senior
 managers.  The loss of any of these individuals  could  materially  affect our
 business.  In  addition,  our success  depends on our ability to continue  to  attract,
 recruit  and retain  sufficient  qualified  scientific,  technical,  managerial  and
administrative  personnel as we grow.  Competition  for qualified  personnel in Brazil is
strong,  and there is  generally  a limited  number  of  persons  with the  requisite
 experience  in the  sectors  in which we operate.  We cannot assure you that we will be
able to retain senior  management,  integrate new managers or recruit qualified personnel
in the future.

Holders of our common shares will be able to control most corporate
transactions.

Entities affiliated with our major shareholders:  Globopar,  BNDES
Participações S.A., or Bndespar, Bradesplan  Participações  S.A., or Bradesplan,  RBS
Participações S.A., or RBS, together own almost 100% of our common  shares.  Common
shares are our only shares of capital stock that hold full voting  rights.  As a result,
 these major  shareholders,  acting together,  will be able to control most corporate
 transactions. In accordance with Brazilian  corporate law and our by-laws,  holders of
the preferred  shares,  and thus of the ADSs, are entitled to vote at meetings of our
 shareholders in only limited  circumstances.  This means, among other  things,  that
you, as a holder of  preferred  shares or ADSs,  are entitled to vote only on the
following matters:

- our transformation, consolidation, merger or spin-off;
- valuation of assets used in increases in our capital;
- approval  of  certain  specified  agreements  between  us and
our  controlling  shareholder  or its               affiliates;
- choice of a company skilled in the  determination of the our
economic value intended for the public               offering of our shares; and
- change or repeal of  statutory  provisions  of our by-laws that
alter or modify any São Paulo Stock               Exchange, also known as Bovespa,
requirements.

Certain of our major  shareholders  have interests in companies that
currently or may in the future compete with us,  including  the  interests of Globopar
 and the Marinho  family in Sky Brasil,  a satellite pay-television  provider,  and in
several broadcast television stations.  Accordingly,  the interests of our major
 shareholders  may conflict  with the  interests  of holders of our  preferred  shares,
 and our major shareholders  may cause  the  company  to act in a manner  divergent  with
the  interests  of our  preferred shareholders.

Risks Related to Our Business

The industry in which we compete is highly  competitive,  which can
 adversely  impact our business and      results of operations.

The television industry in Brazil is highly competitive.  We
currently compete with:

- cable  systems in seven of the 44 cities in which we  operate,
 including  systems in the cities of               São Paulo,  Curitiba and Florianópolis
 operated by TVA Sistema de Televisão S.A., or TVA, and               in Belo Horizonte
operated by W@y Brasil;
- DBS services offered in Brazil by Brazilian and international
 media consortia,  including:  Galaxy               Brasil Ltda., a subsidiary of DirecTV
Latin America LLC; Sky Brasil,  a joint venture  between               News  Corporation
 plc, a subsidiary  of The News  Corporation  Limited,  Globopar and Liberty
              Media International, Inc.; and Tecsat;
- Brazilian broadcast networks and their local affiliates; and
- multi-channel  multi-point  distribution  systems, or MMDS,
 including those systems operated by or               affiliated with TVA in São Paulo
and Rio de Janeiro.

We also  compete  with movie  theaters,  video rental  stores and
other  entertainment  and leisure activities generally.

Our high-speed  Internet access service,  Vírtua,  faces
 significant  competition  from providers, principally  telephone companies,  including
 Telefonica,  Telemar and Brasil Telecom, of asymmetric digital subscriber line
technology, or ADSL.

Our corporate  data  transmission  service,  Vicom,  competes  with
 numerous  providers of similar services, including Embratel, Telefonica and AT&T Latin
America.

A number of our competitors  have greater  financial and other
 resources,  including access to the financial  resources  of their  shareholders,  than
we do. As a result,  we are unable to assure you that we will have the ability to compete
 successfully  and any such failure could have a material adverse effect on our
 business,  financial  condition  and results of  operations.  In addition,  changes in
 technology  may affect our  competitiveness.  The  pay-television  industry
 historically has been, and likely will continue to be, subject to rapid and significant
 changes in technology.  In particular,  the emergence of new, lower cost  delivery
 systems  or the  widespread  use of  digital  compression  technology,  which  is
 currently available for certain  transmission  media and under  development  for others,
 would allow  transmission of multiple  channels on the same  frequency,  and  therefore
 could  result in  increased  competition  in the Brazilian  pay-television  industry.
 We  are  unable  to  assure  you as to the  ultimate  effect  on us of possible
 technological  changes.  Technological  advances could require us to expend substantial
 financial resources in the  development or  implementation  of new  technologies in
order to prevent our services from becoming obsolete.

High rates of churn could negatively affect our revenues and
profitability.

Our ability to generate pay-television  subscription revenue is
dependent on our ability to attract and retain  subscribers,  which entails  significant
 costs such as the programming fees we must pay in order to assemble  attractive
 programming  packages.  In addition,  we incur certain  unrecoverable  costs,
particularly  equipment  installation costs, sales commissions and marketing costs, for
every new subscriber we connect to our cable  network.  Subscriber  churn is the total
number of net  disconnected  subscribers (excluding  the  temporarily  blocked
 subscribers)  for a period as a  percentage  of the average  number of subscribers  for
the same  period.  The fact that we  experience  a variety of  significant  fixed costs
for each new subscriber  means that high rates of subscriber  churn could have a material
 adverse effect on our revenues and profitability.  During 2002, we experienced
 decreased churn due to various factors,  including positive results from the
implementation of a more selective  screening process when determining  whether to accept
new  subscribers,  the use of retention  islands,  a program that utilizes  skilled
 customer service representatives  to target  subscribers that may discontinue their
services with us due to  dissatisfaction, and our  heightened  focus  on  customer
 satisfaction,  such as the  outsourcing  of our  customer  service centers.  We cannot
assure you that our churn rates will not be higher in future periods.

Increases in our programming costs would adversely affect our cash
flow and operating margins.

Programming  has  been,  and  is  expected  to  continue  to be,
 our  largest  operating  expense, representing,  including  trademark fees,
 approximately  31.5% and 36.3% of our gross operating revenues in 2001 and 2002
 respectively.  In  addition,  since a  substantial  portion  of our  programming  costs
 have historically  been  denominated  in U.S.  dollars,  depreciation  of the real
 against  the U.S.  dollar has increased the cost of our  programming in reais.  Under
 Brazilian  currency  rules,  our contracts with our current  subscribers  allow us to
increase  subscription fees only once every 12 months and in proportion to inflation.
 Accordingly,  these  contracts,  along with  market  constraints,  may limit our ability
to pass along  increases in programming  costs to our  subscribers.  Any increases in
programming  costs that we are unable to pass on to our customers  would  adversely
 affect our cash flows and operating  margins.  We have entered into  negotiations  with
our programmers,  through Net Brasil, to convert our programming costs from U.S. dollars
to reais,  readjusted by the Indice Geral de Preços do Mercado,  or IGP-M.  However,  we
cannot assure you that agreements  will be reached with each of our  programmers to
convert our  programming  costs from U.S. dollars to reais.

We operate our cable systems under licenses that are non-exclusive
and subject to conditional renewal.

Our  subsidiaries  provide  cable  television  services  pursuant
 to the terms and  conditions  of licenses  granted and  supervised  by the Agência
 Nacional de  Telecomunicações,  or Anatel,  the Brazilian Telecommunication  Agency
 under the  applicable  legislation.  See  Item 4.  Information  on the  CompanyRegulationCable
  Television   Services.   Consequently,   Anatel,  could  grant  additional  licenses
 to competitors  in the same  geographic  area. As a result,  competing  operators may
build systems in areas in which we hold  licenses.  The  existence  of more than one
cable system  operating in the same  territory is referred to as an  overbuild.  Overbuilds
 could  adversely  affect our growth,  financial  condition  and results of operations by
increasing  competition or creating  competition where none existed previously.  We
experience  overbuild in seven of the 44 cities in which we operate,  including
 overbuilding of 26% and 50% of our network in São Paulo and Belo Horizonte, respectively.

In addition,  our licenses are subject to periodic  renewal,  which
is conditioned  upon our having met certain  requirements  concerning our ownership,
 system build-out,  our technical,  financial and legal ability  to  operate  the  system
 and  others.  Within  its  supervisory  role,  Anatel may seek a judicial decision,
 which would allow it to revoke the license of a cable television  concessionaire that,
due to the lack of  technical,  financial or legal  capacity,  fails to render cable
 television  services on a regular basis. We cannot assure you that our  subsidiaries
 will have the necessary  working capital to maintain the regular  rendering  of cable
 television  services in the event our debt  restructuring  is not  completed  in a
satisfactory  manner.  Also,  we cannot  assure you that in the event of a sale or
 liquidation  of assets,  our subsidiaries  would  maintain the  technical  and
 financial  capacity to render  regular  cable  television services.  The failure to
provide regular cable television  services could, as explained above,  lead to the
revocation  of our  subsidiaries'  licenses  by Anatel.  If we were to lose any of our
 licenses,  such loss could materially adversely affect our business, financial condition
and results of operations.

We are subject to extensive  government  regulations and changes in
regulations  could adversely affect      our operations.

Substantially  all of our cable television  activities are regulated
by Anatel.  Regulations  cover all facets of the  Brazilian  cable  industry and relate
to, among other  topics,  licensing,  local access, commercial advertising and foreign
investment.  For example, Brazilian cable regulations:

- place  limits on the number of  licenses  that may be held by
any  single  cable  operator  and its               affiliates;
- provide that cable television licenses may not be transferred
without approval of Anatel;
- require pay-television operators to carry certain channels or
content;
- limit the provision of our broadband Internet service to
existing cable subscribers; and
- prevent us from acting as an Internet Service Provider, or ISP.

Under Brazilian  currency rules,  our contracts with our current
 subscribers  allow us to increase subscription fees only once every 12 months and in
proportion to inflation.

In addition,  Brazilian law requires that 51% of the voting rights
of companies holding licenses to provide cable  television be held by Brazilian  citizens
or by companies that  themselves  have 51% of their voting rights held by Brazilian
 citizens.  These ownership  restrictions will limit the number of potential buyers of or
 investors in our company and could  therefore  depress the price of the  preferred
 shares and the ADSs.

The  Brazilian  Congress,  from  time  to  time,  considers
 revisions  to one or more  aspects  of regulations  applicable  to us. Any  changes to
the  current  Brazilian  regulatory  framework  could have a material adverse impact on
our results of operations and financial condition.

The Internet access portion of our business is subject to a variety
of risks.

Our  business  plan  depends in part on the  continued  growth of
our  high-speed  Internet  access service,  Vírtua.  Only a limited  number of households
 currently  use the Internet in Brazil.  If Internet usage does not  increase,  declines
or evolves away from the  technologies  in which we are  investing,  our business and
results of operations could suffer an adverse effect.

The Internet  industry faces a number of related  uncertainties.
 These include but are not limited to the following:

- a lack of reliable security technologies;
- privacy concerns;
- Internet traffic congestion;
- evolving industry standards which may make certain services
obsolete;
- inconsistent service quality;
- excessive or unduly restrictive government regulation;
- network infrastructure and risk of system failure, such as
viruses;
- uncertainty regarding intellectual property rights and other
legal issues;
- the failure of the Internet  infrastructure,  such as servers
and modems, to support current levels               of usage growth;
- dependence on partnerships with ISPs;
- claims of liability against ISPs as a result of computer
viruses or security breaches; and
- slower than  expected  development  and  commercialization  of
 performance  improvements,  such as               high-speed modems.

Any of these and other factors could negatively affect our ability
to sell our high-speed  Internet access  service  or  any  other  Internet-based
 services  we may  introduce  in the  future.  Finally,  our broadband  Internet  service
 faces a broad  range of strong  competition,  including  from major  Brazilian telephone
 companies  providing  ADSL  services.  There can be no assurance  that we will be able
to compete effectively in this market.

We may be subject to substantial,  additional taxes on our network,
which would have a material adverse      impact on our business and results of operations.

In 1999, several of the principal Brazilian  municipalities,  which
contain 57% of our subscribers, issued  municipal  decrees  and  laws  imposing  taxes
 for  the  use  of  public  thoroughfares,  including installation and passage of cables.
We have filed lawsuits  challenging the  constitutionality  and legality of this tax in
each of these places, namely, São Paulo, Rio de Janeiro,  Caxias do Sul, Anápolis,
 Campinas, Florianópolis,  Criciúma,  São Carlos,  Indaiatuba,  Brasília and Campo
Grande.  These taxes apply to, among others, cable companies and telecommunication
companies.

Two lawsuits  have already been decided in the lower  courts.  In
Rio de Janeiro,  we were released from any  payment  obligation  in respect of the tax,
 while in São Paulo the lower court ruled that we must pay the tax  retroactively  to the
date the decree was issued.  Both  decisions  are subject to appeal,  and our payment in
the São Paulo case has been stayed pending the outcome of the appeal.

We have not  established  any reserves for the payment of this tax.
The tax varies by  municipality but in aggregate  would require monthly  payments,  on
average,  in an amount equal to R$1.04  (US$0.29) per meter  of  installed  cable.  We
 have   approximately   18,561,000   meters  of  installed  cable  in  such
municipalities  where  this  tax  exists.  If the  courts  rule  that  the  collection
 of  this  tax by the municipalities is valid, the tax would have to be paid
 retroactively.  In addition,  if the  municipalities which  currently  impose  the tax
are  successful  in  implementing  and  collecting  this  tax,  additional municipalities
 may seek to impose it as well.  If our appeals  fail and we are  required to pay this
tax to the various municipalities, our operating results would be materially and
adversely affected.

We are party to  several  other  civil,  tax and labor  lawsuits.
 Unfavorable  decisions  in these lawsuits may require us to pay  significant  pecuniary
 amounts  which may  negatively  impact our business, results  of  operations  and
 financial   condition.   See  Item  4.   Information  on  the   CompanyLegal
Proceedings.

Our success in  medium-term  will depend in part on our ability to
offer new  services and to keep pace      with advances in technology.

We are in the early stage of  assessing  the  introduction  of new
services  such as digital  cable television and near  video-on-demand.  We cannot be
sure, however,  that demand for our new services will be sufficient  to  recover  our
 costs  of  developing  and  marketing  them.   Moreover,   technology  in  the
communications  industry is changing very rapidly,  which means it is possible that the
 technology in which we invest for purposes of  delivering  our new  services  could be
rendered  uncompetitive  by the advent of superior  or  cheaper  technology.  Finally,
 it is  likely  that many of the new  services  we offer in the future will also be
offered by our  competitors.  Therefore,  our failure to introduce these new services as
rapidly,  or to  market  and sell them as  effectively,  as our  competitors  could
 significantly  harm our ability to generate significant revenues from new services.

Risks Related to Brazil

A downturn or volatility  in the  Brazilian  economy or the
 depreciation  of the real could  adversely      affect our revenues, cash flows and
profitability.

All of our  operations  and customers are located in Brazil.
 Therefore,  our results of operations and  financial  condition  depend  upon the level
of  economic  activity  in Brazil,  including  the rate of economic  growth and its
impact on demand for our  services.  The  weakness  in the  Brazilian  economy  has
already  adversely  affected our subscriber and revenue growth.  There can be no
assurance that the economic weakness  will not be prolonged or become more severe.
 Either  occurrence  would lead to  shortfalls in our revenues and  subscriber  levels
and would have an adverse  impact on the price of our preferred  shares and ADSs.

Although  our  revenues  are in reais,  a  substantial
 portion  of our debt and cash obligations are denominated in other  currencies,
 particularly  U.S.  dollars.  These  obligations  include payments  of  principal  and
 interest  under our U.S.  dollar-denominated  debt,  some  payments  under our
programming  contracts and payments for certain  equipment  used in our network.
 Accordingly,  depreciation of the real  against the U.S.  dollar  would  provide us with
a lower  amount of revenue to support our U.S. dollar-denominated  obligations,  which
would in turn lead to decreased  margins and have an adverse  impact on our  earnings
 and  cash  flow  and our  ability  to  service  our  debt.  We are  currently  engaged
 in negotiations  with our programmers  through Net Brasil to convert our programming
costs from U.S. dollars to reais.  However,  we cannot assure you that agreements will be reached with
 each of our programmers to convert our programming costs from U.S.
dollars to reais.

As of March 31, 2003, we had US$219.3 million of debt denominated in
U.S.  dollars.  Also,  because our revenues are  denominated in reais, a  depreciation
 of the real against the U.S.  dollar would make our total revenue and average  revenue
per unit grow more slowly (or even decline) in U.S.  dollar terms than it does in reais.
 This lower  level of U.S.  dollar-denominated  growth  could  have an adverse  impact on
the price of the preferred shares and ADSs.

The real has  historically  suffered  several major  depreciations
 against the U.S. dollar and has fallen  against the U.S.  dollar since it was allowed to
float by the Brazilian  government in 1999.  During 2002,  the real fell in value by
52.3%  against  the U.S.  dollar,  from an  exchange  rate of  R$2.3204  to US$1.00 on
December 31, 2001 to an exchange  rate of R$3.5333 to US$1.00 on December  31, 2002.
 Within this general trend of depreciation,  the Brazilian  currency has shown high
volatility.  Depreciation of the real against the dollar could negatively impact the
market price of the preferred shares and the ADSs.

The Brazilian  government  has  exercised,  and continues to
exercise,  significant  influence over the      Brazilian  economy.  Brazilian  political
and economic  conditions have a direct impact on our business      and the market price
of the preferred shares and the ADSs.

Our  financial  condition  and  results of  operations  are
 substantially  dependent  on  Brazils economy.  The Brazilian  government  frequently
 intervenes in the Brazilian economy and occasionally  makes drastic changes in monetary,
 fiscal,  taxation,  credit, tariff, wage and price controls and other policies to
influence the course of Brazils  economy.  Our business,  financial  condition and
results of operations may be  adversely  affected by such changes in policy as well as
other  factors  outside of our control such as:

- currency fluctuations;
- inflation;
- price instability;
- interest rates;
- tax policy; and
- other political, diplomatic, social and economic developments
in or affecting Brazil.

Inflation could threaten our revenues,  contribute significantly to
economic uncertainty in Brazil, and      cause heightened volatility in the Brazilian
securities markets.

Brazil has, from time to time, experienced extremely high rates of
inflation,  with annual rates of inflation  during the last ten years  reaching as high
as  1,174.7% in 1992,  2,567.3% in 1993 and 869.8% in 1994,  according to the IGP-M,
 published by Fundação Getúlio Vargas.  Since the introduction of the real in July 1994,
 Brazils  inflation rate has been  substantially  lower than in previous periods.  Brazils
rate of  inflation,  according  to  IGP-M,  was  20.1% in 1999,  10.0% in 2000,  10.8% in
2001 and 25.3% in 2002. Inflation itself and governmental  measures to combat inflation
have, in the past, had significant  negative effects  on the  Brazilian  economy.  Since
 1999,  governmental  actions  to  combat  inflation,  including interest rate increases
and  intervention in the foreign  exchange  market through the sale of U.S.  dollars and
government bonds linked to the U.S. dollar,  and public  speculation  about possible
future actions have also  contributed  to  economic  uncertainty  in  Brazil  and to
 heightened  volatility  in  the  Brazilian securities  markets. If Brazil experiences
 substantial  inflation in the future, our costs may increase and our operating and net
margins may decrease,  which may adversely affect our financial  condition and results of
 operations.  Inflationary  pressures may also curtail our ability to access  foreign
 financial  markets and may lead to further  government  intervention in the economy,
 including the  introduction of government policies that may adversely affect the overall
performance of the Brazilian economy.

Brazilian securities markets are volatile and illiquid,  which could
negatively affect the market value      of our ADSs.

The Brazilian securities markets are substantially  smaller, less
liquid and more volatile than the major  securities  markets in the United States,  and
are not as highly regulated or supervised as are those markets.  The relatively  small
market  capitalization  and illiquidity of the Brazilian  equity markets may cause  the
 price of  securities  of  Brazilian  companies,  including  our ADSs and  preferred
 shares,  to fluctuate in both the domestic  and  international  markets.  This may
 substantially  limit your ability to sell  the  preferred  shares  underlying  your
 ADSs at a price  and time at  which  you wish to do so.  The Bovespa,  which is the
principal  Brazilian  stock  exchange and which  accounted for  substantially  all of
Brazils 2002 share trading volume,  had a market  capitalization  of  approximately
 US$124.0 billion as of December  31, 2002 and an average  daily  trading  volume of
 approximately  US$166.3  million for 2002.  In comparison,  the Nasdaq  National Market
had a market  capitalization  of US$2.0 trillion as of December 31, 2002 and an average
daily trading volume of approximately US$28.8 billion for 2002.

The  market for our  preferred  shares and the ADSs has  experienced
 significant  price and volume fluctuations.  In 2000,  2001 and 2002,  the prices of the
 preferred  shares and the ADSs declined 38%, 69% and 97%, respectively.

The perception of risk in emerging  economies may impede our access
to  international  capital  markets      and adversely affect the market price of our
preferred shares and ADSs.

International investors generally consider Brazil to be an emerging
market.  Historically,  adverse developments in the economies of certain  emerging market
 countries have resulted in investors  perception of greater  risk from  investments  in
emerging  markets in general.  Such  perceptions  regarding  emerging market  countries
have  significantly  affected the Brazilian  securities  markets and the  availability
 of credit in the  Brazilian  economy,  from both  domestic  and  international  sources
 of  capital.  Although economic conditions are different in each country,  investors  reactions
to developments in one country can have effects on the securities of issuers in others,
 including  Brazil.  Economic and market  conditions in other  emerging  market
 countries,  especially  those in Latin America and Asia,  have at times resulted in
considerable  outflows of funds and  declines  in the amount of foreign  investment  in
Brazil,  have caused Brazilian  companies to face higher costs of raising funds, and have
adversely  affected the market price of Brazilian  companies  securities.  Such events
 have  included  the  depreciation  of the  Mexican  peso in December 1994,  the Asian
 economic  crisis of 1997 and the Russian  currency  crisis of 1998.  These events were
 exacerbated  in  Brazil  by  the  1999  currency  depreciation  and  related  economic
  developments. Argentinas instability in 2001 and 2002 increased international
financial markets volatility,  resulting in an October 2002  exchange  rate of R$3.9552
to US$1.00,  its lowest  value  against the U.S.  dollar  during 2002.

To the extent that economic  problems in emerging markets countries
or elsewhere spread into Brazil or adversely  affect the Brazilian  securities  markets,
 our business and the price of the preferred shares and ADSs will be adversely affected.

We cannot assure you that, in the event of adverse  developments in
emerging market economies,  the international  capital markets will remain open to
Brazilian  companies or that prevailing interest rates in these markets will be
advantageous to us. Decreased  foreign  investment in Brazil could  negatively  affect
growth and liquidity in the Brazilian economy, which in turn could have a negative impact
on our business.

Restrictions on the movement of capital out of Brazil may hinder
your ability to receive  dividends and      distributions on, and the proceeds of any
sale of, the preferred shares.

The Brazilian government may impose temporary  restrictions on the
conversion of Brazilian currency into foreign  currencies  and on the remittance to
foreign  investors of proceeds from their  investments in Brazil.  Brazilian  law permits
the  government  to impose these  restrictions  whenever  there is a serious imbalance in
Brazils balance of payments or there are reasons to foresee a serious imbalance.

The Brazilian  government imposed remittance  restrictions for
approximately six months in 1989 and early 1990.  If  reintroduced,  these  restrictions
 would hinder or prevent the  conversion  of  dividends, distributions  or the proceeds
from any sale of preferred  shares,  as the case may be, from reais into U.S. dollars and
the remittance of the U.S.  dollars abroad.  We cannot assure you that the Brazilian
 government will not take  similar  measures  in the  future.  In such a case,  the
 custodian,  acting on behalf of the depositary  for the ADSs,  will hold the reais it
cannot convert for the account of the ADR holders who have not been  paid.  The
 depositary  will not invest  the reais and will not be liable  for  interest  on those
amounts.  In  addition,  any reais so held will be subject  to  depreciation  risk.  We
do not expect to pay dividends to our shareholders for the foreseeable future.

You may face difficulties in proceedings with respect to your
interests as a shareholder, because we      are a Brazilian company.

We are a  sociedade  anonima,  or  corporation,  organized  under
the laws of Brazil and all of our directors and officers  reside in Brazil.
 Substantially  all of our assets and those of these other persons are  located in
Brazil.  As a result,  it may not be possible  for  investors  to effect  service of
process upon us or these  other  persons  within  the  United  States or other
 jurisdictions  outside  Brazil or to enforce  against us or these other persons
 judgments  obtained in the United States or other  jurisdictions outside  Brazil.
 Because  judgments  of U.S.  courts  for civil  liabilities  based  upon the U.S.
 federal securities laws may only be enforced in Brazil if certain  requirements  are
met, you may face  difficulties in protecting  your  interests in the case of actions by
our  directors or officers than would  shareholders of a corporation incorporated in a
state or other jurisdiction of the United States.

Risks Related to Our Securities

We are subject to different corporate rules and regulations as a
Brazilian company, and the ADSs have      fewer and less well defined shareholders rights.

Our corporate  affairs are governed by our by-laws and the Brazilian
 corporate  law, which differs from the legal  principles that would apply if we were
 incorporated in a jurisdiction in the United States, such as Delaware or New York, or in
other  jurisdictions  outside  Brazil.  In addition,  your rights or the rights of
holders of the  preferred  shares under the  Brazilian  corporate  law to protect  your
 interests relative  to actions by our board of  directors  may be fewer and less
 well-defined  than under the laws of those other jurisdictions outside Brazil.

The Brazilian  securities markets are not as highly regulated and
supervised as the U.S. securities markets or markets  in other  jurisdictions.  In
 addition,  rules and  policies  against  self-dealing  and regarding  the  preservation
 of minority  shareholder  interests  may be less well  defined and enforced in Brazil
 than in the  United  States,  putting  holders  of the  preferred  shares  and  ADSs at
a  potential disadvantage.  Corporate  disclosures  may be less complete or informative
 than what might be expected of a U.S. public company.

If you exchange the ADSs for preferred shares, you risk losing the
ability to remit foreign currency      abroad and Brazilian tax advantages.

The  Brazilian  custodian  for the  preferred  shares  must  obtain
an  electronic  certificate  of registration  from the Central  Bank to be entitled to
remit U.S.  dollars  abroad for payments of dividends and other  distributions  relating
to the preferred shares or upon the disposition of the preferred  shares. If you decide
to exchange your ADSs for the underlying  preferred  shares,  you will be entitled to
continue to relyfor five business days from the date of the exchangeon the  custodians
 electronic  certificate of registration.  Thereafter,  you  may  not be  able  to
 obtain  and  remit  U.S.  dollars  abroad  upon  the disposition  of, or  distributions
 relating to, the preferred  shares unless you obtain your own electronic certificate  of
 registration  or  register  your  investment  in  the  preferred   shares  under
 specified regulations  that entitle  foreign  investors to buy and sell  securities  on
the Bovespa.  If you obtain an electronic  certificate  of  registration,  you may be
subject to  unfavorable  tax  treatment on gains with respect  to the  preferred  shares
 unless  you are  resident  in a tax  haven  jurisdiction.  See Item 10. Additional
 InformationTaxationMaterial  Brazilian  Taxation  Considerations.  If you  attempt
 to obtain your  own  electronic  certificate  of  registration,  you  may  incur
 expenses  or  suffer  delays  in the application  process,  which could delay your
ability to receive dividends or distributions  relating to the preferred  shares  or the
 return  of your  capital  in a  timely  manner.  We  cannot  assure  you that the
custodians  electronic  certificate of  registration  or any  certificate of foreign
 capital  registration obtained  by you may not be  affected  by  future  legislative
 changes,  or  that  additional  restrictions applicable to you, the disposition of the
underlying  preferred  shares or the  repatriation of the proceeds from  disposition
 will not be  imposed  in the  future.  In  addition,  if you  exchange  your ADSs for
the underlying  preferred shares you may be subject to a Brazilian tax (currently
 imposed at the rate of 0.38%) upon the withdrawal of funds from any Brazilian  account
in connection  with the payment of dividends by Net Serviços or the remittance from
Brazil of the proceeds of the sale of preferred shares.

You might be unable to exercise preemptive rights with respect to
the preferred shares.

You may not be able to exercise the preemptive rights relating to
the preferred  shares,  including preferred  shares  underlying  ADSs,  unless a
registration  statement under the Securities Act is effective with respect to those
rights or an exemption from the  registration  requirements  is available.  We are not
obligated  to file a  registration  statement  with  respect to the shares or other
 securities  relating to these  preemptive  rights  and we  cannot  assure  you that we
will  file any such  registration  statement. Unless we file a registration  statement or
an exemption  from  registration  applies,  you may receive only the net proceeds from
the sale of your  preemptive  rights by the depositary  or, if the  preemptive  rights
cannot be sold, they will be allowed to lapse.

Holders of ADSs may find it difficult to exercise their voting
rights.

You may find it difficult to exercise some of your rights as a
shareholder  if you hold ADSs rather than preferred  shares.  For instance,  if we fail
to timely provide the depositary  with voting  materials, you may not be able to vote by
giving instructions to the depositary on how to vote for you.

The preferred shares and ADSs do not entitle you to a fixed or
minimum dividend.

Holders  of our  preferred  shares  and  ADSs are not  entitled  to
a fixed  or  minimum  dividend. Although  under our current  by-laws we are generally
 obligated to pay our  shareholders  25% of our annual net adjusted income, our
shareholders,  acting at our annual shareholders  assembly, have the discretion to
suspend this  mandatory  distribution  of dividends if the board of directors  advises
them that the payment of the  dividend  is not  compatible  with our  financial
 situation.  Neither  our  by-laws  nor  Brazilian corporate  law  specifies  the
 circumstances  in which a  distribution  would  not be  compatible  with our financial
 situation.  However,  general Brazilian practice is that a company need not pay
dividends if such payment  would  threaten the  existence of the company as a going
concern or would harm its normal course of operations.  We do not expect to pay dividends
to our shareholders for the foreseeable future.

The sale by us or our  shareholders  of a substantial  number of
preferred or common shares,  including      the potential  issuance of additional
 preferred or common shares in connection  with the  negotiations      regarding
 restructuring  of our debt facilities and  instruments,  could decrease the market
prices of      the preferred shares and the ADSs, and could significantly dilute our
shareholders.

Sales by us or our  shareholders of a substantial  number of
preferred or common shares,  including the  potential  issuance of  additional  preferred
 or common  shares in  connection  with the  negotiations regarding  restructuring of our
debt facilities and instruments,  or the belief that any of these may occur, could
 decrease the market  prices of the  preferred  shares and the ADSs.  If we or our major
 shareholders sell large blocks of preferred  shares or common shares,  the market prices
of the preferred  shares and the ADSs could be adversely affected.

We may explore  raising  additional  capital by selling  shares,
 convertible  securities  or other equity-linked  securities.  The  timing,  terms,  size
and  pricing of any such  transaction  will depend on investor interest and market
 conditions.  Any issuance of equity or  equity-related  securities that we may sell
would dilute our  shareholders,  possibly  substantially to the extent that pre-emptive
 rights are not made available to shareholders or exercised by them.

The liquidity of the trading market for ADSs in the United States is
limited; this could lead to price      volatility and a lack of buyers for the ADSs.

As of March 31, 2003, there were 737,792 ADSs  outstanding,  and
their average daily trading volume on the Nasdaq  National  Market  during  2002 was 1.8
billion  shares per day and  US$28.8  billion per day. Securities  that trade at such
 volumes and that have a similar  float  typically  have much lower levels of liquidity
 than other  securities  traded in the United  States.  This means there tend to be fewer
 willing buyers and sellers and fewer trades for the ADSs than for other equity
 securities;  as a result, the prices quoted for the ADSs may be less  reliable and more
volatile  than those for other  securities  traded in the United States.

Risks relating to Net Serviços entry into the Novo Mercado

Our entry into the Novo Mercado could adversely affect holders of
preferred shares by eliminating      their dividend preference and negatively impact the
trading market for the preferred shares.

In the Protocol of  Recapitalization,  entered into during the
second  quarter of 2002 among us and our major  shareholders,  our major  shareholders
 have  undertaken  to cause Net Serviços to enter the Novo Mercado of the Brazilian
 stock  exchange,  subject to a number of specified  conditions.  One  prerequisite for
entry into the Novo Mercado is that Net Serviços  have only one class of capital  stock,
 namely  common shares.  Accordingly,  if we decide to  proceed  with our plans to enter
 the Novo  Mercado,  all  preferred shares  outstanding  at the time  will be  converted
 into  common  shares  through a  mandatory  conversion process.  As a result,  holders
of preferred  shares will lose their  preferred  dividend  and  distribution rights.
 This  conversion  could also cause Globopar,  our indirect  controlling  shareholder,
 to no longer hold the majority of our voting  shares.  In addition,  the  liquidity of
the trading  market and the market price for the  preferred  shares  and the ADSs may be
 negatively  impacted  as a result of the  process  of entering the Novo Mercado.

Holders of preferred shares may be entitled to withdraw from the
capital stock of Net Serviços and to      seek cash reimbursement for the appraised value
of their preferred shares.

If we elect to enter  the Novo  Mercado,  we will do so  through  a
 mandatory  conversion  process whereby all outstanding  preferred shares will be
automatically  converted into common shares,  unless their holders  exercise  withdrawal
 rights.  In connection  with this mandatory  conversion  process,  holders of preferred
 shares  will be entitled to withdraw  from the  capital  stock of Net  Serviços  and to
seek cash reimbursement  for  their  preferred  shares  at  book  value  or  at  a
 specified  appraised  value.  If a substantial  number of  preferred  shareholders
 elect to seek cash  reimbursement  from us (and we elect to proceed  to enter the Novo
 Mercado  nonetheless),  we may be subject to  significant  payment  obligations, which
could adversely affect our liquidity position.

ITEM 4.      INFORMATION ON THE COMPANY

Business Overview

We are the largest cable  television  operator in Brazil,  based
upon the number of subscribers and homes passed.  As of December 31, 2002,  we had 1.3
million  subscribers  in 44 cities in Brazil,  including São Paulo and Rio de  Janeiro,
 the two  largest  Brazilian  cities.  We are also the  leading  provider  of high-speed
 cable  modem  Internet  access  through  our  Vírtua  service,  which had  approximately
 55,700 subscribers  as of December 31, 2002.  Our  advanced,  broadband  network of
coaxial and  fiber-optic  cable covers  over  35,000  kilometers  and passes  more than
6.5 million  homes.  In 2002,  we had net  operating revenues of US$403.5 million.

Since 1998, we have focused on building our cable infrastructure,
 primarily in the most prosperous and populous regions of Brazil.  Our network currently
 operates in major cities located  throughout Brazil, including: São Paulo, Rio de
Janeiro,  Brasilia, Belo Horizonte,  Porto Alegre and Curitiba, six of Brazils largest
cities.  We  substantially  completed the build-out of our network in 1998. Our
 acquisitions of Net Sul,  Unicabo and Vicom in 2000 were  designed to add scope and
scale to our network and new services to our customers.  In 2001,  we focused on
upgrading  the quality of our network to increase  bandwidth and install two-way
 communication  capability.  As of December 31, 2002,  approximately  35% of our network
had two-way communication capability.

Currently,  our principal  services  include basic cable television
under the NET brand name with five separate programming packages,  high-speed Internet
access under the Vírtua brand name,  pay-per-view programs and corporate data
transmission services to corporate customers through our subsidiary Vicom.

By expanding our networks  capacity and upgrading its capabilities,
 we expect to have the ability to offer  services that are  value-added  and
 complementary  to our  traditional  pay-television  packages. During 2004, we plan to
begin offering  digital cable  services on a selected  basis.  By providing  digital
cable services, we will be able to offer subscribers premium programming  packages,
 additional channels and more  value-added  programming  options and services,  such as
audio channels  containing a variety of music packages,  near  video-on-demand  and
interactive  services.  As we introduce  digital cable, we will target our network
upgrades on neighborhoods  that serve a larger  proportion of high-income  homes. By
rolling out digital  cable in this manner,  we can focus our capital  expenditures  on
areas where we expect to optimize returns.

Strategy

Our strategy is to maintain our position as Brazils  leading
provider of  pay-television  services and take  advantage of  anticipated  demand for
advanced  services in Brazil.  In doing so, we will maintain our focus on  improving  our
cash  flows and  operating  margins.  In order to  achieve  our  goals,  we are
undertaking the following business and financial initiatives.

Business Initiatives

- Improve customer satisfaction by providing reliable,  high
quality services and responsive customer               interaction.  We view our business
as a service  business and therefore have been working hard               to improve
customer  satisfaction,  both with our existing cable and broadband services and in
              our  responsiveness  to customer  inquiries.  Before the  outsourcing of
our customer  service               centers  in July  2002,  only  approximately  75% of
the calls  made to our  customer  service               centers  were  answered.
 Currently,  approximately  92% of the  calls  made  to our  customer
              service  centers are answered.  Our goal is to increase this percentage to
 approximately  95%               by the end of 2003.
- Pursue growth by increasing  revenue per  subscriber  and
 penetration  along our existing  network               through  targeted  marketing.  We
have begun to focus our  marketing  efforts on our  existing               customer base
and potential  customers  already  passed by our network.  Through this targeted
              marketing  approach,  we hope  to  encourage  existing  customers  to
 migrate  to  higher-end               programming packages and purchase value-added
 services,  and to increase penetration of Class               A and B homes (the top two
 Brazilian  socio-economic  tiers  established  by IBGE)  currently               passed
by our network.  Approximately  3.1 million,  or 47% of our homes  passed,  are Class A
              and B households.  Approximately  1.6 million,  or 61%, of these homes
passed are on a portion               of our network having the bandwidth and two-way
capacity necessary for digital cable.
- Continue the growth of Vírtua,  our high-speed  Internet
 access  service.  In order to achieve our               growth  targets,  we will  need
to  enhance  our  relationship  with  Vírtua  subscribers  and
              differentiate  service and content.  On July 31, 2002,  we launched the  Ambiente
 Vírtua, a               service that is  exclusive to Vírtua  subscribers,  which
 allows such  subscribers  to browse               multimedia sites.  This service
entitles the user to gain access to an interactive  community,               giving  them
 access to content  and  services  segmented  by areas of  interest  such as: (i)
              entertainment,   (ii)  games,  (iii)  interactivity,  (iv)  tourism,  (v)
 services  and  (vi)               shopping.  Moreover,  the  environment  will  optimize
 subscriber  access,  since the content               providers will be directly linked
to our  operation  center.  The following  portals               and websites
 are part of the  Ambiente  Vírtua:  SuperIG,  Terra,  Yahoo,  All TV,  Fulano,
              InetChat,  X-Virtual,  Câmera Aberta,  Velop,  WHG,  Climatempo,  Domínio  Fácil,
 Justo Aqui,               Tucows,  E-Store  Symantec and Futsim.  We also  announced a
new  business  model for Vírtuas               relationship  with ISPs.  We led
a  consortium  of broadband  ISPs that  negotiated a               significant  reduction
in the cost of leasing  Embratels link. As a result,  costs for Vírtua
              subscribers  fell  substantially,  due to lower  monthly fees paid to ISPs.
 In July 2002,  we               began receiving monthly fees from ISPs based on the
number of Vírtua subscribers  connected to               their Internet access services.
 Since then,  broadband revenues have been positively impacted               by this
development.
- Introduce  digital cable.  We plan to begin to introduce
 digital cable on a selective basis during               2004 based on the current and
potential  performance of our networks  2,836 nodes.  This will               allow us
to increase the number of pay-per-view  channels and offer new services such as audio
              channels  containing a variety of music  packages,  near  video-on-demand
 and an  interactive               programming  guide.  This strategy is designed to
increase  revenues from current  subscribers               and  make  us  more
 competitive  against  DBS  providers.  Currently,  more  than  75% of our
              subscribers  belong to Class A and B  households.  In addition,  our
 subscriber  base has the               following  characteristics:  (i) more than 65%
have at least two  televisions;  (ii) more than               69% have at least one
 computer;  and (iii)  approximately  57% are Internet  users.  With the
              offering of these new services,  we have the  potential to capitalize on
the amount  available               for spending by our subscribers for entertainment and
leisure.

Financial Initiatives

- Improve our capital structure and liquidity position.  We are
pursuing several measures,  including               a proposed debt restructuring,
 designed to improve our capital structure and better align our               operating
costs,  financial expenses and capital investment levels with our anticipated future
              revenues and cash flows.  These measures  include,  among other things,
 seeking to (i) reduce               our near-term  debt service  obligations  to levels
that can be serviced with  operating  cash               flows,  (ii) limit the impact of
future  exchange  rate  volatility by converting a portion of
              dollar-denominated  debt to  real-denominated  debt,  (iii) amend certain
 financial and other               covenants in our debt  facilities  and  instruments,
 (iv)  increase our equity  capital,  (v)               optimize our capital
 expenditures  and (vi) cut our operating costs. Our plans to improve our
              capital  structure  and  liquidity  position are  described  in greater
 detail under Item 5.               Operating and Financial Review and ProspectsLiquidity
and Capital Resources.
- Optimize  capital  expenditures by making targeted
 investments.  Our capital spending plan targets               our capital  expenditures
in geographic  areas and on services where we believe we can achieve               higher
returns on our investments.  Pursuant to this plan,  whereby we made an analysis of our
              network on a node-by-node  basis, we will target our capital spending on
selected  portions of               our existing network,  principally in wealthy, urban
areas, where we anticipate greater demand               for  broadband,  digital cable
and advanced  services.  We believe such  targeted  investments               will allow
us to reduce our capital  expenditures  while providing  sufficient  investments to
              upgrade our network to enable us to offer  broadband,  digital cable and
advanced  services to               our targeted market.
- Continue to focus on cost-cutting  initiatives.  We have
announced  significant  measures to reduce               operating  expenses  since the
middle of 2001.  This  included the  renegotiating  of the rent               expenses
 of our  headquarters  and  dismissing  approximately  50% of our work  force.  These
              layoffs  were  mainly as a result of the  outsourcing  of our  customer
 service  centers  and               information  technology  systems.  For  2003,  we
 plan  to  continue  to  examine  additional               cost-cutting initiatives.
- Change in listing  arrangements  with  Bovespa.  Since June
2002,  our shares  have been  listed in               Bovespas  Special  Corporate
 Governance Level 2. We believe that trading our shares in these               listing
 segments  brings  several  benefits;  it: (i) promotes  improved  supervision  of our
              business by  investors  and (ii)  enhances  the rights of minority
 shareholders  in corporate               governance.

History and Development of the Company

Our  company  was  founded  in 1994  by Mr.  Antonio  Dias  Leite
 under  the  name  of  Multicanal Participações  S.A.,  or  Multicanal.  Multicanal
 began  operations  by acquiring  several  existing  cable operators  in  northern  and
 central  Brazil,  a pattern  it  continued  through  1996.  In  October  1996,
Multicanal  listed its ADSs on the Nasdaq  National  Market.  In late 1997,  Mr.  Leite
and our other  major shareholders  at that time,  sold their  interests in Multicanal to
Globopar.  Following  that  transaction, the principal  shareholders  of Multicanal were
Globopar and União Comércio e  Participações,  the latter of which was at that time a
wholly owned subsidiary of Banco Bradesco S.A..

In September 1998,  Multicanal  acquired  certain cable assets and
related  liabilities of Globopar and changed its name to Globo Cabo S.A..  The assets we
acquired  from  Globopar  included a 50% interest in Unicabo and controlling  interests
in three  significant  metropolitan-area  cable operators:  Net São Paulo Ltda.,  Net Rio
S.A.  and Net  Brasilia  Ltda.  In  2000,  we  continued  our  strategy  of  growth
 through acquisitions  by  purchasing  Net  Sul,  the  nations  second  largest  cable
 operator.  During  2000,  we experienced  significant  growth,  both from the
acquisition of Net Sul and on our existing subscriber base. We did not  experience
 growth in 2001 due  mainly to the  slowing  economy in Brazil,  or in 2002 due to the
slowing  economy in Brazil,  an increase in hook-up  fees that took effect in June 2002
and as result of the implementation  of a more selective  screening  process,  which
places  increased  emphasis on the potential subscribers  credit.  In May 2002, we
changed our name from Globo Cabo S.A. to Net Serviços de  Comunicação S.A..

Our Services

We offer our customers  traditional cable television  services and
programming,  as well as new and advanced high bandwidth  services such as high-speed
 Internet  access and corporate data  transmission.  We plan to  continue  to enhance
 and upgrade  the  services  we offer by adding,  on a  selective  basis,  new
programming  and further  advanced  products and services as they become  available.
 During 2004, we expect to  begin  our  roll-out  of  digital  cable  television
 services  by  offering  them to  certain  selected customers.  As  of  December  31,
 2002,  we  had  approximately  1.3  million  pay-television  subscribers, approximately
 55,700  broadband  Internet  subscribers  through  Vírtua  and over 4,000  corporate
 network stations through Vicom.

Most  of  our  pay-television  subscribers  are in  the  top  two
 Brazilian  socio-economic  tiers established  by the IBGE, a Brazilian  federal
 institute  that compiles  demographic  and economic data. We refer  to  households  in
these  tiers  as Class A and  Class B  households.  Class A and B  households  are
especially  attractive  to us, as we believe  they will  demonstrate  significant  demand
 over time for our premium  pay-television  and Internet  services and have  relatively
high  creditworthiness.  According to a survey published by the Instituto  Brasileiro de
Opinião Pública e Estatística,  or IBOPE, a market research institute,  Class  A and
 Class B  households  represented  at  year-end  2002  approximately  31% and  46%,
respectively, of our pay-television subscriber base.

Following our launch of Vírtua in April 2000, our high-speed
 Internet access  subscriber base grew considerably, from approximately 1,700 to
approximately 55,700 at December 31, 2002.

Vicom has been  developing  its  corporate  data  transmission
 customer  base over the past  three years. Its current corporate  customers  include:
 Carrefour;  Cargill;  Nossa Caixa;  Castrol;  Cemig; Duke Energy; McDonalds; Visa; and
Embratel.  As of December 31, 2002, Vicom had over 100 corporate clients.

Pay-Television

Currently,  most of our operations  relate to providing
 pay-television  services,  including cable television and  pay-per-view  services.  We
offer our  pay-television  services through the NET brand name using our cable
 television  network  and,  to a lesser  extent,  through  MMDS.  We operate in 44 cities
in Brazil,  including some of Brazils most populated  metropolitan  areas,  such as São
Paulo, Rio de Janeiro, Belo Horizonte,  Porto Alegre, Recife, Brasília,  Goiìnia,
 Curitiba and Florianópolis.  In order to attract and retain  pay-television
 subscribers,  we are committed to  continuing  to offer an appealing  variety of quality
programming, coupled with a range of programming packages.

Our Programming Packages

We offer our pay-television  service in three major programming
packages that provide our customers with a  variety  of  price  points  and  channel
 selection.  We also  have  subscribers  to two  additional packages,  one  that  is not
 accepting  new  subscribers,  and one  that  is  offered  to our  cable  modem
subscribers.  Historically,  our subscribers  have tended to choose our added channel
 packages that offer a greater  number of total  channels  over our more basic  packages.
 The  following  table  shows  subscriber figures and other information for each of our
various channel packages as of December 31, 2002.

Programming Packages as of December 31, 2002

|Package     | Monthly Subscription Fee | No. Channels | No. of ActiveSubscribers(1) | % of TotalSubscribers
|----------- | ------------------------ | ------------ | --------------------------- | ---------------------
|            | R$                       | US$          |                             | (in thousands)       
|Advanced    | 87.90                    | 24.88        | 63                          | 659.1                
|Plus(2)     | 87.89                    | 24.87        | 54                          | 184.9                
|Master      | 64.90                    | 18.37        | 49                          | 306.2                
|Standard    | 42.90                    | 12.14        | 32                          | 133.3                
|Vírtua Cabo | 16.90                    | 4.78         | 27                          | 39.8                 

|(1) | Active subscribers equal connected
subscribers less subscribers whose service has been blocked due to late payment.
|--- | -------------------------------------------------------------------------------------------------------------------
|(2) | Has not been available for new subscriptions since 1996.                                                           

Our programming packages include the programming we purchase,
 together with other channels that we are required to provide.  These required  channels
 include free  broadcast  television  stations  generally available in the service area
in which a  subscriber  resides and six  government  public  service  channels that  are
 available  nationwide.  Outlined  below  are the  current  programming  packages  we
offer to our subscribers.  In each package the monthly  subscription  price includes
 rental of the set-top box needed to receive our cable signal.

Advanced  package.  Our  Advanced  package  is our  premium
 package  focused  on  Class  A and B households,  who  generally  have  a  higher
 willingness  than  other  socio-economic  groups  to  purchase value-added  services
such as pay-per-view  television and broadband  Internet access. It is our strategy to
encourage subscribers to our other packages to migrate to the Advanced package.

Plus package.  Our Plus package has not been available for new
 subscriptions  since 1996. We are encouraging  Plus  subscribers  to switch to the
Advanced  package,  which  includes  more  channels and has substantially  the same
monthly  subscription  fee as that for the Plus  package.  We are  encouraging  this
migration  because we are in the process of replacing  the Plus  packages  set-top boxes
with the Advantage packages newer set-top boxes, which allow us to send a coded signal
to the subscribers.

Master  package.  The Master package is our mid-range product that
is marketed to, and has proved particularly popular among, Class B households.

Standard  package.  Our  Standard  package  offers  subscribers  a
basic  cable  service  that is targeted to Class C households.  In an effort to eliminate
 potential bad debt risks,  we offer our Standard package only through prepaid
subscriptions.

Vírtua Cabo  package.  In accordance  with Brazilian  regulations,
 a household must subscribe to our pay-television  service in order to also use our Vírtua
high-speed  Internet access service.  We created a  special  pay-television  option,  the
 Vírtua  Cabo  package,  for  customers  that  have not  previously subscribed  to any of
our  pay-television  packages,  but that now wish to subscribe in order to gain access to
Vírtua.  The Vírtua  package is priced at less than half the price of our  Standard
 package  and carries only 27 broadcast television channels.

While our  number of  channel  offerings  for each  programming
 package  varies by  location,  the following  table generally  describes our channel
line-up for each  programming  package.  Each  programming package  described in this
table also includes the channels listed in the programming  package(s)  preceding it.

|STANDARD PACKAGE      
|----------------------
|                      
|Programming Service   
|                      
|S-TV                  
|Eventual 1            
|Eventual 2            
|CNT                   
|Canal Nacional Brasil 
|TV Justiça            
|TV Senado             
|Cìmara Federal        
|Assembléia Legislativa
|Canal Comunitário     
|Canal Universitário   
|Rede Mulher           
|Cultura               
|Globo                 
|Record                
|Rede TV!              
|CNT/Gazeta            
|Bandeirantes          
|SBT                   
|CBI                   
|Canal 21              
|MTV                   
|Rede Vida             
|Rede Gospel           
|Shoptime              
|Futura                
|NET TV                
|Canal Local           
|Fox Kids              
|USA                   
|Multishow             
|Globo News            
|People and Arts       

|MASTER PACKAGE            
|--------------------------
|                          
|Programming Service       
|                          
|Cartoon Network           
|Deutsche Welle            
|SPORTV                    
|CNN International         
|TNT                       
|TV Espanha                
|TV 5                      
|Sony Entertainment Network
|The Warner Channel        
|Fox                       
|GNT                       
|RAI                       
|AXN                       
|National Geographic       
|Canal Rural               
|Nickelodeon               
|Discovery Channel         

|PLUS PACKAGE       
|-------------------
|                   
|Programming Service
|                   
|Bloomberg          
|BBC                
|ESPN International 
|Telecine Premium   
|CNN Español        

|ADVANCED PACKAGE   
|-------------------
|                   
|Programming Service
|                   
|Animal Planet      
|Discovery Kids     
|Telecine Action    
|Telecine Emotion   
|Telecine Happy     
|Telecine Classic   
|Canal Brasil       
|MGM Gold           
|ESPN Brasil        

We  continuously  monitor and update our packages  based on
 availability  of programs and customer demand.

Moreover,  we offer three  special  channels,  including TV Korea,
 Playboy TV and Sexy Hot, for an additional monthly subscription price.

Pay-Per-View Alternatives

In addition to the programming  packages described above, we also
offer pay-per-view  alternatives. These include a variety of sporting events,  musical
 concerts by national and  international  artists,  and movies.  The sporting events
include  exclusive  broadcast rights to the Brazilian  Soccer  Championship and certain
popular State Soccer Championships, such as the Rio de Janeiro Soccer Championship.

Our revenues  from  pay-per-view  events are  seasonal,  based
 largely on the soccer  season,  and accounted  for  approximately  2.8% of our total
 gross  revenues  for  2002.  We expect  our  revenue  from pay-per-view  to grow
 steadily  in the  future,  particularly  as we start to offer  interactive  services,
allowing subscribers to order pay-per-view selections with their remote control units.

Digital Cable Services

During 2004, we expect to begin offering our subscribers  digital
cable services,  which will carry many more  channels  than our  current  programming
 packages.  In  addition,  digital  cable will allow for high-quality  broadcasting  and
will enable us to offer near  video-on-demand,  a service that offers movies at
pre-determined times.

We intend to roll-out  digital cable  services  gradually on a
 node-by-node  basis. A typical node serves  approximately  2,300 houses,  and our
network has 2,836 nodes. We have identified  individual  nodes along our  network  that
have a high  proportion  of Class A and B  households  expressing  an  interest  in
digital  cable  services.  We  will  gradually  upgrade  these  nodes  to  allow  both
 digital  and  analog transmission.  We plan to have  upgraded  approximately  200  nodes
 by the end of 2004,  approximately  410 nodes by the end of 2005 and approximately 620
nodes by the end of 2006.

We plan to offer basic digital set-top boxes to subscribers and sell
more advanced  digital set-top boxes in retail  stores.  We will  collect  old analog
 set-top  boxes and reuse  them for new and  existing analog  subscribers.  We believe
that this  approach  will allow us to target our capital  expenditures  and other upfront
costs to households that have the greatest likelihood to subscribe to digital service.

Hook-up and Upgrade Fees

In  addition  to our  monthly  subscription  fees,  we charge  our
 customers  one-time  hook-up or installation  fees of R$160  (US$45.28)  as of December
31, 2002. We also usually  charge a service  upgrade fee of up to R$60  (US$16.98) to
customers  requesting an upgrade to a more  advanced  programming  package. We have
 occasionally  offered  discounts under special  marketing  promotions.  We expect
revenues  derived from  hook-up  fees paid by new  subscribers  to decrease  and
 revenues  from upgrade fees to increase as a percentage  of total  revenues,  as a
result  of the  completion  of our  cable  network  build-out  and our introduction of a
wider variety of programming alternatives.

Programming Sources

We purchase all of our programming from our affiliate Net Brasil,
 60% of which is indirectly owned by  Globopar  and  40% of  which  is  owned  by us.
 Net  Brasil  acts  as our  intermediary  in  purchasing programming  from both
 Brazilian  and  international  sources.  Net Brasil also  provides  this service for
other  pay-television  companies,  principally  Sky Brasil,  a DBS provider that Globopar
owns a significant interest in, along with cable  television  providers that operate
outside of our licensed  territories.  Our contract with Net Brasil also grants us the
right to use the NET brand name.

Much of the  programming  we purchase  through Net Brasil is
 produced by our  affiliate  Globosat, which is wholly owned by Globopar.  Globosat is a
producer of mostly Portuguese-language  programming,  such as SportTV,  GNT,  Globo
 News,  Shoptime,  Multishow,  Futura and Canal  Brasil.  Globosat  also  purchases
programming from third parties.

We have a  programming  agreement  with Net Brasil  pursuant  to
which it obtains on our behalf the rights to all programming that our  pay-television
 operators provide to their subscribers.  Typically,  Net Brasil  negotiates  programming
 contracts with content  providers on behalf of us, Sky Brasil,  and certain other
pay-television  providers,  and we and Sky Brasil are consulted with regard to those
negotiations.  At the conclusion of the  negotiations,  we have the option,  independent
of any decision of Sky Brasil and Net Brasil,  to accept or not accept  programming from
that source.  We believe that by aggregating  subscribers across  several  different
 pay-television  platforms,  Net  Brasil is able to  create a better  negotiating
position than we could on our own and to obtain for us better terms and prices for our
programming content.

Pursuant to our  agreement  and ongoing  arrangements,  we pay to
Net Brasil a fee comprised of two parts:

- a fee equal to the amount that programmers charge Net Brasil
for programming provided to us; and
- a monthly variable fee to cover Net Brasils overhead equal to
R$0.47 per subscriber per month.

Our arrangements  with Net Brasil and our  shareholders  agreement,
 that was entered into on July 12, 2002,  specify,  among other  things,  that:  (i) in
its dealings with us, Net Brasil is not intended to operate at a profit; and (ii) new
programming  contracts and renewals or amendments to existing  programming contracts,
 pursuant to which we will be receiving programming,  must be approved by our board of
directors, including the affirmative vote of a director appointed by either Bndespar or
Bradespar  Participações  S.A., or Bradespar.

Pursuant to our  programming  agreement,  we paid Net Brasil,
 US$146.8  million in 2000,  US$152.9 million in 2001 and US$131.0  million in 2002.  We
also believe  that,  if we grow,  Net Brasil will be able to negotiate better contract
terms on our behalf and will pass those savings on to us.

Although  the fees we pay to Net Brasil are  in reais,
 during 2002,  our  programming costs were  substantially  denominated in U.S.  dollars.
 As a result,  during 2002, our  programming  costs increased as a percentage of revenue
due to a decline in the value of the real in dollars.

High-speed Internet Access

In April 2000,  we launched  Vírtua,  the  largest  high-speed
 cable  Internet  access  service in Brazil.  Vírtua  partners  with 13 ISPs to provide
 internet  access  primarily  to  residential  customers. Vírtua is the third largest
 broadband  provider in Brazil. As of December 31, 2002, Vírtua was available in the
 following  ten  Brazilian  cities:  São  Paulo,  Rio de  Janeiro,  Brasília,  Belo
 Horizonte,  Santos, Sorocaba,  Curitiba,  Porto Alegre,  Campinas,  and Florianópolis,
 reaching approximately 1.6 million homes and  serving  approximately  55,700
 residential  subscribers.  In  accordance  with  regulations,  we offer Internet access
services only to subscribers of our pay-television services.

Market  Opportunity.  We believe the introduction of bi-directional,
 high-speed  Internet services to Brazil presents a business opportunity due to several
factors:

- more than  69% of our subscriber households also include a
personal computer;
- more than  57% of our subscribers also have Internet access; and
- the existing capability of our cable network to provide
high-speed cable Internet services.

According to IBOPE, in 2002, 58.6% of  pay-television  households in
Brazil had personal  computers and 45.3% had  Internet  access.  There is  currently  a
low  penetration  rate for  broadband  services  in Brazil,  principally if compared to
demand for broadband  services  recorded recently in countries with more developed
 economies  than  Brazils.  According to the Pay-TV  Survey No. 73, there were 137,568
 cable and MMDS broadband  services users in December 2002.  This  represents a
penetration  rate of only 4.0% over the base  of  pay-television   subscribers  served
 by  these  two  technologies.   According  to  International Telecommunication  Union,
 or ITC, the penetration  rate per inhabitant was 0.4% in Brazil,  a very low rate when
compared to penetration of 20.7% in Korea, 14.6% in Hong Kong and 6.2% in the United
States.

Service  Packages.  As with our  pay-television  offerings,  we try
to tailor our  Internet  access offerings to suit customer demand and currently offer
four different  connection  speeds:  128, 256, 384 and 512 Kbps.  The  following  tables
set forth the  up-front  installation  fees that we charged as of December 31,  2002  for
the  Vírtua  service,  as well as the  monthly  subscription  rates  for  customers
 based on connection speed:

|Type of Fee                | Up-front Payment
|-------------------------- | ----------------
|                           | R$              
|Standard installation(1) | 70.00           
|Complete installation(1) | 120.00          
|Cable modem purchase(2)    | 599.00          

|(1) | The complete installation includes the subscribers purchase of an
Ethernet card, priced at R$50, that must be installed in the PC in order to permit Internet access. This is not
included in the standard installation.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | We currently offer three choices for the purchase of the cable modem: in three installments
of R$206.50; six installments of R$106.70; or twelve installments of R$63.50.                                                    

|Speed    | Monthly subscription
|-------- | --------------------
|         | R$                  
|128 Kbps | 49.90               
|256 Kbps | 73.90               
|384 Kbps | 105.00              
|512 Kbps | 140.00              

Partners.  We have  sought to partner  with a wider  variety  of
ISPs and  content  providers,  and currently have  relationships  with over 13 ISPs.
 These  relationships  are critical to growing our service as  regulations  do not
 permit us to act as our own ISP.  Since the second  half of 2002,  we have begun to
receive monthly fees from these ISPs based on the number of subscribers  through Vírtua
to their  respective Internet  services.  We are  adopting a new business  model in
 conjunction  with the ISPs,  under which the ISPs will now work mainly as content
 providers.  This change will result in a decrease in the monthly  fees paid by our
 subscribers to the ISPs. In addition,  our subscribers  will be entitled to exclusive
 products and services  such as several  email  accounts,  virtual disk space and dial-up
 access to the user when the subscriber does not have access to a computer connected to Vírtua.

Corporate Data Transmission Services

We offer data  transmission  services for corporate  customers
 through our  subsidiary,  Vicom. We believe that Vicom is an attractive solution for
companies requiring reliable,  high-speed  connections that integrate voice, data, video
and Internet communications.  Vicom offers data transmission services via:

- satellite;
- hybrid fiber-coax, or HFC, network; and
- radio circuits.

Vicom was founded in 1985 to establish a nationwide  data network
using  satellite  technology.  We purchased Vicom in July 2000 in order to take advantage
of synergies  between Vicoms  satellite network and our own terrestrial  network.  Vicoms
integrated  satellite and terrestrial system allows clients to set up networks  that
fully serve  Brazils  major  cities  while also  reaching  more remote areas of the
country. Vicoms customers include: Carrefour;  Cargill; Nossa Caixa; Castrol; Cemig;
Duke Energy; McDonalds;  Visa; and Embratel.

Operations

Subscriber and Operational Data

In building our network and  marketing  our  services,  we have
focused  primarily on Class A and B households,  which have the largest  disposable
 income  available  to purchase our  services,  particularly value-added  services.  The
table below provides certain  information about our network and subscribers both overall
and by class.

|                            | Subscriber and Operational Data as of December 31, 2002
|--------------------------- | -------------------------------------------------------
|                            | Total                                                  
|Active subscribers (1)      | 1,323,264                                              
|Kilometers of cable network | 35,187                                                 
|Total homes passed          | 6,512,936                                              
|Average cable penetration   | 20.3%                                                  

|(1) | Includes approximately 22,000 MMDS subscribers.
|--- | -----------------------------------------------

Regional Data

The table on the next page sets forth,  as of December 31, 2002,
 the cable  television  systems in which we hold an ownership  interest,  including  our
economic  interest  (based  generally on the ownership interest in outstanding capital
stock of an owned entitys  operations,  often called an equity interest), and certain
other  selected  information.  In  connection  with our  acquisitions  of Net Sul and
Unicabo we reorganized our operations, which we now manage as three regional clusters:

- Region 1, consisting of São Paulo State and Campo Grande;
- Region 2, consisting of Rio de Janeiro, Belo Horizonte, Recife,
Brasília, Goiìnia and Anápolis; and
- Region 3, consisting of southern Brazil.

|                | NET SERVIÇOS
CABLE TELEVISION SYSTEMS
|--------------- | --------------------------------------
|Cable System    | Homes Passed(In thousands)            
|                | Dec 31                                
|                | 2002                                  
|São Paulo       | 2,275.7                               
|Bauru           | 66.9                                  
|Campinas(1)     | 185.0                                 
|Campo Grande    | 91.0                                  
|Franca(1)       | 39.1                                  
|Indaiatuba(1)   | 15.6                                  
|Jundiaí(1)      | 68.2                                  
|Piracicaba      | 68.7                                  
|Ribeirão Preto  | 126.2                                 
|S.J. Rio Preto  | 75.1                                  
|Santos          | 163.2                                 
|São Carlos(1)   | 44.7                                  
|Sorocaba        | 75.1                                  
|Region 1        | 3,294.6                               
|Rio de Janeiro  | 1,115.4                               
|Anápolis        | 36.9                                  
|Belo Horizonte  | 496.8                                 
|Brasília        | 227.6                                 
|Goiìnia         | 215.5                                 
|Recife(2)       | 0.0                                   
|Region 2        | 2,092.2                               
|Arapongas       | 8.2                                   
|Bagé            | 10.5                                  
|Bento Gonçalves | 7.0                                   
|Blumenau        | 38.2                                  
|Caxias          | 41.0                                  
|Chapecó         | 10.7                                  
|Criciúma        | 13.8                                  
|Cruz Alta       | 7.9                                   
|Curitiba        | 251.3                                 
|Erechim         | 6.5                                   
|Farroupilha     | 4.9                                   
|Florianópolis   | 76.2                                  
|Joinville       | 28.2                                  
|Lajeado         | 6.0                                   
|Litoral         | 17.7                                  
|Londrina        | 71.0                                  
|Maringá         | 44.0                                  
|Novo Hamburgo   | 22.9                                  
|Passo Fundo     | 19.2                                  
|Pelotas         | 56.4                                  
|Porto Alegre    | 306.1                                 
|Rio Grande      | 25.0                                  
|Santa Cruz      | 13.9                                  
|Santa Maria     | 32.5                                  
|Uruguaiana      | 7.2                                   
|Region 3        | 1,126.1                               
|Total           | 6,512.9                               

|(1) | We acquired the remaining 50% stake of Unicabo from the Nogueira
family on May 31, 2000. After such acquisition, we owned 100% of Unicabos cable television operations except for the Jundiaí operation
(50%). Operations under Unicabo became part of the Interior São Paulo cluster, beginning in the second
quarter of 2000.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | In 2001, we are not considering the homes reached by our MMDS operations in Recife as Homes Passed.
This change was responsible for the net decrease in the total number of Homes Passed.                                                                                                                                     
|(3) | The Southern Brazil cluster became a part of our operations in connection with our acquisition of Net
Sul in September 2000.                                                                                                                                                                                                    
|(4) | In 2000 we only considered connected subscribers.                                                                                                                                                                                                                                                                               
|(5) | Equity Subscribers refers to the number of connected subscribers when taking into account our
percentage interest owned in the entity with those subscribers.                                                                                                                                                                   

Set forth below is a description of each of our three
regional clusters.

Region 1. This cluster covers the largest cable television  market
in Brazil,  measured in terms of homes passed and active  subscribers.  São Paulo is the
 wealthiest  state in Brazil,  as well as one of the most  densely  populated.   The
 Region  1  cities  we  serve  have  an  estimated  combined  population  of 14.9 million.
 As of December 31, 2002, our cable  networks  passed  approximately  3.3 million homes in
this region,  an  average  number  of 201  homes per  kilometer.  At the same  date,  we
 served  603,403  active subscribers,  resulting  in a 18.3%  penetration  rate in Region
1. Our cable  network in Region 1 is served by 13 headends.

The following  table sets forth,  as of December 31, 2002,  the
percentage of the homes in Region 1 passed by our cable networks with the bandwidth
capacity indicated:

|Percentage | Bandwidth Capacity
|---------- | ------------------
|23%        | 750 MHz           
|61%        | 550 MHz           
|15%        | 450 MHz or less   

Region 2. This cluster  includes Rio de Janeiro,  Belo  Horizonte,
 Recife,  Brasília and two other cities in  central  Brazil,  representing  a  combined
 population  of  approximately  12.5  million.  As of December 31, 2002, our cable
networks passed  approximately  2.1 million homes in this region, an average of 215 homes
per  kilometer.  At the same date,  we served  423,648  active  subscribers,  resulting
in a 20.2% penetration rate.  Our cable network in Region 2 is served by 6 headends.

The following  table sets forth,  as of December 31, 2002,  the
percentage of the homes in Region 2 passed by our cable networks with the bandwidth
capacity indicated:

|Percentage | Bandwidth Capacity
|---------- | ------------------
|35%        | 750 MHz           
|62%        | 550 MHz           
|3%         | 450 MHz or less   

Region  3.  Region 3  represents  our  operations  in  southern
 Brazil,  where we are  active because of the Net Sul  acquisition.  The Region
3 cities we serve have an estimated  population of 7.5 million.  As of December  31,
 2002,  our cable  networks  passed  approximately  1.1 million  homes in this region,
 an average of 124 homes per  kilometer.  At the same date, we served  296,213  active
 subscribers, resulting in a 26.3% penetration rate.  Our cable network in Region 3 is
served by 26 headends.

The following  table sets forth,  as of December 31, 2002,  the
percentage of the homes in Region 3 passed by our cable networks with the bandwidth
capacity indicated:

|Percentage | Bandwidth Capacity
|---------- | ------------------
|44%        | 750 MHz           
|32%        | 550 MHz           
|24%        | 450 MHz or less   

Network Technology

General

Cable  television  utilizes  a  broadband  network  employing  radio
 frequency  transmission  over fiber-optic  and/or  coaxial  cable lines to transmit
 multiple  channels  carrying  images,  sound and data between a central  facility and
the  subscribers  television  set. A cable  system  consists of three major parts:

- A headend,  which is a point from which a programming or other
signal  originates  along a network.               A headend typically includes a
satellite dish,  satellite  receivers,  modulators,  amplifiers               and video
cassette playback machines.  Our headends typically receive  programming content via
              satellite  and then  amplify,  process  and feed this  signal  into a
 distribution  path that               reaches the subscriber.
- A distribution  network,  which consists of fiber-optic cable
and coaxial cable. A signal generally               travels most of its distance over
 fiber-optic  cable and is transferred to coaxial cable at a               node. As it
approaches the  subscriber,  the network  carries the signal over  progressively
              smaller cables,  terminating with the drop cable that connects to the
subscribers  television               receiver.
- A home terminal, or set-top box, which allows an individual
subscriber to receive the cable signal.

Cable Network

Our current network  architecture  utilizes  advanced  technologies,
 including  significant use of fiber-optic  cable.  Our headends  send content via light
 signals  through our optical  cable to an optical node,  where an optical  receiver
 translates the signals into an electric  signal that is transmitted  over our coaxial
 cable.  The coaxial cable is then divided into  individual  cables that terminate in
individual subscriber  households,  each of which  has  been  equipped  with a set-up
 box  and/or a cable  modem.  Our network  consists  of  cables  having  bandwidth
 capacities  of 450 MHz,  550 MHz and 750 MHz.  Most of our network has a capacity of at
least 550 MHz. This capacity  allows  subscribers  to access  numerous  premium services
including analog pay-per-view services and Internet access.

At December 31, 2002,  our cable  network  totaled  35,187
 kilometers.  The  following  table sets forth,  as of December 31, 2002,  the
 percentage  of homes passed by our cable  network with the  bandwidth capacity indicated:

|Percentage | Bandwidth Capacity
|---------- | ------------------
|32%        | 750 MHz           
|54%        | 550 MHz           
|14%        | 450 MHz or less   

As of December  31, 2002 we had coded,  or  scrambled,  the signal
of 56% of the homes we passed, with the objective of reducing piracy and allowing for the
launch of our new Standard  programming  package, which  requires  set-top boxes that
function as decoders.  All of our new  customers  receive  set-top boxes with decoding
capability.

As of December 31, 2002 we had activated  two-way,  or
 bi-directional,  technology for 2.3 million homes passed.  This technology  currently
permits us to offer our broadband  Internet access service because it allows the user to
send data from their  computer to the network.  With the  introduction  of interactive
services,  bi-directionality  will allow two  functions:  it will permit the cable
operator to transmit to the  subscriber the specific  programs the  subscriber has
ordered,  and it will allow the subscriber to use its remote control unit to request
programming from, and respond to, the cable operator.

At December 31, 2002,  our network  consisted  of 2,836 fiber nodes
that  generally  fed on average 2,300 homes each. Each node is fed with sixteen fibers.
 This  architecture  allows for future  migration to 500  homes per fiber  node  design,
 and is  designed  to create a  platform  to  support  services  such as pay-per-view
 television and near  video-on-demand.  The platform may be used to support additional
services as they become  commercially  viable and is already being used to provide
broadband  Internet access through Vírtua.

A substantial portion of our network consists of aerial cables,
 often strung on electrical utility poles,  rather  than  buried  cables.  We  gain
 access  to the  utility  poles  by pole  attachment  rental agreements  with local
 electrical  utilities,  who are  generally  required to provide us this access for a
negotiated  fee.  We are in  disputes  with a number of these  utilities  in an effort to
reduce the fee. In Belo Horizonte,  our cable network  incorporates  fiber-optic trunk
line  distribution  capacity leased from Telemar Norte Leste S.A., or Telemar,  one of
the three Brazilian  fixed-line  telephone  utilities.  We are required to pay Telemar a
percentage of our revenues in Belo Horizonte under this lease.

We believe that using aerial  cables makes outages  easier to locate
and repair.  The most frequent problems we have  experienced  with our network relate to
damage due to automobile  accidents in urban areas and  deterioration  of cable
 insulation.  We maintain our network by employing,  as of December 31, 2002, a
maintenance crew of approximately 429 employees and approximately 49 independent
contractors.

Each of our cable  systems  utilizes  one  headend,  with the
 exception  of the São Paulo,  Rio de Janeiro,  Campinas,  Brasília  and Belo  Horizonte
 systems.  The São Paulo system is served by two headends and six hub sites,  the only
system in our network  with  redundant  capacity.  All of our headends are less than five
years old,  utilize either Barco,  General  Instruments or  Scientific-Atlanta  equipment
and have more than 60 active  channels per headend.  Each headend  utilizes seven
antennae,  which presently  receive C-Band  from  Brasilsat  BI, B2 and B3,  PanAmSat  3,
 PanAmSat 5 and  Intelsat  806.  Ku-Band  signals  are received from Intelsat Ku,
Hispasat, PanAmSat 3 and PanAmSat 6 satellites.

MMDS

In addition to our traditional  cable network,  we also have a MMDS
that operates in Recife,  Porto Alegre and Curitiba,  with approximately  22,000
 subscribers.  MMDS is a microwave  transmission  system in which  programming is sent by
microwave  transmitters  from an antenna located on a tower or a building to a small
 receiving  antenna  located at a  subscribers  premises,  where the  encoded  microwave
 signals are decoded.

Information Technology Systems

Since  August 2002,  we have been  developing a new system
 structure  with the aim to improve all internal  controls and user accesses.  This
structure will integrate  through our systems with a view towards  increasing our ability
to effectively track all user accesses.

Capital Expenditures

Our network  upgrades  going  forward  will be  conducted  on a
highly  targeted  basis in order to optimize the return from our capital  investments.
 We expect to maintain our level of capital  expenditures on our network  during 2003 at
the level that was  committed  in 2002 and to slightly  increase our level of capital
 expenditures  in 2004 and 2005 by  targeting  areas  that will  support  our  growth.
 Our  capital expenditure   plan  is  more  fully   described   under  Item  5.
  Operating  and  Financial   Review  and ProspectsLiquidity and Capital ResourcesCapital
Expenditures.

Pay-Television Customer Care

Customer Service, Billing and Collection

Maximizing customer satisfaction is a key element of our business
strategy.

Up until July 2002,  we operated 12 customer  service  centers
 (including 4 centers for  broadband services).  These centers  allowed  subscribers to
easily contact us with  questions  about their bills,  as well as to request
 pay-per-view  events or to change their monthly  service  packages.  At these centers we
employed  service  representatives  who were  trained to assist our  subscribers  and
sell our services in a helpful manner.

Since  the  introduction  of  our  pay-per-view  service  and  the
 expansion  of our  network,  we experienced  a  significant  increase in call volume.
 As a result of the  increase in call  volume,  and as part of our  cost-cutting
 initiatives,  on June 26, 2002 we entered into an agreement with  Electronic Data
Systems  Corporation  for the  outsourcing of our customer  service  centers.  Before the
outsourcing of our customer  service  centers,  only  approximately  75% of the  calls
 made to these  centers  were  answered. Currently, approximately 92% of the calls made
to our customer service centers are answered.

As part of our  cost-cutting  initiatives,  in  July  2002,  we
 also  outsourced  our  information technology systems, resulting in the dismissal of 87
employees.

Subscriber Payment Collection System

Our subscriber  payment  collection system is intended to provide
 accurate,  timely and convenient billing to our subscribers  while  maintaining a
cost-efficient  method of receiving  payments.  Our monthly billing  system is  automated
 and utilizes  computer  links with large banks and, in certain  cases,  local telephone
 companies,  whereby  they  distribute  our bills to their  customers  and collect
 payment on our behalf.

Most of our  subscribers  pay for our  services by  personally
 delivering  checks to a local bank, which is how most  utility  payments  are made in
 Brazil.  We also  offer  automatic  withdrawal  from bank accounts,  and credit card
payment via telephone and the Internet.  At December 31, 2002,  approximately 38% of our
 subscribers  were  participating  in a  direct  withdrawal  plan to pay  their  monthly
 bills.  Our collection  system is intended to provide  accurate,  timely and convenient
 billing to our customers  while maintaining a cost-efficient method for us to receive
payment.

Disconnection and Delinquency Charge-off Policy

Because  we  were  aggressively  building  our  subscriber  base
 during  the  early  phase  of our development,  credit delinquency became a significant
 challenge for us, particularly in connection with the economic  downturn in Brazil that
began in October  1997.  In late 1997,  in order to minimize the impact of credit
 delinquency  on our  financial  results,  we began a program to strengthen  our credit
 requirements policy and  decrease  the days  customers  can stay past due before
 blocking or  disconnection.  Until that point,  disconnection  generally  would  not
occur  until an  account  was 120 days past due.  We moved to a 90-day past due
 disconnection  policy in late 1997 and to a 60-day past due  disconnection  policy in
early 1998.  In the  fourth  quarter  of 2000,  we  adopted  a 30-day  past due
 disconnection  policy,  and began temporarily  blocking the signal of  subscribers
 whose  payments  were at least five days past due.  Once a subscriber is considered to
be  disconnected,  we will send a  representative  to collect that  subscribers set-top
box. In order to further  minimize  credit  delinquency  effects,  we have also  enhanced
our credit approval requirements and strengthened our collection process.

Management of Churn

We  calculate  churn by taking the total  number of net
 disconnected  subscribers  (excluding  the temporarily  blocked  subscribers)  for a
period as a percentage of the average number of paying  subscribers for the same period.
 We include as disconnected  only those  subscribers  whose payment has been in arrears
for more than 30 days.  When a  subscriber  becomes  reconnected,  that  subscriber  is
netted  against  the number of  disconnects in that period.  Our annual churn rate has
generally  declined from its peak rates in 1997 and 1998, as indicated in the table below:

|Year | Churn
|---- | -----
|2002 | 18.1%
|2001 | 22.8%
|2000 | 16.1%
|1999 | 22.1%
|1998 | 32.0%
|1997 | 34.0%

During 2002, we experienced  decreased  churn when compared to 2001
levels due to various  factors, including  positive results from the  implementation of a
more selective  screening process when determining whether to accept new  subscribers,
 use of retention  islands,  a program that  utilizes  skilled  customer service
 representative  to target  the  subscribers  that may  discontinue  their  services
 with us due to dissatisfaction,  and our heightened focus on customer  satisfaction such
as the outsourcing of our customer service centers.

We rely on the following factors and initiatives to continue to limit
our churn:

- our required credit reviews prior to accepting a new subscriber;
- the exclusive programming content we receive through our
affiliate Net Brasil; and
- the general lack of overbuilding of other cable systems in our
service areas.

Piracy

All  pay-television  providers must develop effective methods to
prohibit piracy, which refers to a household  purposefully  receiving the  providers
 services  without paying for them. We estimate that as of December 31, 2002,  there were
households  equal to 3.9% of our homes passed receiving but not paying for our
 pay-television  services  compared  to the 1.7%  estimated  piracy  rate that we were
 experiencing  at year-end  2001.  The  estimated  piracy rate was 5.1%,  4.1% and 2.6%
at December 31,  1998,  1999 and 2000, respectively.  The primary  reasons for the
increase in piracy  during 2002 were (i) the  suspension  of the hotline to receive
 reports  of piracy and (ii) the  decrease  in network  scanning  activities  to detect
piracy.

Sales and Marketing

We have a centralized  team  responsible  for  overseeing  the sales
and the marketing of our three regions.  In addition,  we have a dedicated  marketing
 specialists for each region  dedicated to building a detailed  action  plan  for  each
of our main  operations.  We  constantly  monitor  subscriber  perception, competition,
pricing and service preferences to increase our responsiveness to our subscribers.

Our long-term  marketing  objective is to increase our market
penetration and growth in revenue per household.  We expect that our subscribers  will
eventually come to view their cable  connection as the best pipeline  to the  home for
a  variety  of  services.  To  achieve  this  objective,  we are  pursuing  the following
strategies:

- introducing new value-added services;
- designing our offerings to enable greater opportunity for
subscriber  entertainment and information               choices;
- packaging  product  offerings to promote the sale of premium
services and niche  programming and to               provide an attractive price/value
relationship with our subscribers;
- targeting  marketing  opportunities  based on demographic data,
 including a focus on Class A and B               households for higher-end packages and
value-added services, including broadband internet; and
- employing the NET and Vírtua brand names to promote subscriber
awareness and loyalty.

To  increase  subscriber  penetration  and the  level of  services
 used by our  customers,  we use coordinated  marketing  techniques.  In December 31,
2002,  approximately 93% of our sales were made through our  outsourced  customer
 service  centers.  We also use a number of other  methods  to  contact  potential
subscribers  including  telemarketing,  the Internet,  door-to-door sales, direct mail
and sales forces that focus on  condominiums.  Each of these marketing  techniques  focus
on minimizing our cost of acquisition of new customers.

In addition,  we have an ongoing marketing program in which we
participate in community projects in areas in  which we  operate.  One of these  programs
 is Net in the   Classroom,  in which we offer  free access to our programming and to
Canal Futura as a teaching aid for  underpriviledged  children.  We believe that
 participating  in the  communities  in which we operate is part of our  social
 responsibility  and is important to developing a positive corporate image.

Competition

We provided service to approximately 38% of Brazils pay-television
 subscribers as of December 31, 2002. In addition to other  pay-television  providers,
 such as DBS, we compete with  broadcast  television, and sources of home entertainment
 generally,  including the Internet.  We compete with these  organizations on the  basis
 of  price,  service  offerings  and  service  reliability.  We  expect  that new
 sources  of competition,  including  pay-television  providers who may emerge as a
result of changing  technology,  will shape our  competitive  environment  in the future.
 In  addition,  to the extent we expand into  additional services  such as  interactive
 services,  we will face  competition  from other  providers  of each type of service.

The following describes our key sources of competition.

Broadcast Television

Free broadcast television remains the dominant media provider in
Brazil.  Brazil is the largest free broadcast television market in Latin America, with
approximately 39.5 million urban television households as of December 31, 2002, according
to IBOPE.  The majority of free television services are broadcast by six privately-owned
national broadcast television networks and a government-owned national public television
network.  These national television networks utilize one or more satellites to retransmit
their signals, which can be received by over 99% of the Brazilian population.

DBS

DBS systems use medium- or  high-power  satellites to deliver
 signals to satellite  dish  antennas  installed at  residences, hotels and other
buildings.  Unlike MMDS signals,  which are transmitted  locally, a DBS satellite  footprint can
be transmitted over large areas.  Ku-Band DBS technology,  which offers more channels and
better picture  quality than C-Band DBS technology,  now accounts for 100% of all DBS
services in Brazil.

As is the case with MMDS  (described  below),  establishing a DBS
system is less capital  intensive than  constructing a cable television  network.  This
 competitive  advantage,  however,  may be offset by several  factors.  DBS tends to
entail  higher  monthly subscription fees than cable. In addition,  DBS requires the
subscriber to own a special receiver  targeted at the satellite,  which is not always
possible in densely populated areas.

Three DBS  providers are currently  operating in Brazil.  Sky Brasil
is the largest DBS operator in Brazil and second  largest pay-television  provider,  with
approximately  647,000 subscribers and an 18.7% market share in pay-television as of
December 31, 2002. Sky Brasil offers Ku-Band  technology to its  subscribers  and
operates under the Sky brand.  Galaxy Brasil Ltda. is the second largest DBS  operator in
Brazil,  with  approximately  432,000  subscribers  as of December  31,  2002.  Galaxy
 Brasil  Ltda.  offers  Ku-Band technology under the DirectTV brand.

Cable Overbuilds

As of December 31,  2002,  the  Brazilian  cable  industry
 consisted of more than 50 cable  operators  in  approximately  280 municipalities,
 serving an estimated 2.0 million  subscribers.  Under Brazilian law, cable  television
 service licenses in a specific service area are  nonexclusive  licenses.  In certain
markets,  such as São Paulo,  our licensed service areas completely  overlap with the
service areas of other  licensees.  There are overbuilt cable systems in São Paulo,
 Curitiba and  Florianópolis,  where we compete with TVA; in Pelotas and Rio Grande,
 where we compete with  Adelphia;  and in Santos,  where we compete with Canbrás.  We
also compete in Belo Horizonte with a small overbuilt network operated by W@y Brasil.

Our main cable  competitor is TVA,  which  provides  pay-television
 services  using cable and MMDS  technology.  TVA provides cable service in the cities of
São Paulo,  Curitiba and  Florianópolis.  TVA has been providing  pay-television
 services through cable and MMDS in the city of São Paulo  since  1994.  As of  December
 31,  2002,  TVAs  operations  accounted  for 8.7% of  pay-television subscribers in
Brazil.

MMDS

Pay-television  utilizing MMDS technology became available in Brazil
in 1991,  initially  targeting the largest urban areas of the country.  As of December
31, 2002,  Pay-TV  estimated  that MMDS accounted for  approximately  7.2% of
 pay-television  services in Brazil.  TVA is the leading MMDS  operator in Brazil and
provides  MMDS  services in São Paulo,  Rio de Janeiro,  and  Curitiba.  As of December
31, 2002, TVAs MMDS operations  accounted for 3.4% of  pay-television  subscribers in
Brazil. We operate MMDS only in Recife, Curitiba and Porto Alegre.

Establishing  an MMDS  system is less  capital  intensive  than
 constructing  a cable  television  network.  While  this cost differential may give an
MMDS operator some competitive advantage in providing  pay-television  services,  this
advantage may be offset by several factors.  Among these is the fact that MMDS generally
 requires a clear  line-of-sight  because  microwave  signals will not pass through
 obstructions.  MMDS therefore can generally not be received in shadowed  areas where
microwave  transmission is blocked by terrain,  buildings or other physical  objects,
 though sometimes  blocked signals can be retransmitted by low-power  repeaters that can
send an otherwise  blocked signal over a limited area.  Moreover,  MMDS has the
 disadvantages of limited channel  capacity,  lower reliability and lower quality of
signal.  In key cities such as São Paulo,  Rio de Janeiro and Belo  Horizonte,  where
there are a high concentrations of tall buildings and topographical barriers, MMDS is at
a disadvantage to cable.

High-speed Internet Access

High-speed  Internet  access is  currently  being  offered in Brazil
 primarily by telephone  companies  and cable  television operators.  The broadband
 service  providers with which Vírtua  competes  include  Speedy, which is a service
offered by Telefonica, BR Turbo, which is a service offered by Brasil Telecom,  Velox, which
is a service offered by Telemar,  and Internet  Rápida TVA,which is a service offered
by TVA. Telefonica  competes with us in São Paulo,  Santos,  Campinas and Sorocaba;
 Brasil Telecom competes with us in Porto Alegre,  Brasília,  Florianópolis and Curitiba;
 Telemar competes with us in Rio de Janeiro and Belo Horizonte and TVA competes  with us
in São Paulo and Rio de  Janeiro.  As of  December  31, 2002, Speedy had  approximately
 334,000  subscribers,  Brasil Telecom  had  approximately  167,000  subscribers,
 Telemar had  approximately  47,000  subscribers  and TVA had  approximately  14,000
subscribers.

Vicom

Two companies,  Embratel and  Telefonica,  lead the data
 transmission  market in Brazil.  The remainder of the Brazilian data transmission
 market is divided between many smaller  companies,  most notably AT&T Latin America,
 MetroRed and Pegasus.  Embratel and Telefonica  possess  greater  financial  resources
 than we do,  and they also  have  well  established  relationships  with  Brazilian
corporations and businesses and a history of providing these  corporations  and
businesses with  communications  services.  Many of our smaller  competitors,  most
notably AT&T Latin America,  are  subsidiaries or joint ventures of foreign  corporations
 that have strong financial resources and experience providing similar communications
services in other countries.

Licenses

We currently  hold 46 licenses to operate  pay-television  systems
in 44 cities.  Three of these licenses are for MMDS service and the remaining 43 are for
cable services.

The licenses are issued on a non-exclusive  basis by Anatel, the
national  communications  agency. The licenses are for a term of 15 years, and are
automatically renewable, subject to:

- satisfactory fulfillment of all technical and financial
requirements for establishing a network and operating the business;
- compliance with applicable laws and regulations; and
- payment of a fee.

Description of Property

We own most of the fixed assets essential to our operations.  Our
major fixed assets are:

- 35,187 kilometers of coaxial cable, of which 5,544 kilometers
have fiber-optic capability;
- set-top boxes for subscribers homes;
- electronic transmission, receiving, processing and distribution
equipment;
- microwave equipment; and
- antennas.

We lease  some of our  distribution  facilities  from third
 parties.  These  facilities  include  space on utility  poles and underground  ducts
where we place  portions  of our cable  systems,  roof rights and land leases  which we
use to place some of our hub sites and headends and certain portions of the fiber-optic
network of the Minas Gerais state telephone company.

We lease most of our office space,  including our headquarters
 located in São Paulo,  which consists of  approximately  3,200 square meters, and data
processing equipment from third parties and rely on more than 3,000 ground-based
 satellite stations,  which we lease from third parties.  We generally own our service
vehicles,  data processing  facilities and test equipment.  We anticipate that, upon the
expiration of any of our current leasing  arrangements,  we will be able to renew those
arrangements or enter into alternative leasing arrangements.

Legal Proceedings

We are party to several civil,  tax and labor lawsuits,  both
judicial and  administrative,  arising out of our regular course of business.  We have
 provisioned  to cover losses with respect to such  lawsuits that we have deemed
 probable,  based on the opinion provided by our independent legal  consultants.  We
believe that the provisions made with respect to such  contingencies,  as described
below, are sufficient to cover the losses deemed as probable:

|For the Year Ended December 31, 2002 (in thousands)
|---------------------------------------------------
|                                                   
|                                                   
|Provisions for civil litigation                    
|Provisions for Administrative and Judicial         
|Tax Proceedings                                    
|Provisions for Labor Proceedings                   
|Total                                              
|                                                   

Civil Litigation

Increase in monthly subscription rates

There have been ten separate  lawsuits filed against our
subsidiaries as a result of increases in monthly  subscription  rates from and after
April 1999.  Five of these  lawsuits  have been  brought by the  Attorney  General for
the State of São Paulo.  The five other  lawsuits  have been  brought by  Fundação
 Procon,  a consumer  protection  foundation;  the  Brazilian  Association  of General
Consumers;  the Attorney  General for the Federal  District;  the Attorney  General for
the State of Santa  Catarina;  and the Attorney General for the State of Rio Grande do
Sul.

The plaintiffs  allege that the increases in monthly  subscription
 rates,  which became effective in April 1999, were abusive and  unjustified  and violate
the  principles of the Brazilian  Consumer  Defense Code.  The  plaintiffs  argue that
the increases were illegal, that the amounts paid be reimbursed to subscribers and that
the clause in our standard subscription  contract,  which provides for an increase in
monthly subscription rates in the event that the cost of the service increases, be
declared null and void.

In most of these  lawsuits,  the plaintiffs  have also  petitioned
 for an injunction to suspend the increase in  subscription rates.  The majority of these
 petitions  have been denied.  Those  decisions  are subject to appeal.  Furthermore,
 some lawsuits were dismissed without judgment on the merits on the ground that the
Attorney General had no standing to bring the action.

We believe our chances of success are strong and have not  recorded
a provision  for these  lawsuits.  However,  if we were to obtain unfavorable outcomes in
these lawsuits, our operating results would be materially and adversely affected.

In  addition,  a lawsuit  has been  brought  by the  Attorney
 General  for the  State of Rio de  Janeiro  against  one of our subsidiaries  concerning
 the  legality of certain  clauses in our  standard  subscription  contract  used by one
of our  subsidiaries, including a clause that provides for  unilateral  increases in
monthly  subscription  rates.  This lawsuit is now awaiting  judgment by the superior
courts.

Lease and use of utility poles

In 1999, our subsidiary Net Rio S.A.  brought an action against
Light Serviços de Eletricidade  S.A., or Light, an electricity supplier in Rio de
Janeiro.  Net Rio S.A.  petitioned  for the deposit  into court of an amount that it
believed  was owed to Light for the use of Lights  electricity poles.  Light refused to
receive payment and alleged that the municipal  government had been attempting to levy
ISS on such amounts,  and Light was contesting the imposition of such tax. The ISS, or
Imposto Sobre  Serviços,  is a municipal tax on services.  The judge granted the petition
on the grounds that Net Rio S.A. was duly  performing  its  obligations.  The decision
was affirmed on appeal.  The total amount deposited into court is approximately R$5.6
million (US$1.6 million).

We lease and use electric utility poles.  Since a substantial
 portion of our network is composed of aboveground  cables,  the imposition  of ISS on
rental  amounts could  adversely  affect our operating  results.  Lawsuits  relating to
this issue have also been filed in Rio Grande do Sul, Minas Gerais, São Paulo, Santa
Catarina, Goiás and the Federal District.

In addition, most of our subsidiaries have brought actions to review
and reduce the amounts charged for the lease of poles.

Administrative tax proceedings

The Instituto  Nacional de Seguridade Social has brought actions
against us claiming that we owed R$529,000  (US$150,000) with respect to social security
contributions.  We have filed an appeal and are awaiting the determination.

Actions have also been brought against us relating to amounts due
with respect to income tax and  Contribuição  Social sobre o Lucro  Líquido,  or CSLL,  a
tax levied  upon a  companys  net  profits.  Among the most  significant,  are the
 actions  against  our subsidiaries Net São Paulo Ltda. and Net Santos Ltda. described
below.

Net São Paulo Ltda.  The Secretary of the Federal  Internal  Revenue
 Service,  or Federal  Internal  Revenue,  has brought an action against us alleging that
we have  improperly  treated as operational  expenses the  depreciation  of ongoing
 installations  and payments  made with  regard  to  royalties  and  technical
 assistance.  The  Federal  Internal  Revenue  has  determined  that we have
under-calculated  our  income  tax  basis,  as well as the CSLL basis for the 1995,  1996
and 1997  fiscal  years,  and as a result owe approximately  R$6.2  million  (US$1.8
 million).  We have filed an appeal  with the Federal  Internal  Revenue  and are
 awaiting  its determination.

The Federal Internal  Revenue has also brought an action against us
claiming that Net São Paulo Ltda. has improperly  deducted operational  expenses related
to: (a) the acquisition of programming;  (b) discounts  offered to subscribers;  and (c)
foreign exchange variations.  According to the Federal  Internal  Revenue,  such undue
deduction  reduced the amount of the income tax and CSLL due with respect to the 1996
fiscal year in the approximate amount of R$1.8 million (US$509,000).

Net Santos  Ltda.  The Federal  Internal  Revenue has brought an
action  against us alleging  that we treated the  acquisition costs of fixed assets as an
 operational  expense,  which resulted in lower profits for the fiscal year ended on
December 31, 1995. The Federal  Internal  Revenue  claims  that we owe R$1.9  million
 (US$538,000)  as a result.  We have  filed an appeal  with the  Federal Internal Revenue
and are awaiting its determination.

The  Secretary of the State of Rio de Janeiro  Internal  Revenue
 Service,  or State  Internal  Revenue,  has brought  several actions  against us
claiming that we have excluded  subscription  fee payments from the ICMS tax basis.  The
aggregate  amount of these actions is  approximately  R$17.0 million  (US$4.8  million).
 We argue that we have adopted  procedures  which are in accordance  with Resolution
 2585/95 of the State Internal  Revenue,  which provides that  subscription  fee payments
 should not be deemed  programming providing.  Therefore,  the  subscription  fee
 payments  should not be  considered  as ICMS  taxable  income,  which  only  applies to
communication services.

Our  subsidiary  Net Rio S.A.  received a tax  assessment  notice
from the State Tax Authority in the amount of  approximately US$17.5  million  relating
to ICMS tax. The State Tax  Authority has taken the position that as a result of delaying
the payment of the ICMS tax during the period from  September 2001 to October 2002, we
lost its rate  reduction  benefit.  Supported by the opinion of our external  legal
 counsel,  we have  presented  our defense to this  assessment.  We believe  that we have
 meritorious  and  substantial defense  arguments.  However,  considering  the risks
 involved,  we have  established  a reserve in the amount of US$4.7  million  for
potential losses related to this assessment.

Judicial Tax Proceedings

Municipal Tax

In 1999,  several Brazilian  municipalities,  which contain 57% of
our subscribers,  issued municipal decrees or laws, seeking collection of taxes for the
use of public  thoroughfares,  including  installation and passage of cables. The tax is
assessed per meter of cable installed in the municipalities in which this tax was created
and varies widely by municipality.  The  municipalities  include São Paulo, Rio de
Janeiro,  Caxias do Sul, Anápolis,  Campinas,  Florianópolis,  Criciúma, São Carlos,
 Indaiatuba,  Brasília and Campo Grande.  These taxes apply to, among others, cable
companies and telecommunication companies.

We have filed  lawsuits in each of these  municipalities  to
 challenge  the  constitutionality  and  legality of this tax. In these lawsuits,  we
argue that: (i) the tax intrudes upon the exclusive  authority of the Brazilian federal
 government to legislate on telecommunications;  and (ii) the  legal  nature  of the tax
is not that of a public  price,  fee or  contribution,  as  defined  under Brazilian
 law.  We  believe  this  municipal  tax is  unconstitutional  since  it is not  included
 in the list of  taxes  within  the jurisdictional authority of municipalities, as
established in the Brazilian federal constitution.

Two lawsuits have already been decided in the lower courts.  In Rio
de Janeiro,  we were released from any payment  obligation in respect of this tax,  while
in São Paulo we were ordered to pay the tax  retroactively.  Both  decisions  are subject
to appeal.  We have not made any  reserves for the payment of this tax, as it is probable
 that  favorable  outcomes  may result from these  lawsuits. The tax varies by
municipality  but in aggregate would require monthly  payments,  on average,  in an
amount equal to R$1.04  (US$0.29) per meter of installed  cable.  We have  approximately
 18,561,000  meters of  installed  cable in such  municipalities  where this tax exists.
 If the  courts  rule  that  the  collection  of  this  tax by the  municipalities  is
 valid,  the tax  would  have to be paid retroactively.  In addition,  if the
municipalities  which currently impose the tax were successful in implementing and
collecting this tax,  additional  municipalities  may seek to impose it as well. If our
appeals fail and we are required to pay this tax, our operating results would be
materially and adversely affected.

Other

The  Municipality  of São Paulo  brought  an action  against  us
 claiming  that we owed ISS of  approximately  R$1.3  million (US$368,000) for the 1994
and 1995 tax years for installation and equipment assembly services.

We have  brought  actions to dispute  income tax  retained on
 earnings  under our hedge  transactions.  On the  authority  of preliminary  injunctions
 obtained in these  actions,  we have not  collected  or  remitted a total  amount of
R$16.9  million  (US$4.8 million) on those transactions.  Of that amount, R$11.6 million
(US$3.3 million) has been deposited into court.

We have filed  lawsuits  challenging  the 1988 law that  expanded
the  calculation  base for the  Contribuição  ao Programa de Integração  Social, or PIS,
and Contribuição para  Financiamento da Seguridade Social, or COFINS, to include all
gross revenues (rather than gross  revenues  earned in  respect of  services  rendered,
 as had been the case  previously),  and that  increased  the rate for COFINS.  Our
lawsuits  claim that the federal  government  improperly  exceeded its taxing  authority
 when it attempted to broaden the calculation  base for PIS and  COFINS  because  this
 calculation  base does not fall  within  the  concept of income as defined in the
Federal  Constitution  and that the COFINS rate increase was invalid as a discriminatory
 tax because it permitted  taxpayers that paid certain  social taxes on profits to claim
 credits  against the  increased  liability.  Our  obligation to pay the increases in PIS
and COFINS has been  suspended in several of these lawsuits as a result of our having
 deposited  with the applicable  court the amounts in dispute.  Although  Brazils
 Supreme Court has not yet decided this question,  several  favorable  decisions have
been issued by lower courts.  We have made judicial deposits and provisioned R$56.4
million (US$16.0 million) in respect of these lawsuits.

We are  currently  defending a federal tax  assessment  notice in
the amount of US$6.2  million.  This  assessment is due to a difference in the way we and
the State Tax Authorities  classify  analogical  decoders for use in  pay-television
 systems.  We believe our chances for success are strong and we have not established
reserves for this dispute.

Our  subsidiaries Net Campinas Ltda. and Net São José do Rio Preto
Ltda. have received  assessment  notices from the State Tax Authorities,  suspending the
previously  approved benefit of payment of their ICMS tax debt in  installments,
 resulting from the delay in the payment of the  installments.  We are defending the
 assessment  and have recorded a reserve in the amount of US$2.8 million for losses
related to this matter.

In December  2002,  Unibanco  filed a  collection  suit  against us
with the Central  Civil Court of São Paulo with respect to amounts  outstanding  under a
loan  facility we entered  into with  Unibanco on August 26,  2002.  The amount  sought
 under this claim totals  approximately  R$72.2  million  (US$20.4  million).  The
Central  Civil Court of São Paulo ordered the pledge of certain of our assets as security
for this loan. We do not believe  that these  court  proceedings  will  affect our
 operating  performance,  nor our ability to continue  the negotiations with our lenders
and debt holders.

Labor Proceedings

We and our subsidiaries are party to approximately  1,364 judicial
labor  proceedings.  We estimate that the total contingency with respect to these
 labor-related  proceedings for which we and our  subsidiaries  are responsible is
 approximately  R$24.6 million (US$7.0  million) and have  established  a provision in
this amount.  The majority of these claims  relate to (i) overtime  payment and (ii)
recognition of an employment relationship with us and for amounts resulting from such
employment  relationship,  made by employees of service companies.

Various  employees in the sales and  telemarketing  sector have
brought labor claims against us for payment of overtime on the grounds  that their time
worked be  recorded.  Since,  their work is  performed  off  company  premises,  we do
not record  their hours worked.  In the great majority of these cases, the former
employees have been successful.

We and our subsidiaries  have engaged service companies to perform
certain  installation and maintenance  tasks. In connection with these services,  we and
our subsidiaries  have been ordered to pay claimants all the benefits usually granted to
formally employed personnel and to pay any debts to claimants arising out of illegal
practices adopted by their employers.

General

In  addition,  we are party to various  legal  actions  arising in
the ordinary  course of our  business,  including  disputes regarding  contracts,  labor
law and  taxation.  However,  we do not expect  significant  losses  from  these  actions
or that any such losses,  individually or in the aggregate,  will have a material adverse
effect on our liquidity or our consolidated financial position or results of operations.

Regulation

Cable Television Services

Cable television  services in Brazil are licensed and regulated by
Anatel pursuant to Law No. 8,977,  enacted by the Brazilian Congress on January 6, 1995;
 Decree No. 2,206,  enacted by the President of Brazil on April 14, 1997;  Ordinance No.
256 issued by the Ministry of  Communications on April 18, 1997; and the General Law of
 Telecommunications  No. 9,472 enacted on July 16, 1997. Prior to the enactment of Law
8,977 in 1995,  the Brazilian  cable  industry had been governed by two principal
 regulatory  measures  since its inception in 1989:  Ordinance No. 250, issued by the
Ministry of  Communications  on December 13, 1989; and Ordinance No. 36, issued by the
Ministry of Communications on March 21, 1991.

Ordinance  No. 250,  which was  suspended  approximately  15 months
after its  enactment by Ordinance  No. 36,  regulated  the distribution of television
 signals,  or DISTV, by physical means (i.e., by cable  television) to end-users.  DISTV
services  generally are limited only to the reception and  transmission  of signals
 without any  interference by a DISTV operator with the signal content. Under Ordinance
No. 250, the Ministry of Communications  granted 101  authorizations  to local operators
to commercially  exploit DISTV services.  Although Ordinance No. 250 did not specifically
address cable television  services,  a number of DISTV operators,  including our own
cable operating  subsidiaries,  began to offer cable television  services based on DISTV
 authorizations.  With the issuance of Ordinance No. 36 in March 1991, the Ministry of
Communications  suspended Ordinance No. 250; however, the DISTV  authorizations  issued
during the preceding 15 months remained  valid.  Proposed  regulations  relating to cable
services were submitted for public comment by the Ministry of  Communications at the same
time Ordinance No. 36 was issued,  but were never adopted and no further  regulatory
action was taken until the  enactment of Law No. 8,977 in 1995.  Law No. 8,977,  together
 with No. Decree 2,206 and Ordinance No. 256,  which provide detailed procedures for the
implementation of Law No. 8,977,  constitute the current regulatory  framework for cable
television services in Brazil.  The  Brazilian  Congress is currently  discussing a
series of bills,  which,  if accepted,  may modify the current regulatory  framework.
 These legislative  discussions are at a preliminary stage and it is unclear what
 modification,  if any, to the current regulatory scheme might ultimately be enacted.

Under Law No.  8,977 and Decree No.  2,206,  a cable  operator  must
obtain a license  from  Anatel in order to provide  cable television  services in Brazil.
 All cable  licenses  are  non-exclusive  licenses to provide  cable  television
 services in a service area.  Cable  television  licenses are granted by Anatel for a
period of 15 years and are renewable for equal and  successive  periods. Renewal of the
cable  television  license by Anatel is assured if the cable  system  operator  has  (i) complied
 with the terms of the license grant and applicable  governmental  regulations and (ii) agrees
to meet certain technical and economic requirements relating to the furnishing of
adequate  service to subscribers,  including  system  modernization  standards.  The
renewal of the cable  television license may also be subject to the payment of a renewal
fee in an amount agreed upon by the licensee and Anatel.

Only private legal entities which provide cable  television
 services as their main business  activity,  are  headquartered in Brazil and controlled
as to at least 51% of their voting capital by Brazilian  citizens or naturalized
 Brazilian citizens for over ten years,  or companies  incorporated  in Brazil
 controlled  by Brazilian  citizens,  are eligible to receive a license to operate  cable
television  systems in Brazil.  In the event that no private entity  displays an interest
in providing cable  television  services in a particular service area, Anatel may grant
the local incumbent telephone operator a license to provide cable television services.

Cable  operators that provided cable  television  services under a
DISTV  authorization  granted under  Ordinance No. 250 were required under Law No. 8,977
to file applications to have their DISTV authorizations  converted into cable television
 licenses.  DISTV authorizations covering all of our service areas were converted into
cable television licenses in December 1996.

According to General Law No.  9,472,  the provision of each type of
 telecommunication  service shall be subject to a specific bid for a relevant license.
 Decree No. 2,206 establishes  specific  guidelines related to bids for cable licenses.
 In general,  cable television  licenses will be granted  pursuant to a public bidding
process  currently being  administered by Anatel.  All such licenses shall be
 nonexclusive  licenses.  In order to submit a bid for a license,  a bidder must meet
certain  financial,  technical and legal prerequisites.  After such  prerequisites  are
met, a bidder  then must  submit a detailed  bid  describing  its plan to provide  cable
television services in the service area.

Once a cable  television  license is  granted,  the  licensee  has
an 18-month  period  from the date of the license  grant to complete the initial stage of
the  installation  of the cable system and to commence  providing  cable  services to
 subscribers in the service  area.  The 18-month  period is subject to a single  12-month
 extension at the request of the  licensee,  to be granted at the discretion of Anatel.

Any transfer of a cable  television  license is subject to the prior
 approval of Anatel.  A licensee may not be transferred by a license until it has
commenced  providing cable  television  services in its service area. The license may,
 however,  be transferred to a subsidiary company controlled by the licensee,  by
hereditary  succession or by a spin-off  transaction before the commencement of cable
 television  services.  Transfers  of shares  causing a change in the control of a
licensee or the legal  entity that  controls a licensee  also are subject to the prior
 approval of Anatel.  Anatel must  receive  notice of any change in the capital
 structure of a licensee within 60 days, including any transfer of shares or increase of
capital, which does not result in a change of control.

Law No.  8,977 and Decree No.  2,206  regulate  programming  content
 and access to cable  systems.  In  addition  to channels allocated  for  unrestricted
 programming,  a cable  television  operator  is required to make  available  for use in
its service  area channels in the following  categories:  (i) basic channels for use free
of charge;  (ii) channels  devoted to occasional services;  and (iii) channels devoted to
permanent services.  A cable operator must provide access free of charge for the
following basic channels:

- channels for the distribution of programming by local uncodified
VHF and UHF television stations;
- a channel for transmitting the sessions and proceedings of state
and municipal legislatures;
- a channel for transmitting the sessions and proceedings of the
federal House of Representatives;
- a channel for transmitting the sessions and proceedings of the
federal Senate;
- a channel for use by local universities;
- a channel for use by federal, state and municipal bodies for
cultural and educational purposes;
- a community channel for use by local non-profit private
institutions; and
- a channel for use by the Brazilian Supreme Court.

A cable  operator must reserve at least two channels for  occasional
 services,  which are dedicated for the  transmission  of seminars,  public protests and
 demonstrations,  meetings of Congress and similar events of public interest.  Thirty
percent of a cable systems  available  channels  must be reserved for  permanent
 services.  Permanent  services are dedicated to the  transmission  of programming
 produced by companies which are not affiliated with the cable  television  operator on a
commercial  basis (except for the mere sale or licensing of programs).  Channels for
 occasional  or permanent  services  must be publicly  offered by the operator,  and
compensation of the operator is to be established pursuant to market practices and costs
involved in the rendering of such services.

Law No.  8,977  and  Decree  No.  2,206  also  limit the use by a
cable  operator  of its  channels  devoted  to  unrestricted programming.  A cable
 television  operator  may not:  impose  conditions  that result in  participation  in
the control or require any financial  interest  in the  entity  providing  programming;
 compel the  programming  entity to provide  for  exclusivity  rights as a condition to
the programming  agreement;  or restrict the unaffiliated  programming  entitys market
competition  capacity.  Further, a cable  television  operator  may  acquire  programming
 produced  outside of Brazil  only  through a company  located in Brazil.  Cable
television  operators  are also required to offer at least one channel  consisting
 exclusively  of  independently  produced  Brazilian motion pictures and features.
 Decree No. 2,206 also specifies that cable system operators  should make available to
subscribers,  upon their request and at their expense, a device that blocks reception of
certain subscription programming.

Cable system  operators are permitted  under  Ordinance No. 256 to
offer  commercial  advertising  on channels  other than the public basic channels for use
free of charge, as discussed above.

Access to basic  television  services is guaranteed to all those
located within the relevant  service area upon the payment of an installation  fee and a
periodic  subscription  fee established by the cable  television  operator.  Anatel is
empowered to regulate installation and subscription fees.  Under Law No. 8,977 and Decree
No. 2,206, the fees shall be reasonable and fair.

Anatel may revoke a license upon the issuance of a judicial
decision, if the licensee:

- lacks the technical, financial or legal capacity to continue to
operate a cable system;
- is under the management of individuals, or under the control of
individuals or corporations,  who, according to Law No. 8,977,               do not
qualify for such positions;
- has its license transferred, either directly or by virtue of a
change in control, without the prior consent of Anatel;
- does not start to provide cable services within the time limit
specified by Law No. 8,977; or
- suspends its activities for more than 30 consecutive days
without justification, unless previously authorized by Anatel.

In September 1996, the Ministry of  Communications  issued Ordinance
No. 1,086.  This ordinance  established  Cable Television Rule No. 13/96.  Cable
 Television Rule No. 13/96  subsequently  was amended by, and republished as,  Ordinance
No. 256.  Ordinance No. 256  imposes  restrictions  on the number of areas that can be
served by a single  cable  television  system  operator,  including  its affiliates.
 According to Ordinance  No. 256, a single cable system  operator,  including its
 affiliates,  may only hold licenses with respect to (i) a maximum of seven  areas with a
 population  of 700,000 and above and (ii) a maximum of 12 areas with a  population  of
300,000  or more and less than  700,000.  The  restrictions  only  apply to areas in
which the cable  system  operator,  including  its affiliates,  faces no competition from
other  pay-television  services,  excluding  services that utilize  satellites to
transmit their signal.  Ordinance No. 256 grants Anatel full discretion to alter or
eliminate these ownership  restrictions.  The term  affiliate is defined by Federal
 Decree No. 2,206 as any legal  entity that,  directly or  indirectly,  holds at least
20% of the voting  capital of another legal entity, or any of two legal entities with
common ownership of at least 20% of their respective voting capital.

Rule No. 13/96 grants a one-year period from the date a DISTV
 authorization is converted into a cable television  license for any cable system
 operator to comply with such  restrictions, and a six-month  period to make the basic
channels for use free of charge, and channels  devoted to occasional  or permanent
 services to the public.  We believe that we are in compliance  with the terms of the
ordinance.

Cable-Related Services

General

Prior to the enactment of Amendment No. 8 in 1995, Article 21 of the
Federal  Constitution  required the Brazilian  Government to operate directly,  or
through  concession,  permissions or  authorizations  granted to companies whose shares
were controlled by the Brazilian Government,  all telephone,  telegraph,  data
transmission or other public  telecommunications  services. This constitutional
requirement was the basis for the establishment of the state-owned  telephone monopoly,
 Telebrás,  which held controlling interests in 27 regional  telephone  operating
 companies.  With the adoption of Amendment No. 8/95, Article 21 was modified to permit
the Brazilian Government to operate  telecommunications  services either  directly or
though  authorizations,  concessions or permissions  granted to private entities.  Since
the enactment of Amendment No. 8, the government has implemented  structural reform in
the  telecommunications sector.  The main  purpose of this  reform was the  transfer of
the control and  operation  of the  services  from the state to private companies.

On July 16, 1997,  Congress approved Law No. 9,472,  known as the
General  Telecommunications  Law, or LGT, which provided the legislative  framework  and
is the  basis  for  telecommunications  regulation  in  Brazil.  The  LGT  governs  the
 regulation  of all telecommunications services, with the exception of radio and TV
broadcasting services.

The adoption of the LGT, as well as the  privatization  of fixed
line  telephone  and cellular  services,  has led to sweeping changes in the operating,
 regulatory and competitive  environments of the Brazilian  telecommunications  sector.
 The changes include: (a) the establishment of an independent regulator,  ANATEL, and the
development and implementation of comprehensive  regulation for the telecommunications
 sector; (b) the break up of the previously existing  state-owned  telephone  monopoly;
 and (c) the introduction of prevalent competition in the rendering of all
telecommunications services.

As part of the restructuring  and  privatization of the state-owned
 telecommunications  companies,  the Brazilian  Government approved  Decree No.  2,534,
 of April 2, 1998,  which  established  the  General  Plan of  Concessions,  also known
as Plano  Geral de Outorgas, or PGO.  Amongst others, the PGO imposed limitations on
competition in the rendering of fixed-line telephone services.

For privatization  purposes,  the PGO divided Brazil into 4
geographic  regions,  each of which has at least 2 operators,  one holding a  concession,
 the  privatized  state-owned  company and the other an  authorization.  As a result
 thereof,  4 licenses  were granted to what are called the mirror companies.

Deregulation of the Telecommunications sector in 2002

The  deregulation  of the  telecommunications  sector set forth in
PGO and  regulated  by Anatel  Resolution  No.  283,  dated November  29,  2001,
 overturns  the  restriction  which  limited  the number of  fixed-telephone  operators
 allowed to operate in the concession  areas.  Such  Resolution  encouraged  greater
  competitiveness  in  the  telecommunications   sector.  In  light  of  such
deregulation,  the fixed-line telephone operators,  after satisfying certain
requirements,  will now be able to obtain new licenses and own capital stock of companies
authorized by Anatel to offer other telecommunications services, such as cable TV
services.

In  connection  with the cable TV  services,  although the PGO
permits the  fixed-line  telephone  operators to provide  other telecommunications
 services,  they are still subject to certain  limitations.  The  concession  agreement
 among União Federal and the fixed-line  telephone  operators prohibits such operators
from providing cable TV services or owning interests in cable TV operators in the same
Commuted  Fixed-Line  Telephone  Services  concession areas. The exception to this rule
is that they may provide such cable TV services and the like in such areas when there is
a clear of lack of interest of other  private  companies in the bidding  announcement for
the cable TV services operation in that area.

High-Speed Cable Data Services

Law No. 8,977,  Decree No. 2,206 and Anatel  Resolution 190, issued
in November 1999,  authorize  cable  television  operators such as Net Serviços to:

- furnish video and audio signals on their cable networks; and
- utilize their networks to provide value-added services,
 including high-speed access to Internet service providers that enable               the
transmission of meteorological, banking, financial, cultural, prices and other data.

Under this  grant,  cable  television  operators  are not  allowed
to act as their own ISPs,  but must grant  other ISPs equal access to the cable network.
 In addition,  cable television  providers can only provide Internet services to existing
cable television subscribers.

Multimedia Communications Service

Anatel issued the Multimedia  Communications Service, or SCM,
Regulation,  Resolution No. 272 of August 9, 2001, which permits the offering of capacity
for  transmission,  emission and reception of multimedia  information in the format of
audio  signals,  video, data,  voice and other sounds,  images,  texts and other
 information of any nature,  to  subscribers  within the same area of service, using any
means.

The SCM is a fixed  telecommunication  service  rendered for the
 collective  interest on a domestic or  international  basis, excluding  fixed
 telephone,  Mass Electronic  Communication  Services  (Cable TV, MMDS and DTH), and
Broadcast  Service.  According to Resolution  No. 272, SCM  providers  can offer their
 services to any  residential  subscriber.  Therefore,  cable TV  operators  could
request an Anatel  authorization  to offer SCM and then offer high speed cable data
 service,  not only to their cable TV  subscribers, but to any user of this service
located in the licensed area of the cable TV operator.

SUMMARY ORGANIZATIONAL CHART                    (ownership figures
represent total economic interests (not voting power) as of March 31, 2003)

Corporate Structure

We are the largest cable  television  operator in Brazil.  As such,
 we conduct our cable  television  and related  activities through a group of 29
operating  companies  that we have acquired and developed  over the past decade.  In
addition,  we are controlled by  Globopar  and the  Marinho  family and as such are part
of  Organizações  Globo,  the  largest  media  group in Brazil.  Globopars ownership
interest in us is subject to a shareholders  agreement with several other shareholders
who, with Globopar,  collectively own 98.2% of our  common  shares.  The  chart  on the
 preceding  page  illustrates  our  corporate  structure  and our  relationship  with
 Globopar and our other shareholders.

We were incorporated in 1994 as a sociedade anonima,  or
corporation,  under Law 6,404/76 of the Federative Republic of Brazil and began our
 current  operations  in 1998 when we  acquired  certain  pay-television  assets  from
 Globopar.  We are  entered in the commercial  register  of São Paulo under  number
 35.300.177.240.  Our  registered  office is located at Rua Verbo  Divino,  1356,  São
Paulo-SP-04719-002, Brazil, telephone +55 11 5186-2606.

Globopar

Globopar is a Brazilian  holding company with interests in cable
and satellite television, pay
television programming, magazine publishing, printing and the Internet.

Our controlling  shareholders are Distel,  which was previously
named Globo Cabo Holding,  S.A., and Roma Participações Ltda., or Romapar.  As of March
31, 2003,  Distel owned 31.0% of our common shares and 3.4% of our  preferred  shares,
 representing  14.7% of our total capital  stock,  and Romapar owned 36.2% of our common
shares and 20.9% of our  preferred  shares  representing  27.2% of our total  capital.
 Distel is 100% owned by Globopar,  and Romapar is 100.0% owned by Globopar.  Globopar
 also  directly owns 6.9% of our preferred  shares  representing  4.1% of our total
capital.  Globopar is controlled by the family of Mr. Roberto  Irineu  Marinho,  the
Chairman of our board of directors.  The Marinho family, thereby, indirectly controls
67.2% of the voting power of Net Serviços.

Ownership of Net Serviços

As of March 31, 2003 our shareholders were:

- RBS, a media concern operating in southern Brazil, and its
affiliates,  Zero Hora Editora  Jornalistica S.A., or Zero Hora and               RBS
Interativa  S.A., or RBS Interativa.  Zero Hora owned 0.3% of our preferred  shares,  RBS
Interativa owned 2.8% of our               preferred  shares  and  RBS  directly  owned
 6.8% of our  common  shares  and  1.6% of our  preferred  shares,  together
              representing ownership of 5.6% of our total capital stock.
- Bradesplan,  a wholly owned  subsidiary of  Bradespar,  an
investment  vehicle under common  control with Banco  Bradesco S.A.
              Bradesplan owned 15.8% of our common shares, representing 6.4% of our total
capital stock.
- Bndespar,  a wholly owned subsidiary of Banco Nacional de
 Desenvolvimento  Econômico e Social, or BNDES.  Bndespar owned 8.4%               of our
common shares and 31.5% of our preferred shares, representing 22.1% of our total capital
stock.
- Globopar,  which holds shares directly and indirectly  through
Distel and Romapar,  owned 67.2% of our common shares and 31.2%               of our
preferred shares, representing 46.0% of our total capital stock.
- The public,  which owned less than 2.0% of our common  shares
and 32.6% of our  preferred  shares,  representing  19.9% of our               total
capital stock.

Through its ownership of a majority of our common shares, the only
class of shares with significant  voting rights,  Globopar, through Distel and Romapar,
 is able to control votes at meetings of our  shareholders,  except to the extent
otherwise  provided under our  shareholders   agreement,   which  is  described  under  Item
 7.  Major  Shareholders  and  Related  Party   TransactionsMajor ShareholdersShareholders Agreement.

Our Subsidiaries

We are a holding company with equity  interests in numerous
 companies that provide cable  television,  Internet and corporate data  transmission
 services.  Most of our  subsidiaries  were  formed to hold cable  operating  licenses
 issued by various  Brazilian municipalities.  In aggregate,  our  subsidiaries  hold 46
licenses,  consisting of 43 licenses for the provision of cable services and 3
licenses for MMDS. We manage the affairs of these  subsidiaries  on a day-to-day  basis
and generally  operate as one entity from a strategic, financial and operational
perspective.

Set forth in the table below is a list of our direct and indirect
operating subsidiaries as of March 31, 2003:

|Name of Subsidiary                                      | Direct Interest | Total Interest
|------------------------------------------------------- | --------------- | --------------
|                                                        | (%)            
|Multicanal Telecomunicações S.A                         | 86.00           | 100.00        
|Net Belo Horizonte Ltda(1)                              | 100.00          | 100.00        
|CMA Participações S.A                                   | 50.60           | 97.20         
|Net Brasília Ltda.(1)                                   | 100.00          | 100.00        
|Net Rio S.A                                             | 100.00          | 100.00        
|Net Recife Ltda.(1)                                     | 100.00          | 100.00        
|Net São Paulo Ltda                                      | 94.37           | 100.00        
|Net Campinas Ltda.(1)                                   | 100.00          | 100.00        
|Net Indaiatuba Ltda.(1)                                 | 100.00          | 100.00        
|Net São Carlos S.A.(1)                                  | 100.00          | 100.00        
|Net Franca Ltda.(1)                                     | 100.00          | 100.00        
|Net Sul Comunicações Ltda.(1)                           | 100.00          | 100.00        
|Vicom Ltda(1)                                           | 100.00          | 100.00        
|TV Cabo e Comunicações Jundiaí S.A                      | 50.00           | 50.00         
|Net Brasil S.A                                          | 40.00           | 40.00         
|Horizonte Sul Comunicações Ltda.(2)                     | -               | 100.00        
|DR  Empresa de Distribuições e Recepção de TV Ltda.(2) | -               | 100.00        
|Net Paraná Comunicações Ltda.(2)                        | -               | 100.00        
|Net Joinville Ltda.(2)                                  | -               | 100.00        
|Net Florianópolis Ltda.(2)                              | -               | 100.00        
|Net Curitiba Ltda.(2)                                   | -               | 100.00        
|Net Maringá Ltda.(2)                                    | -               | 100.00        
|Americapar Participações Ltda.(2)                       | -               | 100.00        
|Net Arapongas Ltda.(2)                                  | -               | 100.00        
|TV Cabo Criciúma Ltda.(2)                               | -               | 60.00         
|Net São José do Rio Preto Ltda.(3)                      | 0.01            | 100.00        
|Net Piracicaba Ltda.(3)                                 | -               | 100.00        
|Net Ribeirão Preto S.A.(3)                              | -               | 100.00        
|Net Baurú Ltda.(3)                                      | -               | 100.00        
|Net Goiânia Ltda.(3)                                    | -               | 100.00        
|Net Anápolis Ltda.(3)                                   | -               | 70.00         
|Net Campo Grande Ltda.(3)                               | -               | 100.00        
|Net Sorocaba Ltda.(3)                                   | -               | 100.00        
|Reyc Comércio e Participações Ltda.(3)                  | 0.50            | 100.00        

|(1) | Distel Holding S.A. holds one share.         
|--- | ---------------------------------------------
|(2) | Held through Net Sul Comunicações Ltda.      
|(3) | Held through Multicanal Telecomunicações S.A.

ITEM 5.      OPERATING AND FINANCIAL REVIEW AND PROSPECTS

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

Overview

We are the largest  operator of cable  television  systems in
Brazil,  based upon the number of subscribers  and homes passed. Our  network  currently
 operates  in  major  cities  located  throughout  Brazil,  including  five  of  Brazils
 largest  cities.  We substantially  completed  the  build-out  of our  network in 1998.
 Currently,  our  principal  business  is  providing  pay-television services,  including
 cable  television  under the NET brand name,  pay-per-view  programs and high-speed
 Internet  access under the Vírtua brand name.  We also offer corporate data
transmission services through our subsidiary, Vicom.

The  acquisitions we completed in 2000 had significant and varied
effects on our operating  results and financial  position in 2000, 2001 and 2002, such
that our historical  results of operations and financial  position for 2002 and 2001 are
not fully comparable with 2000.  See Item 3.  Key InformationSelected Financial Data, and
Acquisitions and Results of Operations below.

In 2002,  our  financial  condition  and  results of  operations
 were  significantly  and  adversely  affected by foreign and Brazilian  economic factors
and the depreciation of Brazilian real against the U.S. dollar.  Since  all
of our revenue is denominated in reais,  the  depreciation  in 2002 resulted in a lower
amount of funds in dollar terms being  available to us to support our significant
dollar-denominated debt service, programming and capital expenditure obligations.

We have taken a number of steps in  response to these  adverse
 developments.  In order to reduce the impact of exchange  rate variations on programming
 fees, we have entered into negotiations  with our programmers,  through Net Brasil,  to
convert  programming costs from U.S.  dollars to reais,  readjusted by IGP-M.  Although
we have not yet entered into definitive  agreements with most of our programmers,
 programmers  representing  approximately 80% of our programming costs have already
started accepting reais as payment for programming  costs.  This has already had a
positive  impact on our  financial  performance  for the first  quarter of 2003.  We
cannot assure you that agreements will be reached with each of our programmers to convert
our programming costs from U.S. dollars to reais.

In 2002,  we  maintained  our capital  expenditures  at 2001
 levels.  Going  forward,  we expect to maintain the level of the capital expenditures
 budgeted for 2003 and slightly increase the level of capital  expenditures  budgeted for
2004 and 2005, investing in areas that will support our growth.

During 2002,  due to weakness in our business and liquidity
 position,  we deferred to 2003, a significant  amount of payments due to equipment
 suppliers and to 2004 and 2005, a  significant  amount of payments due to  programmers.
 We started  paying  deferred fees to  equipment  suppliers  in  January  2003 and we
plan to  payoff  these  fees by the end of  2003.  We plan on  paying  deferred
programming fees during 2004 and 2005.

We are currently  pursuing a debt  restructuring to improve our
capital  structure and to allow us to grow operations.  We are seeking,  among others
 things,  to reduce the near term  debt-service  obligations  to levels that can be
serviced with operating cash flow  and  limit  the  impact  of  future  exchange  rate
 volatility  by  converting  a  portion  of our  dollar-denominated  debt  to
real-denominated debt.

Our consolidated  financial  statements included elsewhere in this
Form 20-F have been prepared under the assumption that we will continue as a going  concern.  Continuing
 adverse  conditions  in the  general  economic  environment  and the effect of those
 conditions  on our business  have had a negative  impact on our cash flows and results
from  operations  and  therefore  on our ability to make  scheduled principal  and
 interest  payments on our debt and on our ability to comply with certain  financial
 covenants  previously  established under our debt facilities and  instruments.  Because
of the  uncertainties as to the results of current  negotiations  with our lenders and
debt holders  regarding  the  restructuring  of our debt and  therefore as to the
adequacy of our  financial  resources to meet our anticipated  cash  requirements  for
the second  half of 2003 and future  periods,  there is  substantial  doubt  about our
 ability to continue as a going  concern. Our ability to continue as a going concern is
dependent upon,  among other things,  the  satisfactory conclusion of our debt
 restructuring  and our ability to generate  sufficient cash from operations and
financing  arrangements to meet our  obligations.  If the going  concern basis was not
 appropriate  for our  consolidated  financial  statements,  then  significant
adjustments  might be necessary in the carrying value of assets and liabilities,  the
revenues and expenses  reported,  and the balance sheet classifications used.

For a  discussion  of these and other  steps we have  taken to
 address  our  financial  condition  as well as  details of our outstanding debt, see Liquidity
and Capital Resources.

The Recapitalization

During the third quarter of 2002, our major shareholders  completed
our  recapitalization in the amount of approximately R$1.2 billion (US$399.9  million),
 corresponding to US$392.2  million,  net of issuance cost, which increased our equity
capital and reduced our debt.  The  recapitalization  included a Brazilian  offering  of
common and  preferred  shares and an  international  placement  of preferred shares.

The  recapitalization  was implemented  pursuant to an agreement
called the Protocol of  Recapitalization  of Globo Cabo S.A., which was  signed on April
10,  2002,  and  subsequently  amended  on April 30,  2002 and June 14,  2002,  among Net
 Serviços  and the following Net Serviços shareholders:

- Globo  Comunicações e Participações  S.A., or Globopar,  and its
two controlled  subsidiaries:  Roma  Participações  Ltda., or               Romapar, and
Distel Holding S.A., or Distel;
- Bradesplan Participações S.A., or Bradesplan, and Bradespar
S.A., or Bradespar;
- RBS Participações S.A., or RBS; and
- BNDES Participações S.A., or Bndespar,  a wholly owned
subsidiary of Banco Nacional de Desenvolvimento  Econômico e Social, or
              BNDES.

Our affiliate, Net Brasil S.A., or Net Brasil, signed the Protocol
of Recapitalization as an intervening consenting party.

The recapitalization involved the following steps:

- We issued  707,182,199  common and  1,040,584,048  preferred
 shares as result of a Brazilian  offering  and an  international               placement.
- Bndespar  delivered 1,000 of our  convertible  debentures due
2006 held by it, which  represented a total principal  amount of
              approximately  R$139.6  million  (US$45.6  million),  as  consideration
 for subscribing  preferred  shares at the public               offering price for a
share.
- Globopar  delivered 553 of our  convertible  debentures  due
2006 held by it, which  represented a total  principal  amount of
              approximately R$78.8 million (US$25.3 million),  as consideration for
subscribing preferred shares at the public offering               price for a share.
- Bradespar,  through a subsidiary,  delivered 130 of our
convertible  debentures due 2006 held by it, which represented a total
              principal amount of approximately R$18.3 million (US$6.1 million),  as
consideration for subscribing  preferred shares at               the public offering
price for a share.
- Globopar and its affiliates converted an advance for future
 capitalization,  or AFAC, advanced in the first half of 2001, and               valued
at R$393.2 million (US$126.8  million),  into shares at the public offering price for a
share. This did not result               in new cash proceeds to Net Serviços  since the
funds  represented  by the AFACs were  previously  advanced by Distel and
              Globopar.
- Bradesplan  converted its loans to us, valued at R$79.5 million
 (US$26.5  million),  into shares at the public offering price               for a share.
 This did not result in new cash proceeds for Net Serviços.
- RBS converted its loans to us, valued at R$18.5  million
 (US$6.2  million),  into shares at the public  offering  price for a
              share, and also converted loans to us by RBS Interativa,  an affiliate of
RBS, valued at R$16.5 million (US$5.5 million),               into shares at the public
offering price for a share.  This did not result in new cash proceeds for Net Serviços.
- Bndespar  and RBS and their  affiliates  purchased  for cash
 shares at the public  offering  price for a share for a total of               R$174.7
million (US$58.3 million).
- Globopar and its affiliates converted all of the deferred
programming fees owed to it by Net Serviços  (approximately  R$155.2
              million  (US$49.8  million))  into  shares  at the  public  offering  price
for a share.  This did not  result in new cash               proceeds for Net Serviços.
- RBS satisfied R$2.2 million (US$0.7  million) of its total
 commitment by converting all of the deferred  programming fees and
              services  rendered fees owed to it by Net Serviços  into shares at the
public  offering  price for a share.  This did not               result in new cash
proceeds to Net Serviços.
- In connection with the Brazilian  offering,  other holders of
our convertible  debentures due 2006 had the right to deliver or      convert their
convertible  debentures as consideration for subscribing  preferred shares at the public
offering price for a share.      Holders delivered 431 such convertible debentures,
 representing a total principal amount of approximately R$60.8 million (US$20.3
     million) and  converted  522 such  convertible  debentures,  representing  a total
 principal  amount of R$68.3  million  (US$22.8      million).
- The public  purchased for cash shares at the public offering
price for a share for a total of R$17.6 million (US$5.9  million).

Acquisitions

We completed three significant acquisitions in 2000.

In May 2000, we acquired the remaining  50% of Unicabo that we did
not already own. We financed  this  acquisition  by issuing 40,000,000  shares of
preferred stock,  having a market value at the acquisition date of US$61.6  million,  and
assuming  approximately US$21  million of  Unicabos  debt.  Unicabo was a holding
 company that  controlled  and managed  cable  operators in the state of São Paulo.  We
recorded US$73.8 million of goodwill in connection with this acquisition.

In July 2000, we acquired  100% of MDS  Telecomunicações  S.A.,
 which held 100%  ownership in Vicom,  a company that provides nationwide data
transmission  services to the corporate sector in Brazil by using satellite and
terrestrial  technologies.  We financed this acquisition by issuing 28,648,365 shares of
preferred stock,  having a market value at the acquisition date of US$42 million,  and
assuming approximately US$43 million of Vicoms debt.  We recorded goodwill of US$48.2
million in connection with this acquisition.

In September  2000, we completed the  acquisition  of Net Sul
Holding  S.A.,  the 99.99% owner of Net Sul, the second  largest cable  television
 operator in Brazil.  The Net Sul acquisition  significantly  increased our subscriber
base and provided us access to markets in southern Brazil,  a region that we previously
had not served.  We financed this  acquisition by issuing  387,121,852  shares of
preferred stock and 123,989,259  shares of common stock,  having a total market value of
US$719.3  million at the acquisition  date, and assuming  approximately  US$147  million
of Net Suls debt. We accounted for this  acquisition as a purchase,  and we
 consolidated the results of operations of Net Sul with our results of operations  from
September 1, 2000. We recorded  goodwill of US$795.6  million in connection with this
acquisition.

Since these  acquisitions  were made, we have been working  towards
the  integration  of the new  operations.  During 2001, we completed the consolidation of
administrative and commercial policies,  including conforming  disconnection  policies
and prices. Also, we started offering  corporate data  transmission  services that take
advantage of our extensive fiber and coaxial network.  Currently, we are improving and
integrating the systems to these operations.

Critical Accounting Policies

An  accounting  policy is critical if it is important  to our
 financial  condition  and  results,  and  requires  significant judgment and estimates
on the part of management in its implication.

We review the  accounting  policies we use in reporting our
 financial  results and evaluate our estimates and judgments on an on-going basis. We
base our estimates and  assumptions on historical  experience,  industry trends and other
factors that we believe to be reasonable  under the  circumstances.  Actual results may
vary from what we anticipate and different  assumptions or estimates about the future
could change our reported  results.  We believe the following  accounting  policies are
the most critical to us. We describe our significant  accounting  policies,  including
the critical  accounting  policies  discussed  below,  in note 3 to our  consolidated
financial statements.

Impairment of Goodwill

Effective  January 1, 2002, we adopted SFAS No. 142,  Goodwill  and
Other  Intangible  Assets. In  accordance  with SFAS No. 142,  on  January 1, 2002 we
ceased to  amortize  goodwill  arising  from  acquisitions  completed  prior to July 1,
 2001.  In lieu of amortization, we were required to perform an initial impairment review
of our goodwill in 2002.

In  determining  impairments,  management  must make  significant
 judgments  and  estimates to calculate the fair value of an investment.  Fair value is
the amount at which the asset could be bought or sold in a current  transaction  between
willing parties and may be estimated  using a number of techniques,  including  quoted
market prices or valuations by third  parties,  comparison to market multiples,
 comparison  of similar  recent  sales  transactions  and  discounted  cash flows.
 Discounted  cash flow is  calculated  by estimating  future cash flow streams,  applying
 appropriate  discount rates to determine the present values of cash flow streams,  and
then  assigning  probabilities  to the various  cash flow  scenarios.  The fair value of
the asset could be different  using  different estimates and assumptions in these
valuation techniques.

During 2002,  we completed the required  tests for goodwill and
 indefinite  lived  intangible  assets.  We  established  four reporting  units for the
purposes of this  evaluation,  the consumer  services of Region I, Region II and Region
III and the  corporate services of Vicom.  These tests  indicated  that an impairment
 loss must be recognized at the goodwill from both the Net Sul and Vicom acquisitions.
 The evaluation  process was validated and the  assumptions  and procedures in the model
were  considered  acceptable and properly constructed by our external consultants.

In the second  quarter of 2002, we recognized a non-cash  charge of
US$367.7  million to reduce the carrying value of goodwill associated  with the Net Sul
and Vicom  acquisitions.  Since the tests were  performed for the first time in 2002,
 reflecting a change in accounting principles, the impairment losses were recognized as
non-operational.

We also  concluded  the  measurement  tests for fiscal year 2002 and
 recognized  a non-cash  charge that reduced the carrying value of  goodwill  associated
 with the Vicom  acquisition  in the amount of US$2.8  million.  This was  recorded  as a
 component  of operating income.

Depreciation of property and equipment

At December 31, 2002, the carrying value of our property and
equipment and other cable related long-term  assets,  net totaled $349.9  million,  which
 represents  53.0% of our total assets.  This carrying value includes costs  capitalized
for labor and overhead incurred in connection  with the  installation  of cable systems
and is stated at cost.  The  application of our property and equipment accounting
 policies  incorporates  estimates,  assumptions and judgments by management  relative to
the  capitalized  costs and useful lives. We depreciate our cable assets using the
straight-line  method over an eight-year  estimated  remaining  economic useful life of
the assets,  resulting in an 8.3%  depreciation  rate. In 2002, we changed the estimated
useful lives of our cable plant to reflect our evaluation of the positive  impact of new
services  that could be provided  through our cable  network,  in  conjunction  with
industry practice.

Changes in  circumstances  such as  technological  advances,
 changes to our  business  model or  changes in our  capital  and investment  strategy
can result in the actual useful lives differing from our estimates leading  management to
revise useful lives that can be shortened for certain  asset  categories and extended for
others  depending on  technological  decisions  made by us. Set top boxes are an example
of an asset item subject to significant  technological  changes.  On the other hand, new
set top boxes  associated  with new equipment  allowing signal  compression  may allow us
to provide new value added services and extend the remaining  useful lives of our fiber
optic  assets.  In those cases where we  determined  that the useful life of property and
 equipment  should be reviewed,  we would depreciate the net book value over its revised
 remaining useful lives thereby  increasing or decreasing  depreciation  expenses. During
2000, we made  significant  investments in building  two-way  communication  to allow
 deployment of our new broadband  Internet access  services.  If  circumstances  arise,
we may review and extend the remaining  useful lives of our cable plant to reflect
further technological enhancements.

In light of the  recent  upgrades  made to the cable  plant in
 connection  with  building  a two-way  communication,  to allow introduction of our
broadband  Internet  services,  we performed a study of the estimated  useful lives of
specified items of our cable transmission  network. Our management,  based on an external
 independent-study,  decided to change the estimated economic useful lives of specified
 asset  categories,  as of January 1, 2002.  Accordingly,  the  depreciation  rate of the
net book value of the  following items has been revised:

|Description   | Prior Useful Life | Revised Useful Life | Prior Depreciation Rate Per Year | Revised Depreciation Rate Per Year
|------------- | ----------------- | ------------------- | -------------------------------- | ----------------------------------
|Cable network | 5-8               | 12-15               | 12.5%-20%                        | 6.67%-8.33%                       
|Optic fiber   | 10                | 15                  | 10%                              | 6.67%                             
|Decoders      | 8                 | 10                  | 12.5%                            | 10%                               
|Cable modem   | 8                 | 10                  | 12.5%                            | 10%                               

Contingent liabilities

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

We are subject to various  claims,  legal and labor  proceedings
 covering a wide range of matters  that arise in the ordinary course of business
 activities.  We accrue reserves for legal  proceedings  that our subsidiaries and we are
party to when we determine the losses  are  probable  and can be  reasonably  estimated.
 Our  judgment  is always  based on the  opinion  of our  external  legal advisors.
 Reserve  balances  are  adjusted  to account for  changes in  circumstances  for
 ongoing  issues and the  establishment  of additional  reserves  for emerging  issues.
 While we believe  that the current  level of reserves is  adequate,  changes in the
future could impact these determinations.

Recent Accounting Pronouncements

In May 2002,  the FASB issued SFAS No.145,  Rescission of FASB
 Statements No. 4, 44 and 64,  Amendment of FASB Statement No. 13, and  Technical
 Corrections.  SFAS No.  145  eliminates  the  requirement  under  SFAS No. 4,  Reporting
 Gains and Losses  from Extinguishment  of  Debt,  to report  gains  and  loses  from
 extinguishments  of debt as  extraordinary  items in the  statement  of operations.
 Accordingly,  gains or losses from  extinguishments  of debt for fiscal years  beginning
 after May 15, 2002 are not to be reported as extraordinary  items unless the
 extinguishment  qualifies as an extraordinary item under the provisions of APB Opinion
No. 30,  Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business,  and  Extraordinary,  Unusual and Infrequently  Occurring Events
and Transactions. Upon adoption of this  pronouncement,  any gain or loss on
extinguishment of debt previously  classified as an  extraordinary  item in prior periods
 presented that does not meet the criteria of APB Opinion No. 30 for such  classification
 should be  reclassified  to conform to the  provisions  of SFAS No. 145. The  Statement
 also amends SFAS No. 13, Accounting  for Leases, to require  sale-leaseback
 accounting for certain lease  modifications  that have economic  effects that are
similar to sale-leaseback  transactions and amends other existing  authoritative
 pronouncements to make various technical corrections, clarify meanings,  or describe
their applicability  under changed conditions.  Application of SFAS No. 145 did not
impact our financial statements.

In June 2002, the FASB issued SFAS No. 146,  Accounting for
Disposal  Obligations,  which became effective for us beginning January 1, 2003. SFAS
No. 146 supersedes  EITF Issue No. 94-3 Liability  Recognition  for Certain  Employee
 Termination  Benefits and Other Costs to Exit an Activity  (including  Certain Costs
 Incurred in a  Restructuring).  SFAS No. 146 addresses the  accounting for and
disclosure of costs to terminate an existing contractual  obligation  (including but not
limited to operating leases),  incremental direct and other costs associated with the
related  disposal  activity and termination  benefits  (severance pay) provided to
employees pursuant to a one-time  benefit  arrangement  that does not  constitute a
 pre-existing  or  newly-created  ongoing  benefit plan.  The adoption of SFAS No. 146
had no impact on our consolidated financial position or results of operations.

In November  2002, the FASB issued FASB  Interpretation  No. 45,  Guarantors
 Accounting  and  Disclosure  Requirements  for Guarantees,  Including  Indirect
 Guarantees and  Indebtedness  of Others (an  interpretation  of FASB Statements No. 5,
57 and 107 and Rescission of Interpretation  No. 34), or FIN 45. This  interpretation
 elaborates on the disclosures to be made by a guarantor in its interim and annual
financial  statements about its obligations  under certain  guarantees that it has
issued.  It also clarifies that a guarantor is required to recognize,  at the inception
of a guarantee,  a liability for the fair value of the  obligation  undertaken in issuing
the  guarantee.  This  interpretation  does not  prescribe a specific  approach  for
 subsequently  measuring  the  guarantors recognized  liability  over the  term of the
 related  guarantee.  FIN 45 also  incorporates,  without  change,  the  guidance  in
FASB Interpretation  No. 34,  Disclosure  of Indirect  Guarantees  of  Indebtedness  to
 Others,  which is being  superseded.  The initial recognition and initial  measurement
 provisions of this  interpretation  are applicable on a prospective basis to guarantees
issued or modified  after  December 31, 2002,  irrespective  of the  guarantors  fiscal
 year-end.  The  disclosure  requirements  of FIN 45 are effective for financial
 statements of interim or annual  periods ending after  December 15, 2002.  Our financial
 statements  have not been impacted by the application of FIN 45.

In December 2002, the FASB issued SFAS No. 148,  Accounting for
Stock-Based  Compensation - Transition and Disclosure, which amends SFAS No. 123, to
provide  alternative  methods of transition for a voluntary change to the fair value
based method of accounting for  stock-based  employee  compensation.  In  addition,  SFAS
No. 148 amends the  disclosure  requirements  of SFAS No. 123 to require prominent
 disclosures  in both annual and interim  financial  statements  about the method used on
reported  results.  The  disclosure provisions  of SFAS No.  148 are  effective  for
 fiscal  years  ending  after  December  15,  2002 and had no impact on our  financial
statements and accompanying footnotes.

In  January  2003,  the  FASB  issued  FASB  Interpretation  No.
 46,  Consolidation  of  Variable  Interest  Entities  - and Interpretation  of ARB No.
 51, or FIN 46. This  interpretation  of  Accounting  Research  Bulletin  No. 51,  Consolidated
 Financial Statements,  addresses  consolidation by business  enterprises of variable
interest entities,  which have one or both of the following characteristics:

- The  equity  investment  at risk is not  sufficient  to permit
 the  entity  to  finance  its  activities  without  additional      subordinated
 financial support from other parties,  which is provided through other interests that
will absorb some or all of the      expected losses of the entity.
- The equity investors lack one or more of the following essential
characteristics of a controlling financial interest:
- The direct or indirect ability to make decisions about the entitys
activities through voting rights or similar rights,
- The  obligation to absorb the expected  losses of the entity if
they occur,  which makes it possible for the entity to finance      its activities, or
- The right to receive the expected  residual  returns of the
entity if they occur,  which is the  compensation  for the risk of      absorbing the
expected losses.

FIN 46 applies  immediately to variable  interest  entities created
after January 31, 2003, and to variable  interest entities in which an enterprise
 obtains an interest  after that date.  It applies in the first fiscal year or interim
 period  beginning  after June 15, 2003 to variable  interest  entities in which an
 enterprise  holds a variable  interest that it acquired  before  February 1, 2003.  FIN
46  applies to public  enterprises  as of the  beginning  of the  applicable  interim  or
annual  period,  and it applies to non-public enterprises as of the end of the applicable
annual period.

FIN 46 may be applied  prospectively  with a  cumulative-effect
 adjustment  as of the date on which it is first applied or by restating previously
issued financial  statements for one or more years with a cumulative-effect  adjustment
as of the beginning of the of the first year restated.  We are still evaluating the
impact of this  interpretation  on our financial  statements.  However,  we do not
believe that the adoption of FIN 46 will have a material impact on our results of
operations or financial position.

Sources of Revenues

When our cable  television  systems  began  operations,  the
 revenues  from  sign-on and hook-up  fees  represented  the most significant  portion of
our net revenues,  as we were growing  rapidly from a small existing  subscriber  base.
As our subscriber  base has grown in relative  terms,  aggregate  monthly  subscription
 fee revenues have increased  significantly,  while sign-on and hook-up revenues  have
 declined  significantly.  The  combination  of these two trends has  changed  our mix of
 revenues,  such that  monthly subscription  fee  revenues  have become the dominant
 portion,  and sign-on and hook-up fee  revenues  constitute  a relatively  minor
percentage of our net revenues.

- Subscription  fees. We charge  subscribers  to our cable
 television  services a monthly fee for cable  programming  services.
              Subscription  fees are recorded in the month the service is  provided.
 They are also  denominated  in reais and adjusted               for inflation on an
annual basis.  Substantially  all of our revenues  come from these monthly  subscription
 fees. As of               December 31, 2002, 49.8% of our subscribers were enrolled in
our Advanced programming package,  which is the costliest of               our available
packages.
- Sign-on and hook-up fees. We also charge  subscribers a fee for
the  installation of the equipment and  connections  necessary               to receive
our cable  television  service.  Sign-on and hook-up fees billed to new subscribers are
deferred to the extent               that they exceed  related  direct  selling  costs.
 The deferred  fees are  amortized  to revenue  over ten years,  which
              represents the estimated average period that we expect subscribers to
remain connected to our cable network.
- Pay-per-view  fees.  In addition to  subscription  fees for our
 programming  packages,  we charge  separate fees for specific               pay-per-view
programs, such as sporting events.
- Internet  access  charges.  We charge  subscribers  to our Vírtua
 broadband  Internet  access  service a monthly  fee.  As of               December
 2002, we had  approximately  55,700  Vírtua  subscribers.  During the second half of
2002,  we began  receiving               monthly fees from ISPs based on the number of
 subscribers  through Vírtua to their  respective  Internet  services.  See
              Item 4.  Information on the CompanyOur ServicesHigh-speed Internet
Access.
- Telecommunication  service fees. Vicom charges corporate
 customers a fee for the provision of data transmission  services via
              satellite,   dedicated  leased  lines  and  virtual  private   networks.
  These  revenues  also  consist  of  fees  from               telecommunication
 engineering services, the provision of technical assistance and corporate network
consulting services,               and revenues from the sale of satellite data
communication systems.

In 2004, we plan to begin to offer digital cable services to our
 subscribers  in specified  prosperous  areas.  Digital cable will provide subscribers
with additional  programming  options and services,  such as near  video-on-demand.  We
do not expect material revenues from digital cable services during 2004 and 2005.

Operating expenses

Our most significant operating expenses are:

- Programming  purchase costs.  Programming  purchase costs
consist of (a) programming  fees paid by our operating  subsidiaries
              through Net Brasil,  which is owned 40% by us and  indirectly  owned 60% by
 Globopar,  to  Brazilian  and  international               programmers,  including
Globosat,  which is wholly owned by Globopar, and (b) additional service fees paid to Net
Brasil.               These  costs  vary with our total  number of  subscribers  and the
 number of  subscribers  for our  various  programming               packages.  The
 programming  fees we must pay are  generally  highest with respect to our Advanced
 programming  package.               During 2002, our  programming  costs were
 substantially  denominated in U.S.  dollars.  See Item 4.  Information on the
              CompanyPay-TelevisionProgramming Sources for a discussion of our
programming arrangements.
- Infrastructure  costs.  Infrastructure  costs include  expenses
for utility pole rentals,  electricity,  maintenance and other               costs that
 increase as a function of the  development  of our network.  Infrastructure  costs also
include  costs in our               customer service, management, billing and information
systems.
- Depreciation  of cable network.  Due to the  investments we have
made in our cable and broadband  networks,  and the increased               size of our
network  resulting from the Net Sul acquisition in September 2000, we face  significant
 annual  depreciation               costs.  Depreciation  costs  relating  to our
 network  were  US$59.8  million  and  US$123.2  million  in 2002 and 2001,
              respectively.  Our  depreciation  costs are affected by changes in the real-U.S.
 dollar  exchange  rate. We maintain all               accounting  records in functional
reais and we translate amounts to U.S. dollars for reporting  purposes.  An increase in
              the foreign exchange rate (i.e., a depreciation of the real) will result in
lower depreciation  amounts when expressed in               U.S. dollars.  Despite the
increase in our depreciation  charges,  mainly as a result of Net Sul, our total
 depreciation               cost in 2002 expressed in U.S.  dollars was partially  offset
by the larger  depreciation of the real,  which occurred in               2002.  See Depreciation
and Amortization.

Depreciation and Amortization

We  depreciate  our cable network and fiber optic cable assets using
the straight  line method,  over the  estimated  economic useful  life of the assets.  In
1998 and 1999,  we used an  estimated  economic  useful life of 5 years for both our
cable  network and fiber  optic  cable,  which  resulted  in a 20%  annual  depreciation
 rate in  respect of such  assets.  In 2000 and 2001,  we used an estimated useful life
of 8 years for our cable network and 10 years for our fiber optic cable,  resulting in
annual  depreciation rates of 12.5% and 10%,  respectively.  Since  January 1, 2002, in
view of  technological  advances that permit us to provide a greater range of value-added
 services through our network,  as well as improved  network  maintenance  techniques,
 we have used an estimated useful life of 12 years for our cable  network and 15 years
for our fiber optic  cable,  resulting  in annual  depreciation  rates of 8.3% and 6.7%,
respectively.

We  performed  studies  of the  estimated  useful  lives of our
 cable  network  and  fiber  optic  cable  in light of  recent technological
developments.  See Critical Accounting PoliciesDepreciation of property and equipment.

State Value-added Tax

Law No.  8,977,  the  main  Brazilian  statute  governing  the
 provision  of  cable  services,  classified  cable  television subscription  services as
 telecommunications  services  and thus made them subject to the  value-added,  or
ICMS,  tax levied by the various  Brazilian  states.  The ICMS is a tax  typically  imposed
at a rate of 25% on the  operators  telecommunications  revenues.  In 1995,  most of the
 states  in which our cable  systems  are  located  set the  bases  and  rates of the
ICMS tax  applicable  to cable television  operations at a rate  calculated as a 25% tax
to be paid on 20% of the  aggregate of  subscription  revenue and sign-on and hook-up
fees.  These ICMS bases and rates generally remained in effect until October 1999.

In October 1999,  the National Tax Policy Council  issued  Agreement
No. 57/59,  to which all of the states in which our cable subsidiaries  operate,  except
Rio Grande do Sul,  have adhered.  Agreement  No. 57/59  authorized a reduction in the
basis of the ICMS tax as applied to providers of subscription  television  services.
 Based on Agreement No. 57/59, the rate of the ICMS tax on sales and services  for the
year ended  December 31, 2000 was 7.5%,  and is 10% from  January 1, 2001  onward.  The
State of Rio Grande do Sul is applying the ICMS tax to us at a rate of 12%, the legality
of which we are  contesting.  Pending the outcome of this legal dispute,  we have fully
 accrued  and paid into escrow  amounts at the rates of 7.5% for 2000 and 10% for 2001
and 2002.  We include the ICMS tax in the subscription fees payable by our subscribers,
including the 12% rate for subscribers in Rio Grande do Sul.

Income Taxes

Income taxes have been provided for in accordance with the liability
 method.  Valuation  allowances are established to reduce deferred tax assets while we
and our subsidiaries are accumulating losses and realization is not yet assured.

Results of Operations

Functional and reporting currencies

While we maintain our  financial  records in reais,  our  reporting
 currency is the U.S.  dollar.  We adopted the real as our functional  currency in 1998.
 Changes in the value of the real  against the U.S.  dollar have had and will  continue
to have  material effects on our results of operations  and the value of our assets and
 liabilities  denominated  in reais.  We discuss these effects in detail in  Effects
 of  Inflation  and  Exchange  Rate  Fluctuations  later in this  Item 5.  Operating
 and  Financial  Review and Prospects.

EBITDA

We present  adjusted  EBITDA in this Form 20-F  because  it is a
 material  covenant  under  some of our debt  facilities  and instruments  and it has been
 determined  in the  manner in which it is  required  to be  calculated  under  these
debt  agreements.  As calculated by us, adjusted EBITDA represents the sum of: (a) net
income (loss);  (b) financial income  (expenses),  net; (c) income tax benefit (expense);
 (d) depreciation and amortization;  (e) non-recurring  severance charges; (f) gain
(loss) on translation,  net; (g) monetary indexation,  net; (h) loss on exchange rate,
net; (i) other non-operating  expenses, net; (j) minority interests in results of
consolidated  subsidiaries;  and (k) equity in results of  investees  (i.e.,  companies
 in which we have  between a 20% and 50% equity interest). We  believe  adjusted  EBITDA is
a standard  financial
 statistic commonly reported and widely used by analysts and other interested  parties in
the subscription  television  industry.  Adjusted EBITDA should not be considered  in
isolation or as a substitute  for net income or loss,  as an indicator of operating
 performance  or as an alternative  to cash flow as a  measure  of  liquidity.  Adjusted
 EBITDA  also  does not  represent  funds  available  for  dividends, reinvestment or
other  discretionary  uses. Because adjusted EBITDA is not determined in accordance with
U.S. GAAP,  adjusted EBITDA as calculated and reported by other companies may not be
comparable to adjusted EBITDA as calculated and reported by us.

On  December  31,  2002,  we were  not in  compliance  with  the
 financial  covenants  related  to our  debt  facilities  and instruments.  See Debt
Financing for a discussion of the financial covenants related to our debt facilities and
instruments.

|                                                           | Net Serviços de Comunicação S.A.
Reconciliation of Adjusted EBITDA
For the Year Ended December 31,
|---------------------------------------------------------- | --------------------------------------------------------------------------------------------------
|                                                           | 1998                                                                                              
|                                                           | (U.S. dollars in thousands)                                                                       
|Net income (loss)                                          | US$(270,152)                                                                                      
|Financial income (expenses), net                           | 83,351                                                                                            
|Income tax benefit (expense)                               | (5,140)                                                                                           
|Depreciation and amortization                              | 240,996                                                                                           
|Non-recurring severance charges                            | 0                                                                                                 
|Gain (loss) on translation, net                            | 0                                                                                                 
|Monetary indexation, net                                   | 0                                                                                                 
|Loss on exchange rate, net                                 | 55,154                                                                                            
|Other non-operating expenses, net                          | 1,582                                                                                             
|Minority interests in results of consolidated subsidiaries | (3,065)                                                                                           
|Equity in results of investees                             | 12,679                                                                                            
|                                                          
|Adjusted EBITDA                                            | US$115,405                                                                                        

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

Subscription revenues

Subscription  revenues consist of monthly  subscription fees paid by
pay-television  subscribers.  These revenues decreased by 15.4% to US$433.5  million in
2002 from US$512.3  million in 2001. The decrease was  principally  due to the
 depreciation of the real. Subscription  revenues  remained fairly stable in local
currency.  Average revenue per subscriber in U.S. dollars decreased by 11.5% in 2002
compared to 2001 despite  increases in monthly  subscription  fees in reais that took
effect in June and September 2002. Our churn in 2002 was 18.1%  compared to 22.8% in
2001.  The  decrease  in churn was  primarily  due to the  implementation  of a more
 selective screening process when determining  whether to accept new subscribers,  the
use of retention islands, a program that utilizes skilled customer service
 representatives to target subscribers that could potentially  disconnect due to
 dissatisfaction,  and our heightened focus on customer satisfaction, such as the
outsourcing of our customer service centers.

Sign-on and hook-up fee revenues

Sign-on and hook-up fee revenues  decreased by 54.6% to  US$9.3 million
 in 2002 from  US$20.5 million  in 2001. This decrease was  primarily due to the
 depreciation  of the real against the U.S.  dollar and a decrease in the number of
subscriber  installations during 2002.

In  accordance  with U.S.  GAAP,  we defer and  amortize  over a
period of 10 years that  portion of sign-on  and  hook-up fee revenues that exceeds
related direct selling  expenses.  This deferral reduces  reported  revenues as compared
with cash flow generated by operations.  On the other hand,  reported  revenues in
subsequent  periods are increased by the amortization of deferred sign-on and hook-up
fees.

Telecommunication service revenue

Telecommunication  service  revenue  consists of revenue
 representing  monthly fees we receive from corporate  customers for data  transmission
 services we offer through Vicom.  Telecommunication  service revenue  decreased by 24.1%
to US$18.3 million in 2002 from US$24.1  million in 2001 due  primarily  to the renewal
of contracts  with  corporate  costumers  for amounts less than what these customers
 were  previously  paying  and  the  effect  of  the  depreciation  of  the  real
 against  the  dollar.  We  began  offering telecommunication services to corporate
customers in the third quarter of 2000 following our acquisition of Vicom in July 2000.

Other services

Other  services  revenues  consist of  revenues  from  pay-per-view,
 monthly  subscription  fees paid by  subscribers  to our broadband  service,  Vírtua,
 sales  of  our  programming  guide,   programming  package  upgrades,   technical
 support  services  and disconnection/reconnection  services.  Revenue from other
services  decreased to US$26.9  million in 2002 from US$31.0 million in 2001. The
decrease was primarily due to the  depreciation of the real against the U.S.  dollar.
 This decrease offset the positive effects of the increase in the number of broadband
 subscribers  and the  improvement in our subscriber  base mix, which had a positive
 impact on broadband revenues.  Our Vírtua subscriber active base grew by 4.4% to 55,700
at December 31, 2002 from 53,300 at December 31, 2001.

A substantial part of our  pay-per-view  revenues each year are
derived from our transmission of the state and national soccer championships,  which
usually begin in March and August,  respectively.  Therefore, our pay-per-view revenues
tend to be seasonal, with a disproportionate percentage recorded in the first and third
quarters of each year.

Taxes and other deductions from revenues

Taxes and other deductions from revenues consist of:

- the ICMS tax, which is levied at rate of 10% on  subscription
 revenues and sign-on and hook-up fees in each state in which we               operate
(other than Rio Grande do Sul, where the rate is 12%);
- the ISS, a municipal tax on services that is levied at a maximum
rate of 5% (some  municipalities have lower rates) on certain               services such
as maintenance and other technical activities;
- a federal tax related to the PIS that is levied at a rate of
0.65% on total revenues;
- the COFINS, a federal social security tax that is levied at a
rate of 3% on total revenues; and
- the Fundo de Universalização dos Serviços de Telecomunicações,
 or Fust, and the Fundo para o Desenvolvimento  Tecnológico das               Telecomunicações,
 or Funttel,  which are computed based on gross service  revenues,  excluding  canceled
sales and other               taxes over this same base, and which are levied at the
rates of 1.0% and 0.5%, respectively.

Taxes and other  deductions from revenues are directly linked to our
volume of subscription  sales.  These expenses  decreased by 10.8% to US$84.5  million in
2002 from US$94.7  million in 2001, as a result of the  depreciation  of the real. This
decrease offset the  increases  in  customer  disconnections  and  cancellations  and the
 impact of the  increase  in the ICMS tax rate on our  Virtua operations in the State of São
Paulo.

Programming and other direct operating costs

Programming  and other direct  operating  costs consist  principally
of programming  fees paid through Net Brasil to Brazilian and international  programmers,
 including  Globosat,  customer service expenses,  network  maintenance  expenses,  pole
rental charges payable to utility  companies,  and payroll and related  charges.
 Although  programming and other direct  operating  expenses in local currency were
higher in 2002 when compared to 2001, in U.S. dollars,  these costs decreased by 10.9% to
 US$235.5 million  in 2002 from US$264.3  million in 2001 due to the real  depreciation.
 As a  percentage  of net  operating  revenues,  programming  and other direct operating
costs increased to 58.3% in 2002 compared to 53.6% in 2001.

Our  programming  costs  decreased by 5.5% to US$144.5  million in
2002 from  US$152.9  million in 2001.  This  decrease was a result of the higher exchange
rate in 2002. Our programming  costs are affected by the number of subscribers,
 programming  upgrades by existing subscribers, the addition of more channels to our
line-up and the exchange rate of the real to the U.S. dollar.

Other direct  operating costs decreased by 18.3% to US$91.0  million
in 2002 compared to US$111.4  million in 2001.  Increases in other direct  operating
 costs such as pole rental and network  maintenance  expenses  were offset by the
 depreciation  of the real against the U.S. dollar.

Selling, general and administrative expenses

Selling,  general and  administrative  expenses  decreased by 29.0%
to US$91.3 million in 2002 from US$106.1  million in 2001. The decrease  was  primarily
 attributable  to the  reduction in  marketing,  personnel  and office  expenses to
better align our costs structure to our  liquidity  position.  As a  percentage  of net
 operating  revenues,  selling,  general and  administrative  expenses remained fairly
stable at 22.6%.

Depreciation and amortization

Depreciation and amortization  expenses decreased by 65.2% to US$78.7 million
 in 2002 compared to  US$226.1 million  in 2001. This decrease was caused by the higher
 exchange rate and the revision of the estimated  useful lives of some of our main
assets,  such as our network and decoders.

Monetary indexation expense, net; Loss on exchange rate, net

Monetary  indexation  expense,  net,  consists of monetary
 correction  charges on  real-denominated  debt, which  represented approximately  32.1%
and 49.4% of our total debt in 2002 and in 2001,  respectively.  As described below under
 Liquidity and Capital ResourcesDebt  Financing, our  real-denominated  debt includes
 convertible  debentures,  of which the principal amounts are adjusted periodically
 based on the IGP-M  inflation  index,  a Brazilian  inflation  index  calculated on a
monthly basis by reference to price increases in a variety of goods and services
nationwide.

Loss on exchange rate, net, consists of foreign exchange gains and
losses on U.S.  dollar-denominated  debt, which represented approximately  67.9% and
50.6% of our total debt in 2002 and in 2001,  respectively.  We record foreign exchange
losses or gains on our U.S. dollar-denominated debt as a function of the U.S. dollars
appreciation or depreciation in relation to the real.

Our  combined  monetary  indexation  expense,  net, and loss on
exchange  rate,  net,  was  US$160.0 million  in 2002, a 27.8% increase  from  US$125.2
 million  in 2001.  This  increased  combined  expense  and loss was  mainly  due to the
fact that the  reals depreciation  against  the  dollar  was  significantly  higher in
2002 than in 2001.  Annual  inflation  as  measured  by the IGP-M was approximately
 25.3% in 2002 compared to  approximately  10.8% in 2001, and the real lost 52.3% of its
value against the U.S. dollar in 2002, compared to 18.7% in 2001.

Financial expenses

Financial  expenses  consist  principally of interest  payable on
our  outstanding  debt;  amortization  of financial  charges associated with the issuance
of debt instruments;  the Contribuição Provisória sobre Movimentações Financeiras,  or
CPMF, a federal tax on financial  transactions  levied at a rate of 0.38% on withdrawals
 from checking  accounts;  and PIS and COFINS,  taxes on financial revenues  derived
 from  short-term  investments.  Financial  expenses  increased  by 33.1% to US$174.8
 million in 2002 from  US$131.3 million in 2001.  This  increase  was  primarily  due to
the  recording  of an IOF (tax on  financial  transactions)  tax  provision on
transactions with related companies,  in the amount of  US$34.7 million,  to provide for
potential tax liabilities.  This was necessary given certain recent adverse  decisions in
the Tribunal  Regional de Justiça  (Regional Court) and the restatement of the AFACs made
to us by some of our major shareholders prior to the recapitalization.

Financial income

Financial income consists of income on hedge positions and
short-term  investments,  as well as penalty and interest  payments we collect  from
 subscribers  who are late in their fee payments to us.  Financial  income  increased to
US$20.2  million in 2002 from US$17.1 million in 2001.  The increase was primarily due to
gains from hedge positions.

Equity in results of investees

Equity in results of  investees  reflects  our share of gains and
 losses of  subsidiaries  in which we do not hold a majority stake.  Equity in results of
investees was a loss of US$1.2  million in 2002  compared to a loss of US$36,000 in 2001.
 This result was principally attributable to higher losses incurred by our subsidiary Net
Brasil during 2002.

Income tax expense

In 2002, we recorded income tax expenses of US$4.4 million compared
to income tax expenses of US$1.4 million in 2001.

Cumulative effect of accounting change

In January 2002,  we adopted SFAS,  No. 142,  which  requires
 companies to stop  amortizing  goodwill and certain  intangible assets with an
indefinite useful life.  Instead,  SFAS, No. 142 requires that goodwill be reviewed for
impairment upon adoption of SFAS, No. 142 and annually thereafter.

Upon adoption of SFAS,  No. 142, we recorded a non-cash  charge of
US$367.7  million to reduce the carrying value of goodwill. This charge is reflected as a
cumulative  effect of accounting  change in our  accompanying  consolidated  statement of
operations.  In calculating  the  impairment  charge,  the fair value of the impaired
 reporting  units was estimated  using the  discounted  cash flow methodology. The
impairment is associated with the decline in our stock price since the 2000 acquisitions
of Net Sul and Vicom.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

The consolidated  results of Net Serviços for the year ended
December 31, 2000 reflect the  consolidation of Vicom for the six months beginning July 1
and Net Sul for the four months beginning September 1.

Subscription revenues

Subscription  revenues consist of monthly  subscription fees paid by
pay-television  subscribers.  These revenues increased by 5.6% to US$512.3  million in
2001 from US$485.0  million in 2000. The increase was principally due to the
 consolidation of Net Sul for the full year 2001  compared to its  inclusion in our
results for the four months  beginning  September 1 in 2000.  This  accounted for
additional  subscription  revenues of US$27.3 million in 2001. The increase in
subscription  revenues in 2001 was partially offset by a decrease in subscription
 revenues in U.S.  dollars due to the depreciation of the real against the U.S. dollar
and a 2.8% reduction in the number of active  subscribers  due  primarily to the slowdown
in the  Brazilian  economy.  Average  revenue per  subscriber in U.S. dollars  decreased
by 14.3% in 2001 compared to 2000 despite  increases in monthly  subscription fees in
reais that took effect in June 2001.  Our churn in 2001 was 22.8%  compared to 16.1% in
2000.  This  increase  was  primarily  due to the  slowdown  in the  Brazilian economy,
 the monthly  subscription  fee  increase of 7% on average  that took  effect in June
2001 and higher  customer  adoption of a lower-priced  programming  package that
typically  features higher churn.  Subscription  fees are increased based on an inflation
index as applied on an annual basis.

Sign-on and hook-up fee revenues

Sign-on and hook-up fee revenues  decreased  by 16% to US$20.5
 million in 2001 from US$24.4  million in 2000.  This  decrease was primarily due to the
 depreciation of the real against the U.S. dollar and a decrease in the number of
subscriber  installations in the last six months of 2001 compared to the same period in
2000.  These  negative  factors were partially  offset by the  consolidation of Net Sul
for the full year 2001 compared to its consolidation for the four months beginning
September 1 in 2000.

Telecommunication service revenue

Telecommunication  service  revenue  consists of revenue
 representing  monthly fees we receive from corporate  customers for data  transmission
 services we offer through Vicom.  Telecommunication  service revenue  increased by 62.8%
to US$24.1 million in 2001 from US$14.8  million in 2000 due  primarily to the  inclusion
of Vicom in our results for the full year 2001,  offset  somewhat by the effect of the
 depreciation  of the real against the dollar.  We began offering  telecommunication
 services to corporate  customers in the third  quarter  of 2000  following  our
 acquisition  of Vicom in July  2000.  In 2001,  we  increased  our  offerings  of
 certain telecommunication  services,  such as  point-to-point  fiber  connections  and
virtual  private  networks  that benefit from our cable network.

Other services

Other  services  revenues  consist of  revenues  from  pay-per-view,
 monthly  subscription  fees paid by  subscribers  to our broadband  service,  Vírtua,
 sales  of  our  programming  guide,   programming  package  upgrades,   technical
 support  services  and disconnection/reconnection  services.  Revenue from other
services  decreased to US$31.0  million in 2001 from US$31.7 million in 2000. The
 decrease  was  primarily  due to the  depreciation  of the real against the U.S.
 dollar,  which  offset the  positive  effects of consolidating  Net Sul for the full
year 2001.  Vírtua  started to be offered in new cities,  which caused an increase in the
number of broadband  subscribers and,  consequently,  broadband  revenues.  Our Vírtua
subscriber base grew by 90% to 53,330 at December 31, 2001 from 28,136 at December 31,
2000.

Taxes and other deductions from revenues

Taxes and other  deductions from revenues are directly linked to our
volume of subscription  sales.  These expenses  increased by 41.3% to US$94.7  million in
2001 from  US$67.0  million in 2000.  The  US$27.7  million  increase  in 2001 was
 principally  due to increased  revenues,  and also, as described  above,  to an increase
of the ICMS from 7.5% in 2000 to 10% in 2001,  and the addition of the Fust and the
Funttel.

Programming and other direct operating costs

Programming  and other direct  operating  costs consist  principally
of programming  fees paid through Net Brasil to Brazilian and international  programmers,
 including  Globosat,  customer service expenses,  network  maintenance  expenses,  pole
rental charges payable to utility  companies,  and payroll and related  charges.  As a
percentage of net  operating  revenues,  programming  and other direct  operating  costs
 increased  to 53.6% in 2001  compared  to 51.8% in 2000.  Programming  and other  direct
 operating  expenses increased by 4.4% to US$264.3 million in 2001 from US$253.2 million
in 2000.

Our  programming  costs  increased by 7.7% to US$152.9  million in
2001 from US$142.0  million in 2000, due primarily to a one-time payment related to a
contract renegotiation and the acquisition of Net Sul.

Other  direct  operating  costs were  relatively  steady at US$111.4
 million in 2001  compared  to US$111.2  million in 2000. Increases  in other  direct
 operating  costs due to  consolidation  of Net Sul for the full year 2001  were  offset
 primarily  by the depreciation  of the real against the U.S.  dollar (which caused costs
as expressed in dollars to decrease) and cost savings  resulting from our 2001
cost-cutting initiatives.

Selling, general and administrative expenses

Selling,  general and  administrative  expenses  decreased by 17.4%
to US$106.1 million in 2001 from US$128.4 million in 2000, despite the  consolidation  of
Net Sul and Vicom for the full year 2001.  The decrease was primarily  attributable  to
the reduction in our workforce by 1,600  employees  during 2001. We also cut marketing
and other costs and expenses to better align our costs  structure to a lower than
 expected  revenue  level.  This decrease was slightly  offset by the increase in our
reserves for bad debt  provisions from US$9.9 million in 2000 to US$11.9  million in
2001. This increase in reserves is the result of improved  internal  control systems that
allowed us to apply more timely and  consistent  disconnection  procedures at all our
operating  subsidiaries.  As a percentage of net  operating  revenues,  selling,  general
and  administrative  expenses  decreased  from 26.3% in 2000 to 21.5% in 2001. We
recorded non-recurring severance charges of US$4.4 million in 2001 in connection with our
workforce reduction.

Depreciation and amortization

Depreciation  and  amortization  expenses  increased by 19.6% to
US$226.1  million in 2001 from US$189.1 million in 2000. This increase  was due to our
 consolidation  of Net Sul and  Vicom for the full year 2001 and  increased  amortization
 expense  due to the goodwill we incurred upon our  acquisitions  in 2000.  These factors
were offset  somewhat by the  depreciation of the real against the dollar, which reduced,
in dollar terms, the size of depreciation and amortization expenses.

Monetary indexation expense, net; Loss on exchange rate, net

Monetary  indexation  expense,  net,  consists of monetary
 correction  charges on  real-denominated  debt, which  represented approximately  49.4%
and 42.2% of our total debt in 2001 and in 2000,  respectively.  As described below under
 Liquidity and Capital ResourcesDebt  Financing, our real-denominated debt consists
primarily of our convertible debentures,  the principal amounts of which are adjusted
 periodically  based on the IGP-M inflation index, a Brazilian  inflation index
calculated on a monthly basis by reference to price increases in a variety of goods and
services  nationwide;  and our loans from BNDES,  the interest rates on which are
adjusted periodically based on the TJLP, a long-term interest rate that includes an
inflation factor that is reset quarterly.

Loss on exchange rate, net, consists of foreign exchange gains and
losses on U.S.  dollar-denominated  debt, which represented approximately  50.6% and
57.8% of our total debt in 2001 and in 2000,  respectively.  We record foreign exchange
losses or gains on our U.S. dollar-denominated debt as a function of the U.S. dollars
appreciation or depreciation in relation to the real.

Our combined  monetary  indexation  expense,  net,  and loss on
exchange  rate,  net,  was US$125.2  million in 2001, a 100.6% increase  from  US$62.4
 million  in 2000.  This  increased  combined  expense  and loss was  mainly  due to the
fact  that the  reals depreciation  against  the  dollar  was  significantly  higher in
2001 than in 2000.  Annual  inflation  as  measured  by the IGP-M was approximately
 10.8% in 2001 compared to  approximately  10.0% in 2000, and the real lost 18.7% of its
value against the U.S. dollar in 2001, compared to 9.3% in 2000.

Financial expenses

Financial  expenses  consist  principally of interest  payable on
our  outstanding  debt;  amortization  of financial  charges associated  with the
 issuance of debt  instruments;  the CPMF, a federal tax on  financial  transactions
 levied at a rate of 0.38% on withdrawals  from checking  accounts;  and PIS and COFINS
taxes on financial  revenues derived from short-term  investments.  Financial expenses
 increased  by 34.7% to  US$131.3  million in 2001 from  US$97.5  million  in 2000.  This
 increase  was  primarily  caused by increased debt levels during 2001 due to the
acquisition of Net Sul and to non-cash  financial  expenses  unrelated to debt,
 primarily the restatement of the AFAC and tax payments using fiscal credits.

Financial income

Financial  income  consists of income on  short-term  investments,
 as well as penalty and  interest  payments we collect from subscribers  who are late in
their fee payments to us.  Financial  income  decreased to US$17.1 million in 2001 from
US$33.0 million in 2000.  The decrease was primarily due to lower cash balances  during
2001 compared to 2000 and the increased  depreciation  rate of the real against the U.S.
dollar in 2001 compared to 2000.

Equity in results of investees

Equity in results of  investees  reflects  our share of gains and
 losses of  subsidiaries  in which we do not hold a majority stake.  Equity in results of
investees was a loss of US$36,000 in 2001 compared to a loss of US$724,000 in 2000.  This
 difference  was principally attributable to the acquisitions of Unicabo, Vicom and Net
Sul.

Income tax expense

In 2001, we recorded income tax expenses of US$1.4 million compared
to income tax expenses of US$6.5 million in 2000.

Liquidity and Capital Resources

We  broadly  define  liquidity  as our  ability  to  generate
 sufficient  cash flow  from  operating  activities  to meet our obligations  and
 commitments.  In addition,  liquidity  includes the ability to obtain  appropriate  debt
and equity  financing and to convert into cash those assets that are no longer  required
to meet our  strategic  and financial  objectives.  Accordingly,  liquidity cannot be
 considered  separately  from capital  resources  that consist of current or  potentially
 available  future funds for use in meeting debt services requirements and long-range
business objectives.

Cash Flows

We had cash and cash  equivalents of US$15.8  million as of December
31, 2002, an increase of 26.4% from US$12.5 million as of December 31, 2001.  As of March
31, 2003, we had cash and cash equivalents of US$22.4 million.

Cash flows from operating  activities.  Net cash from operating
 activities was US$107.7 million in 2002,  compared to US$33.3 million  in 2001.
 Although  there  was a  decrease  related  to lower  average  revenue  per  subscriber
 in U.S.  dollars  due to the depreciation  of the real against the dollar,  a reduction
in the number of our  subscribers and increased  programming  expenses,  the
capitalization  of US$50.6  million from programmer  suppliers  linked to the
 recapitalization  and our deferral of US$19.8 million in programming fees during 2002
caused an increase in our cash flow from operating activities.

Net cash from  operating  activities  was US$33.3  million in 2001,
 compared to US$64.0  million in 2000.  This  decrease was primarily  related to lower
average revenue per subscriber in U.S.  dollars due to the  depreciation of the real
against the dollar,  a reduction in the number of our subscribers and increased
programming expenses.

Cash flows from  investing  activities.  We used US$26.7  million of
cash in investing  activities  during 2002, a decrease of 79.3%  when  compared  to
 US$129.0  million  in  2001.  The  decrease  was due  primarily  to our  significant
 reduction  in  capital expenditures,  our  selective  investments  in  installations
 and our  deferral  from 2002 to 2003 of US$12.4  million of  payments to equipment
 suppliers  to 2003 , based on  negotiations  with a number of our major  suppliers.
 This  deferral  will  increase our cash disbursements for capital expenditures in 2003.

We used  US$129.0  million of cash in  investing  activities  during
 2001  compared  to  US$238.0  million  in 2000,  a 45.8% decrease.  The decrease was
 primarily  due to our  significant  reduction in capital  expenditures  during the
second half of 2001, as well as to the deferral from 2001 to 2002 of US$14.7 million of
payments to equipment  suppliers,  based on negotiations  with a number of our major
suppliers.

Cash flows from financing  activities.  We had a cash outflow of
US$70.5  million from  financing  activities in 2002 compared to an inflow of US$46.5
 million in 2001.  Our  principal  sources of  financing  during 2002 were (1)  proceeds
of US$92.0  million in connection with our  recapitalization  and (2) proceeds from
capital advances from our  shareholders.  In 2002, we refinanced or repaid US$444.4
 million in aggregate  principal  amount of debt. This consisted of (1) the payment by
our subsidiary,  Jonquil Ventures Ltd., of US$52.0 million aggregate  principal amount at
maturity of zero-coupon  guaranteed notes on July 15, 2002, (2) the payment of US$7.7
million  related to the October 30, 2002  exercise  of put options by holders of our
 floating  rate notes,  (3) the payment of US$25.6 million aggregate  principal amount on
our BNDES loan facility,  (4) the payment of US$33.2 million  aggregate  principal amount
on the sale of subscriber  receivables to Cable S.A., (5) the repayment of US$35.3
million of scheduled  payments under our IFC facilities and (6) the payment of trade
financing and short-term loans in the amount of US$290.6 million.

We had US$46.5  million of cash flows from  financing  activities in
2001 compared to US$138.3  million in 2000. Our principal sources of financing during
2001 were the proceeds from (1) the issuance in December 2000 of R$200 million  aggregate
 principal amount of our  non-convertible  debentures due December 2003, (2) the issuance
by our  subsidiary,  Jonquil  Ventures Ltd., of US$52.0 million aggregate principal
amount at maturity of zero-coupon  guaranteed notes due July 15, 2002  (corresponding,
 after discount,  to US$45.7 million) to refinance the  redemption  of a portion of our
senior  guaranteed  notes due 2004,  (3) cash proceeds of R$120 million from the sale of
 subscriber  receivables  to Cable S.A. in June 2001, to refinance  the  redemption  of a
portion of our senior  guaranteed notes due 2004, and (4) capital  advances and loans
from  shareholders.  In 2001, we refinanced or repaid US$324.0 million in aggregate
principal  amount of debt.  This  consisted of our  repayment  and  refinancing  of
US$175.3  million of  short-term  debt,  consisting principally of principal  payments
 relating to trade financing and short-term loans, our repayment and refinancing of
US$148.7 million of long-term  debt,  consisting  principally of the repayment of
scheduled  payments under our BNDES and IFC loan facilities and of the refinancing of
scheduled principal payments on our senior guaranteed notes due 2004.

Liquidity requirements and sources

We need  significant  cash to make  principal  and  interest
 payments on our debt,  conduct our ongoing  operations  and fund capital expenditures.
 We have historically funded these liquidity  requirements through operating cash flows,
 borrowings under credit facilities,  the  proceeds of debt and equity  financings,  and
capital  advances  and loans from our  shareholders.  After taking into consideration
 the range of  projections  of cash flows from  operations,  anticipated  capital
 expenditures  and debt  principal  and interest  repayment  requirements,  unless we
 restructure  our debt or  obtain  financing  from  third  parties  or  capital  from our
shareholders,  we will not have adequate financial  resources to meet our anticipated
cash requirements for the second half of 2003 and future periods, unless we sell assets
or otherwise raise capital.

The amount of our anticipated  operating cash flows in 2003 could be
adversely affected by a number of factors,  many of which are not within our control.
 Continued  weakness or worsening of the  Brazilian  economy could result in a decline in
the number of our subscribers,  which would lower  subscription  and sign-on and hook-up
fees.  Further  depreciation of the real against the U.S. dollar would  decrease  our
revenue  per  subscriber  in U.S.  dollar  terms,  unless we were able to  implement
 corresponding  increases  in subscription  fees in reais,  which we do not believe is
likely.  Depreciation  of the real against the dollar would also  increase the amount of
cash that we have to use to cover our programming expenses and other dollar-denominated
or dollar-indexed expenses.

Principal and interest  payments on our debt represent  significant
 liquidity  requirements  for us. As of December 31, 2002, our total debt was US$323.7
 million,  US$219.3  million of which was  denominated  in U.S.  dollars.  As of March
31, 2003,  our total debt was US$330.3  million,  US$219.3  million of which was
 denominated  in U.S.  dollars.  See Debt  Financing  for details of our debt.  We
have a significant  working  capital  deficit.  At March 31, 2003,  our current
 liabilities  exceeded our current  assets by $450.2  million.  If we and our  various
 lenders  and debt  holders  are unable to  successfully  negotiate,  among  other
 things,  a reduction in our near-term debt service  obligations,  we would have to
consider  pursuing  alternative  restructuring  options,  which could include a sale or
liquidation of assets.

We have not made scheduled  principal or interest  payments on any
of our debt since December 2, 2002, and we have not maintained specified  financial
 ratios nor met specified  financial  tests required  under certain debt  facilities  and
 instruments,  including consolidated  indebtedness to consolidated  operating cash flow, or
adjusted EBITDA and adjusted EBITDA to consolidated  net interest  expense.  Our non-payment of these
scheduled  principal and interest  payments and our inability to maintain or comply with
ratios or financial tests under our debt facilities  and  instruments  have resulted in
violations  under a number of our debt  facilities  and  instruments.  These  violations
enable our various lenders and debt holders to accelerate  amounts due under their
 respective debt  facilities and  instruments.  As a result,  various of our lenders  and
debt  holders may declare all amounts  outstanding  under their  respective  debt
 facilities  and instruments,  including accrued interest and other obligations,  to be
due and payable.  In December 2002,  Unibanco filed a collection suit  against us in the
Central  Court of São Paulo to recover  approximately  R$72.2  million  (US$20.4
 million)  relating to amounts outstanding  on a loan made to us. We cannot  assure you
that our other  lenders or debt  holders will not seek to  accelerate  amounts
outstanding  under any of our debt  facilities or instruments or seek to exercise legal
remedies to enforce their rights  thereunder or in accordance with Brazilian law.

In the second half of 2002, we and our various lenders and debt
holders commenced  negotiations with regard to a restructuring of our debt facilities and
 instruments,  and these  negotiations  are still taking place.  The goal of these
 negotiations  are to, among other things,  reduce our  near-term  debt service
 obligations  to levels that can be serviced with  operating  cash flows,  limit the
impact of future  exchange rate  volatility by converting a portion of our
 dollar-denominated  debt to  real-denominated  debt,  amend certain  financial and other
 covenants in our debt  facilities  and  instruments  and establish a  fully-funded
 business plan for the medium term.  Although the terms of such  restructuring  remain
under  negotiation,  we expect that this  restructuring  will result in either:  (i) an
exchange of a portion of our debt by our lenders and debt  holders for an equity
 ownership  position in Net  Serviços; (ii) an  exchange of a portion of our debt by our
lenders  and debt  holders  for new debt of Net  Serviços;  or (iii) an exchange of a
portion of our debt by our  lenders and debt  holders for a  combination  of new debt and
equity of Net  Serviços.  Any debt for equity exchange would dilute  holders of our
common and preferred  shares and ADSs. We can give no assurance  that the  restructuring
 will be consummated or our outstanding  debt will be renegotiated in full or in part. If
the  restructuring  is not concluded in a satisfactory manner,  we will not be able to
make the required  payments on our debt that have come due since December 2002, and which
have not been paid,  or meet  scheduled  principal  and  interests  payments  on our debt
that  comes due in the  second  half of 2003,  with our own resources or without further
(a) financing by third parties or (b) capitalization by our major  shareholders,  unless
we sell assets or otherwise  raise  capital.  This would result in a liquidity  crisis
for us and would have a material  adverse  impact on our financial condition.  Such an
event would  continue to leave us with negative  working  capital and could result in our
inability to operate as a going  concern.  If we are unable to continue as a going
 concern,  we may be forced to pursue a sale or  liquidation  of assets to satisfy our
creditors. This would materially adversely affect holders of our preferred shares and
ADSs.                   We have engaged The Blackstone  Group, an investment bank, to
assist us with the restructuring of our debt facilities and instruments.  The
implementation of the debt  restructuring is subject to a number of uncertainties and
factors,  many of which are not within our control,  such as the state of Brazilian and
international  capital markets and our ability to reach agreements with our lenders and
debt holders.

During 2002,  we continued  our pursuit of a number of steps that
were first  implemented  during the middle of 2001  designed to address our weaker than
expected operating  results,  the downturn in the Brazilian economy and the depreciation
of the real against the U.S.  dollar,  as well as our financial  covenant  requirements
and our debt service and other liquidity needs. A key goal of these efforts is to better
align our operating costs,  financial  expenses and capital investment levels with our
anticipated future revenues and cash flows, which we do not expect to grow significantly
in the next two years.  The major steps include the following:

- We decreased our capital  spending in 2002 by 71.2%  compared
 with 2001 levels.  We have  developed a more  targeted  capital               spending
plan for 2003 that lowers  significantly  our capital  expenditure  requirements  in
comparison to 2001 and 2002               levels.  See Capital Expenditures.
- Based on negotiations with various equipment  suppliers,  we
were able to defer US$12.4 million of payments from 2002 to 2003.               As of
March 31, 2003, the amount of deferred  payments to equipment  suppliers  totaled US$9.6
million.  During the first               quarter of 2003, we have paid approximately
US$3.1 million of the deferred payments to equipment suppliers.
- We deferred  US$39.8  million of payments  for  programming
 from 2002 to 2004 and 2005.  This  resulted in an increase in our               accounts
 payable to  programmers  at December 31, 2002 to US$51.1  million  compared to US$32.8
 million at December 31,               2001.  As of March 31, 2003 our accounts payable
to programmers totaled US$57.7 million.
- In 2002,  we  continued a number of  cost-cutting  initiatives
 first  implemented  in 2001  designed  to lower our  operating               expenses.
 This included the  renegotiating of the rent expenses of our headquarters and dismissing
 approximately 50% of               our work  force.  These  layoffs  were  mainly  as a
result  of the  outsourcing  of our  customer  service  centers  and
              information  technology systems. For 2003, we plan to continue to examine
additional  cost-cutting  initiatives.  We have               announced significant
measures to reduce operating expenses since the middle of 2001.

As part of the  recapitalization,  Bndespar,  Globopar and Bradespar
delivered a total of 1,683 of our convertible  debentures due 2006 as consideration  for
subscribing  preferred  shares.  This decreased our total debt by R$236.7 million
 (US$77.0  million) in principal  amount.  The  conversion by Bradespar and RBS of their
 outstanding  loans reduced our total debt by another  R$98.0 million (US$32.7  million).
 In  addition,  other  holders of our  convertible  debentures  due 2006  delivered  and
 converted  a total of 953 convertible  debentures as  consideration  for subscribing
 preferred  shares.  This decreased our total debt by an additional  R$129.1 million
(US$43.1 million).

Our ability to raise  short-term  or long-term  debt  financing  or
equity  financing in the future will depend on a number of factors  outside of our
 control,  including  conditions  in Brazil and in  international  financial  markets
 and our ability to reach agreement  with our  various  lenders  and  debt  holders.  We
 cannot  assure  you that we will be able to  raise  debt  financing  in appropriate
 amounts or at all.  During 2002,  Standard & Poors  lowered our foreign and local
 currency  corporate  credit and senior unsecured  debt  ratings  and placed us on credit
 watch with  negative  implications.  Our rating was  lowered  (i) to B+ from BB-, on
February 8, 2002, (ii) to CCC+ from B+, on June 28, 2002 and (iii) to D from CCC+, on
December 3, 2002.

These  announcements  (and related  announcements)  could adversely
affect our ability to access the capital markets and raise debt financing on acceptable
terms and restructure our debt.

If we are unable to  restructure  our debt,  we would have to reduce
 further the level of our planned  capital  expenditures, undertake additional
cost-cutting  initiatives,  seek to sell assets and/or seek to raise additional equity
capital, to attempt to meet our debt service and other liquidity  requirements.  We
cannot assure you that, in such event,  these  alternatives  would be available or would
provide us with the funds necessary to meet our liquidity requirements.

We are party to long-term  rental  agreements  for use of electric
 utility poles and corporate  office.  The following  table sets out future minimum
rental payments under operating leases as of December 31, 2002.

|              | 2003              | 2004 | 2005 | Total
|------------- | ----------------- | ---- | ---- | -----
|              | (US$ in millions)
|Utility poles | 13.2              | 13.6 | 14.1 | 40.9 
|Office space  | 0.8               | 0.8  | 0.8  | 2.4  
|Total         | 14.0              | 14.4 | 14.9 | 43.3 

Capital Expenditures

Our capital expenditures, identified by major category, are as
follows:

- subscriber installation, including purchases of set top boxes;
- cable network  construction and rebuilding,  which primarily
 includes  construction  costs related to installing cable system
              infrastructure  in multiple  dwelling units, or MDUs,  rebuilding  portions
of our network and, to a very limited extent,               the growth, or build-out, of
our cable network;
- broadband  network  construction  and  rebuilding,  which
 primarily  includes  construction  costs  related  to  cable  modem
              installation,  installing  broadband  infrastructure  in MDUs,  rebuilding
 portions  of our  network  to permit  two-way               communication and the
build-out of our broadband network, including our data center; and
- upgrading existing systems,  which is designed  principally to
improve technical quality,  improve further management controls               and support
subscriber growth.

We have  historically made significant  capital  expenditures
 relating to codification of our network,  principally to reduce piracy. As this process
is now substantially  complete,  we have not made substantial capital  expenditures for
codification since 2001 and we do not expect to make capital  expenditures  for this
purpose in 2003. We also make capital  expenditures,  principally  ongoing maintenance
capital expenditures, related to our corporate data transmission company, Vicom.

We  significantly  reduced  our level of capital  spending in 2002
in response to adverse  developments  in our  business  and operating  results.  In 2002,
we made total capital  expenditures of US$38.0 million,  a decrease of 71.2% from the
US$132.2 million in 2001. In 2002, the breakdown of capital  expenditures by major
category was as follows:  subscriber  installation  (23%), cable network construction and
rebuilding (7%), upgrading existing systems (22%).

In 2001, we made total capital  expenditures of US$132.2 million,  a
decrease of 33.0% from 2000 levels (due to non-deferrable purchase  commitments  that we
were subject to at the time, we were unable to further reduce our 2001 capital
 expenditures).  In 2001, the breakdown of capital expenditures by major category was as
follows:  subscriber  installation (26%), broadband network construction and rebuilding
 (26%),  cable network  construction  and rebuilding  (19%)  upgrading  existing  systems
(19%) and  codification of our network (4%).

We expect to make  total  annual  capital  expenditures  of
 approximately  US$30  million  in 2003.  We will  continue a very selective  capital
 spending plan for 2003 to foster our objective of achieving  higher  returns on our
 investments.  Pursuant to this plan,  we will target our capital  spending on selected
 portions of our existing  network,  principally  in wealthy,  urban areas.  In these
areas,  we will make capital  expenditures  principally  to upgrade the technical
 quality and capacity of our existing  systems, upgrade headends and specifically
 targeted nodes to permit  transmission of digital cable and, in some cases,  rebuild
portions of our network.  Upgrading  our cable  systems  will  enable us to offer a
variety of  advanced  products  and  services  in the near  future, including digital
cable, which we plan to introduce in 2004, additional channels,  expanded  pay-per-view
options,  video-on-demand and interactive  services.  We will also make  capital
 expenditures  for  subscriber  installation.  We do not plan on making  substantial
capital  expenditures  for codification of our network and will  significantly  reduce
 expenditures  related to both cable network and broadband network construction and
rebuilding.

Related Party Transactions

We purchase all of our  programming  from our affiliate,  Net
Brasil.  Net Brasil is owned 40% by us and indirectly  owned 60% by Globopar,  our
 controlling  shareholder.  Net Brasil acts as our  intermediary  in  purchasing
 programs  from both  Brazilian  and international  programming  sources.  A significant
 portion of the programming  that we purchase through Net Brasil is produced by our
affiliate,  Globosat,  which is wholly owned by Globopar.  Our  relationship  with Net
Brasil is governed by a  programming  agreement. This agreement gives us the exclusive
cable television  rights for Globosat  programming in the areas in which we operate and
the right to use the NET  brand name for our cable  television  services.  Our
 programming  arrangements  with Net Brasil are also  subject to provisions of our
shareholders agreement relating to affiliate transactions.

We pay to Net Brasil the amount of the programming  fees payable by
Net Brasil to programming  sources,  as well as a separate service fee.  We paid Net
Brasil US$146.8 million in 2000, US$152.9 million in 2001 and US$131.0 million in 2002.

For a  more  detailed  description  of our  programming
 arrangements  with  Net  Brasil,  see  Item  4.  Information  on the CompanyPay-TelevisionProgramming
Sources and note 8 to our consolidated financial statements.

Debt Financing

At December 31, 2002, we had US$323.7  million of total debt.  We
have not made  scheduled  principal or interest  payments on any of our debt since
 December 2, 2002,  and we have not  maintained  specified  financial  ratios nor met
specified  financial  tests required under certain debt facilities and  instruments.  Our
non-payment of these  scheduled  principal and interest  payments and our inability to
maintain or comply with ratios or financial tests under our debt  facilities and
 instruments  have resulted in violations under a number of our debt  facilities and
 instruments.  These  violations  enable our various  lenders and debt holders to
accelerate amounts due under their  respective debt facilities and instruments.  As a
result,  various of our lenders and debt holders may declare all amounts  outstanding
under their respective debt facilities and instruments,  including accrued interest and
other obligations,  to be due and payable. At December 31, 2002, all of our
indebtedness was classified as current.

We and our consolidated subsidiaries had the following debt
outstanding as of December 31, 2002.

|U.S. dollar denominated debt:                | (in thousands)
|-------------------------------------------- | --------------
|Senior guaranteed notes                      | US$  97,692   
|Floating rate notes                          | 72,300        
|Trade Financing and bank loans               | 37,642        
|IFC facility                                 | 11,681        
|                                             | 219,315       
|Real denominated debt (1):                  
|Non-convertible debentures                   | 55,229        
|Convertible debentures                       | 11,444        
|Working capital and bank loans               | 37,760        
|                                             | 104,433       
|                                             | 323,748       
|Less current portion                         | -             
|Less amounts reclassified to short-term debt | (323,748)     
|Long-term debt                               | US$       -   

The various base rates used to determine the interest rate of our
debt at December 31, 2002 were as follows:

|LIBOR | 1.44% 
|----- | ------
|TJLP  | 10.00%
|CDI   | 24.83%
|IGPM  | 25.30%

|(1) | Calculated using the December 31, 2002 exchange rate of R$3.5333 = US$1.00.
|--- | ---------------------------------------------------------------------------

Senior guaranteed notes

In June 1996, our predecessor  issued US$185 million  principal
 amount of 12.625% senior  guaranteed notes due June 18, 2004, or the senior  guaranteed
 notes.  At maturity,  holders  that then hold senior  guaranteed  notes will also
receive a premium  payment equal to 5% of the principal amount of their senior guaranteed
notes being redeemed.  The senior  guaranteed notes are  unconditionally guaranteed on a
joint and several basis by a number of our subsidiaries.

Each  noteholder  was  entitled to require us to redeem  senior
 guaranteed  notes held at a  redemption  price of 101% of the principal  amount on June
18, 2001.  On March 20,  2001,  we announced a waiver  solicitation  to the holders of
the senior  guaranteed notes,  offering a waiver  payment of US$7 per  US$1,000 of
 principal  amount held to each holder that would agree not to exercise its redemption
right on June 18, 2001.  Holders of senior  guaranteed  notes  representing the principal
amount of US$71.9 million accepted the waiver payment,  thereby agreeing to hold their
senior guaranteed notes until maturity.  Holders  representing the principal amount of
US$25.8  million did not accept the offer of a waiver  payment,  but nonetheless  did not
exercise their  redemption  right.  Senior guaranteed notes  representing the principal
amount of US$87.3 million were redeemed on June 18, 2001.  Accordingly,  senior
guaranteed notes in the principal amount of US$97.7 million will be held to maturity in
June 2004.

The indenture  relating to the senior  guaranteed  notes  contains
 covenants  which  restrict our ability and our  subsidiary guarantors ability to incur
additional indebtedness  (prohibiting us from incurring debt if our consolidated
 indebtedness to consolidated operating  cash flow, or adjusted EBITDA ratio for the latest fiscal quarter exceeds 6.00 to
1.0), pay dividends,  create certain liens,  consummate certain asset sales, and
materially  alter the  organizational  and legal  structure of our business.  We would be
required to make an offer to purchase the outstanding  senior  guaranteed notes in the
event of a change in control or, in certain  circumstances,  with the net cash proceeds
of certain  asset  sales.  As of  December  31,  2002,  we were not in  compliance  with
the  financial  covenants  related  to the senior guaranteed notes.

We did not make the scheduled  interest  payments of US$8.9 million
which were due on December 18, 2002, and of US$8.9 million which were due on June 18,
2003.

Floating rate notes

In  connection  with the September  2000  acquisition  of Net Sul,
we guaranteed  all  obligations  associated  with Net Suls October 1997 issuance of
US$80  million  principal  amount of floating rate notes due October 2005.  The notes
consist of US$48 million of Series A floating  rate notes,  US$11  million of Series B
floating  rate notes and US$21  million of Series C floating  rate notes. The notes bear
 interest at LIBOR plus a spread  that  varies with our total  consolidated  debt to
 consolidated  operating  cash flow ratio.  The spread on the Series A floating  rate
notes  ranges from 3.125% to 4% and on the Series B and C floating  rate notes ranges
from 2.5% to  3.375%.  During  2002,  the  interest  rate on the Series A,  Series B and
 Series C  floating  rate notes was LIBOR plus 3.625%, LIBOR plus 3.0% and LIBOR plus
3.0%, respectively.  Interest is payable quarterly in arrears.

The notes are  guaranteed  by us and a  substantial  number of our
 subsidiaries.  On August 30,  2002,  the  deadline for the exercise of put options on
the Series B and Series C floating rate notes,  holders  exercised  their put option in
the amount of US$7.7 million,  representing  24% of the total  amount that was  entitled
to be put.  Notes  having an  aggregate  principal  amount of US$48 million are subject
to redemption at the option of the holders in October  2003.  The final  maturity date
for notes not so redeemed is October 2005.

The  indenture  relating to the  floating  rate notes  requires us
to observe a number of  restrictive  covenants,  including: limitations  on  restricted
 payments,  dividends  and  liens;  restrictions  on  transfers  of  existing
 businesses;  limitations  on transactions  with affiliates;  prohibitions on a change of
control;  asset  dispositions;  and limitations on guarantees by restricted subsidiaries.

In  addition,  we are  required  to observe  financial  covenants
 requiring  us to maintain  at all times  certain  specified financial ratios,
 including:  consolidated  indebtedness to consolidated  operating cash flow, or adjusted  EBITDA for the
prior two semi-annual periods of 5.25 to 1.0 and 5.00 to 1.0 in 2002 and 2003,
 respectively;  and adjusted  EBITDA to consolidated  net interest  expense for the prior
two  semi-annual  periods  of 1.80 to 1.0 and  2.00 to 1.0 in 2002  and  2003,
 respectively.  On  December  31,  2002,  we were not in compliance with the financial
covenants related of the floating rate notes.

We also did not make the  scheduled  interest  payments of
 US$932,000  which were due on January 31, 2003,  and of  US$951,000 which were due on
April 30, 2003.

Trade Financing and U.S. dollar-denominated bank loans

A number of our  subsidiaries  have entered into U.S.
 dollar-denominated  trade financing  loans and U.S.  dollar-denominated bank loans with
Brazilian  financial  institutions.  As of December 31, 2002, we had US$37.6 million
principal amount outstanding under these loans.  Trade financing loans are short-term
loans guaranteed by us or our wholly owned  subsidiary  Multicanal  Telecomunicações
S.A., or a combination of the two. The average  nominal  interest rate of our trade
 financing loans was 7.9% at December 31, 2002. Our U.S. dollar-denominated bank loans
bear interest at floating rates based on LIBOR.

IFC facility

As of December 31, 2002,  we had total  borrowings of US$11.7
 million  outstanding  under the IFC facility.  The IFC facility consisted of an A loan
 facility and a B loan  facility.  On October 11,  2002,  we paid off the B loan
 facility.  The  remaining  IFC facility  consists of only the A loan facility.  Each A
loan bears interest at a variable  interest rate equal to 2.75% to 3% per annum over the
six-month  U.S.  dollar LIBOR.  The loans are due in semi-annual  installments  of US$2.9
million in April and October of 2003 and in April and October of 2004, with final
maturity in October 2004.

Loans under the IFC facility are guaranteed by Globopar and members
of the Roberto Marinho family,  the principal  stockholder of Globopar.  As security for
its guarantee,  Globopar pledged 51% of its interest in the voting stock of its
subsidiary  Distel to the IFC.  Globopar  has also agreed to pledge to the IFC 51% of any
 additional  voting  stock of Distel that it may acquire in the future. In connection
with this guarantee,  we have pledged to Globopar shares of our subsidiary  Multicanal
 Telecomunicações  S.A.,  based on the amount of borrowings  outstanding  at any time
under this facility and the size of Multicanal  Telecomunicações  S.A.s  subscriber
base.  At  December  31,  2002,  we had  pledged to  Globopar a total of  6,806,344,107
 shares of  Multicanal  Telecomunicações  S.A., representing 4.8% of Multicanal
Telecomunicações S.A.s total outstanding shares.

The IFC facility  contains  covenants which restrict our ability to,
among other things,  incur additional  indebtedness;  pay dividends;  create certain
liens;  sell,  pledge,  transfer,  lease or otherwise dispose of the shares in any
 subsidiaries;  prepay or repurchase long-term debt; and undertake any merger,
consolidation or reorganization.

The  financial  covenants  in the IFC  facility,  require us to
 maintain at all times  certain  specified  financial  ratios, including:  consolidated
 indebtedness  to consolidated  operating cash flow, or adjusted  EBITDA for the prior two  semi-annual
 periods of 5.25 to 1.0 and 5.00 to 1.0 in 2002 and 2003,  respectively;  and adjusted
 EBITDA to consolidated  net interest  expense for the prior two semi-annual periods of
1.80 to 1.0 and 2.00 to 1.0 in 2002 and 2003,  respectively.  As of December 31, 2002,
 we were not in  compliance  with the financial covenants related to the IFC facility.

We also did not make the scheduled  interest  payments of US$280,000
and principal payment of US$2.9 million which were due on April 15, 2003.

Non-convertible debentures

In December 2000, we issued  real-denominated  debentures in an
aggregate  principal  amount of R$200 million.  The debentures originally  bore  interest
at CDI plus 0.75% per annum.  As a result of  negotiations  in April 2001 to eliminate
 our  floating  asset pledge that previously had applied to these  debentures,  we now
pay interest at CDI plus 1.05% per annum.  These debentures  mature on December 1, 2003.

The indenture  governing the debentures  contains a financial
 covenant  requiring us to maintain a  consolidated  net debt to adjusted  EBITDA ratio
that does not exceed 6.00 to 1.0 for any two  consecutive  quarters.  As of December  31,
 2002,  we were not in compliance with this covenant.

We did not make the scheduled  interest  payments of US$5.2  million
which were due on December 1, 2002,  and of US$8.0 million which were due on June 2, 2003.

Convertible debentures

In  December  1999,  we issued  3,500  real-denominated  convertible
 debentures  in an  aggregate  principal  amount of R$350 million.  The convertible
 debentures bear interest,  payable annually,  at 12% over the IGP-M rate and mature on
December 1, 2006. The IGP-M rate is a Brazilian  inflation  index  calculated  on a
monthly  basis by reference to price  increases in a variety of goods and services
 nationwide.  Each  debenture has a face value of R$100,000  and is  convertible  into
8,208  (giving  effect to our June 2002 ten-for-one  reverse stock split) of our
preferred  shares through  November 30, 2004.  After  November 30, 2004, the conversion
 ratio will  decrease to 5,745  (giving  effect to our June 2002  ten-for-one  reverse
 stock  split) for the period from  December 1, 2004 to November 30, 2005 and to 3,283
(giving  effect to our June 2002  ten-for-one  reverse stock split) for the period from
December 1, 2005 until maturity.  We are required to redeem those debentures not
converted,  in accordance with the following schedule:  30% at December 1, 2004, 30% at
December 1, 2005 and 40% at December 1, 2006.

In April 2001, we paid each holder R$1,200 per debenture,  as a
result of  negotiations to eliminate our floating asset pledge that previously had
applied to these debentures.

If we increase our capital or issue shares to our founders,  the
 debentures  may be converted  into  preferred  shares at the same price of the  issuance
 during the  subscription  period for such new shares,  the period of the  preemptive
 rights or during the public  offering.  As of December 31, 2002, 32% of the debentures
 had been converted into preferred  shares,  and an additional 60% of the debentures had
been delivered to us as payment of preferred  shares in connection with our 2002
 recapitalization,  with the result that R$40.4 million (US$11.4 million), principal
amount of debentures was outstanding at that date.

The indenture  governing the convertible  debentures contains a
financial covenant requiring us to maintain a consolidated net debt to adjusted  EBITDA
 ratio,  each  quarter,  that does not exceed 6.00 to 1.0. As of December 31, 2002,  we
were not in compliance with this covenant.

We did not make the scheduled interest payments of US$1.3 million
which were due on December 1, 2002.

Working capital and bank loans

These  loans  consist  of R$131.8  million  (US$37.8  million)
 principal  amount of  real-denominated  short-term  loans with Brazilian financial
institutions, as of December 31, 2002.   These loans bear interest at floating interest
rates based on the CDI.

In December  2002,  Unibanco,  filed a collection  suit against us
with the Central  Civil Court of São Paulo with respect to amounts  outstanding  under a
loan  facility we entered  into with  Unibanco on August 26,  2002.  The amount  sought
 under this claim totals approximately R$72.2 million (US$20.4 million).  See Item 4.
 Information on the CompanyLegal Proceedings.

Off-balance sheet arrangements

On June 11, 2001 we and our subsidiaries Net São Paulo Ltda. and Net
Rio S.A. entered into financial  transactions  with Cable S.A., a specific limited
purpose company.  The proceeds from these  transactions  amounted to US$52.1 million and
were settled by means of exchanging  future accounts  receivable  from  subscribers  over
a 15-month  period.  Interest and other financial  charges on these transactions were
expensed on an accrual basis over the 15-month period.

Since September 2002, we have not engaged in any off-balance sheet
arrangements.

Brazilian Economic Environment

General

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

Historically,  inflation,  government  actions  taken to combat
 inflation,  and  public  speculation  about  possible  future government actions,  have
also contributed  significantly to economic uncertainty in Brazil and heightened
 volatility in the Brazilian securities  markets.  Beginning in December 1993,  the
 Government  launched an economic  stabilization  plan,  known as the Real Plan, which
was intended to reduce  inflation  by reducing  certain  public  expenditures,
 collecting  liabilities  owed to the  Government, increasing tax revenues,  continuing a
privatization  program and introducing a new currency,  the real, into circulation in
June 1994. The Real Plan followed a series of economic adjustment programs,  which were
largely  unsuccessful.  In October 1994, Fernando Henrique Cardoso,  the former  Minister
 of Finance and the  principal  architect  of the Real Plan,  was elected as  president
 of Brazil.  Mr. Cardoso  served as president of Brazil from January 1995 through
 December  2002,  and continued to follow the policies  implemented by the Real Plan.
 Following the  implementation of the Real Plan,  inflation dropped  significantly  from
previous levels (which at times had  exceeded  40% per month) to monthly  rates of lower
 than 1%. In  addition,  the  Government  has  demonstrated  a  commitment  to
instituting  conservative  fiscal  policy;  early in 2000 Congress  passed the Fiscal
 Responsibility  Law, which limits public payroll expenditures.  The  Brazilian  growth
rate  reached 4.2% in 2000. A somewhat  lower growth rate  occurred for 2001,  as a
result of the Brazilian electricity shortage and the energy consumption limitations the
Government had imposed.

Emerging  markets  volatility  and the 2002  elections in Brazil,
 caused  considerable  outflows of funds and declines in the amount of foreign
 investments in Brazil.  These factors adversely  affected the Brazilian markets and
caused the real to depreciate to R$3.9552 to US$1.00 in October  2002,  its lowest value
 against the U.S.  dollar  during 2002.  Since taking  office in January  2003, President
 Luis Inacio Lula da Silva has  continued  to follow the policies  implemented  by Mr.
 Cardoso,  causing a reduction in this volatility and an improvement in market conditions.

There can be no assurance that the Government will not change its
economic  stabilization  policy in the future, and continued economic stability remains
subject to a variety of domestic and external pressures.

In November 1997, in response to the Asian economic crisis,  the
Government  adopted a fiscal and monetary package designed to reduce the deficit in Brazils
balance of payments and deter  speculative  currency  attacks.  The package  involved
several  measures, including an increase in interest rates  (including a doubling of
short-term  interest  rates within one year),  an increase in certain tax rates,  and a
reduction in  Government  spending for 1998.  These  measures  resulted in a  significant
 and rapid  slowdown of the Brazilian  economy.  In October  1998,  in response to the
Russian  crisis,  the  Government  increased the interest rate up to 45% per annum and in
the beginning of 1999 decided to remove the exchange rate band that had  controlled  the
 depreciation  of the real,  thus allowing  the real to float  freely.  As a result,  the
exchange  rate against the U.S.  dollar  increased  from  R$1.2087 = US$1.00 at December
 31, 1998 to R$1.7890 = US$1.00 at December  31,  1999 to R$1.9554 = US$1.00 at December
 31,  2000 to R$2.3204 = US$1.00 at December 31, 2001 to R$3.5333 = US$1.00 at December
31, 2002.  At June 24, 2003, the exchange rate was R$2.8616 = US$1.00.

Depreciation  of the real in relation to the U.S.  dollar,  which
had reached 52.3% in 2002,  has  significant  effects on our financial  position and
results of operations.  The major impacts of  depreciations  of the real against the U.S.
 dollar are discussed in the next section.  Our exchange losses for 2002 reached US$134.0
million.

Effects of Inflation and Exchange Rate Fluctuations

Until July 1994,  Brazil had for many  years  experienced  high and
 generally  unpredictable  rates of  inflation  and steady depreciation  of its currency
 relative to the U.S.  dollar.  The  following  table sets forth  Brazilian  inflation as
measured by the Indice Geral de  Preços-Mercado,  or IGP-M, a widely used indicator of
inflation in Brazil  published by Fundação  Getúlio Vargas,  and the depreciation of the
real against the U.S. dollar for the periods shown:

|                        | Year Ended December 31,
|----------------------- | -----------------------
|                        | 1998                   
|Inflation (IGP-M Index) | 1.7%                   
|Currency Depreciation   | 8.3%                   

As a result of the Real Plan, the rate of inflation and the rate of
depreciation had been reduced  considerably  since July 1, 1994.  In the  first  nine
 months  of 2002,  due to market  instability  driven  by  international  factors,  the
real  experienced  a depreciation  of  67.9%.  However,  in the last  quarter of 2002,  the
 Brazilian  currency  partially  recovered  and  ended  the year  with a depreciation  of
52.3%.  Inflation  and  exchange  rate  variations  have had,  and may  continue to have,
 substantial  effects on our financial condition and results of operations.

Despite the principles  adopted for translating our
 real-denominated  financial  statements  into U.S.  dollars,  significant distortions
 to our reported  results for the affected  periods may remain,  as a result of the
inability of accounting  conventions to fully reflect actual  economic  conditions
 during the relevant  fiscal  periods.  While our financial  records have been maintained
in reais,  our reporting  currency for all periods is the U.S. dollar.  Our functional
 currency prior to 1998 was required to be the U.S. dollar under SFAS No. 52, Foreign
Currency Translation, but in 1998 we changed our functional currency to the real.

We made this change  because,  in accordance  with the SFAS No. 52,
a company  operating in an environment  that is not highly inflationary  is not
 obligated to use the U.S.  dollar as its  functional  currency.  The  Brazilian  economy
 ceased to be considered highly  inflationary  as of  January 1,  1998.  Therefore,
 under SFAS No. 52, we  determined  our  functional  currencytypically  the currency in
which a company  generates and expends cash, based upon factors  including cash flow
indicators,  sales prices  indicators, expense  indicators,  financing  indicators and
management  focusto be the real.  Because of the differences  between the evolution of
the rates of  inflation  in Brazil  and  changes in the rates of  depreciation,  as well
as the  effects  of the change our  functional currency,  amounts  presented in U.S.
 dollars may show  distortions when compared on a  period-to-period  basis.  Since we
adopted the real as our functional  currency in 1998, the  depreciation  of the real
against the U.S.  dollar has had the following  effects on our results of operations:

- The translation  effects of our U.S. dollar  transactions,
 primarily  represented by loans,  are recorded as loss on exchange               rate,
 net, in our statement of operations.  We did not record  translation  effects for
periods during which we measured               our results of operations using the U.S.
dollar as our functional currency.
- Our  non-monetary  assets,  consisting  primarily of property
 and  equipment,  goodwill on the  acquisition  of  consolidated
              subsidiaries and certain other long-term  assets,  are no longer translated
upon acquisition using historical U.S. dollar               rates and fixed in U.S.
dollars.  Therefore,  any depreciation of the real against the U.S. dollar is reflected
 directly               in stockholders equity,  including through the decrease in
real-denominated book value of property,  plant and equipment               when
translated into U.S. dollars.  These currency translation effects are beyond our
managements control.

For  further  information  on the  presentation  of our  financial
 information,  see  note  2 to our  consolidated  financial statements for the year ended
December 31, 2002.

Inflation  and exchange rate  variations  historically  have
 affected,  and will  continue to have  multiple  effects on, our results of  operations.
 Our  statements  of  operations  expressed in local  currency are  translated  to U.S.
 dollars at the average exchange rate for the period.  The current  period  dollars in
the  statements  of  operations  will be reduced at the same rate as the real lost value
in relation  to the U.S.  dollar over the period in  question.  However,  a portion of
our  operating  expenses  (e.g., maintenance,  selling,  general and administrative
 expenses) is in reais and tends to increase with Brazilian inflation.  As expressed in
U.S.  dollars,  these  increases are typically  offset at least in part by the effect of
 depreciation  of the real against the U.S. dollar.  If expenses in reais  increase  more
 quickly  than the rate of  depreciation,  our  operating  expenses as  expressed in U.S.
dollars  increase.  Conversely,  if the rate of  depreciation  increases  more  quickly,
 our  operating  expenses as expressed in U.S. dollars  decrease.  Additionally,  a
substantial  portion of our  indebtedness,  capital  expenditures and operating  costs,
 including network  equipment costs and programming  arrangements,  are denominated in or
indexed to U.S.  dollars.  Any  depreciation of the real against the U.S.  dollar,  if
such  depreciation  were in excess of  inflation,  would  result in a relative  increase
in the  expenses related to such indebtedness and capital  expenditures and in such
operating  expenses as compared to revenues,  which are generated in reais.  In such a
situation,  if we were not able to increase our prices to match the rate of  inflation,
 our ability to meet our debt service  obligations  and  operating  costs might be
 impaired.  Historically,  we have been able to adjust  prices to  counteract  the
effects of inflation, although there can be no assurance that we would be able to do so
in the future.

Another  significant  effect of  inflation  and  exchange  rate
 variations  concerns  our  monetary  assets  and  liabilities denominated in reais.  The
value of such assets and liabilities as expressed in U.S.  dollars  declines when the
real devalues  against the U.S. dollar,  and increases when the real  appreciates
 against the U.S. dollar.  Many financial  instruments  denominated in reais are indexed
according to a contractual index.  In periods of depreciation of the real, we report:

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

In addition,  certain financial  instruments  denominated in reais
are not indexed to a contractual  index, but their interest rates include the expectation
of future  inflation.  The interest on these  financial  instruments is also included in
our statement of operations under Financial income and Financial  expenses, and up to
December 31, 1997, were also generally  compensated,  at least in part, by the
 translation  gain or loss on these monetary  liabilities or assets,  which was recorded
in our statement of operations under Gain (loss) on translation,  net. As from January
1, 1998, these  translation  gains and losses are reported in the cumulative translation
 adjustments  component  of  stockholders  equity.  In 1998,  exchange  losses of
US$55.2  million  were  reported in the statement of operations and further  translation
 losses of US$26.9 million were recorded in the cumulative  translation  adjustmentscomponent
of  stockholders  equity.  The  principal  reason for these  larger  losses in 1998 was
the change in  translation  criteria following  our  adoption  of the real as our
 functional  currency.  In 1999,  we  reported  exchange  losses of  US$70.7  million
 and translation  adjustment  losses of US$48.4  million,  resulting from the significant
 depreciation of the real that occurred on January 15, 1999 and continued  through the
year. In 2000, we reported  exchange losses of US$27.6 million and  translation
 adjustment  losses of US$45.1  million,  resulting from the 9.3%  depreciation of the
real against the U.S. dollar that occurred during the year. In 2001, we reported
 exchange  losses of US$85.5  million and  translation  adjustment  losses of US$125.1
 million,  resulting  from the 18.7% depreciation of the real against the U.S. dollar
that occurred  during 2001. In 2002, we reported  exchange losses of US$134.0  million
and translation  adjustment profit of US$17.1 million,  resulting from the 52.3%
 depreciation of the real against the U.S. dollar that occurred during 2002.

ITEM 6. DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES

We are managed by our Conselho de
Administração, or board of directors, and our Diretoria, or
executive officers. In accordance with our by-laws, the directors are elected at a general
meeting of shareholders to serve one-year terms. The tenure of the directors will end upon
the election of the new members at our annual shareholders meeting to be held by
April 2004.

Our by-laws provide for a minimum of
two and a maximum of four executive officers appointed by our board of directors for
renewable two-year terms. Our executive officers are responsible for all matters
concerning our day-to-day management and operations. Our executive officers must be
residents of Brazil and may or may not be shareholders of Net Serviços.

Directors

Our shareholders agreement
provides that, subject to certain conditions, each of our major shareholders has the
right to appoint at least one member to our board of directors. As a result of Microsoft
B.V.s failure to comply with minimum share ownership requirements provided for in
the shareholders agreement, it is not entitled to appoint a member to our board of
directors. Accordingly, although our by-laws provide that the board of directors shall
consist of a minimum of nine members, we currently only have eight directors. According to
our by-laws and Brazilian corporate law, each member of our board of directors must be a
Net Serviços shareholder.

The Companys
directors are:

|Name                         | Position                     | Position Held Since | Current Term Expires
|---------------------------- | ---------------------------- | ------------------- | --------------------
|                            
|Roberto Irineu Marinho       | Chairman, Board of Directors | February 22, 2000   | April 30, 2004      
|Nelson Pacheco Sirotsky      | Director                     | September 18, 2000  | April 30, 2004      
|Stefan Alexander             | Director                     | September 18, 2000  | April 30, 2004      
|Romulo de Mello Dias         | Director                     | April 30, 2002      | April 30, 2004      
|Ronnie Vaz Moreira           | Director                     | April 30, 2002      | April 30, 2004      
|Jorge Luiz de Barros Nobrega | Director                     | April 30, 2002      | April 30, 2004      
|Jorge Eduardo Martins Moraes | Director                     | April 30, 2003      | April 30, 2004      
|Rossana Fontenele Berto      | Director                     | April 30, 2003      | April 30, 2004      

Our board of directors generally
holds meetings every month or as called by any director. Its responsibilities include,
among other things, the establishment of the policy and general strategy of the business,
and the appointment and supervision of our executive officers.

Biographies of Our Board
of Directors

Roberto Irineu Marinho is the
co-chairman of Organizações Globo, a conglomerate of companies in the
Brazilian media and entertainment industries. Mr. Marinho has been a member of our board
of directors since February 2000, and Chairman of the board of directors since that time. Mr. Irineu
Marinho began his career at the newspaper O Globo, where he served in a variety of
assignments culminating in his appointment as the newspapers director. In 1978, Mr.
Marinho was appointed executive vice president of Globo TV Network and in 1990 he became
executive vice president of Organizações Globo. Mr. Marinho has received
recognition and awards from numerous Brazilian business and civic organizations and public
institutions. Mr. Marinho is also a board member of Editora Globo.

Nelson Pacheco Sirotsky has
been a member of our board of directors since September 2000. He holds a degree in Public
Administration from the Universidade Federal do Rio Grande do Sul and a graduate degree
from the University of Southern California. Mr. Sirotsky began his career at Rádio
Gaúcha, in 1972, where he was director before becoming regional director of Grupo
RBS. In 1981, he became Vice President of Grupo RBS. He was Executive President of RBS and
a member of Grupo RBS administration since 1992. Currently, he is a member of the Conselho
da Associação Brasileira de Jornalismo, of the Associação
Brasileira de Rádio e Televisão and of the Associação dos
Dirigentes de Vendas do Brasil. He is also a member of the Instituto Europeu de
Administração de Empresas.

Stefan Alexander has been a
member of our board of directors since September 2000. Currently, he is the Executive
Director of Corporate Finance at Globopar. Previously, he was the Director of Financial
Planning and Investor Relations at Globopar. Prior to joining Globopar, he was the
Director of Corporate Finance in Brazil at Bank of America/Nations Bank where he was
responsible for several operations, including consulting and financing of the acquisition
of Companhia Vale do Rio Doce by Companhia Siderúrgica Nacional. He had also worked
at Capital Markets Department and Banco BBA Creditanstalt S.A. Mr. Alexander holds a
Masters degree in Economics from the Pontifícia Universidade Católica
do Rio de Janeiro.

Rômulo de Mello Dias has
been a member of our board of directors since April 30, 2002. He has been the Officer for
New Businesses for Bradespar since 2000, where he is responsible for the analysis and
negotiation of new business in Brazil and Latin America. Prior to joining Bradespar, he
was a partner at the Private Equity Fund of Albion in association with Alliance Capital,
from 1999 to 2000. Mr. Dias also served as an officer at Citibank from 1995 to 1999, where
he was initially responsible for the Corporate Finance Area and, subsequently, for the
Private Equity Area. He was previously a member of the board of directors of several
companies, including Escelsa, Enersul, Americel, Telet and Iven. He is currently a member
of the board of directors of the following companies: CVRD, Valepar, Valepontocom,
Latinexus and Estrutura Net. Mr. Dias holds a degree in Economics from Universidade
Federal Fluminense, and an MBA degree from Ibmec. Mr. Dias attended the PDG EXEC 
Executive Management Development Program  SDE.

Ronnie Vaz Moreira has been a
member of our board of directors since April 30, 2002. He became the Chief Executive
Officer of Globopar in March 2002, where he is responsible for the Corporate Finance area
of the Globo Organizations. Previously, Mr. Moreira was the Executive Officer of Deutsche
Bank and the Financial Officer of Petrobrás. He holds a degree in Economics from
Universidade Federal do Rio de Janeiro and a graduate degree in International Business
Administration from the American Graduate School of International Management.

Jorge Luiz de Barros
Nóbrega has been a member of our board of directors since April 30, 2002. Mr.
Nóbrega has been the Strategic Coordination Officer of the Globo Organizations
since 1998. Previously, Mr. Nóbrega was a World Bank advisor and projects
coordinator of the Inter-American Development Bank. He has also worked at General Electric
and Xerox. He holds a B.A. degree from Fundação Getúlio Vargas (Rio
de Janeiro) and an Industrial Engineering masters degree from Pontifícia
Universidade Católica do Rio de Janeiro.

Jorge Eduardo Martins Moraes
has been a member of our board of directors since April 30, 2003. He worked as an
analyst for BNDES Participações S.A. from 1982 to 1992, as an investment
manager from April 1992 to August 2000 and as the Division Superintendent from July 2000
to February 2003. Mr. Moraes is also a member of the board of directors of Aços
Villares S.A., and a member of the Brazil Private Equity Fund Consulting Board. He holds a
degree in civil engineering from UFRJ (Rio de Janeiro, Brazil) and a masters degree in
business from COPPEAD/UFRJ (Rio de Janeiro, Brazil).

Rossana Fontenele Berto has
been a member of our board of directors since April 30, 2003. Ms. Berto has been Director
of Strategic Planning and Business Development for Organizações Globo since
2002. Prior to that, Ms. Berto was the General Director of Sky Brasil from 1999 to
February 2002, General Director of Net Rio from 1998 to 1999 and Director of Controls of
Multicanal from 1993 to 1998. She is also a board member of Sky Brasil. She holds a B.A.
degree from Universidade do Estado do Rio de Janeiro and a MBA degree from COPPEAD/UFRJ
(Rio de Janeiro, Brazil).

Audit Committee

Under Brazilian corporate law, a
Conselho Fiscal (Fiscal Board), or an Audit Committee, may be appointed as a
corporate body independent of our management and external auditors. Its primary
responsibilities are to review managements activities and the financial statements
and report their findings to the shareholders. We are not currently required to, and
currently do not, maintain a permanent Conselho Fiscal or an Audit Committee. However, we
would be required to install a Conselho Fiscal upon the request of shareholders who, in
the aggregate, hold ten percent of our common shares or five percent of our preferred
shares. If we were required to create a Conselho Fiscal, the Conselho Fiscal would consist
of five members and an equal number of alternates elected by shareholders at a general
shareholders meeting.

Executive Officers

|Name                        | Position                | Position Held Since | Current Term Expires
|--------------------------- | ----------------------- | ------------------- | --------------------
|                           
|Francisco Tosta Valim Filho | Chief Executive Officer | February 2003       | April 30, 2005      
|Leonardo P. Gomes Pereira   | Chief Financial Officer | April 2000          | April 30, 2005      
|Jose Antonio Guaraldi Felix | Chief Operating Officer | May 2003            | April 30, 2005      

Francisco Tosta Valim Filho
became Chief Executive Officer of Net Serviços in February 2003. Mr. Valim replaced
Luiz Antônio Viana, who served as Chief Executive Officer of Net Serviços
from October 2001 until January 2003. Before joining Net Serviços, Mr. Valim was
the Financial and Administrative Superintendent of Telemar for three years. Prior to that,
he served as the Vice President and as Chief Financial Officer of RBS. Mr. Valim also
served as Executive Director of Net Sul. He has a degree in Business Administration from
Universidade Federal do Rio Grande do Sul (UFRGS) and a post-graduate degree in Finance
from Fundação Getúlio Vargas (FGV-SP) and in Strategic and
Organizational Planning from UFRGS. He also holds an MBA in Finance and Administration of
Multinational Companies from the University of Southern California.

Leonardo P. Gomes Pereira has
been our Chief Financial Officer since April 2000. Previously, he was the Director of
Planning and Investor Relations at Globopar for four years. Mr. Pereira worked at Citibank
from 1982 to 1995, holding various positions in the corporate banking and corporate
finance areas in several countries, including Brazil, Thailand, Venezuela and the United
States. Mr. Pereira received a BSC in Engineering from the Federal University of Rio de
Janeiro and a BSC in Economics from Candido Mendes University in Rio de Janeiro. Mr.
Pereira also received an MBA from Warwick University in the U.K., with post-graduate work
at Wharton Business School at the University of Pennsylvania.

José Antônio Guaraldi
Félix has been our Chief Operating Officer since May 2003. Previously, he was
the Regional Officer of Region 3 at Net Serviços for two years. He was an officer of Net Sul where
he was responsible for implementing 16 operations in Southern Brazil. Mr. Félix worked at RBS from 1980 to
1990, holding various positions in the operational area. Mr. Felix has a degree in
telecommunication engineering from Pontifícia Universidade Católica do Rio
Grande do Sul.

Indemnification

We do not currently have any
contracts or arrangements with our directors and officers which provide for the insurance
or indemnification by us or our subsidiaries against any liabilities which may be incurred
as a director or officer of Net Serviços.

Benefits upon termination
of employment

Our executive officers are entitled
to one month salary for each year of service with Net Serviços, plus six months of
life insurance and medical assistance following a termination of their employment with us.

Compensation of
Directors and Senior Management

For the year ended December 31, 2002,
the aggregate compensation of all directors and members of senior management, for services
in all capacities, was approximately US$950,000.

Employees

As of December 31, 2002, we had 3,152
employees, all located in Brazil. This significant decrease compared to the 4,695 and
6,282 employees we had at December 31, 2001 and December 31, 2000, respectively, was due
to employee dismissals driven by our cost-cutting initiatives. At December 31, 2002,
approximately 54.6% of our employees were working in installation, repair and network
maintenance, and 45.4% were working in administrative functions. We believe that our
relations with our employees and the labor union Sindicato Nacional dos Trabalhadores
em Empresas Prestadoras de Serviços e Operadoras de Sistemas de Televisão
por Assinatura, a Cabo e MMDS are generally good.

Share Ownership

No director or other member of our
senior management is the record owner of more than 1% of our shares. For certain
information on the beneficial ownership of our shares, including shares held by affiliates
of our directors, see Item 7. Major Shareholders and Related Party
Transactions.

Long Term Incentive Plans

We currently have three long term
incentive plans: Pacto, an annual bonus program for all employees,
Bravo, a plan based on the performance of our stock and restricted to
higher-level employees, and a retention plan for a selected number of our senior excecutive and managers

Pacto establishes financial and
operational goals relating to: adjusted EBITDA, total number of subscribers, number of
subscribers to new services, and level of customer satisfaction. If we achieve these
goals, our employees may receive maximum possible bonuses ranging from the equivalent of a
one month salary payment to a six month salary payment depending upon such employees
level of responsibility. If some of the goals are not achieved, the maximum possible bonus
decreases accordingly. In 2002, we did not make any payments to our employees pursuant to
Pacto.

The benefits under Bravo are linked
to the performance of our ADSs on the Nasdaq National Market. Bravo participants receive,
at the beginning of the year, the right to buy a certain amount of these securities at a
specified price based on a market price. However, instead of receiving actual shares at
the time of remuneration, the participant receives a cash amount equal to the difference
between the market value of the ADSs and the grant price. These benefits can only be fully
exercised after the end of the three-year vesting period. Because the price of our ADSs
has decreased significantly, the benefits granted in 2000 and 2001 currently have no
market value. In 2002, we did not grant any benefits under Bravo.

In 2002 we developed a retention plan
for a selected number of our senior executives and managers to ensure the successful
completion of our debt restructuring. The goal of this plan is to retain key executives
and managers during the debt restructuring in order to guarantee our ability to continue
as a going concern.

ITEM 7.      MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

We have two classes of capital stock
authorized and outstanding: common shares and preferred shares. Our common shares have
full voting rights. Our preferred shares have voting rights in only limited circumstances.
As of March 31, 2003, none of our outstanding common shares and approximately 2% of our
outstanding preferred shares, including in the form of ADSs, were held in the United
States. On March 31, 2003, there were approximately 10,000 record holders of preferred
shares, including in the form of ADSs, in the United States.

The following table sets forth, as of
March 31, 2003, giving effect to the ten-for-one reverse stock split of our common shares
and preferred shares that occurred in June 2002, information regarding the beneficial
ownership of common shares and preferred shares by each person known by us to own
beneficially more than 5% of any class of our voting securities. None of our major
shareholders identified in the table has special voting rights.

|                                           | Common Shares | Preferred Shares           | Total Equity
|------------------------------------------ | ------------- | -------------------------- | ------------
|Name                                       | Number        | Percentageof TotalOutstand | Number      
|Roma Participacoes Ltda.(1)                | 300,134,962   | 36.2%                      | 251,159,262 
|Distel Holding S.A.(1)                     | 256,673,248   | 31.1%                      | 40,646,152  
|Globo Comunicacoes e Participacoes S.A.(1) | 0             | 0.0%                       | 83,416,681  
|Bradesplan Participacoes S.A.(2)           | 130,511,010   | 15.8%                      | 0           
|BNDES Participacoes S.A                    | 69,776,346    | 8.4%                       | 378,422,927 
|RBS Participacoes S.A.(3)                  | 56,523,792    | 6.8%                       | 56,424,277  

|______ | __________                                                                                                                                                                                                 
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)    | Distel Holding S.A. and Roma Participações Ltda. are controlled by Globopar,
which is controlled by the Marinho Family.                                                                                    
|(2)    | Bradesplan Participacoes S.A. is a wholly owned subsidiary
of Bradespar Participações S.A., an investment vehicle under common control
with Banco Bradesco S.A., the largest private Brazilian retail bank.
|(3)    | Includes 3,548,152 of our preferred shares owned by Zero
 Hora Editora Jornalistica S.A. and 33,196,965 of our preferred shares owned by RBS Interativa,
affiliates of RBS Participações S.A.              

Shareholders
Agreement

On July 12, 2002, we entered into a
new shareholders agreement with Romapar, Globopar, Bradesplan, Bndespar, Microsoft
B.V., RBS and Zero Hora, with respect to their ownership of our common shares and, in the
case of Bndespar, RBS and Microsoft B.V., also with respect to their ownership of our
preferred shares. The shareholders agreement establishes, among other things, the
following:

Right of first refusal. The
shareholders agreement establishes specific rules for the transfer of shares by the
shareholders that are parties to the shareholders agreement. In the event that one
of the shareholders intends to transfer its shares that are subject to the
shareholders agreement, such shareholder is required to notify the other
shareholders, that are parties to the shareholders agreement, in order to enable
them to exercise their right of first refusal. Each such shareholder, however, will be
subject to the specific rules described in the shareholders agreement concerning the
possibility of making a public offering of our shares that are subject to the
shareholders agreement.

Prior Meetings. The
shareholders agreement provides that a prior meeting of the shareholders must be
held before all general meetings of shareholders and meetings of the board of directors at
which a relevant matter or matters (as defined in the shareholders agreement) are to
be considered. The prior meetings will establish the position that will be adopted by the
shareholders that are party to the shareholders agreement at the general meeting or
board meeting. Relevant matters submitted at prior meetings must be approved by the
favorable vote of a majority of the common shares subject to the shareholders
agreement and must include the favorable vote of Bradesplan or Bndespar. The shareholders
are then required to vote or instruct their respective directors to vote, as the case may
be, in accordance with the outcome of the vote at the prior meeting.

Tag-along rights. Under the
shareholders agreement, in the event of the sale of control of us, either by a
single transaction or by way of successive transactions, directly or indirectly, by any
shareholder party to the shareholders agreement, the purchaser must agree to
undertake a public offering to purchase the common and preferred shares of the remaining
shareholders within a period of no more than 90 days for 100% of the amount paid per
voting share of our controlling block.

In the event that one of the
shareholders party to the shareholders agreement individually owns more than 50% of
the common shares subject to the shareholders agreement, an eventual sale of such
common shares by such shareholder will entitle the remaining shareholders party to the
shareholders agreement to tag-along rights.

Drag-along rights. The
shareholders agreement provides that in the event of a sale of control by Globopar,
Globopar may compel the other shareholders which are parties to the shareholders
agreement to sell their shares to the purchaser on the same terms that the purchaser has
offered to Globopar, subject to specific rules applicable to Bndespar, as described in the
shareholders agreement. Globopar shall also comply with the right of first refusal
when transferring the shares representing our control by offering the shares to the
remaining shareholders party to the shareholders agreement.

Furthermore, in the event that the
ratio between our net debt and adjusted EBITDA exceeds 6.00 to 1.0 for two
consecutive quarters, the parties to the shareholders agreement shall have the right
to seek a purchaser for their shares and for the shares held by the other shareholders
that are parties to the shareholders agreement.

Continuation of major
shareholder status. Each shareholder that is party to the shareholders
agreement will be required to maintain ownership of at least 6% of our voting capital.

Appointment of directors. The
shareholders agreement provides all of our major shareholders with the right to
appoint at least one member to our board of directors.

Term. The shareholders agreement has a term of ten years.

Put/Call Options Among
Shareholders

On November 16, 1999, Distel and
Microsoft Corporation entered into an Option Agreement pursuant to which Distel granted
Microsoft Corporation an option to purchase 5,250,000 of our preferred shares held by
Distel, at the exercise price of US$6.00 per share. This option may be exercised by
Microsoft Corporation as a result of the launching of our high speed internet access
service using our broadband infrastructure that occurred in the fourth quarter of 2000.

In addition, Distel and Bndespar
entered into an Contrato de Opção de Compra e de Opção de
Venda de Ações on December 22, 1999, under which Bndespar granted Distel an
option to purchase all of our common and preferred shares held by Bndespar prior to our 2002
recapitalization and Distel granted to Bndespar
an option to sell all our common and preferred shares held by Bndespar prior to our 2002 the
recapitalization effected during the third quarter of 2002. The exercise price of the
options is R$11.60 accrued with TJLP plus 7% per year pro rata tempore, until the full
exercise of the options and the payment of the exercise price. The options may be
exercised from December 2005 until December 2006.

Related Party
Transactions

We have engaged in a variety of
related party transactions, including the transactions described below. We cannot state
with any certainty the extent to which such transactions are comparable to those which
might have been obtained from a non-affiliated third party. We intend to enter into any
future material related party transactions on terms that are fair and reasonable to us.

Material Transactions
with Affiliates

Net Brasil Programming
Agreement

We purchase all of our programming
from our affiliate Net Brasil, which is indirectly owned 60% by Globopar and 40% by us.
Net Brasil acts as our intermediary in purchasing programming from both Brazilian and
international sources. Net Brasil also provides this service for other pay-television
companies, principally Sky Brasil, a DBS provider that is also controlled by Globopar,
along with cable television providers that operate outside of our licensed territories.
Our contract with Net Brasil also grants us the right to use the NET brand
name.

Much of the programming we purchase
through Net Brasil is produced by our affiliate Globosat, which is wholly owned by
Globopar. Globosat is a producer of mostly Portuguese-language programming, such as
SportTV, GNT, Globo News, Shoptime, Multishow, Futura and Canal Brasil. Globosat also
purchases programming from third parties.

We have a programming agreement with
Net Brasil pursuant to which it obtains on our behalf the rights to all programming that
our pay-television operators provide to their subscribers. Typically, Net Brasil
negotiates programming contracts with content providers on behalf of us, Sky Brasil, and
certain other pay-television providers, and we and Sky Brasil are consulted with regard to
those negotiations. At the conclusion of the negotiations, we have the option, independent
of any decision of Sky Brasil and Net Brasil, to accept or not accept programming from
that source. We believe that by aggregating subscribers across several different
pay-television platforms, Net Brasil is able to create a better negotiating position than
we could on our own and to obtain for us better terms and prices for our programming
content.

Pursuant to our agreement and ongoing
arrangements, we pay to Net Brasil a fee comprised of two parts:

- a fee equal to the amount that programmers charge Net Brasil
for programming provided to us; and
- a monthly variable fee to cover Net Brasil's overhead equal to
R$0.47 per subscriber per month.

Our arrangements with Net Brasil and
the shareholders agreement, specify, among other things, that (i) in its dealings
with us, Net Brasil is not intended to operate at a profit; and (ii) new programming
contracts and renewals or amendments to existing programming contracts, pursuant to which
we will be receiving programming, must be approved by our board of directors, including
the affirmative vote of a director appointed by either Bndespar or Bradespar. Pursuant to
our programming agreement, we paid Net Brasil US$146.8 million in 2000, US$152.9 million
in 2001 and US$131.0 million in 2002. We also believe that if we grow, Net Brasil
has been able to negotiate better contract terms on our behalf and has passed those
savings on to us.

Our liabilities to Net Brasil are
considered normal trading transactions and are classified as accounts payable to
programmers under current liabilities.

Programming Guide

Our program guide is produced by
Editora Globo S.A., a publishing company affiliated with Globopar. In 2000, 2001 and 2002,
we paid Editora Globo S.A. US$4.4 million, US$7.7 million, and US$6.5 million,
respectively, for the publication of our program guide.

Financing Arrangements
with Affiliates

Protocol of
Recapitalization

During the third quarter of 2002, our
major shareholders effected a recapitalization of approximately R$1.2 billion (US$399.9
million), corresponding to US$392.2 net of issuance costs, which increased our equity
capital and reduced our debt. For a more detailed description of the recapitalization,
which included a Brazilian offering of common and preferred shares and an international
placement of preferred shares, see Item 5. Operating and Financial Review and
ProspectsThe Recapitalization.

Convertible debentures
due 2006

In connection with the
recapitalization, two of our major shareholders, Globopar and Bndespar, delivered an
aggregate amount of 1,553 of our convertible debentures issued in December 1999, which
were worth R$218.4 million (US$70.9 million), as consideration for subscribing preferred
shares as part of the recapitalization. In addition, Bradespar, through a subsidiary,
delivered an aggregate amount of 130 of our convertible debentures, which were worth
approximately R$18.3 million (US$6.1 million), as consideration for subscribing preferred
shares as part of the recapitalization. Additional details regarding the terms of these
convertible debentures are discussed under Item 5. Operating and Financial Review
and ProspectsLiquidity and Capital ResourcesDebt FinancingConvertible
Debentures. The recapitalization is discussed in greater detail under Item 5.
Operating and Financial Review and ProspectsThe Recapitalization.

Globopar AFACs

In April 2002, Globopar and its
affiliates advanced R$10.0 million (US$4.3 million at that time) to us. The advances by
Globopar and its affiliates were designated as advances for future capitalization, or
AFACs. In connection with the recapitalization, Globopar and its affiliates converted this
AFAC into shares at the public offering price for a share.

Loans

In July 2002, RBS Interativa, an
affiliate of RBS, loaned us R$16.4 million (US$4.8 million at that time). In connection
with the recapitalization, through RBS Interativa, RBS converted this loan into shares at
the public offering price for a share.

In July 2002, Bradesplan loaned us
R$78.8 million (US$22.8 million at that time). In connection with the recapitalization,
Bradesplan converted this loan into shares at the public offering price for a share.

Interest

We earned US$0.8 million, US$0.1
million and US$0 in interest on related party receivables in 2000, 2001 and 2002,
respectively. Our interest expense on related party payables was US$0.6 million, US$12.5
million and US$35.2 million in 2000, 2001 and 2002, respectively.

Guarantees and pledges

Several of our loan agreements
involve guarantees and pledges between us and our shareholders, or among our shareholders.
See Item 5. Operating and Financial Review and ProspectsLiquidity and Capital
ResourcesDebt Financing, IFC facility and Trade
Financing and U.S. dollar denominated bank loans.

Guarantees and pledges by our
shareholders to support our or our subsidiaries obligations:

Loans under the IFC facility are guaranteed
by Globopar and members of the Roberto Marinho family, the principal stockholder of
Globopar. As a security for its guarantee, Globopar pledged to the IFC 51% of its interest
in the voting stock of Distel. Globopar has also agreed to pledge to the IFC 51% of any
additional voting stock of Distel that it may obtain in the future.

A number of our subsidiaries have
entered into U.S. dollar-denominated trade financing loans with Brazilian financial
institutions. As of December 31, 2002, we had US$37.6 million principal amount outstanding
under these loans.

We have not paid any fees to Globopar
or its affiliates in connection with these guarantees and pledges.

Guarantees and pledges by us or
our subsidiaries to support our shareholders obligations:

In connection with Globopars guarantee
under the IFC facility, we have pledged to Globopar shares of our subsidiary Multicanal
Telecomunicações S.A., based on the amount of borrowings outstanding at any
time under this facility and the size of Multicanal Telecomunicações
subscriber base. At December 31, 2002, we had pledged to Globopar a total of 6,806,344,107
shares of Multicanal Telecomunicações S.A., representing 4.8% of Multicanal
Telecomunicações S.A.s total outstanding shares.

ITEM 8. FINANCIAL
INFORMATION

Our audited consolidated financial
statements as of December 31, 2002 and 2001 and for each of the three years in the
period ended December 31, 2002 are included elsewhere in this Form 20-F. There have
been a number of significant changes with respect to our financial position since
December 31, 2002, the date of the most recent financial statements included in this
Form 20-F.

- We have not made any payment of principal and interest on our
debt since December 31, 2002.
- We are pursuing a debt restructuring plan with respect to our
debt facilities and instruments.
- Accounts payable to programmers increased from US$51.1 million
at December 31, 2002, to US$57.7 million at March 31, 2003.
- Our liquidity position has weakened and our working capital
deficit has continued to be significant.
- We recorded a net loss of approximately US$12.0 million for the
three-month period ended March 31, 2003. We are likely to continue recording net losses
for the foreseeable future.

See Item 5. Operating and
Financial Review and ProspectsLiquidity and Capital ResourcesLiquidity
requirements and sources for a discussion of these and other changes to our
financial position.

See "Item 4. Information on the Company--Legal Proceedings" for a
discussion our legal proceedings.

See "Item 10. Additional Information--Dividend Policy" for a
discussion of our policy on dividend distributions.

ITEM 9. THE OFFER AND
LISTING

General

The principal non-United States
market for our preferred shares is the Bovespa. Our preferred shares are traded on the
Bovespa under the symbol PLIM4.

In June 2001, we complied with the
requirements of Corporate Governance Level 1 of the Bovespa. The Corporate Governance
Level 1 is a listing segment created for the trading of shares issued by companies that
voluntarily undertake to comply with certain corporate governance practices and disclosure
requirements that are in addition to those imposed by the Brazilian legislation. The
inclusion of a company in the Corporate Governance Level 1 signifies the companys
compliance with a series of corporate rules, known as good practices of corporate
governance, which are more rigid than those required by the Brazilian legislation. These
rules increase the rights of the shareholders as well as improving the quality of
information we provide to the market.

In June 2002 we were approved for
listing in Bovespas Corporate Governance Level 2. We anticipate seeking to list our
shares in the Novo Mercado of Bovespa, subject to a number of conditions. See
Level 2 and the Novo Mercado of Bovespa below.

Our predecessor company, Multicanal,
conducted an offering of ADSs in October 1996. Each ADS represents ten preferred shares.
The ADSs trade in the United States on the Nasdaq National Market under the symbol
NETC and are evidenced by ADRs. The ADSs are outstanding under an amended and
restated deposit agreement dated as of December 17, 2001 among us, JPMorgan Chase Bank as
depositary, and the owners and holders from time to time of the ADSs. On December 17,
2001, JPMorgan Chase Bank succeeded The Bank of New York as depositary for the ADSs. An
ADR may represent any number of ADSs. Only persons in whose names ADSs are registered on
the books of the depositary are treated as owners of ADSs under the deposit agreement.

The table below sets forth, for each
period indicated, the high and low closing prices in reais for the preferred shares on the
Bovespa and the high and low closing prices of the ADSs in U.S. dollars as reported by the
Nasdaq National Market.

|                            | Sao PauloStock Exchange(1)R$ per preferred share | NasdaqUS$ per ADS
|--------------------------- | ------------------------------------------------ | -----------------
|                            | High                                             | Low              
|Year                       
|                           
|1998                        | R$ 6.81                                          | R$ 2.39          
|1999                        | 35.50                                            | 1.91             
|2000                        | 44.30                                            | 15.60            
|2001                        | 24.40                                            | 5.60             
|2002                        | 8.50                                             | 0.19             
|                           
|Quarter                    
|1Q/01                       | 24.40                                            | 13.30            
|2Q/01                       | 14.00                                            | 7.40             
|3Q/01                       | 12.20                                            | 5.60             
|4Q/01                       | 8.70                                             | 5.60             
|                           
|1Q/02                       | 8.50                                             | 4.90             
|2Q/02                       | 5.50                                             | 1.65             
|3Q/02                       | 1.87                                             | 0.23             
|4Q/02                       | 0.45                                             | 0.19             
|                           
|1Q/03                       | 0.25                                             | 0.53             
|                           
|Month                      
|December 2002               | 0.45                                             | 0.33             
|January 2003                | 0.53                                             | 0.34             
|February 2003               | 0.38                                             | 0.25             
|March 2003                  | 0.32                                             | 0.27             
|April 2003                  | 0.43                                             | 0.27             
|May 2003                    | 0.43                                             | 0.34             
|June 2002 (through June 24) | 0.39                                             | 0.31             

|______ | __________                                            
|------ | ------------------------------------------------------
|(1)    | Reais per share reflected nominal price at trade date.

Trading Markets

Nasdaq National Market

The primary market for those
preferred shares held in the form of ADSs is the Nasdaq National Market. On March 31,
2003, there were 737,792 ADSs outstanding, representing 0.6% of the total amount of
preferred shares held by public shareholders (which are all preferred shares not owned by
the shareholders listed in Item 7. Major Shareholders and Related Party
TransactionsMajor Shareholders). The average daily trading volume of the ADSs
on the Nasdaq National Market during 2002 was approximately US$200,000, or 13,502 ADSs.

Brazilian Stock Exchanges

In 2000, the Brazilian stock
exchanges were reorganized through the execution of a memorandum of understanding by the
Brazilian stock exchanges. Pursuant to the memorandum, all securities are now traded only
on the Bovespa, with the exception of electronically traded public debt securities and
privatization auctions, which are traded on the Rio de Janeiro Stock Exchange. In 2002,
the Bovespa accounted for 100% of the trading value of equity securities on all Brazilian
stock exchanges. The Bovespa is a non-profit entity owned by its member brokerage firms.
Trading on the Bovespa is limited to member brokerage firms and a limited number of
authorized non-members.

Trading.
          The Bovespa has two open outcry trading sessions each day from 11:00 a.m. to
          1:30 p.m. and from 2:30 p.m. to 5:45 p.m., Brazil local time, except during
          daylight savings time in the United States. During daylight savings time in the
          United States, the sessions are from 10:00 a.m. to 1:00 p.m. and from 2:00 p.m.
          to 4:45 p.m., Brazil local time, to closely mirror New York Stock Exchange
          trading hours.

Trading is also conducted between
11:00 a.m. and 6:00 p.m., or between 10:00 a.m. and 5:00 p.m. during daylight savings time
in the United States, on an automated system known as the Computer Assisted Trading System
on the Bovespa and on the National Electronic Trading System. This system is a
computerized system which links electronically with the seven smaller regional exchanges.

The Bovespa also permits trading from
6:45 p.m. to 7:30 p.m. on an online system connected to traditional and internet brokers
called the After Market. Trading on the After Market is subject to regulatory
limits on price volatility and on the volume of shares transacted through internet
brokers. There are no specialists or officially recognized market makers on the Bovespa.
Trading in securities listed on the Brazilian stock exchanges may be effected off the
exchanges in certain circumstances, although such trading is very limited.

In order to better control
volatility, the Bovespa adopted a circuit breaker system pursuant to which
trading sessions may be suspended for a period of 30 minutes or one hour whenever the
indices of these stock exchanges fall below the limits of 10% or 15%, respectively, in
relation to the index registered in the previous trading session.

Settlement of transactions is
effected three business days after the trade date without adjustment of the purchase price
for inflation. Delivery of and payment for shares are made through the facilities of a
clearinghouse, or Câmara Brasileira de Liquidação e Custódia
S.A., which maintains accounts for member brokerage firms. The seller is ordinarily
required to deliver the shares to the exchanges on the second business day following the
trade date.

Market Size. As of December
31, 2002, the aggregate market capitalization of the 441 companies listed on the Bovespa
was equivalent to approximately US$124.0 billion. Although any of the outstanding shares
of a listed company may trade on a Brazilian stock exchange, in most cases fewer than half
of the listed shares are actually available for trading by the public, the remainder being
held by small groups of controlling persons, by governmental entities or by one principal
shareholder. As of December 31, 2002, we accounted for approximately 0.13% of the market
capitalization of all listed companies on the Bovespa.

Although at December 31, 2002 the
Brazilian equity market was Latin Americas largest in terms of market
capitalization, expressed in U.S. dollars, it is relatively small and illiquid compared to
major world markets. In 2002, the average daily trading value was approximately US$158.0
million on the Bovespa.

Index.
          We have been included in the Bovespa index, or the Ibovespa, since May 2000. The
          Ibovespa is the most representative indicator of the performance of the prices
          of the Brazilian stock market, since it clearly shows the behavior of the
          principal shares traded on the São Paulo Stock Exchange. In August 2000,
          the Bovespa announced that the Ibovespa for the last four months of 2000 would
          contain 7.8% of our preferred shares, an increase from 4.6%. As a result, our
          preferred shares became the third highest weighted stock in the index. On
          December 31, 2002, our weighting in the index was 0.42%. Our securities are also
          trade on several additional markets, including: SOMA, a Brazilian electronic
          trading market, where our convertible debentures began trading in January 2000;
          the Chicago, Pacific and American option exchanges, where options on ADSs began
          trading in February 2000; and Latibex, the market for Latin American companies
          on the Madrid Stock Exchange, where trading on our shares began in July of 2000.

Tax Matters. Trading on
Brazilian stock exchanges by a holder not deemed to be domiciled in Brazil for Brazilian
tax and regulatory purposes, or a non-Brazilian holder, is subject to certain limitations
under Brazilian foreign investment legislation. With limited exceptions, non-Brazilian
holders may only trade on Brazilian stock exchanges in accordance with the requirements of
Resolution No. 2,689, of January 26, 2000, of the National Monetary Council. Resolution
No. 2,689 requires that securities held by non-Brazilian holders be maintained in the
custody of, or in deposit accounts with, financial institutions duly authorized by the
Central Bank and the Brazilian securities commission. In addition, Resolution No. 2,689
requires non-Brazilian holders to restrict their securities trading to transactions on
Brazilian stock exchanges or qualified over-the-counter markets. With limited exceptions,
non-Brazilian holders may not transfer the ownership of investments made under Resolution
No. 2,689 to other non-Brazilian holders through a private transaction. See Item 10.
Additional InformationTaxationMaterial Brazilian Taxation
ConsiderationsTaxation of Gains for a description of certain tax benefits
extended to non-Brazilian holders who qualify under Resolution No. 2,689.

Level 2 and the Novo
Mercado of Bovespa

On December 11, 2000, the Bovespa
launched three new listing segments designed for the trading of shares issued by publicly
held companies: the Special Corporate Governance Level 1, the Special Corporate Governance
Level 2 and the Novo Mercado of Bovespa. These new listing segments were designed for the
trading of shares issued by companies that voluntarily undertake to abide by corporate
governance practices and disclosure requirements in addition to those already required
under Brazilian corporate law.

The inclusion of a company in any of
the new segments implies the adherence to a series of corporate rules, known generically
as good corporate governance practices. These rules are designed to increase
shareholders rights and enhance the quality of information provided by Brazilian
corporations.

Pursuant to the terms and conditions
of the Protocol of Recapitalization, our major shareholders have undertaken to ensure that
all required steps are carried out in order for us to be listed as a Level 2 Company, and
to meet any and all requirements necessary to list Net Serviços in the Novo Mercado
as soon as possible. Our shares have been listed in Bovespas Special Corporate
Governance Level 2 since June 2002.

The principal practices of Corporate
Governance Level 2 of Bovespa require that we adopt the following provisions as part of
our corporate structure. We have adopted each of these provisions.

Preferred Shares with Voting
Rights. We are obligated to establish voting rights on our preferred shares with
respect to the following:

- our transformation, consolidation, merger or spin-off;
- valuation of assets used in increases in our capital;
- approval of certain specified agreements between us and our
controlling shareholder or its affiliates;
- choice of company skilled in determining our economic value; and
- change or repeal of provisions of our by-laws that alter or modify
any Bovespa requirements.

Tag-Along Rights. Upon the
acquisition of a controlling interest in us, the purchaser must offer tag-along rights to
our remaining shareholders in an amount equivalent to 100% of the price paid for each
share in the controlling stake, in the case of holders of common shares, and at least 70%
of the price paid for each share in the controlling stake, in the case of holders of
preferred shares. Our by-laws require the purchaser to offer 100% of the price paid for
each share in the controlling stake to our holders of preferred shares.

Establishment of a single one year
mandate for the entire board of directors. Our board of directors shall be composed of
at least five members elected by a general meeting to serve for a unified term of office
of one year, with the option for reelection.

Free float. We shall maintain
a minimum percentage of outstanding shares equivalent to at least 25% of our total capital
stock.

Public offers of shares through
mechanisms intending to favor capital dispersion and broader retail access. In any and
all public distributions of stock, we shall exert our best efforts towards shareholding
dispersion, adopting special procedures to ensure: (i) access to all interested investors,
or (ii) allocation of at least 10% of the total distribution to individuals or
non-institutional investors.

Improvement in the quarterly
information reports. In addition to the information to be included in quarterly
information statements as required by law, we will be obliged to:

- present a consolidated balance sheet, a consolidated statement
of results, and a consolidated performance report, whenever we are required to submit
consolidated statements at year-end;
- disclose any direct or indirect ownership interest exceeding 5%
of our voting capital;
- inform, on a consolidated basis, the quantity and
characteristics of the companys securities directly or indirectly held by our
controlling shareholders, senior managers and audit committee members;
- report on the purchases and sales of securities held by the
persons referred to in the third bullet point above, within the immediately preceding
twelve months;
- include, in explanatory notes, our cash flow statement; and
- disclose the quantity of outstanding shares and the percentage
expressed in relation to the total amount of shares issued.

In every quarter, the quarterly
information statement must be presented no later than fifteen days after the deadline
prescribed by law for presentation thereof. The quarterly information statement must also
enclose a special revision report, issued by an independent auditor duly registered with
the CVM, in accordance with CVM regulations.

Trading of securities and
derivatives by senior managers, controlling shareholders and audit committee members.
Our senior managers, controlling shareholders and the audit committee members will be
obligated to report to Bovespa the volume and the characteristics of our securities
directly or indirectly held by them, including the respective derivatives. Any trades in
securities and derivatives by such persons shall be reported in detail to Bovespa, within
ten days as of the end of the month in which such trades occur.

Self-regulatory procedures. We
have a self-regulatory body that adopts internal policies comprising the following
actions:

- from one month before the end of
the financial year until the publication of the notice to shareholders regarding the
availability of our financial statements, the senior managers, the controlling
shareholders and the audit committee members shall abstain from trading in our securities
and respective derivatives;
- during the period ranging between
the decision regarding any capital increase, distribution of dividends, bonuses in stocks
and respective derivatives, or splitting of shares until publication of the respective
notices, our senior managers, controlling shareholders and audit committee members shall
abstain from trading in our securities and respective derivatives;
- the senior managers, the
controlling shareholders and the audit committee members shall periodically advise us and
Bovespa of their plans to trade in our securities and respective derivatives, including
subsequent changes therein and any departure from such plans.

Shareholder agreement, stock
option program and contracts with the same economic group. Upon signing a new
shareholders agreement, we must forward it and notify Bovespa within five days of
the respective filing and/or annotation in our files.

A copy of all option plans for our
employees or administrators shall also be delivered to Bovespa and disseminated
accordingly.

In addition, we shall forward to
Bovespa and make public disclosure of any and all contracts entered into between us and
our controlled and associated companies, senior managers and the controlling shareholder,
whenever a single contract or a series of related contracts reaches an amount equal to or
greater than R$200,000, within any one-year period, or reaches an amount equal to or
higher than 1% of our net worth.

Resolution of corporate conflicts
through arbitration. We, our controlling shareholders, senior managers and the audit
committee members shall undertake to refer to arbitration any and all disputes or
controversies arising out of the new listing segment rules or any other corporate matters.

Entry into the Novo
Mercado of Bovespa

In addition to the requirements
described above, which are requirements for the listing of a company in the Special
Corporate Governance Level 2, whenever we decide to be listed in the Novo Mercado of
Bovespa, we shall be obliged to have our capital stock composed exclusively of common
shares. If we elect to enter the Novo Mercado, we will do so through a mandatory
conversion process whereby all outstanding preferred shares will be automatically
converted into common shares, unless their holders exercise withdrawal rights.

Regulation of Brazilian
Securities Markets

The Brazilian securities markets are
principally governed by Law No. 6,385, of December 7, 1976 and Law No. 6,404, of December
15, 1976, which together as amended and supplemented compose the Brazilian corporate law,
and by regulations issued by the Brazilian securities commission, which has regulatory
authority over the stock exchanges and securities markets generally, the National Monetary
Council and the Central Bank, which has licensing authority over brokerage firms and
regulates foreign investment and foreign exchange transactions. These laws and
regulations, among others, provide for disclosure requirements applicable to issuers of
traded securities, protection of minority shareholders and, effective on March 5, 2002,
criminal penalties for insider trading and market manipulation. They also provide for
licensing and oversight of brokerage firms and governance of the Brazilian stock
exchanges. Nevertheless, the Brazilian securities markets are not as highly regulated and
supervised as the U.S. securities markets.

Under the Brazilian corporate law, a
company is either companhia aberta, or public, such as we are, or companhia
fechada, or closely held. All public companies, including us, are registered with the
Brazilian securities commission and are subject to reporting requirements. A company
registered with the Brazilian securities commission may have its securities traded on the
Brazilian stock exchanges or in the Brazilian over-the-counter market. Our preferred
shares are listed and traded on the Bovespa and may be traded privately subject to some
limitations.

To be listed on a Brazilian stock
exchange, a company must apply for registration with the Brazilian securities commission
and the stock exchange where the head office of the company is located.

We have the option to ask that
trading in our securities on the Bovespa be suspended in anticipation of a material
announcement. Trading may also be suspended at the discretion of the Bovespa or the
Brazilian securities commission based upon or due to, among other reasons, a belief that a
company has provided inadequate information regarding a material event or has provided
inadequate responses to the inquiries by the Brazilian securities commission or the
Bovespa.

The Brazilian over-the-counter market
consists of direct trades between individuals in which a financial institution registered
with the Brazilian securities commission serves as an intermediary. No special
application, other than registration with the Brazilian securities commission, is
necessary for securities of a public company to be traded in this market. The Brazilian
securities commission requires that it be given notice of all trades carried out in the
Brazilian over-the-counter market by the respective intermediaries.

Trading on the Bovespa by
non-residents of Brazil is subject to limitations under Brazilian foreign investment and
tax legislation. The Brazilian custodian for the preferred shares underlying the ADSs
must, on behalf of the depositary for the ADSs, obtain registration from the Central Bank
to remit U.S. dollars abroad for payments of dividends, any other cash distributions, or
upon the disposition of the shares and sales proceeds thereto. In the event that a holder
of ADSs exchanges ADSs for preferred shares, the holder will be entitled to continue to
rely on the custodians registration for five business days after the exchange.
Thereafter, the holder may not be able to obtain and remit U.S. dollars abroad upon the
disposition of the preferred shares, or distributions relating to the preferred shares,
unless the holder obtains a new registration.

Trading in Brazilian securities
markets is not as highly regulated or supervised as it is in the United States and some
other markets. Brazilian law prohibits market manipulation and insider trading, and it
requires a companys insiders, including directors, officers and major shareholders,
as defined under Brazilian law, to disclose all their transactions in its securities. It
also prohibits a company from trading in its own shares, subject to very limited
exceptions. The enforcement of these legal provisions, and the supervision of trading
markets, are not as well developed as they are in the United States.

ITEM 10.     ADDITIONAL INFORMATION

Memorandum and Articles
of Association

Organization, Register
and Entry Number

We are a publicly held corporation
registered with the CVM and organized under the laws of the Federative Republic of Brazil.
We are registered in the Brazilian commercial registry under the entry number
35.300.177.240 and in the Taxpayers General Registry of the Ministry of Finance
under registration number 00.108.786/0001-65.

Our constituent document is our
Estatuto Social, which we refer to in this Form 20-F as our by-laws.

Object and Purpose

Our corporate object and purpose,
described in article three of our by-laws, are those of a holding company. Our operating
subsidiaries shall have as their corporate purpose the distribution of our pay-television
and other value-added services to subscribers such as telecom services, services of signal
distribution through local network and the production of local channels. We provide our
operating subsidiaries with administrative, financial and consulting support. We may,
without restriction, acquire or hold quotas or shares in other companies which carry on
activities similar to ours and to our subsidiaries, as well as activities related to trade
commerce and representation.

Voting Rights Relating to
Our Common and Preferred Shares

Each common share entitles the holder
to one vote at the general shareholders meetings; each preferred share entitles the
holder to one vote at the general shareholders meetings exclusively on the following
corporate resolutions in accordance with Bovespas Corporate Governance Listing Rules
for Level 2:

- our transformation, consolidation, merger or spin-off;
- valuation of assets used in increases in our capital;
- approval of certain specified agreements between us and our
controlling shareholder or its affiliates;
- choice of a company skilled in the determination our economic
value intended for the public offering of our shares; and
- change or repeal of provisions of our by-laws that alter or
modify any Bovespa requirements.

According to the Brazilian Corporate
Law, the resolutions of a general shareholders meeting shall be passed by a simple
majority of votes, abstentions not being taken into account. Nevertheless, according to
Brazilian corporate law:

- The approval of shareholders representing at least one-half
plus one of our existing voting shares shall be necessary for a resolution which:
- creates preferred shares or increases an existing class without
maintaining its ratio to the other types and classes;
- alters a preference, a privilege or a condition of redemption
or amortization conferred upon one or more classes of preferred shares, or creates a new,
more favored, class;
- reduces the compulsory dividend;
- merges the corporation with another corporation or consolidates
it;
- participates in a group of corporations;
- changes the corporate purpose;
- terminates a state of liquidation of the corporation;
- creates founders' shares;
- divides the corporation; or
- dissolves the corporation.

Furthermore, according to our
by-laws, the choice of a company skilled in the determination of a companys economic
value intended for the public offering of its shares must be adopted by an absolute
majority of shares having the right to vote, without regard to share class, disregarding
abstentions.

According to Brazilian corporate law,
a shareholder without a right to vote may attend a general meeting and take part in the
discussion of matters submitted for consideration. Generally, apart from the exceptions
provided by law, a general meeting shall be opened on first call with the presence of
shareholders representing at least one-quarter of the voting capital; on the second call,
it shall be opened with any number.

Each ADS represents ten preferred
shares. Since voting rights are restricted on our preferred shares, the holders of ADSs
are only entitled to vote at our shareholders meetings on the corporate resolutions
mentioned above.

Conversion Rights

Under Brazilian corporate law, the
conversion of a class of shares into another class of shares must be expressly authorized
in the by-laws of the company. Our by-laws do not contain any provisions regarding the
conversion of shares, and therefore unless a shareholders meeting expressly approves the
amendment of the by-laws, our common shares cannot be converted into preferred shares and
our preferred shares cannot be converted into common shares.

Preemptive Rights

Under Brazilian corporate law, upon
the issuance of new common or preferred shares or securities convertible into shares, all
shareholders shall have the right to subscribe proportionately for the same class of
shares they own. If the issuance of shares causes alterations in the existing proportion
of common to preferred shares, our shareholders have the right to subscribe for the same
class of shares already owned; this right may be extended to another class of shares if
the former is insufficient to assure a shareholder the same proportion in the stock
capital as he had before such capital increase. In the case of the issuance of shares of a
different class from those existing before the new issuance, each shareholder has the
right to subscribe for each class of share created by the increase in the proportion to
the number of shares already owned. These preemptive rights are freely transferable. A
minimum period of 30 days following the publication of notice of the capital increase must
be allowed for the exercise of the preemptive rights. Our by-laws authorize us to issue
shares (or securities convertible into shares) without preemptive rights, as long as the
placement of the shares is made through sales on a stock exchange, by public subscription
or by an exchange of shares in a public tender offer.

In the event of a capital increase by
means of the issuance of new shares, holders of ADSs or preferred shares would, except as
described above, have preemptive rights to subscribe for new shares. However, you may not
be able to exercise the preemptive rights relating to the preferred shares underlying your
ADSs unless a registration statement under the Securities Act is effective with respect to
those rights or an exemption from the registration requirements of the Securities Act is
available.

In addition, our shareholders
agreement establishes certain rules regarding preemptive rights among our major
shareholders. See Item 7. Major Shareholders and Related Party
TransactionsMajor ShareholdersShareholders Agreement.

Liquidation Rights

The common shares and preferred
shares have pro rata rights to share in our assets upon liquidation. However, the
preferred shares have priority in the refund of capital in the case of liquidation.

Redemption Provisions

Our by-laws do not set forth any
redemption provision; however, at any time our shareholders may decide, acting at a
general shareholders meeting, to effect a redemption of our outstanding shares.

Rights of Withdrawal

Brazilian corporate law provides
that, under limited circumstances, a shareholder has the right to withdraw his or her
equity interest from the company and to receive payment for the portion of
shareholders equity attributable to his or her equity interest. This right of
withdrawal may be exercised by our dissenting shareholders in the event that at least half
of all holders of voting shares outstanding authorize us:

- to create new preferred shares or increase the amount of
preferred shares already existing without maintaining its ratio to the other types and
classes, unless otherwise provided in the by-laws;
- to reduce the mandatory distribution of dividends;
- to change our corporate purpose;
- to merge with  another  company or to  consolidate  with
 another  company  subject to the  conditions  set forth in Brazilian
              corporate law;
- to transfer all of our shares to another  company in order to
make us a wholly owned  subsidiary of such company,  known as an
              incorporacao de acoes;
- to participate in a centralized group of companies as defined
under Brazilian  corporate law and subject to the conditions set               forth
therein;
- to alter a preference, privilege or condition of
redemption or amortization conferred upon one or more classes of preferred shares, or
creating a new, more favored, class; or
- to spin-off with another company.

The right of withdrawal lapses 30
days after publication of the minutes of the shareholders meeting that approved the
corporate actions described above. We would be entitled to reconsider any action giving
rise to withdrawal rights within ten days following the expiration of such rights if the
withdrawal of shares of dissenting shareholders would jeopardize our financial stability.
With respect to the first and seventh bullet points above, only shareholders affected by
such actions shall have the right to withdraw from the corporation. In addition,
shareholders may only exercise the rights of withdrawal with respect to the fourth and
seventh bullet points above if such shares are not part of the Ibovespa, or any other
stock exchange index, and if less than 50% of the shares issued by the company are
outstanding. Our preferred shares are included in the Ibovespa.

This right of withdrawal may also be
exercised in the event that the entity resulting from a merger, consolidation or spin-off
of a listed company fails to become a listed company within 120 days of the
shareholders meeting at which such decision was made.

Changes in Rights of
Shareholders

Under Brazilian corporate law, the
rights of our shareholders may only be changed by a shareholder resolution amending our
by-laws. Resolutions to amend the by-laws require the approval of an absolute majority of
votes cast at a shareholders meeting. A quorum of not less than two-thirds of the
share capital entitled to vote must be present. If the quorum requirement is not met at
the initial meeting, then such matters may be approved at a later date at a second call of
such meeting by the majority of any number of holders of voting shares present at the
subsequent meeting.

Shareholders
Meetings

Shareholders meetings are
generally held at our principal office. Shareholders meetings are called by
publication of a notice in the Diário Oficial, the Brazilian official gazette, and
in the Brazilian newspaper Valor Econômico. Our annual shareholders meeting
must be held during the first four months after the closing of the fiscal year and must be
convened on not less than fifteen days notice from the first publication. At the
annual shareholders meeting, the annual accounts, including a report on our
activities during the previous year and our financial statements, are presented to the
shareholders for examination, discussion and approval. Extraordinary meetings may also be
called upon the request of the board of directors, the Audit Committee if installed,
shareholders holding at least 5% of our share capital if directors fail to call a meeting
within 8 days after receipt of a request, or any shareholder whenever the board of
directors delays more than 60 days in calling a meeting that is required by Brazilian law
or our by-laws.

To attend a shareholders
meeting in person or by proxy, shareholders must provide proof of identity upon request.
Shareholders may be represented by written proxies appointed less than one year before the
meeting. The shareholder representative must be a shareholder, a lawyer or a financial
institution. Each shareholders meeting is directed by a board composed of a chairman
and a secretary appointed by the shareholders present.

In addition, pursuant to our
shareholders agreement, our major shareholders are required to vote uniformly
according to decisions reached in prior meetings held by them. See Item 7. Major
Shareholders and Related Party TransactionsMajor
ShareholdersShareholders Agreement.

Transfer of Shares;
Limitations on Shareholdings

There are no legal restrictions on
the transferability of our common shares, except as described in the shareholders
agreement. However, the CVM has issued rules providing that whenever a controlling
shareholder makes a purchase of any class of shares (or securities convertible into
shares) that results in an increase (or a potential increase) by at least 5% of a
companys share capital, the controlling shareholder must immediately provide notice
of this purchase to the CVM, the stock exchange and the over-the-counter market in which
the companys securities trade.

Current CVM regulations require that
the controlling shareholder must effect a public offer whenever it purchases shares
representing more than 1/3 of the total capital stock of a company, if such acquisition of
shares was not already effected through a public offer.

Under the Brazilian
telecommunications regulatory framework, only private legal entities headquartered in
Brazil and controlled as to 51% of their voting-capital by Brazilian-born citizens or
persons who have held Brazilian citizenship for more than ten years, are eligible to
receive a license from Anatel to operate cable television systems in Brazil. Therefore, it
is not legally possible for a non-resident or foreign shareholder to acquire control of
Net Serviços.

Change of Control
Provisions

According to the Corporate Governance
Listing Rules for Level 2, in the event of acquisition of a controlling interest in us,
the purchaser shall offer tag-along rights to all of our remaining shareholders in an
amount equivalent to 100% of the price paid for each share of the controlling stake, in
the case of holders of common shares, and at least 70% of the price paid for each share of
the controlling stake, in the case of holders of preferred shares. Our by-laws require the
purchaser to offer 100% of the price paid for each share in the controlling stake to our
holders of common and preferred shares.

The CVM also requires that whenever a
publicly held company experiences a change of control, the new controlling shareholder
immediately must disclose the transaction to the CVM, the stock exchange and the
over-the-counter market in which the companys securities trade.

Changes in Capital

On May 2, 2002, our shareholders
approved a reverse stock split that, effective as of June 17, 2002, resulted in the
conversion of each block of ten of our common and preferred shares into one share of the
each of the same class of stock. Our corporate capital amounts to R$2,748,650,800 and
consists of 828,371,343 common shares and 1,200,484,187 preferred shares. There are
1,700,000 preferred shares that correspond to a capital amount of R$12.9 million, which have
not been paid in. We intend to reduce our corporate capital by canceling these shares.
Pursuant to our by-laws, the board of directors may increase our corporate capital up to a
maximum amount of R$5,000,000,000.00. This capital increase may be effected without
amending our by-laws or obtaining prior shareholder approval, and without maintaining the
existing proportion among the classes of shares, subject to the applicable limitations
under Brazilian law.

Changes to Brazilian
Corporate Law and Rules enacted by CVM

On October 31, 2001, Law No. 10,303
was passed, amending the Brazilian corporate law. In addition, throughout 2001 and 2002
CVM enacted new rules that affect Brazilian companies. As a result, companies are now
required to adhere to the following:

- Disputes among shareholders will be
subject to arbitration if so provided in the by-laws of a company (our by-laws provide
that disputes arising or related to (i) our by-laws, (ii) rules enacted by CVM, Bovespa,
the Brazilian Central Bank or the Nacional Monetary Council, (iii) rules applicable to the
Brazilian capital markets or (iv) the Brazilian corporate law shall be subject to
arbitration which shall occur in accordance with the Market Arbitration Chamber Created by
Bovespa);
- A tender offer at a purchase price
equal to the fair value for all outstanding shares will be required upon a delisting or a
substantial reduction in liquidity of our shares as a result of purchases by the
controlling shareholders. If less than 5% of all shares issued by us are outstanding after
the expiration of the offering, the shareholders may decide at a general meeting to redeem
these shares for the offering price;
- Non-controlling shareholders which
represent at least 15% of our voting shares will have the right to elect one member of the
board of directors by separate vote, but until the annual general meeting to approve our
2004 financial statements. This director shall be chosen from a list, containing three
candidates, prepared by the controlling shareholders. With respect to the 2006 annual
general meeting, such director shall be elected as set forth in Law No. 10,303, regardless
of the directors mandated term;
- Non-voting non-controlling
shareholders representing at least 10% of the total capital stock will have the right to
elect one member of the board of directors by separate vote;
- Any sale of control will require
the purchaser to offer to purchase the minority shareholders common shares. The
purchaser must offer to purchase the common shares for a price equal to at least 80% (our
by-laws require 100% for both common and preferred shares) of the price per share paid to
the controlling shareholder;
- Shareholders will be entitled to
effect a spin-off only if it entails a change in the corporate purpose, a reduction in
mandatory dividends or the participation in a centralized group of companies;
- Our controlling shareholders, the
shareholders that elect members to our board of directors and Audit Committee, the members
of our board of directors and Audit Committee and our executive officers will be required
to disclose any purchase or sale of our shares to the CVM and the Bovespa;
- The chairman of any
shareholders meeting, or board of directors or executive officers meeting will
be entitled to enforce the voting provisions of any shareholders agreement which has
been duly filed with Net Serviços; and
- The first and second calls for
shareholders meetings will have to be made fifteen and eight days, respectively,
before such meeting, except that the Brazilian securities commission can also require the
first call 30 days before a shareholders meeting.

Material Contracts

Shareholders Agreement

Our major shareholders are party to a
shareholders agreement with respect to their ownership of our shares. See Item
7. Major Shareholders and Related Party TransactionsMajor Shareholders
Shareholders Agreement for additional details about the shareholders
agreement.

Net Brasil Programming
Agreement

We purchase all of our programming
from our affiliate Net Brasil, which is owned 40% by us and indirectly owned 60% by
Globopar. See Item 4. Information on the
CompanyPay-TelevisionProgramming Sources and Item 7. Major
Shareholders and Related Party TransactionsRelated Party TransactionsMaterial
Transactions with AffiliatesNet Brasil Programming Agreement for additional
details about the programming agreement with Net Brasil.

Exchange Controls

There are two principal foreign
exchange markets in Brazil:

- the commercial rate exchange market; and
- the floating rate exchange market.

Most trade and financial foreign
exchange transactions are carried out on the commercial rate exchange market. These
transactions include the purchase or sale of preferred shares or the payment of dividends
or interest with respect to the preferred shares. Foreign currencies may only be purchased
through a Brazilian bank authorized to operate in these markets. In both markets, rates
are freely negotiated but may be strongly influenced by Central Bank intervention. Since
February 1, 1995, the floating market rate has been the same as the commercial market
rate. There is no guarantee that the rates will continue to be the same in the future. In
1999, the Central Bank unified the operational limits applicable to both markets. However,
despite the convergence in pricing and liquidity of both markets, each market continues to
be subject to different regulations.

From its introduction on July 1, 1994
through March 1995, the real appreciated against the U.S. dollar. In 1995, the Central
Bank announced that it would intervene in the market and buy or sell U.S. dollars,
establishing a band in which the exchange rate between the real and the U.S. dollar could
fluctuate. This policy resulted in a gradual depreciation of the real relative to the U.S.
dollar. On January 13, 1999, the band was set at between R$1.20 and R$1.32 per US$1.00.
Two days later, on January 15, 1999, due to market pressures, the Central Bank abolished
the band system and allowed the real/U.S. dollar exchange rate to float freely. As a
result, the exchange rate dropped to R$2.1647 per US$1.00 on March 3, 1999. The exchange
rate improved over the rest of 1999, and closed that year at R$1.789 per US$1.00. During
2000, the exchange rate remained fairly stable. Since then, the exchange rate has
fluctuated considerably. From January 1, 2001 through December 31, 2001, the real
depreciated by approximately 18.7%. From January 1, 2002 through December 31, 2002, the
real depreciated by approximately 52.3% and at March 31, 2003, the commercial selling rate
was R$3.3531 per US$1.00. At June 24, 2003, the commercial selling rate was R$2.8616 per
US$1.00. The Central Bank has only intervened occasionally to control unstable movements
in the foreign exchange rate.

At the present time, it is not yet
possible to predict if the exchange market will be volatile as a result of market
instability or other factors and therefore whether the Central Bank will continue to let
the real float freely or if the real will remain at its present level. Accordingly, it is
not possible to predict what impact the Brazilian governments exchange rate policies
may have on us. The Brazilian government could impose a band system in the future or the
real could devalue substantially.

Dividend Policy

General

Due to our history of operating
losses, we have never paid cash dividends on our preferred shares or our common shares. We
are a holding company and our ability to obtain funds for the payment of cash dividends
depends entirely on our ability to obtain funds from our subsidiaries and investees. In
addition, several of our debt agreements limit our ability to pay dividends.

Our by-laws, in accordance with
Brazilian corporate law, require that, for any year in which we have adjusted net
profits (as defined in Brazilian corporate law), we will, subject to certain
exceptions, be required to pay a yearly minimum dividend equal to not less than 25% of
adjusted net profits, referred to as the mandatory distribution. We have never
reported adjusted net profits and consequently have never paid the mandatory distribution.
We do not anticipate reporting adjusted net profits in the near term. We intend to retain
any profits in excess of any mandatory distribution in a supplementary reserve for use in
the operation and expansion of our business, and therefore we do not anticipate paying any
dividends in excess of any mandatory distribution for the foreseeable future.

To the extent that we declare and pay
dividends on the preferred shares, holders of ADSs on the applicable record date will be
entitled to any dividend declared as of such record date in respect of the preferred
shares underlying the ADSs, subject to the terms of the amended and restated deposit
agreement. We would pay any cash dividend in reais, so that the exchange rate in effect at
the time of payment would determine the dollar value of the dividend received by the
depositary, and hence the amount in dollars paid by the depositary to ADS holders upon the
depositarys conversion of the dividend amounts into U.S. dollars.

Dividends on Our Common
Shares and Our Preferred Shares

In accordance with Brazilian
corporate law, our common and preferred shares each carry the right to receive mandatory
dividends. The preferred shares, however, carry the right to receive dividends in cash,
per each preferred share, of at least 10% more than the dividend, which is available to be
distributed on each common share. In addition, each preferred share has priority in the
reimbursement of capital in the event of liquidation, without a premium. The owner of
common or preferred shares on the date of payment of a dividend, as identified in our
shareholder register, is entitled to receive the dividend.

Amounts Available for
Distribution

At each annual general
shareholders meeting, the shareholders are required to determine how net profits for
the preceding fiscal year are to be allocated. The board of directors is then required to
approve the decision of the shareholders. For purposes of Brazilian corporate law, net
profits are defined as net income after payment of income taxes and social contribution
taxes for such fiscal year, net of any accumulated losses from prior fiscal years and any
amounts allocated to employees and managements participation in our profits.
In accordance with Brazilian corporate law and our by-laws, the amounts available for
dividend distribution are the amounts equal to our net profits less any amounts allocated
from such net profits to:

- the legal reserve;
- a contingency reserve for anticipated losses; and
- an unrealized revenue reserve.

We are required to maintain a legal
reserve, to which we must allocate 5% of net profits for each fiscal year until the amount
for such reserve equals 20% of our paid-in capital. However, we are not required to make
any allocations to our legal reserve in respect of any fiscal year in which the legal
reserve, when added to our other established capital reserves, exceeds 30% of our capital.
Net losses, if any, may be charged against the legal reserve. At December 31, 2002, the
balance of our legal reserve was R$0, which was equal to 0% of our paid-in capital at
December 31, 2002.

Brazilian corporate law also provides
for two additional, discretionary allocations of net profits that are subject to approval
by the shareholders at the annual meeting. First, a percentage of net profits may be
allocated to a contingency reserve for anticipated losses that are deemed probable in
future years. Any amount so allocated in a prior year must be either reversed in the
fiscal year in which the loss was anticipated if such loss does not in fact occur, or
written off in the event that the anticipated loss occurs. Second, if the amount of
unrealized revenue exceeds the sum of:

- the legal reserve;
- retained earnings; and
- the contingency reserve for anticipated losses,

such excess may be allocated to an unrealized  revenue reserve.
 Under Brazilian  corporate law,  unrealized  revenue is defined as the sum of:

- price-level restatement of balance sheet accounts;
- the share of equity earnings of affiliated companies; and
- profits from installment sales to be received after the end of
the next succeeding fiscal year.

With respect to unrealized revenue
reserve, effective as of March 5, 2002, the amount of the mandatory dividend which exceeds
the amount of the realized net profits of a fiscal year may be allocated in an unrealized
revenue reserve. For purposes of Brazilian corporate law, realized revenues shall be
considered the amount which exceeds the sum of:

- the net positive result of equity adjustments; and
- profits or revenues from operations with financial results
after the end of the next succeeding fiscal year.

Under Brazilian corporate law, the
by-laws of any company may authorize the creation of a discretionary reserve. By-laws
which authorize the allocation of a percentage of a companys net income to the
discretionary reserve must also indicate the purpose of the reserve, criteria for
allocation and maximum amount of the reserve.

At December 31, 2002, we had an
investment reserve of R$0.

The amounts available for
distribution may be further increased by a reversion of the contingency reserve for
anticipated losses constituted in prior years but not realized, or further increased or
reduced as a result of allocations of revenue to or from the unrealized reserve. The
amounts available for distribution are determined on the basis of financial statements
prepared in accordance with Brazilian corporate law.

Mandatory Distribution

Brazilian corporate law generally
requires that the by-laws of each Brazilian company specify a minimum percentage of the
amounts available for distribution by such company for each fiscal year that must be
distributed to shareholders as dividends. Under our by-laws, the mandatory distribution
has been fixed at an amount equal to not less than 25% of the amounts available for
distribution, to the extent that such amounts are available for distribution.

The mandatory distribution is based
on a percentage of adjusted net income, not lower than 25%, rather than a fixed monetary
amount per share. Brazilian corporate law, however, permits publicly held companies, such
as ourselves, to suspend the mandatory distribution of dividends if the board of directors
and the audit committee report to the shareholders meeting that the distribution
would be inadvisable in view of the companys financial condition. If the board of
directors and audit committee so report, the board of directors must file a justification
for such suspension with the CVM within five days of the shareholders meeting.
Profits not distributed by virtue of this suspension shall be attributed to a special
reserve and, if not absorbed by subsequent losses, shall be paid as dividends as soon as
the financial condition of the company permits such payments.

Payment of Dividends

We are required by Brazilian
corporate law and by our by-laws to hold an annual shareholders meeting by the
fourth month after the end of each fiscal year at which, among other things, the
shareholders have to decide on the payment of an annual dividend. The payment of annual
dividends is based on the financial statements for the relevant fiscal year. Under
Brazilian corporate law, dividends generally are required to be paid within 60 days
following the date the dividend was declared, unless a shareholders resolution sets
forth another date of payment, which in either case, must occur prior to the end of the
fiscal year in which the dividend was declared. A shareholder has a three-year period from
the dividend payment date to claim unpaid dividends in respect of its shares.

Our by-laws permit us, upon the
approval of our board of directors, to pay interim dividends out of pre-existing and
accumulated profits for the preceding fiscal year or semester.

In general, shareholders who are not
residents of Brazil must register their Brazilian investments with the Central Bank in
order to be allowed to receive dividends, sales proceeds or other amounts with respect to
their foreign investments outside of Brazil. The preferred shares underlying the ADSs are
held by Morgan Guaranty Trust Company of New York, also known as the custodian, as agent
for the depositary, and is the registered owner on the records of the registrar for our
shares. The depositary electronically registers the preferred shares underlying the ADS
with the Central Bank and, therefore, is able to have dividends, sales proceeds or other
amounts with respect to those shares eligible to be remitted outside Brazil.

Payments of cash dividends and
distributions, if any, will be made in Brazilian currency to the custodian on behalf of
the depositary, which will then convert such proceeds into U.S. dollars and will cause
such U.S. dollars to be delivered to the depositary for distribution to holders of ADSs.
Under current Brazilian law, dividends paid to shareholders who are not Brazilian
residents, including holders of ADSs, will not be subject to Brazilian withholding income
tax, except for dividends declared based on profits generated prior to December 31, 1995.

Our preferred shares are not entitled
to receive a fixed or minimum dividend and, therefore, they are not entitled to acquire
voting rights, as determined by Brazilian corporate law.

Due to the operating losses we have
recorded since our formation, as well as to the limitations on dividends imposed by
certain of our credit agreements, we have never paid cash dividends on our preferred or
common shares.

Record of Dividend
Payments and Interest Attributed to Shareholders Equity

Law No. 9,249, dated December 26,
1995, as amended, provides for the distribution of interest attributed to
shareholders equity to shareholders as an alternative form of payment to
shareholders. Such interest is limited to the daily pro rata variation of the TJLP,
a long-term interest rate that includes an inflation factor that is reset quarterly. We
may treat these payments as a deductible expense for corporate income tax and social
contribution purposes, but the deduction cannot exceed the greater of:

- 50% of net income (before taking such distribution and any
deductions for income taxes into account) for the period in respect of which the payment
is made; or
- 50% of retained earnings.

Dividend distributions are generally
not deductible by us under Brazilian law. However, a Brazilian company may elect to treat
dividend distributions as Interest Distributions, in which case such
distributions will be deductible, subject to certain limitations. Any payment of interest
on shareholders equity to holders of ADSs or preferred shares, whether or not they
are Brazilian residents, is subject to Brazilian withholding income tax at the rate of 15%
or 25% if the beneficiary is a resident in a tax haven. We have not made any such payments
to date.

Taxation

Material Brazilian
Taxation Considerations

The following discussion summarizes
the material Brazilian tax consequences of the acquisition, ownership and disposition of
ADSs or preferred shares by a holder that is not domiciled in Brazil for purposes of
Brazilian taxation, or a non-Brazilian Holder. The discussion is based upon Brazilian law
as currently in effect; any change in such law may change the consequences described
below. This discussion does not specifically address all of the Brazilian tax
considerations applicable to any particular non-Brazilian Holder, and each non-Brazilian
Holder should consult his or her own tax adviser concerning the Brazilian tax consequences
of an investment in ADSs or preferred shares.

There is no income tax treaty between
Brazil and the United States.

Taxation of Dividends. In
general, dividends paid by Net Serviços to non-Brazilian Holders or the Depositary
in respect of the preferred shares underlying the ADSs out of profits generated on or
after January 1, 1996 will not be subject to withholding income tax in Brazil. However,
dividends paid from profits generated on or before December 31, 1995 may be subject to
Brazilian withholding tax at varying rates.

Taxation of Gains. Brazilian
law distinguishes between, on the one hand, direct foreign investments in Brazilian
companies and, on the other hand, foreign investments in securities issued by Brazilian
companies through the Brazilian capital markets. Under Resolution No. 2,689, which became
effective on March 31, 2000, superseding previous regulations known as Annex IV, foreign
investors may invest directly in the Brazilian financial and capital markets, as long as
they meet certain requirements. See Exchange Controls above.

Gains realized outside Brazil by a
non-Brazilian holder on the disposition of ADSs to another non-Brazilian holder are not
subject to Brazilian tax. Neither the deposit of preferred shares in exchange for ADSs nor
the withdrawal of preferred shares upon cancellation of ADSs is subject to Brazilian tax.

Non-Brazilian holders are not subject
to tax in Brazil on gains realized on dispositions of preferred shares outside Brazil to
other non-Brazilian holders.

Gains realized by non-Brazilian
holders on dispositions of preferred shares in Brazil or in transactions with Brazilian
residents, if they observe the requirements of Resolution No. 2,689, are exempted from
withholding income tax, unless the foreign investor is located in a jurisdiction which
does not impose income tax or which has an income tax rate lower than 20%, in which case
it will be subject to the same general taxation rules applicable to Brazilian residents.

Gains on the disposition of preferred
shares obtained upon cancellation of ADSs are not taxed in Brazil if such disposition is
made, and the proceeds are remitted abroad, within five business days after cancellation.

Any gains realized by a non-Brazilian
resident upon the redemption of preferred shares will be treated as gains from the
disposition of such preferred shares to a Brazilian resident occurring off of a stock
exchange and will accordingly be subject to tax at a rate of 20%, except for gains
realized by a non-Brazilian resident located in a jurisdiction which does not impose
income taxes or which has an income tax rate lower than 20%, in which case such gain will
be subject to tax at a rate of 25%.

Gain is measured by the difference
between the amount in Brazilian currency realized on the sale or exchange and the
acquisition cost of the shares sold, measured in Brazilian currency without any correction
for inflation; the acquisition cost of shares registered as an investment with the
Brazilian Central Bank is calculated on the basis of the foreign currency amount
registered with the Brazilian Central Bank.

There can be no assurance that the
current preferential treatment for holders of ADSs and non-Brazilian holders of preferred
shares will be maintained.

Any exercise of preemptive rights
relating to our preferred shares or ADSs will not be subject to Brazilian taxation. Gains
on the sale or assignment of preemptive rights relating to our preferred shares will be
treated differently for Brazilian tax purposes depending on (i) whether the sale or
assignment is made by the Depositary or by you, and (ii) whether the transaction takes
place on a Brazilian stock exchange. Gains on sales or assignments made by the Depositary
on a Brazilian stock exchange are not taxed in Brazil, but gains on other sales or
assignments may be subject to tax at rates up to 20%.

Interest on Capital
Distributions. Dividend distributions are generally not deductible by Net
Serviços under Brazilian law. However, Brazilian corporations may make payments to
shareholders characterized as interest on capital, or interest on capital
distributions as an alternative form of making dividend distributions , in which
case such a distribution will be deductible for Brazilian corporate income tax purposes,
subject to certain limitations. Net Serviços charter does not presently
contemplate the payment of interest on capital distributions to shareholders. If Net
Serviços were to make such an interest on capital distribution, non-Brazilian
holders would incur a 15% withholding income tax with respect to such a distribution. Such
withholding would be increased to a rate of 25% for any non-Brazilian holders that are
residents of a tax-haven jurisdiction (i.e., jurisdictions that either have no income tax
or in which the income tax rate is less than 20%).

Other Brazilian Taxes. There
are no Brazilian inheritance, gift or succession taxes applicable to the ownership,
transfer or disposition of ADSs or preferred shares by a non-Brazilian holder except that
certain Brazilian states may impose such taxes in the case of recipients of gifts or
inheritances who are domiciliaries or residents of such states. There are no Brazilian
stamp, issue, registration, or similar taxes or duties payable by holders of ADSs or
preferred shares. However, non-Brazilian holders will be subjected to the CPMF upon the
withdrawal of funds from any Brazilian account in connection with the payment of dividends
by Net Serviços or the remittance from Brazil of the proceeds of the sale of
preferred shares or of the sale of ADSs in certain private transactions with Brazilian
residents. The CPMF is currently imposed at a rate of 0.38%. The CPMF is set to expire in
December 2004.

Taxation of Foreign Exchange
Transactions. The conversion by a non-Brazilian holder of Brazilian currency into
non-Brazilian currency is subject to a tax on exchange transactions known as
IOF/Câmbio. The rate of this tax is currently zero, but such rate may be increased
by the Minister of Finance to a rate as high as 25%.

Taxation on Bonds and Securities
Transactions. IOF/Títulos may be imposed upon the acquisition, sale or other
disposition of preferred shares, even if such transactions are performed on the Brazilian
stock exchange. The rate of this tax is currently zero, but may be increased at the
discretion of executive branch.

Documents on Display

Statements contained in this Form
20-F as to the contents of any contract or other document filed as an exhibit to the
registration statement summarize their material terms, but are not necessarily complete.
We are also subject to the informational reporting requirements of the Exchange Act, which
requires that we file periodic reports and other information with the Commission. As a
foreign private issuer, we file annual reports on Form 20-F as opposed to Form 10-K. We do
not file quarterly reports on Form 10-Q but file reports in relation to material events on
Form 6-K.

Our reports and other information
filed by us with the Commission may be inspected and copied by the public at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 and are also available for inspection and copying
at the regional office of the Commission located at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of these materials are also
available from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at set rates. In addition, the Commission maintains a website
www.sec.gov where those of our documents that have been electronically filed with the
Commission may be found.

We furnish JPMorgan Chase Bank, as
the depositary of ADSs, with annual reports in English, which include a review of
operations and annual audited consolidated financial statements prepared under Brazilian
GAAP, together with reconciliation to U.S. GAAP of net income and shareholders
equity. We also furnish the depositary with six-month reports in English which include
audited semi-annual consolidated financial information prepared under Brazilian GAAP. Upon
our request, the depositary will promptly mail such reports to all record holders of ADSs.
We also furnish to the depositary, in English, all notices of shareholders meetings
and other reports and communications that are made generally available to our
shareholders. Upon our request, the depositary will make such notices, reports and
communications available to holders of ADSs and will mail to all record holders of ADSs a
notice containing a summary of the information contained in any notice of a
shareholders meeting it receives. As a foreign private issuer, we are exempt from
the rules under the Exchange Act prescribing the furnishing and content of proxy
statements. As a foreign private issuer, we are also exempt from the rules under the
Exchange Act relating to short-swing profit disclosure and liability.

ITEM 11. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

We are exposed to various market
risks, primarily related to foreign exchange rates. Market risk is the potential loss
arising from adverse changes in the market rates and prices, such as foreign currency
exchange rates and interest rates.

Foreign Exchange Risk

Our foreign currency exposure gives
rise to market risks associated with exchange rate movements against the U.S. dollar.

A substantial portion of our
indebtedness and operating costs, including programming arrangements, is denominated in
U.S. dollars. Substantially all of our revenues are denominated in Brazilian reais. As a
result, we are exposed to currency exchange risks, which may adversely affect our
business, financial conditions and results of operations, as well as our ability to meet
our debt service obligations.

The table below provides information
about our debt obligation in U.S. dollars. The table summarizes information on instruments
and transactions that are sensitive to foreign currency exchange rates.

|                                    | As of December 31, 2002(Expected Maturity Date)
|----------------------------------- | -----------------------------------------------
|                                    | 2002                                           
|                                    | (in millions)                                  
|Debt denominated in U.S. dollars    | 219.3                                          
|Debt denominated in Reais           | 104.4                                          
|Total short-term and long-term debt | 323.7                                          

Interest Rate Risk

We have mitigated our exposure to
interest rate volatility through the issuance of indebtedness that has fixed rates of
interest. We also attempt to reduce interest rate risk by employing established policies
and procedures to manage our exposure to interest rate fluctuations. Nevertheless, we
continue to remain exposed to interest rate volatility with respect to any future debt
issuances.

The percentages and amounts of our
debt subject to fixed and floating interest rates as of December 31, 2002 was as follows:

|As of December 31, 2002        | Percent | Amount in US$ millions
|------------------------------ | ------- | ----------------------
|Floating rate debt:           
|Denominated in U.S. dollars    | 38%     | US$ 121.6             
|Denominated in Brazilian reais | 32%     | 104.4                 
|                              
|Fixed rate debt:              
|Denominated in U.S. dollars    | 30%     | 97.7                  
|Total                          | 100%    | US$ 323.7             

Our floating interest rate exposure
is primarily subject to the variations of: (i) LIBOR as it relates to the U.S.
dollar-denominated floating rate notes and our IFC facility; and (ii) the IGP-M a monthly inflation index
published by the Getúlio Vargas Foundation as it relates on the majority of the
outstanding debentures issued in Brazil. On December 31, 2002, the TJLP was fixed at 10.0%
per year. In 2002, the accumulated IGP-M was 25.3%.

ITEM 12. DESCRIPTION OF
SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

ITEM 13. DEFAULTS,
DIVIDEND ARREARAGES AND DELINQUENCIES

We have not made scheduled principal
or interest payments on any of our debt that has come due since December 2, 2002 and we
have not maintained specified financial ratios nor met specified financial tests required
under certain debt facilities and instruments. Our non-payment of these scheduled
principal or interest payments and our inability to maintain or comply with these ratios
or financial tests has resulted in violations under a number of our debt facilities and
instruments. These violations enable our various lenders and debt holders to accelerate
amounts due under their respective debt facilities and instruments. As a result, various
of our lenders and debt holders may declare all amounts outstanding under their respective
debt facilities and instruments, including accrued interest and other obligations, to be
due and payable. In December 2002, Unibanco filed a collection suit against us in the
civil court of São Paulo to recover approximately R$72.2 million (US$20.4 million)
relating to amounts outstanding on a loan made to us. We cannot assure you that our other
lenders or debt holders will not seek to accelerate amounts outstanding under any of our
debt facilities or instruments or seek to exercise legal remedies to enforce their rights
thereunder or in accordance with Brazilian law. See Item 5. Operating and Financial
Review and ProspectsLiquidity and Capital Resources.

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

Not applicable.

ITEM 15. CONTROLS
AND PROCEDURES

(a) Evaluation of
disclosure controls and procedures. Within the 90-day period prior to the filing of this
Form 20-F, an evaluation was performed under the supervision and with the participation of
Net Serviços management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of Net
Serviços disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based on their evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the design and operation of these disclosure controls and procedures were
effective to ensure that all material information required to be filed in this Form 20-F
has been made known to them on a timely basis.

(b) Changes in internal
controls. There were no significant changes in Net Serviços internal
controls, or in other factors that could significantly affect Net Serviços
internal controls, subsequent to the most recent evaluation of internal controls performed
by Net Serviços.

ITEM 16.     AUDIT COMMITTEE FINANCIAL EXPERT; CODE OF ETHICS;
PRINCIPAL ACCOUNTANT FEES AND SERVICES

Not applicable.

ITEM 17. FINANCIAL
STATEMENTS

See Item 18. Financial
Statements.

ITEM 18. FINANCIAL
STATEMENTS

The following financial statements
are filed as part of this Form 20-F, together with the report of the independent auditors.

|Net Serviços de Comunicação S.A. Consolidated Financial Statements                                                                     | 
|-------------------------------------------------------------------------------------------------------------------------------------- | 
|Report of Independent Auditors                                                                                                         | 
|Consolidated Balance Sheets as of December 31, 2002 and 2001                                                                           | 
|Consolidated Statements of Operations for the Years Ended December 2002, 2001 and 2000                                                 | 
|Consolidated Statements of Changes in Stockholders' Equity and Comprehensive loss for the Years Ended December 31, 2002, 2001 and 2000 | 
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000                                             | 
|Notes to Consolidated Financial Statements                                                                                             | 



ITEM 19.     EXHIBITS

|ExhibitNumber | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|             
|1.1           | By-laws of Net Servicos de Comunicacao S.A., as amended on October 30, 2002, together with an
                    English-language translation thereof.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|             
|2.1           | Indenture, dated as of June 18, 1996, among Multicanal Participacoes S.A. (predecessor in
                    interest to Net Servicos de Comunicacao S.A.), as Issuer, the Guarantors named therein, as
                    Guarantors, and The Chase Manhattan Bank N.A., as Trustee, with respect to Net Servicos de
                    Comunicacao S.A.'s issuance of its US$185 million Senior Guaranteed Notes due 2004 (incorporated
                    by reference to Exhibit 2.1 of the Registrant's annual report on Form 20-F (No. 0-28860) for the
                    fiscal year ended December 31, 2001 filed with the U.S. Securities and Exchange Commission).                                                                                                                                                                   
|             
|2.2           | Indenture, dated as of October
31, 1997, among Net Sul TV a Cabo e Participações Ltda., as Issuer, the
Guarantors named therein, as Guarantors, The Chase Manhattan Bank, New York, as Trustee,
The Chase Manhattan Bank, New York, as Registrar and Paying Agent, The Chase Manhattan
Bank, London Branch, as Transfer Agent, Calculation Agent and Paying Agent, Chase
Manhattan Bank Luxembourg, S.A,. as Paying Agent, and Chase Trust Bank, as Principal
Paying Agent.                                                                                                                                                                                                                                                                                                                                                                          
|             
|2.3           | First Supplemental Indenture,
dated as of December 18, 1998, to the Indenture, dated as of October 31, 1997, among Net
Sul Comunicações S.A. (formerly known as Net Sul TV a Cabo e
Participações Ltda.), as Issuer, the Guarantors named therein, as Guarantors
and The Chase Manhattan Bank, as Trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|             
|2.4           | Second Supplemental Indenture,
dated as of August 30, 2000, to the Indenture, dated as of October 31, 1997, as amended
and restated on December 18, 1998, among Net Sul Comunicações S.A. (formerly
known as Net Sul TV a Cabo e Participações Ltda.), as Issuer, the Guarantors
named therein, as Guarantors and The Chase Manhattan Bank, as Trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|             
|2.5           | Third Supplemental, dated as of
October 31, 2000, to the Indenture, dated as of October 31, 1997, as amended and restated
on December 18, 1998 and further supplemented as of August 30, 2000, among Net Sul
Comunicações S.A. (formerly known as Net Sul TV a Cabo e
Participações Ltda.), as Issuer the Guarantors named therein, as Guarantors
and The Chase Manhattan Bank, as Trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|             
|2.6           | Fourth Supplemental, dated as of
October 31, 2000, to the Indenture, dated as of October 31, 1997, as amended and restated
on December 18, 1998 and further supplemented as of August 30, 2000 and October 31, 2000,
among Net Sul Comunicações S.A. (formerly known as Net Sul TV a Cabo e
Participações Ltda.), as Issuer, the Guarantors named therein, as Guarantors
and The Chase Manhattan Bank, as Trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|             
|4.1           | New Shareholders' Agreement, dated as of July 11, 2002, among Distel Holding S.A., Roma
                    Participacoes Ltda., Bradesplan Participacoes S.A., BNDES Participacoes S.A.,  Microsoft B.V.,
                    RBS Participacoes S.A., Zero Hora Editora Jornalistica S.A., and, furthermore, as Intervening
                    Parties, Net Servicos de Comunicacao S.A.'s, Globo Comunicacoes e Participacoes S.A., Bradespar
                    S.A. and Microsoft Corporation, together with an English-language translation thereof.                                                                                                                                                                                                                                                                                          
|             
|4.2           | Programming Agreement (Contrato de Comissao Mercantil, Prestacao de Servicos, Licenciamento de
                    Marca e Outras Avencas), dated as of  May 14, 1996, between Net Brasil S.A. and Multicanal
                    Participacoes S.A. (predecessor in interest to Net Servicos de Comunicacao S.A.), together with
                    letters of amendment and English-language translations thereof (incorporated by reference to
                    Exhibit 4.5 of the Registrant's annual report on Form 20-F (No. 0-28860) for the fiscal year
                    ended December 31, 2001 filed with the U.S. Securities and Exchange Commission).                                                                                                                                                                             
|             
|4.3           | Protocol of Recapitalization of Globo Cabo S.A., dated as of April 10, 2002, among Distel
                    Holding S.A., Globo Comunicacoes e Participacoes S.A., Roma Participacoes Ltda., Globo Cabo
                    S.A., Bradesplan Participacoes S.A., Bradespar S.A., RBS Participacoes S.A., BNDES Participacoes
                    S.A., and, as intervening consenting party, Net Brasil S.A., together with an English-language
                    translation thereof (incorporated by reference to Exhibit 4.6 of the Registrant's annual report
                    on Form 20-F (No. 0-28860) for the fiscal year ended December 31, 2001 filed with the U.S.
                    Securities and Exchange Commission).                                                                                                        
|             
|4.4           | First Amendment to the Protocol of Recapitalization of Globo Cabo S.A., dated as of April 30,
                    2002, among Distel Holding S.A., Globo Comunicacoes e Participacoes S.A., Roma Participacoes
                    Ltda., Globo Cabo S.A., Bradesplan Participacoes S.A., Bradespar S.A., RBS Participacoes S.A.,
                    BNDES Participacoes S.A., and, as intervening consenting party, Net Brasil S.A., together with
                    an English-language translation thereof (incorporated by reference to Exhibit 4.7 of the
                    Registrant's annual report on Form 20-F (No. 0-28860) for the fiscal year ended December 31,
                    2001 filed with the U.S. Securities and Exchange Commission).                                                                                 
|             
|4.5           | Second Amendment to the Protocol of Recapitalization of Net Servicos de Comunicacao S.A.
                    (formerly Globo Cabo S.A.), dated as of June 14, 2002, among Distel Holding S.A., Globo
                    Comunicacoes e Participacoes S.A., Roma Participacoes Ltda., Net Servicos de Comunicacao S.A.,
                    Bradesplan Participacoes S.A., Bradespar S.A., RBS Participacoes S.A., BNDES Participacoes S.A.,
                    and, as intervening consenting party, Net Brasil S.A., together with an English-language
                    translation thereof (incorporated by reference to Exhibit 4.8 of the Registrant's annual report
                    on Form 20-F (No. 0-28860) for the fiscal year ended December 31, 2001 filed with the U.S.
                    Securities and Exchange Commission).
|             
|8.1           | List of our Subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|             
|12.1          | Certification of Principal
Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|             
|12.2          | Certification of Principal
Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

We hereby agree to furnish to the
Securities and Exchange Commission copies of any of our other long term debt instruments and agreements
as the Commission requests.



SIGNATURES

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

`NET SERVIÇOS DE COMUNICAÇãO S.A.




                          By:  /s/Francisco Tosta Valim Filho
                               ___________________________________
                               Name: Francisco Tosta Valim Filho
                               Title: Chief Executive Officer




                           By: /s/Leonardo Porciúncula Gomes Pereira
                               ___________________________________
                               Name: Leonardo Porciúncula Gomes Pereira
                               Title: Chief Financial Officer



Dated:  June 30, 2003`



CERTIFICATION

I, Francisco Tosta Valim
Filho, certify that:

1.
          I have reviewed this annual report on Form 20-F of Net Serviços de
          Comunicação S.A.;

2.
          Based on my knowledge, this annual report does not contain any untrue statement
          of a material fact or omit to state a material fact necessary to make the
          statements made, in light of the circumstances under which such statements were
          made, not misleading with respect to the period covered by this annual report;

3.
          Based on my knowledge, the financial statements, and other financial information
          included in this annual report, fairly present in all material respects the
          financial condition, results of operations and cash flows of the registrant as
          of, and for, the periods presented in this annual report;

4.
          The registrants other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)
          designed such disclosure controls and procedures to ensure that material
          information relating to the registrant, including its consolidated subsidiaries,
          is made known to us by others within those entities, particularly during the
          period in which this annual report is being prepared;

b)
          evaluated the effectiveness of the registrants disclosure controls and
          procedures as of a date within 90 days prior to the filing date of this annual
          report (the Evaluation Date); and

c)
          presented in this annual report our conclusions about the effectiveness of the
          disclosure controls and procedures based on our evaluation as of the Evaluation
          Date;

5.
          The registrants other certifying officers and I have disclosed, based on
          our most recent evaluation, to the registrants auditors and the audit
          committee of registrants board of directors (or persons performing the
          equivalent function):

a)
          all significant deficiencies in the design or operation of internal controls
          which could adversely affect the registrants ability to record, process,
          summarize and report financial data and have identified for the
          registrants auditors any material weaknesses in internal controls; and

b)
          any fraud, whether or not material, that involves management or other employees
          who have a significant role in the registrants internal controls; and

6.
          The registrants other certifying officers and I have indicated in this
          annual report whether or not there were significant changes in internal controls
          or in other factors that could significantly affect internal controls subsequent
          to the date of our most recent evaluation, including any corrective actions with
          regard to significant deficiencies and material weaknesses.

Date: June 30, 2003

`By:  /s/Francisco Tosta Valim Filho
                               ___________________________________
                               Name: Francisco Tosta Valim Filho
                               Title: Chief Executive Officer`



CERTIFICATION

I, Leonardo P. Gomes Pereira, certify
that:

1.
          I have reviewed this annual report on Form 20-F of Net Serviços de
          Comunicação S.A.;

2.
          Based on my knowledge, this annual report does not contain any untrue statement
          of a material fact or omit to state a material fact necessary to make the
          statements made, in light of the circumstances under which such statements were
          made, not misleading with respect to the period covered by this annual report;

3.
          Based on my knowledge, the financial statements, and other financial information
          included in this annual report, fairly present in all material respects the
          financial condition, results of operations and cash flows of the registrant as
          of, and for, the periods presented in this annual report;

4.
          The registrants other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)
          designed such disclosure controls and procedures to ensure that material
          information relating to the registrant, including its consolidated subsidiaries,
          is made known to us by others within those entities, particularly during the
          period in which this annual report is being prepared;

b)
          evaluated the effectiveness of the registrants disclosure controls and
          procedures as of a date within 90 days prior to the filing date of this annual
          report (the Evaluation Date); and

c)
          presented in this annual report our conclusions about the effectiveness of the
          disclosure controls and procedures based on our evaluation as of the Evaluation
          Date;

5.
          The registrants other certifying officers and I have disclosed, based on
          our most recent evaluation, to the registrants auditors and the audit
          committee of registrants board of directors (or persons performing the
          equivalent function):

a)
          all significant deficiencies in the design or operation of internal controls
          which could adversely affect the registrants ability to record, process,
          summarize and report financial data and have identified for the
          registrants auditors any material weaknesses in internal controls; and

b)
          any fraud, whether or not material, that involves management or other employees
          who have a significant role in the registrants internal controls; and

6.
          The registrants other certifying officers and I have indicated in this
          annual report whether or not there were significant changes in internal controls
          or in other factors that could significantly affect internal controls subsequent
          to the date of our most recent evaluation, including any corrective actions with
          regard to significant deficiencies and material weaknesses.

Date: June 30, 2003

`By: /s/Leonardo Porciúncula Gomes Pereira
                               ___________________________________
                               Name: Leonardo Porciúncula Gomes Pereira
                               Title: Chief Financial Officer`



FINANCIALS

Consolidated Financial
Statements

Net Serviços de Comunicação
S.A.

Years ended December 31,
2002, 2001 and 2000
with Report of Independent Auditors

NET SERVIÇOS DE
COMUNICAÇÃO S.A.

CONSOLIDATED FINANCIAL STATEMENTS
Years ended December
31, 2002, 2001 and 2000

Contents

|Report of Independent Auditors                                                                  | F - 1
|----------------------------------------------------------------------------------------------- | -----
|                                                                                               
|Consolidated Balance Sheets as of December 31, 2002 and 2001                                    | F - 2
|Consolidated Statements of Operations for the Years Ended December 2002, 2001 and 2000          | F - 4
|Consolidated Statements of Changes in Stockholders' Equity and Comprehensive loss for the Years
|Ended December 31, 2002, 2001 and 2000                                                          | F - 5
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000      | F - 6
|Notes to Consolidated Financial Statements                                                      | F - 7

REPORT OF INDEPENDENTS AUDITORS

The Board of Directors and Stockholders of Net Servicos de
Comunicacao S.A. (formerly Globo Cabo S.A.)

We have audited the accompanying  consolidated  balance sheets of
Net Servicos de Comunicacao S.A. (formerly Globo  Cabo  S.A.)  and  subsidiaries  as of
 December  31,  2002 and  2001,  and the  related  consolidated statements of operations,
 changes in  stockholders'  equity,  and cash flows for each of the three years in the
period ended  December 31, 2002.  These  financial  statements are the  responsibility
 of the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance  with 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 examining,  on a test
basis, evidence supporting the amounts and disclosures in the financial  statements.  An
audit also includes assessing  the  accounting  principles  used  and  significant
 estimates  made  by  management,  as well as evaluating the overall  financial
 statement  presentation.  We believe that our audits provide a reasonable basis for our
opinion.

In our opinion,  the financial  statements  referred to above
present fairly, in all material respects,  the consolidated  financial  position of Net
Servicos de Comunicacao  S.A. and subsidiaries at December 31, 2002 and 2001,  and the
 consolidated  results  of their  operations  and their  cash flows for each of the three
years in the period ended December 31, 2002 in conformity with accounting  principles
 generally accepted in the United States of America.

The  accompanying  financial  statements have been prepared
 assuming that Net Servicos de Comunicacao  S.A. (formerly  Globo  Cabo S.A.) will
 continue  as a going  concern.  As more  fully  described  in Note 1, the Company has
incurred  recurring  operating  losses and has a working capital  deficiency.  In
addition,  the Company has not complied with certain  covenants of debt  agreements.
 These  conditions  raise  substantial doubt about the Company's  ability to continue as
a going concern.  The financial  statements do not include any adjustments to reflect the
possible future effects on the  recoverability  and  classification of assets or the
amounts and classification of liabilities that may result from the outcome of this
uncertainty.

As discussed in notes 3 and 6 to the accompanying  consolidated
 financial  statements,  in 2002 the Company changed its method of accounting for
goodwill.

ERNST & YOUNG
Auditores Independentes S.C.
2SP015199/O-6

Pedro L. Siqueira Farah
Partner

São Paulo, Brazil
March 25, 2003 except for Note 20, as to which the date is May 6, 2003

NET SERVIÇOS DE COMUNICAÇÃO S.A.

CONSOLIDATED BALANCE SHEETS
December 31, 2002 and 2001
(Expressed in thousands of United States dollars, except share amounts)

|                                                          | 2002       | 2001        
|--------------------------------------------------------- | ---------- | ------------
|Assets                                                   
|Current assets                                           
|Cash and cash equivalents                                 | US$15,755  | US$12,474   
|Trade accounts receivable, net of allowance for          
|doubtful accounts of $11,916 in 2002 and                 
|$10,011 in 2001                                           | 29,612     | 44,729      
|Recoverable income tax                                    | 2,389      | 10,123      
|Prepaid expenses                                          | 3,109      | 5,998       
|Other assets                                              | 1,685      | 4,230       
|Total current assets                                      | US$52,550  | US$77,554   
|                                                         
|Property and equipment, net                               | 349,914    | 591,341     
|Investments and advances to equity investees              | 857        | 3,198       
|Goodwill on acquisition of consolidated subsidiaries, net | 221,687    | 703,293     
|Judicial deposits                                         | 30,426     | 39,785      
|Deferred income taxes and recoverable tax                 | 3,437      | 5,893       
|Other long-term assets                                    | 1,552      | 4,742       
|                                                         
|Total assets                                              | US$660,423 | US$1,425,806

|                                                                 | 2002        | 2001        
|---------------------------------------------------------------- | ----------- | ------------
|Liabilities and stockholders' equity                             |             |             
|Current liabilities                                             
|Trade accounts payable                                           | US$25,785   | US$50,363   
|Accounts payable to programmers                                  | 51,060      | 32,774      
|Income taxes payable                                             | 201         | 492         
|Sales taxes                                                      | 13,586      | 20,704      
|Payroll and related charges                                      | 5,680       | 13,320      
|Short-term debt                                                  | 323,748     | 94,339      
|Current portion of long-term debt                                | -           | 185,098     
|Deferred subscription revenue                                    | 14,846      | 13,035      
|Interest payable                                                 | 44,302      | 13,103      
|Other payables and accrued expenses                              | 3,283       | 10,683      
|Total current liabilities                                        | US$482,491  | US$433,911  
|Long-term liabilities                                           
|Long-term debt, less current portion                             | -           | 413,055     
|Due to related companies                                         | 2,111       | 8,399       
|Deferred sign-on and hook-up fee revenue                         | 19,980      | 29,890      
|Other taxes                                                      | 3,725       | 13,223      
|Reserve for contingencies                                        | 112,148     | 52,861      
|Other payables and accrued expenses                              | 3,718       | 15,939      
|Total long-term liabilities                                      | US$141,682  | US$533,367  
|Total liabilities                                                | US$624,173  | US$967,278  
|                                                                
|Commitments and contingencies                                   
|                                                                
|Advances for future capital                                      | -           | 131,154     
|                                                                
|Stockholders' equity                                            
|Preferred stock, no par value, shares authorized,               
|issued and outstanding (2002- 1,198,784,187;                    
|2001 - 159,936,142)                                              | 1,493,279   | 1,272,508   
|Common stock, no par value, shares issued and outstanding (2002-
|828,371,343; 2001-121,189,144)                                   | 811,737     | 652,455     
|Additional paid-in capital                                       | 10,357      | 10,357      
|Unpaid capital (Subscription Receivable)                         | -           | (12,777)    
|Accumulated deficit                                              | (2,046,629) | (1,345,624) 
|Accumulated other comprehensive loss, net                        | (232,494)   | (249,545)   
|Total stockholders' equity                                       | US$36,250   | US$327,374  
|Total liabilities and stockholders' equity                       | US$660,423  | US$1,425,806

See notes to consolidated financial
statements.

NET SERVIÇOS DE
COMUNICAÇÃO S.A.

CONSOLIDATED STATEMENTS
OF OPERATIONS
(Expressed in thousands of United
States dollars, except per share and share amounts)

|                                             | Years Ended December 31,
|-------------------------------------------- | ------------------------
|                                             | 2002                    
|Revenue                                     
|Subscriptions                                | US$433,538              
|Sign-on and hook-up fees                     | 9,294                   
|Telecommunication services                   | 18,311                  
|Other services                               | 26,922                  
|Total revenue                                | 488,065                 
|Taxes and other deductions from revenues     | (84,519)                
|Net operating revenue                        | 403,546                 
|Programming and other direct operating costs | (235,452)               
|Selling, general and administrative expenses | (91,323)                
|Depreciation and amortization                | (78,692)                
|Impairment of goodwill                       | (2,773)                 
|Other                                        | (3,534)                 
|Operating costs and expenses                 | (411,774)               
|Operating loss                               | (8,228)                 
|Other income (expenses):                    
|Monetary indexation, net                     | (26,004)                
|Loss on exchange rate, net                   | (134,016)               
|Interest expense                             | (67,254)                
|Financial expense, net                       | (95,064)                
|Interest income                              | 7,643                   
|Other                                        | (4,807)                 
|Total other expenses                         | (319,502)               
|Loss before equity in results of investees  
|and minority interests                       | (327,730)               
|Equity loss of investees                     | (1,162)                 
|Minority interests                           | 5                       
|Loss before income taxes and cumulative      | (328,887)               
|effect of accounting change                 
|Income tax expense                           | (4,385)                 
|Loss before cumulative effect of accounting  | (333,272)               
|change                                      
|Cumulative effect of accounting change       | (367,733)               
|Net loss                                     | US$(701,005)            
|Basic and diluted loss per share before     
|cumulative accounting change                 | US$(0.35)               
|                                            
|Cumulative accounting change                 | US$(0.39)               
|                                            
|Loss per share, basic and diluted            | US$(0.75)               
|                                            
|Weighted average number of common           
|and preferred shares outstanding             | 939,811,380             

See notes to consolidated financial
statements.

NET SERVIÇOS DE
COMUNICAÇÃO S.A.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS
Years Ended December 31, 2002, 2001 and 2000
(Expressed in thousands of United States dollars, except share amounts)

|                                                          | Capital                 |              
|--------------------------------------------------------- | ----------------------- | -------------
|                                                          | Number of shares Issued | Capital stock
|                                                          | Preferred               | Common       
|                                                          |                         |              
|Balance at December 31, 1999                              | 109,136,188             | 108,790,219  
|Deferred stock compensation                               | -                       | -            
|Issuance of preferred shares                              | 45,577,022              | 12,398,925   
|Conversion of debentures                                  | 3,240,631               | -            
|Change in cumulative translation adjustment for the year  | -                       | -            
|Loss for the year                                         | -                       | -            
|                                                          |                         |              
|Balance at December 31, 2000                              | 157,953,841             | 121,189,144  
|Deferred stock compensation                               | -                       | -            
|Conversion of debentures                                  | 1,982,301               | -            
|Change in cumulative translation adjustment for the year  | -                       | -            
|Loss for the year                                         | -                       | -            
|                                                          |                         |              
|Balance at December 31, 2001                              | 159,936,142             | 121,189,144  
|Amortization of compensation                             
|cost of employees stock purchase plan                     | -                       | -            
|August 9, 2002 activities                                
|Capitalization of advances made for future capital        | 23,645,241              | 352,012,573  
|Conversion of debentures, net of issuance costs           | 293,004,176             | -            
|Capital contribution, net of issuance costs               | 198,909,005             | 75,893,597   
|Capitalization of programming credits due to shareholders | -                       | 3,193,830    
|                                                          |                         |              
|                                                          | 515,558,422             | 431,100,000  
|August 19, 2002 activities                               
|Capitalization of advances made for future capital        | 37,811,449              | 276,082,012  
|Conversion of debentures, net of issuance costs           | 229,591,244             | -            
|Capitalization of programming credits due to shareholders | 221,691,214             | -            
|                                                          |                         |              
|                                                          | 489,093,907             | 276,082,012  
|September 25, 2002 activities                            
|Capitalization of advances made for future capital        | 35,872,799              | -            
|Capital contribution, net of issuance costs               | 22,917                  | 187          
|                                                          |                         |              
|                                                          | 35,895,716              | 187          
|Treasury stock repurchase                                 | (1,700,000)             | -            
|Change in cumulative translation adjustment for the year  | -                       | -            
|Loss for the year                                         | -                       | -            
|                                                          |                         |              
|Balance at December 31, 2002                              | 1,198,784,187           | 828,371,343  
|                                                          |                         |              
|                                                          |                         |              
|                                                          |                         | 2002         
|                                                          |                         |              
|Loss for the year                                         |                         | (701,005)    
|Cumulative Translation Adjustments                        |                         | 17,051       
|                                                          |                         |              
|Total Comprehensive loss                                  |                         | US$(683,954) 
|                                                          |                         |              

NET SERVIÇOS DE
COMUNICAÇÃO S.A.

CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Expressed in thousands of United
States dollars)

|                                                     | Years Ended December 31,
|---------------------------------------------------- | ------------------------
|                                                     |                         
|                                                     | 2002                    
|                                                     |                         
|Operating activities                                
|Net loss for the year                                | US$(701,005)            
|Adjustments to reconcile net loss for the year      
|to net cash provided by operating activities:       
|Deferred sign-on and hook-up fee revenues            | 4,777                   
|Amortization of deferred sign-on and hook-up fee    
|revenues                                             | (4,412)                 
|Equity in loss of investees                          | 1,162                   
|Exchange losses, monetary indexation and interest,  
|net                                                  | 191,436                 
|Depreciation and amortization                        | 78,692                  
|Impairment of goodwill                               | 2,773                   
|Deferred income tax                                  | 3,364                   
|Cumulative effect of accounting change               | 367,733                 
|Gain on disposal of assets                           | (798)                   
|Amortization of stock purchase plan compensation    
|cost                                                 | 594                     
|(Increase) decrease in operating assets             
|Trade accounts receivable                            | (280)                   
|Income taxes recoverable                             | 5,638                   
|Prepaid expenses and other assets                    | (958)                   
|Increase (decrease) in operating liabilities        
|Accounts payable to suppliers and programmers        | 95,774                  
|Income taxes payable                                 | 1,021                   
|Payroll and related charges                          | (3,615)                 
|Sales taxes, accruals and other payables and other   | 11,316                  
|Contingencies accruals                               | 54,503                  
|                                                     |                         
|Net cash provided by operating activities            | 107,715                 
|                                                     |                         
|Investing activities                                
|Acquisition of investments                          
|and advances to related companies, net of repayments | 2,651                   
|Acquisition of property and equipment                | (37,959)                
|Proceeds from sale of equipment                      | 8,631                   
|                                                     |                         
|Net cash used in investing activities                | (26,677)                
|                                                     |                         
|Financing activities                                
|Short-term debt                                     
|Issuances                                            | 46,120                  
|Repayments                                           | (102,266)               
|Long-term debt                                      
|Issuances                                            | -                       
|Repayments                                           | (107,423)               
|Related party loans                                 
|Issuances                                            | 2,332                   
|Repayments                                           | (1,227)                 
|Capital contributions in cash                        | 91,961                  
|                                                     |                         
|Net cash (used) provided by financing activities     | (70,503)                
|                                                     |                         
|Effect of exchange rate changes on cash and cash    
|equivalents                                          | (7,254)                 
|                                                     |                         
|Increase (decrease) in cash and cash equivalents     | 3,281                   
|Cash and cash equivalents at beginning of the year   | 12,474                  
|                                                     |                         
|Cash and cash equivalents at end of the year         | US$15,755               
|                                                     |                         
|Supplemental disclosure of cash flow information    
|Cash paid for income taxes                           | US$851                  
|Cash paid for interest                               | US$57,288               

See notes to consolidated financial
statements.

NET SERVIÇOS DE
COMUNICAÇÃO S.A.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year ended December 31, 2002, 2001 and 2000
(Expressed in thousands of United
States dollars)

1.    
          The Company and its principal operations

a)    Nature of Business and
Financial Conditions

Net Serviços de
Comunicação S.A. (formerly Globo Cabo S.A.) and its subsidiaries referred to
as Net Serviços or the Company is a publicly held
corporation organized under the laws of Brazil. The Company was formed on May 30, 1994 and
controls a group of cable subscription television companies. The Company is the leading
cable television Multiple System Operator in Brazil. Net Serviços shares are
traded at the São Paulo and Madrid Stock Exchanges, and Net Serviços
American Depositary Share receipts or ADS are traded on the NASDAQ National Market.

Pursuant to a shareholders
agreement of July 11, 2002, the Company is controlled, jointly with BNDESPAR, Bradesplan,
RBS, Roma Participaç&otidle;es Ltda. (Romapar) and Distel Holding S.A. Romapar and
Distel are controlled by Globo Comunicaç&otidle;es e Participaç&otidle;es
S.A. (Globopar), the largest media and entertainment group in Brazil, which includes TV
Globo Ltda., the largest television broadcasting company in Brazil and South America. The
following table sets forth the interest in the Companys common voting capital:

|                                    | December 31,
|----------------------------------- | ------------
|                                    |             
|                                    | 2002        
|                                    |             
|Distel Holding S.A.                 | 31.0%       
|Roma Participacoes Ltda.            | 36.2%       
|Bradesplan Participacoes S.A.       | 15.8%       
|Microsoft B.V.                      | -           
|RBS Administracao e Cobrancas Ltda. | -           
|RBS Participacoes S.A.              | 6.8%        
|Public                              | 1.8%        

Net Serviços provides cable
television, high-speed Internet access and data transmission services through several
cable networks located in the countrys largest cities.

The Company holds the following
direct and indirect subsidiaries in percentage of participation  % at December 31:

|                                                         | 2002   | 2001    
|-------------------------------------------------------- | ------ | --------
|                                                         |        |         
|                                                         | Direct | Indirect
|                                                         |        |         
|Consolidated entities                                   
|Multicanal Telecomunicacoes S.A.                         | 86.00  | 14.00   
|Net Belo Horizonte Ltda.                                 | 100.00 | -       
|TV Video Cabo de Belo Horizonte S.A.                     | 100.00 | -       
|CMA Participacoes S.A.                                   | 50.60  | 46.60   
|Dabny, LLC                                               | 100.00 | -       
|G-MMDS Comunicacoes Ltda.                                | -      | -       
|Jonquil Ventures Ltd.                                    | 100.00 | -       
|Net Brasilia Ltda.                                       | 100.00 | -       
|Net Rio S.A.                                             | 100.00 | -       
|Net Recife S.A.                                          | 100.00 | -       
|Net Sao Paulo Ltda.                                      | 94.37  | 5.63    
|Cabodinamica TV Cabo Sao Paulo S.A                       | 63.00  | 37.00   
|Net Campinas Ltda..                                      | 100.00 | -       
|Net Indaiatuba Ltda.                                     | 100.00 | -       
|Net Sao Carlos S. A.                                     | 100.00 | -       
|Net Franca Ltda.                                         | 100.00 | -       
|Jaguari Telecomunicacoes S. A.                           | 91.67  | 8.33    
|Vicom Ltda.                                              | 100.00 | -       
|Net Sul Comunicacoes Ltda.                               | 100.00 | -       
|Net Sao Jose do Rio Preto Ltda.                          | -      | 100.00  
|Net Piracicaba Ltda.                                     | -      | 100.00  
|Net Ribeirao Preto S.A.                                  | -      | 100.00  
|Net Bauru Ltda.                                          | -      | 100.00  
|Net Goiania S.A.                                         | -      | 100.00  
|Net Anapolis Ltda.                                       | -      | 70.00   
|Net Campo Grande Ltda.                                   | -      | 100.00  
|Net Sorocaba Ltda.                                       | -      | 100.00  
|Reyc Comercio e Participacoes Ltda.                      | 0.50   | 99.50   
|Multicanal BVI Ltda.                                     | -      | 100.00  
|Horizonte Sul Comunicacoes Ltda.                         | -      | 100.00  
|DR - Empresa de Distribuicao e Recepcao da TV            | -      | 100.00  
|Ltda.                                                   
|Net Parana Comunicacoes Ltda.                            | -      | 100.00  
|Net Joinville Ltda.                                      | -      | 100.00  
|Televisao a Cabo de Novo Hamburgo Ltda.                  | -      | 100.00  
|Uruguaiana - Empresa de TV a Cabo Ltda.                  | -      | 100.00  
|Televisao a Cabo Vindima Ltda.                           | -      | 100.00  
|Net Florianopolis S.A.                                   | -      | 100.00  
|Net Curitiba Ltda.                                       | -      | 100.00  
|Net Maringa Ltda.                                        | -      | 100.00  
|Americapar Participacoes Ltda.                           | -      | 100.00  
|Net Arapongas Ltda.                                      | -      | 100.00  
|TV Cabo Criciuma Ltda.                                   | -      | 60.00   
|TV Cabo de Chapeco Ltda.                                 | -      | 100.00  
|Net Londrina Ltda.                                       | -      | 100.00  
|Net Sul Provedor de Acesso Ltda.                         | -      | 100.00  
|Cable S.A.                                               | 44.25  | 55.75   
|Equity Investees                                        
|TV Cabo e Comunicacoes Jundiai S.A. (Jointly controlled) | 50.00  | -       
|Net Brasil S.A.                                          | 40.00  | -       

Net Brasil S.A. is a programming and support  services  broker for the NET and SKY systems,  controlled
     by Distel Holding S.A.

The Company and its subsidiaries have
made significant investments in the acquisition, construction and expansion of cable
networks. The main construction phase of the cable networks was completed in 1998. These
investments and the Companys operating losses and working capital deficits have been
funded by the Companys stockholders and by loans. In addition, during 2000 the
Company made three important acquisitions, Unicabo, Net Sul and Vicom, to enhance its
geographical presence in Brazil. During 2001 and 2002, these acquired companies were
integrated and consolidated by means of reorganizations.

The devaluation of the Brazilian real
in relation to the U.S. dollar, which devalued 52.3% in the twelve month period ended
December 31, 2002 had significant effects on the Companys financial position as the
Company has substantial cash obligations denominated in U.S. dollars, including principal
and interest on loans, programming contracts and some imported material supplies. The
exchange losses for the twelve-month period ended December 31, 2002 reached US$ 134,016,
(US$ 85,480 in 2001 and US$27,582 in 2000). The exchange rate of the Brazilian Real (R$)
to the U.S. dollar was R$ 3.5333: US$1.00 at December 31, 2002, R$ 2.3204: US$ 1.00 at
December 31, 2001 and R$1,9554: US$1.00 at December 31, 2000. At March 25, 2003 the
exchange rate was R$ 3.3892: US$1.00. The strengthening of the Brazilian Real exchange
rate should have a positive effect on the Companys financial position and results of
operations due to its high level of foreign currency denominated debt and programming
costs.

During the third quarter of 2002,
shareholders increased capital by R$1.2 billion, corresponding to US$392,236, net of
issuance costs, of which US$57,699 was received in cash, US$165,055 was represented by
advances previously made by shareholders classified as advances for future capital,
US$50,578 represented by programming liabilities due to shareholders converted into
capital and US$118,904 represented by conversion of debentures held by shareholders. In
connection with its capitalization plan, the Company started a process of renegotiating
some of its short- and medium-term financial debts to realign its debt service requirement
to its projected available cash flow. However, since the definition of the terms and
conditions of the financial restructuring were agreed to on July 12, 2002, the overall
market conditions in Brazil were volatile and continued to deteriorate. The continued
deterioration and volatility led the Companys Board of Directors to announce on
December 2, 2002, its decision to review the Companys cash flow with a view towards
achieving the proper balance and a sustainable capital structure.

As more fully described in Note 9,
certain obligations that came due since this announcement were not paid, including trade
financing and working capital facilities, interest on the Senior Guaranteed Notes,
Floating Rate Notes and interests on the Debentures of 2nd and 3rd issuances. At December
31, 2002, all liabilities arising from the Companys debt are classified as current
and include all related default interest and penalties required by the provisions of each
debt instrument. Due to the failure to settle the above described obligations, which could
have their payment flows impacted by the completion of the ongoing restructuring process,
and the disputes regarding the compliance with restrictive contractual clauses, the
Company is subject to the contingency of a collection suit from creditors, either
independently or jointly.

Currently, overdue credits
corresponding to 6.4% of total debt have been called by the bank and are subject to
additional court proceedings. Based on the existing facts, Management does not believe
that these court proceedings will affect the Companys operating performance, nor its
ability to continue the negotiations with creditors.

The Companys Board of Directors
and Management understand that it is essential to achieve balance in the short and medium
terms and that the negotiations with its financial creditors be completed so as to reach a
balanced working capital structure that may provide a lower dependence on third-party
short-term capital and a minimum refinancing risk in the medium term, which will make the
Company less vulnerable to the Brazilian real / US dollar exchange rate volatility. This
will be possible by tailoring a repayment stream that is consistent to the Companys
Business Plan in the medium term. The Companys Management, aided by specialized
financial restructuring and legal consultants, has been continuously working on clarifying
the plan to its creditors to make the Companys debt repayment proposal feasible.
During the week of March 17, 2003, the Company submitted a proposal to its creditors,
along with its revised business plan. Management expects to complete such negotiations
before the end of 2003.

In addition to the 2002
capitalization and ongoing debt-restructuring plan, Management reviewed operating costs
and adapted the Companys investment levels to its cash flow. As part of this
process, and based on analysis and recommendations from its Programming Committee (a
consulting body of its Board of Directors) the Company is still negotiating with its main
content providers through Net Brasil, aiming at detaching its programming costs from the
US dollar indexation and align such costs with its revenues.

Management remain focused on
achieving additional cost efficiencies, having completed the negotiations relative to
important outsourcing initiatives such as those involving Information Technology and the
Customer Service Center, reducing the number of employees by 33% (from 4,695 in 2001 to
3,152 in 2002) and substantially improving customer service in the main capitals. Some
clear examples of management actions are (i) The recent implementation of the JDEdwards
integrated management system and of the budget preparation and management system
(Hyperion), (ii) the start of the integration project which should replace all current
billing systems with a single system that will serve the whole country and, (iii) actions
aiming at improving the quality of its services and subscriber support.

b)    
          Corporate reorganization plan  merger of stockholder Globotel
          Participaç&otidle;es S.A.

As a result of certain ownership
reorganization at its controlling shareholder level, on August 31, 2001, the Extraordinary
Stockholders meeting approved the down-stream merger of Globotel
Participaç&otidle;es S.A. With this merger Net Serviços succeeded the merged
Company in the right of amortizing for Brazilian local statutory and tax purposes a
premium of US$ 194,881 generated at the acquisition of its ownership in Net
Serviços and certain of its subsidiaries. The amortization of this premium for
local statutory purposes will result in a future tax benefit for Net Serviços and
its subsidiaries over an estimated period of up to six years.

In accordance with Brazilian
Corporate Law, the Company will issue shares (pro-rata both common and preferred) up to
the amount of the tax benefits realized by the Company. At the time of the issuance of the
shares, the non-controlling shareholders will be given the right to purchase their
pro-rata share of this capital stock increase in order to prevent dilution. In case they
do not accept the offer, shares will be issued only to the controlling shareholders. The
additional capital paid is transferred to capital upon the issuance of the shares.

2.     Basis of presentation

The consolidated financial statements
of Net Serviços, have been prepared in accordance with accounting principles
generally accepted in the United States of America US GAAP, using the U.S.
dollar as reporting currency. The accounting principles adopted under US GAAP
differ in certain respects from those required under Brazilian GAAP, used to prepare the
statutory financial statements as filed with the Comissão de Valores
Mobiliários (Brazilian Securities Commission or CVM).

The accounts of the Company and its
subsidiaries and equity investees are maintained in Brazilian reais, which have been
translated into U.S. dollars in accordance with Statement of Financial Accounting Standars
SFAS 52 Foreign Currency Translation using the real as functional
currency as from January 1, 1998 when management concluded that Brazilian economy was no
longer highly-inflationary. Under the translation criteria adopted as from January 1, 1998
assets and liabilities are translated from reais to U.S. dollars using the official
exchange rates reported by the Brazilian Central Bank at the balance sheet date (December
31, 2002  US$ 1.00: R$ 3.5333; December 31, 2001  US$ 1.00: R$ 2.3204) and
revenues, expenses, gains and losses were translated using the average exchange rates for
the period. The translation gain or loss is included in the Cumulative Translation
Adjustments (CTA) component of stockholders equity, and in the statement of
comprehensive loss for the period in accordance with the criteria established in SFAS 130
Reporting Comprehensive Income.

Certain prior year amounts have been
reclassified to conform to the current years presentation.

3.    
          Significant accounting policies

a)    
          Basis of consolidation

The consolidated financial statements
include the accounts of Net Serviços and those of wholly owned subsidiaries as
listed in Note 1. All significant intercompany accounts and transactions have been
eliminated in consolidation. The Companys 40 and 50 percent-owned investees, Net
Brasil S.A. and Net Jundiaí S.A. respectively, are accounted for by the equity
method.

b)    
          Use of estimates

The preparation of financial
statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from estimates.

c)    Revenue recognition

Revenue includes fees from
subscription service, connection fees and revenues from providing high-speed data
services. Revenue is recorded in the month the services are provided. Other services
relate primarily to pay-per-view services, which are recognized when services are
provided. The portion of sign-on and hook-up revenue and the related direct selling
expenses are deferred and amortized over ten years, which represents the estimated average
period that subscribers are expected to remain connected to the system. Telecommunication
revenue comprises revenues from the use of Vicom networks for data interchange and is also
recorded in the month services are provided. Sales taxes and sales cancellations included
in gross revenues are recorded as deductions from revenues.

d)    
          Advertising and marketing expenses

Advertising and marketing costs are
expensed as incurred and amounted to US$ 12,160 US$ 17,688 and US$ 7,854 for the years
ended December 31, 2002, 2001 and 2000, respectively, which are reflected in the
consolidated statement of operations under Selling, general and administrative
expenses.

e)    
          Cash and cash equivalents

The Company considers all highly
liquid investments with a maturity of three months or less, at the time of purchase, to be
cash equivalents.

f)    Investments

Investments in which the Company has
ownership interests of 50% or less are accounted for by the equity method. Investments
acquired from the Companys controlling stockholders are recorded at the controlling
stockholders carryover book basis. The Company makes advances to equity investees
under stockholders agreements whereby the Company is committed to finance its share of the
development of the investees operations. Periodically these advances are
capitalized. Allowances are made against these advances when necessary to provide for the
Companys share of the losses of such investees that exceed paid in capital.

g)    
          Property and equipment

Property and equipment are stated at
cost, less accumulated depreciation. Cable plant includes amounts capitalized for direct
labor, overheads and financial expenses attributed to the construction of the network
during the prematurity phase. Cable plant costs also include hook-up costs and
installations at subscribers residences including those of providing high-speed data
services. Materials to be used for the construction of the cable plant are recorded under
property and equipment. Expenses for repairs and maintenance of networks, not considered
to extend the useful life of the underlying asset, are charged to operations as incurred.
Depreciation of property and equipment is computed using the straight-line method, over
estimated economic useful lives as follows: Cable network  12 to 15 years; Optic
fiber  15 years; Buildings  25 years; Leasehold improvements, Installations,
Fixtures and fittings and Other equipment  5 to 10 years; Vehicles and Data
processing equipment  5 years.

The carrying value of fixed assets is
reviewed if facts and circumstances suggest that they may be impaired. If this review
indicates that the carrying value of the fixed assets will not be recovered from
undiscounted future cash flows generated from such assets, an impairment loss would be
recognized for the amount that the carrying value exceeds its fair value. Management
believes that no impairment of fixed assets existed as of December 31, 2002 and 2001.

In the light of the recent upgrades
made to the cable plant in connection with building a two-way communication to allow
introduction of its broad band internet services, the Company and its subsidiaries
performed a study of the estimated useful lives of specified items of its cable
transmission network.

Company management, based on an
external independent-study, decided to revise the estimated economic useful lives of
specified asset categories, as from January 1, 2002. Accordingly the depreciation rate of
the net book value of the following item have been revised:

|Description   | Prior to 2002 | Revised 2002 useful life
|------------- | ------------- | ------------------------
|              |               |                         
|Cable Network | 5-8           | 12-15                   
|Optic fiber   | 10            | 15                      
|Decoders      | 8             | 10                      
|Cable MODEM   | 8             | 10                      

The impact of this change in the
estimated useful life was a decrease in depreciation charges resulting in a reduction of
Companys net loss of US$ 8,132 for 2002.

h)     Goodwill

In July 2001, the Financial
Accounting Standards Board  FASB issued Statements of Financial Accounting Standards
(SFAS) 141, Business Combinations and 142, Goodwill and
Other Intangible Assets, which became effective for the Company beginning January 1,
2002 and changes the accounting for goodwill from an amortization method to an impairment
only approach.

SFAS No. 142 requires that goodwill
be tested annually for impairment using a two-step process. The first step is to identify
a potential impairment and, in transition, the impairment must be measured as of the
beginning of the fiscal year of adoption using the fair market value of the business unit
with which the goodwill is associated, rather than the undiscounted cash flows on an
enterprise-wide basis approach permitted under previously existing accounting standards.

The Company completed the initial
impairment review for its four reporting units, determined in accordance with its
organizational structure on a geographic basis and segregating its corporate data
transmission business into one separate reporting unit. The fair value of the reporting
units was estimated using the discounted cash flow methodology, based on the
Companys business plans and validated by external specialists. Upon adoption of FAS
142, the Company recorded a one-time, non-cash charge of US$357 million for Net Sul and
US$11 million for Vicom to reduce the carrying values of the goodwill associated with
these acquisitions. The charge reflects the overall markets decline since these
acquisitions were made during 2000, is non-operational in nature and is reflected as a
cumulative effect of an accounting change in the accompanying consolidated financial
statements.

On December 31, 2002, the date on
which the Company decided to perform its annual impairment test, the Company, based on
updated fair value analysis of its four reporting units, recorded an additional non-cash
charge of US$ 2,773 on the carrying value of Goodwill associated with Vicom, which is
recorded as a component of operating income in the accompanying consolidated statement of
operations.

i)     Income taxes

Income taxes are provided using the
liability method prescribed by FASB Statement No.109, Accounting for Income
Taxes. Under the liability method, deferred income taxes reflect the tax effect of
net operating loss and investment carryforwards and the net tax effects of temporary
differences between the carrying amount of assets and liabilities for financial statement
and income tax purposes, as determined under enacted tax laws and rates. The financial
effect of changes in tax laws or rates is accounted for in the period of enactment.

j)     Derivative contracts

To help mitigate the Companys
overall foreign currency risk, the Company primarily uses foreign exchange contracts. The
contracts are recorded at current market value in the balance sheet with any gains or
losses recorded through financial expenses or income.

k)    
          Per share calculations

Preferred stock participates with a
10% premium over common stock in the distribution of earnings and preferred stock is
considered to be a common stock equivalent in sharing losses. Per share calculations
reflect the weighted average number of shares outstanding during the year, retroactive
effect being given for all periods presented for share conversions, splits and reverse
splits.

l)     Comprehensive loss

Comprehensive loss is recorded in
accordance with SFAS 130 (Reporting Comprehensive Income) and presented in the
statement of changes in stockholders equity. In our case, comprehensive loss
comprises the translation adjustments included in the CTA component of
stockholders equity.

m)     Restructuring charges

The Company reduced its work force by
2,300 employees in 2002 (1,600 in 2001) in connection with its initiatives to realign its
cost structure in response to adverse market conditions. Nonrecurring severance charges of
approximately US$2,800 in 2002 (US$4,390 in 2001) were fully paid and recorded as
Selling, general and administrative expense in the statement of operations.

n)    
          Recent accounting pronouncements

In May 2002, the FASB issued
Statement of Financial Accounting Standards (SFAS) No.145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145, eliminates the requirement under SFAS No. 4,
Reporting Gains and Losses from Extinguishment of Debt, to report gains and
loses from extinguishments of debt as extraordinary items in the statement of operations.
Accordingly, gains or losses from extinguishments of debt for fiscal years beginning after
May 15, 2002 shall not be reported as extraordinary items unless the extinguishment
qualifies as an extraordinary item under the provisions of APB Opinion No. 30,
Reporting the Results of Operations  Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions.  Upon adoption of this pronouncement, any gain or loss on
extinguishment of debt previously classified as an extraordinary item in prior periods
presented that does not meet the criteria of APB Opinion No. 30 for such classification
should be reclassified to conform to the provisions of SFAS No. 145. The Statement also
amends SFAS No. 13, Accounting for Leases, to require sale-leaseback accounting for
certain lease modifications that have economic effects that are similar to sale-leaseback
transactions and amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability under changed
conditions. Application of SFAS 145 did not impact the Companys financial
statements.

In June 2002, the FASB issued SFAS
No. 146, Accounting for Disposal Obligations, which became effective for the
Company beginning January 1, 2003.  SFAS No. 146 supersedes EITF Issue No. 94-3
Liability Recognition for Certain Employee Termination Benefits and Other Costs to
Exit an Activity (including Certain Costs Incurred in a Restructuring)".  SFAS
No. 146 addresses the accounting for and disclosure of costs to terminate an existing
contractual obligation (including but not limited to operating leases), incremental direct
and other costs associated with the related disposal activity and termination benefits
(severance pay) provided to employees pursuant to a one-time benefit arrangement that does
not constitute a preexisting or newly-created ongoing benefit plan.  The adoption of
SFAS No. 146 had no impact on our consolidated financial position or results of
operations.

In December 2002, the FASB issued
SFAS No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure, which amends SFAS No. 123, to provide alternative methods of transition
for a voluntary change to the fair value based method of accounting for stock-based
employee compensation.  In addition, SFAS No. 148 amends the disclosure requirements
of SFAS No. 123 to require prominent disclosures in both annual and interim financial
statements about the method used on reported results. The disclosure provisions of SFAS
No. 148 are effective for fiscal years ending after December 15, 2002 and had no impact
into these financial statements and accompanying footnotes.

In November 2002, the FASB issued
FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees and Indebtedness of Others (an
interpretation of FASB Statements No. 5, 57 and 107 and Rescission of Interpretation No.
34)" (FIN 45). This interpretation elaborates on the disclosures to be
made by a guarantor in it interim and annual financial statements about its obligations
under certain guarantees that it has issued. It also clarifies that a guarantor is
required to recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. This interpretation does not prescribe
a specific approach for subsequently measuring the guarantors recognized liability
over the term of the related guarantee. This interpretation also incorporates, without
change, the guidance in FASB Interpretation No. 34, Disclosure of Indirect
Guarantees of Indebtedness to Others, which is being superseded. The initial
recognition and initial measurement provisions of this interpretation are applicable on a
prospective basis to guarantees issued or modified after December 31, 2002, irrespective
of the guarantors fiscal year-end. The disclosure requirements in this
Interpretation are effective for financial statements of interim or annual periods ending
after December 15, 2002. The Companys financial statements are not impacted by the
application of this Interpretation.

In January 2003, the FASB issued FASB
Interpretation No. 46, Consolidation of Variable Interest Entities  and
Interpretation of ARB No. 51", (FIN 46). This interpretation of Accounting
Research Bulletin No.51, Consolidated Financial Statements, addresses
consolidation by business enterprises of variable interest entities, which have one or
both of the following characteristics:

The equity investment at risk is not sufficient to
permit the entity to finance its activities without additional subordinated financial
support from other parties, which is provided through other interest that will absorb some
or all of the expected losses of the entity.

The equity investors lack one or more of the
following essential characteristics of a controlling financial interest:

 The direct or indirect ability
to make decisions about the entitys activities through voting rights or similar
rights.

 The obligation to absorb the
expected losses of the entity if they occur, which makes it possible for the entity to
finance its activities.

 The right to receive the
expected residual returns of the entity if they occur, which is the compensation for the
risk of absorbing the expected losses.

This Interpretation applies immediately to variable
interest entities created after January 31, 2003, and to variable interest entities in
which an enterprise obtains an interest after that date. It applies in the fist fiscal
year or interim period beginning after June 15, 2003, to variable interest entities in
which an enterprise holds a variable interest that it acquired before February 1, 2003.
The Interpretation applies to public enterprises as of the beginning of the applicable
interim or annual period, and it applies to non-public enterprises as of the end of the
applicable annual period.

This Interpretation may be applied
prospectively with a cumulative-effect adjustment as of the date on which it is first
applied or by restating previously issued financial statements for one or more years with
a cumulative-effect adjustment as of the beginning of the of the first year restated. The
Company is still evaluating the impact of this interpretation on its financial statements.
However, the Company does not believe that the adoption of FIN 46 will have a material
impact on its results of operations and financial position.

4.    
          Cash and cash equivalents

Cash and cash equivalents at December
31, 2002 include US$ 9,336 (US$ 27 in 2001) invested in highly liquid securities in the
Brazilian financial markets, principally in first tier bank certificates of deposits,
short-term government bonds and other money-market securities, with initial maturities of
30 days, with daily liquidity thereafter. The funds are invested in securities denominated
in Brazilian reais (R$) and, accordingly, the Company is exposed to the risk of
devaluation of the Brazilian real against the U.S. dollar, as well as the credit risk on
the underlying securities.

5.     Recoverable income tax

|                         | 2002     | 2001     
|------------------------ | -------- | ---------
|                         |          |          
|Withholding income taxes | US$5,372 | US$10,922
|Current portion          | (2,389)  | (10,123) 
|                         |          |          
|Long-term portion        | US$2,983 | US$799   
|                         |          |          

Recoverable income tax represents
income tax withheld upon redemption of certain investments and is available to be utilized
against other similar income taxes payable. The Company and its operating subsidiaries are
using these credits to offset payroll income tax withheld from employees.

6.    
          Goodwill on acquisition of consolidated subsidiaries, net

As discussed in Note No. 3, in
January 2002, the Company adopted SFAS 142, which requires companies to stop amortizing
goodwill and certain intangible assets with an indefinite useful life. Instead, SFAS 142
requires that goodwill be reviewed for impairment upon adoption of FAS 142 (January 1,
2002) and annually thereafter.

Upon adoption of FAS 142, the Company
recorded a non-cash charge of US$367,733 to reduce the carrying value of Goodwill. Such
charge is non operational in nature and is reflected as a cumulative effect of accounting
change in the accompanying consolidated statement of operations. In calculating the
impairment charge, the fair value of the impaired reporting units was estimated using the
discounted cash flow methodology. The impairment is associated with the decline in
Companys stock price since the acquisitions of Net Sul and Vicom were made during
2000.

The Company recorded amortization
expense of $63,726 and $49,488 for the years ended December 31, 2001 and 2000,
respectively. As of January 1, 2002, in connection with the adoption of SFAS No. 142, the
Company no longer amortizes goodwill. Applying the effects of adoption of SFAS 142 to the
years ended December 31, 2001 and 2000, would have resulted in the following pro-forma net
loss for the years ended December 31, 2001 and 2000:

|                                               | 2001         | 2000        
|---------------------------------------------- | ------------ | ------------
|                                               |              |             
|Net loss as reported on historical basis       | US$(349,473) | US$(222,234)
|Exclude amortization of goodwill               | 63,726       | 49,488      
|                                               |              |             
|Pro forma net loss                             | US$(285,747) | US$(172,746)
|                                               |              |             
|Pro forma net loss per share basic and diluted | US$(1.02)    | US$(0.73)   

Because goodwill is nondeductible for
tax purposes, there is no income tax impact. The impairment charge was treated as a
permanent difference in the computation of the deferred taxes, same treatment previously
given to goodwill amortization.

A Summary of changes in the
Companys goodwill during the year ended December 31, 2002 and total assets at
December 31,2002, by reporting units is as follows:

|                           | January1,  | CumulativeEffect ofAccountingChange | Loss onTranslation | 4th QuarterImpairment | December 31, 2002
|-------------------------- | ---------- | ----------------------------------- | ------------------ | --------------------- | -----------------
|                           |            |                                     |                    |                       |                  
|Region I                  
|Net Campinas S.A.          | US$58,070  | US$-                                | US$(19,934)        | US$-                  | US$38,136        
|Net Sao Paulo Ltda.        | 27,294     | -                                   | (9,369)            | -                     | 17,925           
|Net Sao Carlos S.A.        | 6,052      | -                                   | (2,077)            | -                     | 3,975            
|Net Piracicaba Ltda        | 4,460      | -                                   | (1,531)            | -                     | 2,929            
|Net Franca S.A.            | 828        | -                                   | (284)              | -                     | 544              
|Net Indaiatuba S.A.        | 136        | -                                   | (46)               | -                     | 90               
|Others                     | 12,424     | -                                   | (178)              | -                     | 12,246           
|                          
|Region II                 
|Net Belo Horizonte Ltda.   | 13,269     | -                                   | (4,555)            | -                     | 8,714            
|Net Rio S.A.               | 12,854     | -                                   | (4,412)            | -                     | 8,442            
|Net Brasilia Ltda.         | 6,116      | -                                   | (2,100)            | -                     | 4,016            
|Net Recife S.A.            | 1,426      | -                                   | (489)              | -                     | 937              
|Others                     | 1,637      | -                                   | (562)              | -                     | 1,075            
|                          
|Region III                
|Net Sul Comunicacoes Ltda. | 529,801    | (357,000)                           | (59,318)           | -                     | 113,483          
|                          
|Region IV                 
|Vicom Ltda.                | 28,926     | (10,733)                            | (6,245)            | (2,773)               | 9,175            
|                           |            |                                     |                    |                       |                  
|TOTAL                      | US$703,293 | US$(367,733)                        | US$(111,100)       | US$(2,773)            | US$221,687       
|                           |            |                                     |                    |                       |                  

During the fourth quarter the Company
performed its annual impairment review for goodwill and recorded an additional charge of
US$2,773 related to Vicom, which is recorded as a component of operating income in the
accompanying statement of operations. The charge reflects Vicoms lower than expected
performance mainly due to lack of Capex investments during 2002. The cable reporting units
had no additional impairment charge even considering the higher discount rates applied,
mainly to the positive effects of the cost reduction measures taken since the acquisitions
on their future cash flows. The translation loss was included in the Cumulative
Translation Adjustment (CTA) component of stockholders equity, and in the statement
of comprehensive loss for the year.

7.    
          Property and equipment, net

At December 31, property and
equipment consisted of:

|                                     | December 31, 2002 | 2001                   
|------------------------------------ | ----------------- | -----------------------
|                                     | Cost              | Accumulateddepreciation
|                                     |                   |                        
|Cable network                        | US$667,102        | US$(402,268)           
|Data processing equipment            | 63,599            | (33,000)               
|Buildings and improvements           | 8,358             | (4,856)                
|Fixtures, fittings and installations | 8,309             | (3,932)                
|Vehicles                             | 1,981             | (1,479)                
|Other                                | 49,237            | (41,649)               
|                                     |                   |                        
|                                     | 798,586           | (487,184)              
|Cable construction materials         | 37,641            | -                      
|Land                                 | 871               | -                      
|                                     |                   |                        
|Total property and equipment, net    | US$837,098        | US$(487,184)           
|                                     |                   |                        

Total accumulated fixed costs and
financial expenses capitalized in the cable network during the prematurity phase, net of
amortization, amount to US$ 6,296 at December 31, 2002 (US$ 16,905 at December 31, 2001).

8.    
          Related party transactions

The Company engages in financial and
commercial transactions with its subsidiaries and investees, with its stockholders and
with companies related to its stockholders. The Company obtains programming from Net
Brasil S.A., which in turn acquires such programming from Globosat
Comunicaç&otidle;es S.A., a company related to Globo Group and from non-related
parties pursuant to a distribution agreement. Globosat produces most of the Portuguese
language content distributed by the Company, such as SportTV, GNT channel, Globo News,
Shoptime, Multishow, Futura and Canal Brasil. Globosat also acquires programming from
third parties. As part of the programming agreement with Net Brasil, the Company has
exclusivity rights in the distribution of Globosat programming to its franchising areas,
with the exception of Net Sat Serviços Ltda, the Globo Group arm that distributes
video content through its DBS systems.

The amounts paid to Net Brasil
related to broker commission during the years ended December 31, 2002, 2001 and 2000 were
US$1,904, US$1,616, US$2,626, respectively. The amounts paid to Globosat for programming
during the years ended December 31, 2002, 2001 and 2000 were US$19,648, US$11,507 and
US$12,227, respectively. The Companys program guide is produced by Editora Globo
S.A., a publishing company related to Globo Group. The amounts paid to Editora Globo S.A.
during the years ended December 31, 2002, 2001 and 2000 were US$6,510, US$7,661 and
US$4,357, respectively.

The amounts due to and due from
related companies as of December 31, 2002 and 2001 are as follows:

|                                   | 2002   | 2001       
|---------------------------------- | ------ | -----------
|                                   | Assets | Liabilities
|Distel Holding S.A.                | US$-   | US$566     
|RBS Administracao e Cobranca Ltda. | -      | 315        
|Net Brasil S.A                     | -      | 49,927     
|Globosat Comunicacoes Ltda.        | -      | 2,223      
|Other                              | 14     | -          
|                                   |        |            
|                                   | US$14  | US$53,031  
|                                   |        |            

The amounts due to Net Brasil S.A. and Globosat  Comunicacoes Ltda. are classified as "Accounts payable
     to programmers" under current liabilities.

The Company enters into various financial
transactions with entities affiliated to Banco Bradesco, a related party to Bradesplan
Participaç&otidle;es S.A. The aggregated amounts paid to entities related to
Bradesplan for property insurance, employee health insurance and collection fees during
the years ended December 31, 2002, 2001 and 2000 were US$4,498, US$7,091, US$16,444,
respectively.

As described in note 9(x), the
Company has obtained loans from Banco Nacional do Desenvolvimento Social  BNDES an
entity related to BNDESPAR.

9.     Debt

At December 31, debt
consisted of:

|                                                                                                                                         | 2002      | 2001      
|---------------------------------------------------------------------------------------------------------------------------------------- | --------- | ----------
|                                                                                                                                         |           |           
|U.S.dollar denominated debt:                                                                                                            
|(i) Multicanal Senior Guaranteed Notes                                                                                                   | US$97,692 | US$97,692 
|(ii) Net Sul Floating Rate Notes                                                                                                         | 72,300    | 80,000    
|(iii) Trade Financing Loans                                                                                                              | 37,642    | 76,837    
|(iv) Facilities from the International Finance Corporation IFC                                                                           | 11,681    | 47,011    
|(v) Jonquil Ventures Ltd. Zero Coupon Guaranteed Notes with annual interest of 12.54% repaid at the final maturity on July 15, 2002      | -         | 45,711    
|                                                                                                                                         |           |           
|                                                                                                                                         | 219,315   | 347,251   
|Brazilian R$ denominated debt:                                                                                                          
|(vi) Non-Convertible debentures                                                                                                          | 55,229    | 84,098    
|(vii) Convertible Debentures with interest due annually at
an annual interest rate of 12% over the indexation at the IGPM domestic index | 11,444    | 155,405   
|(viii) Working Capital Loans                                                                                                             | 30,056    | 22,471    
|(ix) Proceeds from sale of future receivables to Cable S.A. repaid in 2002                                                               | -         | 38,786    
|(x) Brazilian reais facilities from the BNDES with annual interest
between 3.5% to 4.3% over the indexation at the TJLP domestic index   | -         | 29,811    
|Other                                                                                                                                    | 7,704     | 14,670    
|                                                                                                                                         |           |           
|                                                                                                                                         | 104,433   | 345,241   
|                                                                                                                                         |           |           
|                                                                                                                                         | 323,748   | 692,492   
|Less current portion                                                                                                                     | -         | (185,098) 
|Less amounts reclassified to short-term debt                                                                                             | (323,748) | (94,339)  
|                                                                                                                                         |           |           
|Long-term debt                                                                                                                           | US$-      | US$413,055
|                                                                                                                                         |           |           

The various  base rates used to  determine  the  interest  rate of the  Company's  debt at December 31,
follows:

|      | 2002   | 2001  
|----- | ------ | ------
|LIBOR | 1.44%  | 2.44% 
|TJLP  | 10%    | 10%   
|CDI   | 24.83% | 19.02%
|IGPM  | 25.30% | 10.84%

(i) Senior Guaranteed
Notes

On June 18, 1996, Net Serviços
de Comunicação issued US$ 185,000 of 12.625% Senior Guaranteed Notes
(the Notes) due June 18, 2004 with interest payable semiannually on June 18
and December 18 of each year commencing December 18, 1996.

The Senior Guaranteed Notes are
senior unsecured obligations of Net Serviços and have priority equal to all
existing and future senior unsecured indebtedness. The Senior Guaranteed Notes are
unconditionally guaranteed, on a joint and several basis, by each of the Companys
subsidiaries, except for Anápolis, Net Rio S.A., Net Brasília S.A. and Net
Recife S.A. and others subsidiaries acquired after its issue. Additionally, each guarantee
is a senior unsecured obligation of the subsidiary guarantors and has liquidation priority
equal to all existing and future senior unsecured indebtedness of the subsidiary
guarantors.

The Notes are redeemable at Net
Serviços option, in whole but not in part at 100% of the principal amount
plus accrued interest in the event of certain changes affecting the withholding tax
treatment of the Notes. Each holder was entitled to require that Net Serviços
redeem the Notes at a redemption price of 101% of the principal amount on June 18, 2001,
together with accrued interest to date. On March 20, 2001, the Company offered a waiver
payment of US$ 7 per US$ 1,000 of principal amount held to holders that agreed not to
exercise its redemption right on June 18, 2001. Holders of Senior Guaranteed Notes
representing the principal amount of US$ 71,882 accepted the waiver payment, thereby
agreeing to hold their notes until final maturity. In addition, holders representing the
principal amount of US$ 25,810 did not accept the offer of a waiver payment, but
nonetheless did not exercise their right on June 18, 2001. Accordingly, Senior Guaranteed
Notes in the principal amount of US$ 97,692 will be held to maturity.

Senior Guaranteed Notes representing
the principal amount of US$ 87,300 were redeemed on June 18, 2001. The Companys
wholly owned subsidiary Jonquil Ventures Ltd acquired Senior Guaranteed Notes representing
the principal amount of US$ 44,000 with the proceeds of a sale in the European market of
US$ 52,000 aggregate principal amount of Zero-coupon Guaranteed Notes repaid
in July 2002.

The amount payable at the final
maturity on June 18, 2004 includes a premium equal to 5% of the principal amount, which is
accrued as interest expense by the Company.

The Company did not fulfill the
interest payment of US$ 8,927, due on December 18, 2002.

According to the terms of the Senior
Notes, payments of the Notes are not subject to withholding taxes imposed by Brazilian tax
authorities provided that the Notes are not redeemed prior to June 18, 2004. If the Notes
are redeemed for any reason prior to June 18, 2004, the Company will be required to pay
withholding taxes retroactively on interest, fees and commissions paid in connection with
the Notes from the date of issuance. The Company recorded an accrual for these potential
withholding taxes expenses in the amount of US$ 7,216 in connection with the Notes
maturity acceleration.

At December 31, 2002, the Company is
not in compliance with the net debt over operating cash flow financial covenant, which as
defined in the agreement should not exceed 6.0 to 1.0 for the year.

(ii) Net Sul Floating
Rate Notes

On October 28, 1997 Net Sul
Comunicações Ltda. issued US$ 80,000 in Floating Rate Notes, the US$ 48,000
Series A Floating Rate Notes due 2005 (the Series A Notes), the US$ 11,000
Series B Floating Rate Notes due 2005 (the Series B Notes) and the US$ 21,000
Series C Floating Rate Notes due 2005 (the Series C Notes), together the
Floating Rate Notes. Interest on the Floating Rate Notes is payable in arrears
on January 31, April 30, July 31 and October 31 in each year from January 31, 1998.
Floating Notes Series A bear interest of LIBOR plus 3.625% and Series B and C, LIBOR plus
3.00%. The Floating Rate Notes are jointly, severally and unconditionally guaranteed by
each Net Sul subsidiary guarantors.

Due to acquisition of Net Sul
Comunicações Ltda., the Company guaranteed and renegotiated certain
conditions of the Floating Rate Notes, including the first redemption option due on
October 28, 2000. The new redemption options are US$ 32,000 due in October 2002 and US$
48,000 due in October 2003 with a final due date in October 2005.

On August 30, 2002, the deadline for
the exercise of the put options on the US$ 32 million Notes, holders of Notes in the
amount of US$ 7.7 million, representing 24% of the total, notified the Company of
their option. On October 30, 2002, Companys wholly owned subsidiary Jonquil Ventures
Limited acquired the Notes from these holders in the secondary market.

The Company did not fulfill the
interest payment of US$ 932, due on January 31, 2003.

The Floating Rate Notes
issuance agreement requires that the Company should maintain the interest coverage ratio,
EBITDA (income before tax, interest, depreciation and amortization) over net interest
expense, as defined in the agreement above 1.80 for the fiscal year 2002. On December 31,
2002, this ratio was 1.049, calculated according to the terms of the agreement and based
on USGAAP.

(iii) Trade Financing
Loans

Trade financing loans are short-term
loans with local banks, guaranteed by the Company or its wholly owned subsidiary
Multicanal Telecomunicações S.A. or a combination thereof. Average nominal
interest rates were 7.90% at December 31, 2002 and 9.10% at December 31, 2001.

(iv) International
Finance Corporation (IFC)

Under the IFC Facility, IFC provides
loans to Distel Holding for the purpose of financing Distel Holdings subsidiaries
and related parties involved in pay television operations throughout Brazil and in the
construction of their subscription television systems (the Project). Notwithstanding the
assignments of the loan, Distel Holding remains jointly and severally liable with the
Assignees for all amounts borrowed by them. All borrowings under the IFC Facility are
guaranteed by Globopar and members of Roberto Marinho Family. The IFC may enforce all
obligations directly against the relevant Assignee, as well as against Distel Holding.

The IFC Facility bears interest at a
variable interest rate equal from 2.75% to 3% per annum over the six-month U.S. dollar
LIBOR. Under the IFC Facility, the loans are to be repaid in twelve semi-annual
installments beginning on April 15, 1999 and ending on October 15, 2004 and contain a
variety of covenants.

The Company and its controlling
shareholders Distel and Globopar have agreed with the IFC a series of amendments to the
covenants contained in the IFC facility, in order to conform them to the terms of its
other US dollar denominated indebtedness. The Company is in compliance with the amendatory
letter dated October 31, 2001.

The Company is not in compliance with
the financial covenants related to the IFC debt.

There are no overdue principal or
interest amounts related to the IFC Facility.

(v)
          Jonquil Ventures Ltd. Zero Coupon Guaranted Notes

On June 15, 2001, our subsidiary
Jonquil Ventures Ltd. sold in the European Market US$52.0 million aggregate principal
amount at maturity of zero-coupon notes due July 15, 2002. The zero-coupon notes were
guaranteed by the Company.

(vi) Non-Convertible
Debentures

On February 7, 2001, the Company
issued Brazilian R$ denominated debentures in an aggregate principal amount of R$ 200,000
(equivalent to US$ 98,039 on issuance date) 20,000 non-convertible nominative debentures,
with a face value of R$ 10 each (equivalent to US$ 4.90 on issuance date).

As a result of negotiations, to
eliminate the floating assets pledge that previously had applied to these debentures,
interest is due at CDI plus 1.05% per annum.

Due to the Companys debt
maturities acceleration, the deferred costs of the issuance and distribution of the
debentures were fully expensed on December 31, 2002.

The Company is not in compliance with
the financial covenants related to the non-convertible debentures.

The Company did not fulfill the
interest payment due on December 1, 2002 of US$ 5,238.

(vii) Convertible
Debentures

From November 1999 through January
2000, the Company issued 3,500 Real denominated convertible debentures, each of
which with a face value of R$ 100 thousand (equivalent to US$ 51.74 on issuance date), in
an aggregate principle amount of R$ 350,000 thousand (equivalent to US$ 181,090 on
issuance date), convertible into preferred shares maturing in December 2006.

As described in Note 1, during 2002,
convertible debentures in the amount of R$365,817 thousand (equivalent to US$118,904 at
the exchange rate in force at the date of the issuance of shares, net of issuance costs)
were converted into equity as part of the Companys recapitalization process. Out of
the 3,500 convertible debentures issued 258 (7.4%) are outstanding.

As a result of negotiations to
eliminate the floating asset pledge that previously had applied to these debentures, the
Company paid an additional R$ 1,200 in respect of each debenture, which was recorded as
interest expense.

The Company is not in compliance with
the financial covenants related to the convertible debentures.

The Company did not fulfill the
interest payment due on December 1, 2002 in the amount of US$ 1,289.

(viii)Working capital
loans

The working capital loans obtained at
local banks bear interest of CDI plus 3.24% per annum. These loans became overdue in
December 2002 and include interest and other penalties accrued according to the
agreements.

(ix)
          Proceeds from sale of future receivables to Cable S.A.

On June 11, 2001 the Company and its
subsidiaries Net SÃo Paulo Ltda. and Net Rio S.A. entered into financial
transactions with a specific limited purpose company named Cable S.A. The proceeds from
these transactions amounted to US$ 52,063 and were settled by means of exchanging future
accounts receivable from subscribers over a 15-month period with a grace period of 3
months ended in September 2002. Interest and other financial charges on these facilities
were expensed on accrual basis over the 15-month period.

(x)
          Brazilian R$ facilities from the BNDES

During 1997 and 1998 certain of Net
Serviços subsidiaries obtained loan facilities pursuant to loan agreements
with the BNDES (Nacional Economic and Social Development Bank), used for expansion and
upgrading of their cable networks, which were fully repaid.

Other debt related matters

Financial expenses, net: In 2002, the
amount recorded in the statement of operations as financial expense relates primarily to
the fees, charges and other costs incurred as a result of the debt default situation noted
in the debt items above and a reserve for Financial Operations Tax (IOF) under
intercompany transactions, as more fully described in Note 14. In 2001 and 2000, the
amounts relate primarily to the amortization of financial charges associated with the
issuance of debt instruments, the ContribuiçÃo Provisória sobre
MovimentaçÃo Financeira (CPMF), a federal tax on financial transactions
levied at a rate of 0.38% on withdrawals from checking accounts; and PIS and COFINS taxes
on financial revenues derived from short-term investments.

Monetary variation, net: Consists of
monetary correction charges on real-denominated debt, which principal amounts are adjusted
periodically based on the IGPM inflation index, and the Companys debt from BNDES,
the interest rates on which are adjusted periodically based on TJLP interest rate.

Loss on exchange rate, net: Consists
of foreign exchange gain and losses on U.S. dollar-denominated debt, as function of the
U.S. dollars appreciation or devaluation in relation to the real.

10. Stockholders
equity

Capital stock can be increased up to
the limit of R$5,000,000.

Preferred stock is non-voting and
participates with a 10% premium over common stock in the distribution of earnings;
however, it is entitled to right of first refusal on liquidation in the event of
dissolution of the Company. Stockholders are entitled by Brazilian law to a minimum
dividend, payable in Brazilian reais, equivalent to 25% of local currency net income
calculated in accordance with Brazilian Corporation Law. At December 31, 2002, the
Companys local currency financial statements presented an accumulated deficit of
US$ 318,508 (December 31, 2001US$ 843,290).

Relationships among controlling
shareholders of Net Serviços are defined in the shareholders agreement
entered on July 11, 2002. As per the agreement, any shareholder that desires to transfer
part or the whole amount of its common shares, and in the case of BNDESPAR, Microsoft and
RBS also their preferred shares to a third party, shall notify, in writing, all other
parties in the shareholders agreement, allowing the right of first refusal. The
agreement also provides for issuances at the Board of Directors discretion, as referred
below, to be approved by the simple majority of the board members that attend to the
meeting, which shall include the favorable vote of the board member indicated by BRADESPAR
or BNDESPAR: (i) Company capital stock increase, by the issuance of new common shares for
private or public placement; (ii) issuance of any convertible or exchangeable securities
into common shares; (iii) amendment in the terms and conditions, or termination, of the
operators concession contracts. As defined in the shareholders agreement, the
Companys Board of Directors shall comprise of a minimum of 9 (nine) and a maximum of
12 (twelve) regular members, and the same number of alternate members, all shareholders of
Net Serviços and indicated by the Qualified Investors, being certain that each
Qualified Investor shall have the right to indicate, individually, at least one member of
the Company Board of Directors.

Dividends are payable in Brazilian
reais and may be remitted to stockholders abroad provided that the foreign
stockholders capital is registered as foreign capital with the Brazilian Central
Bank. No withholding tax is payable on dividends paid out of profits earned from January
1, 1996.

During 2002, the Board of Directors
approved an aggregated increase in the Companys capital stock of R$ 1.2 billion
(US$392,236) by issuing for public subscription 707,182,199 common shares and
1,040,548,045 preferred shares, all nominative, no-par value, at the price of R$ 0.70
each.

During 2001 the Company issued
19,823,010 new preferred shares due to the option exercised of convertible debentures as
mentioned in note 9.

On May 31, 2000, the stockholders
approved an acquisition of the remaining 50% ownership on the previously jointly
controlled Company Unicabo Participações e Comunicações Ltda.
The Company issued 40,000,000 preferred shares having a market value of US$ 61,582 at that
date to José Bonifácio Coutinho Nogueira.

On July 17, 2000, the Company issued
28,648,365 new preferred shares having a market value of US$ 41,952 at that date to
UniÃo Comércio e Participações Ltda. (9.549.455 shares), Globo
Comunicações e Participações S.A. (9.549.455 shares), Victory
Telecomunicações S.A. (9.549.455 shares), as consideration for the
acquisition of Vicom Ltda.

On September 18, 2000 the Company
issued 123,989,259 new common shares and 387,121,852 preferred shares, having a market
value of US$ 719,335 at that date to Caboparbs Participações S.A., an
affiliate of RBS Group as consideration for the acquisition of Net Sul
Comunicações Ltda.

During the twelve-month period ended
December 31, 2000, the Company issued 32,406,312 new preferred shares due to the option
exercised of the convertible debentures as mentioned in note 9.

11.
          Advances for future capital

Capital advances represent funds
advanced by Distel Holding S.A. that subject to certain conditions may be converted into
common and preferred shares. During 2002, Distel Holding S.A. converted such advances into
approximately 23 million and 352 million preferred and common shares, respectively.

12.
          Employee stock purchase plan

On April 17, 1997, the Companys
stockholders approved a Stock Purchase Plan to be offered to selected officers and other
employees of Net Serviços and its subsidiaries, with the object of encouraging them
to participate in the Companys development and in enhancing its stockholder value.

On June 11, 1997, in connection with
the aforementioned stock purchase plan, the Companys stockholders approved the issue
of 1,700,000 preferred shares totally subscribed by the officers and employees who
exercised the option to purchase Net Serviços shares at a price equivalent to US$
0.80, with an initial payment which, in aggregate, amounted to 10.4% of the total price
paid up in July 1997. The capital increase totaled US$19,550 based on the traded market
price of the shares. The balance of the subscription price payable by the officers and
employees was presented as unpaid capital in the stockholders equity.

The difference between the price
subscribed by the officers and employees and the traded market price of the shares on July
11, 1997 (equivalent to US$ 1.15) was recorded as a deferred compensation cost of US$
5,950, and was amortized, as selling, general and administrative expenses, ratably up to
June 2002. The Company repurchased the 1,700,000 shares for the same amount receivable
from the officers and employees and recorded the unpaid capital as a reduction of paid-in
capital.

13. Income tax

The statutory rates applicable in each
period were as follows (in percentages):

|                             | 2002 | 2001 | 2000
|---------------------------- | ---- | ---- | ----
|                             |      |      |     
|Federal income tax           | 25%  | 25%  | 25% 
|Social contribution          | 9%   | 8%   | 9%  
|                             |      |      |     
|Composite federal income tax | 34%  | 33%  | 34% 
|                             |      |      |     

The reconciliation of the tax benefit
determined using the statutory tax rate to the Companys per tax loss to the tax
expense follows:

|                                                                                                                                                          | Years ended December 31,
|--------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------
|                                                                                                                                                          | 2002                    
|                                                                                                                                                          |                         
|Loss before cumulative effect accounting change,
income tax, equity in results of investees and minority
interests in losses of consolidated subsidiaries | US$(327,730)            
|Statutory composite tax rates                                                                                                                             | 34.00%                  
|                                                                                                                                                          |                         
|Tax benefit at statutory rates                                                                                                                            | US$111,428              
|Adjustments to derive effective rate:                                                                                                                    
|Principles differences from BRGAAP to USGAAP                                                                                                             
|Income and Social tax on permanent differences USGAAP                                                                                                     | 63,859                  
|Income and Social tax on permanent differences BRGAAP                                                                                                     | (104,873)               
|Non deductible goodwill amortization and                                                                                                                 
|impairment                                                                                                                                                | (2,773)                 
|Other                                                                                                                                                     | (35,167)                
|Increases/decreases in valuation allowance                                                                                                                | (36,859)                
|                                                                                                                                                          |                         
|Income tax expenses, net per consolidated statement of operations                                                                                         | US$(4,385)              
|                                                                                                                                                          |                         
|Current income tax                                                                                                                                        | (1,021)                 
|Deferred income tax                                                                                                                                       | (3,364)                 
|                                                                                                                                                          |                         
|Income tax benefit expenses, net                                                                                                                          | US$(4,385)              
|                                                                                                                                                          |                         

The net deferred tax asset is
comprised as follows:

|                                                                                                                     | December 31,
|-------------------------------------------------------------------------------------------------------------------- | ------------
|                                                                                                                     | 2002        
|                                                                                                                     |             
|Deferred tax assets:                                                                                                
|Tax loss carryforwards                                                                                               | US$222,284  
|Differences between Brazilian tax basis and                                                                         
|US GAAP - accounting principles related to                                                                          
|deferred hook-up revenue charges and financial leasing                                                               | 6,538       
|Accrued expenses - not currently deductible                                                                          | 22,982      
|                                                                                                                     |             
|                                                                                                                     | 251,804     
|                                                                                                                     |             
|Deferred tax liabilities:                                                                                           
|Differences between Brazilian tax basis and US GAAP - accounting principles related to                              
|- differences in depreciation rates, capitalized financial
expenses and other items affecting property and equipment | (5,043)     
|- other differences between tax basis and                                                                           
|Reporting basis of assets and liabilities,                                                                          
|Resulting from change in functional currency                                                                         | (16,127)    
|                                                                                                                     |             
|                                                                                                                     | (21,170)    
|                                                                                                                     |             
|Net deferred tax assets                                                                                              | 230,634     
|Valuation allowance                                                                                                  | (230,180)   
|                                                                                                                     |             
|Net deferred tax asset-non current                                                                                   | US$454      
|                                                                                                                     |             

Net Serviços principal operating
subsidiaries continue to record tax losses and, accordingly, valuation allowances continue
to be recorded for deferred tax assets recognized in these companies.

Brazilian tax law allows tax losses
to be carried forward indefinitely to be utilized to offset future taxable income. Tax
legislation enacted in 1995 limits the utilization of tax loss carryforwards in a given
year to 30% of taxable income. At December 31, 2002 and 2001, the Company and its
subsidiaries had tax loss carryforwards of US$ 676,799 and US$ 732,225, respectively.

14.
          Commitments and contingencies

a)
          Commitments

Future minimum rental payments
required under non-cancelable operating leases are not significant.

Rental expenses for the years ended
December 31, 2002, 2001 and 2000 were US$17,761, US$19,638 and US$20,698, respectively.

b) Contingencies

Taxes and contributions, determined and
withheld by the Company and its subsidiaries, as well as their tax, and corporate records
and tax returns, are subject to examination by tax authorities during different expiration
periods, pursuant to applicable legislation.

The Company and its subsidiaries are
party to certain legal proceedings involving tax, labor, civil and other claims, arising
in the ordinary course of business.

At December 31, the reserves for
contingent liabilities are summarized below:

|                     | 2002       | 2001     
|-------------------- | ---------- | ---------
|                     |            |          
|Tax related matters  | US$99,525  | US$44,083
|Labor related claims | 6,958      | 4,693    
|Civil related claims | 5,665      | 4,085    
|                     |            |          
|Total                | US$112,148 | US$52,861
|                     |            |          

Following is a description of the
Companys major tax related matters:

(i)
          2002 activity:

The Company and its subsidiaries have
centralized cash management and cash transfers made under a current intercompany account.
Based on the opinion of its external legal counsel, management understands that such
transactions are not subject to Financial Operations Tax (IOF) charges. However, in view
of certain recent adverse court decision in respect to this matter, management has
established a reserve of US$34,738 during 2002. It is the understanding of management and
its external legal counsel that interest accrued under the current intercompany accounts
is not subject to withholding tax and no accruals are established in respect to this
matter.

The subsidiary Net Rio S.A. received
a tax assessment notice from the State Tax Authority in the amount of approximately
US$17,547 relating to ICMS tax. The assessment is based on the Tax Authorities
understanding that as a result of delaying the payment of the ICMS tax during the period
from September 2001 to October 2002, the Company lost its rate reduction benefit.
Management, supported by the opinion of its external legal counsel, has presented its
defense against the assessment. Management understands that the company has meritorious
and substantial defense arguments and considering the risks involved established a reserve
in the amount of US$4,693 for potential losses related to this assessment.

The Company is defending a federal
tax assessment notice in the amount of US$ 6,170 due to a difference in classification
between the Company and the Tax Authorities of analogical decoders for use in pay-TV
systems under the Common Mercosur Names. Based on its substantial defense arguments and
the opinion of its external legal counsel that the chance of an unfavorable outcome is
remote, the Company did not establish reserves for this dispute.

The subsidiaries Net Campinas Ltda.
and Net SÃo José do Rio Preto Ltda. have received assessment notices from
the State Tax Authorities, suspending the previously approved benefit of payment of their
ICMS tax debt in installments, a result of the delay in the payment of the installments.
Management is defending the assessment and has recorded a reserve in the amount of US$
2,805 for losses related to this matter.

(ii)
          Previous years matters:

The Company and its subsidiaries have
questioned, in court, the incidence of PIS and COFINS (social fund contributions) on their
revenues. The amount of US$ 36,247 (US$ 40,564 in 2001) is currently recorded under
reserve for tax contingencies. Since July 1999, the subsidiaries have given up these
proceedings and started to pay these contributions normally.

The judicial deposits made in
connection with this litigation in the amount of US$15,956 will be relinquished upon an
official judicial ruling and used to offset the amounts due related to this dispute.

All states in which Net
Serviços subsidiaries operate, except for the State of Rio Grande do Sul, adhered
to the provisions in the ICMS Agreement 57/99, which authorized a reduction in the ICMS
tax rate on subscription television services as compared to the ICMS tax rate on other
telecommunication services of 25%. The current ICMS tax rate under this Agreement is 10%.
The State of Rio Grande do Sul is taxing such services at the rate of 12%. The Company is
judicially challenging the rate of 12% and is making judicial deposits of the amounts in
excess of the rates in effect under the ICMS Agreement 57/99. At December 31, 2002, court
deposits related to this dispute amounts to US$ 6,219.

The subsidiary Net SÃo Paulo
Ltda. is defending itself at the administrative level, from two Federal Tax Authorities
assessment notices, in the amount of US$ 2,269, related to the deductibility of certain
expenses in the fiscal years from 1995 to 1997. Management has established full reserves
for these assessments.

The subsidiary Net Rio S.A. is
challenging in court the collection of ICMS in the period from December 1996 to September
1999 and offered as a guarantee its cable network. Management has established reserve in
the amount of US$ 2,258 to cover potential losses arising from this dispute.

Certain operators controlled by the
Company are challenging in court the taxation of their broadband Internet access services,
claiming that this activity integrates the subscriptions TV services as regulated by
Anatel and therefore should be subject to the same ICMS tax rate reduction benefits. The
Company has been depositing in court the tax amounts due and made reserves in the amount
of US$ 1,280 (US$ 800 in 2001).

In 1999, the Company has requested
injunctions aiming the non-collection of Withholding Tax over hedge gains in the amount of
US$ 4,796. All injunctions have so far been accepted in court, authorizing the
non-collection of said tax. The Company does not make reserves for this purpose in view
that, in case of an unfavorable decision, the withheld amount will be accounted for as tax
credit.

The Companys operating
subsidiaries are challenging in court the collection, by municipalities of various
locations in which it operates, of taxes for the use of land on which poles are placed for
sustaining signal transmission cables. Management believes that the collection of such
taxes presents various constitutional and legal irregularities and is not recording
reserves related to these taxes.

Civil proceedings arise in the normal
course of business corresponding mainly to indemnifications for moral and material damages
filled by subscribers, as well as public lawsuits related to the revision of certain
provisions of the cable subscription agreement and subscription price realignment.
Management has established the reserves deemed appropriated to cover probable losses on
civil proceedings.

Labor proceedings arise primarily
from employees of subcontractors, in conjunction with the high turnover in the industry.
Management has established the reserves for probable losses arising from these
proceedings.

In connection with some of these
proceedings, the Company was required to place deposits with the related judicial court.
These judicial deposits will only be released upon a favorable final court decision. The
aggregated amount of deposits made related thereto is US$ 30,426 (US$ 39,785 in 2001),
which is available to offset payments required under ultimate unfavorable court decisions.

While it is impossible to determine
with certainty the ultimate outcome of these matters, management has established reserves
when it can reasonably estimate probable losses based on its analysis of the pending
disputes and on the opinion of its legal counsel.

15.
          Financial instruments

a)
          Concentration of credit risk

Financial instruments that
potentially subject the Company to concentration of credit risk consist principally of
cash and cash equivalents and accounts receivable. The Company maintains cash and cash
equivalents with various financial institutions and as a policy limits exposure to any one
institution. Concentration of credit risk with respect to accounts receivable is limited
due to large number of subscribers comprising the customer base.

b)
          Fair value

The following methods and assumptions
were used in estimating the fair value disclosures for financial instruments:

(i)
          Cash and cash equivalents, accounts receivable and accounts payable

Due to the short-term nature of these
accounts, the carrying amounts reported in the balance sheet approximate the fair values.

(ii) Debt

At December 31, 2002 the carrying
value of debt was comprised as follows:

|Description                        | Carrying Value
|---------------------------------- | --------------
|                                   |               
|Multicanal Senior Guaranteed Notes | US$ 97,692    
|Net Sul Floating Rate Notes        | 72,300        
|Trade Financing Loans              | 37,642        
|IFC Credit Facility                | 11,681        
|Non-Convertible Debentures         | 55,229        
|Convertible Debentures             | 11,444        
|Working Capital Loans              | 30,056        
|Other                              | 7,704         
|Total                              | US$ 323,748   

As previously noted, the Company is
in default of certain loan and related covenant agreements. The Company is in current
discussions with their creditors to renegotiate certain repayment terms and conditions.
Concurrent with such discussions, the Company continues to reorganize their operations in
an attempt to enhance their cash flow and profitability.

The Multicanal Senior Guaranteed
Notes, which corresponds to approximately one third of the debt, is publicly traded. Even
though those instruments are not liquid, based on very limited trading activity over the
last 6 month-period, management estimates that these instruments would be trading at
between 30-40 cents on the dollar. However, due to the limited trading volume and lack of
a well-defined Brazilian market for all such instruments, this may not be an indicative of
the fair value amounts for or the amounts for which this debt could be settled.

The remaining debt is neither public
nor liquid. Due to the complexities of the current default situation, negative credit
ratings, ongoing debt restructuring process and corporate reorganization activities, it is
not possible to provide a reliable estimate of the fair value of these debt instruments,
as the ultimate outcome of the negotiations is unknown.

(iii) Derivatives

In order to help manage the risk of
the effects of major devaluation of the Brazilian real against the U.S. dollar, Net
Serviços entered into short-term forward interest and foreign exchange swaps
contracts throughout 2002. At December 31, 2002 there were no outstanding contracts.

16. Non-cash transactions

The following non-cash transactions
occurred as part of the recapitalization of the Company:

- Programming credits amounting to
R$155,184 thousand (equivalent to US$49,832 at the exchange rate in force at the date of
the issuance of shares) held by companies related to Organizações Globo and
R$2,236 thousand (equivalent to US$746 at the exchange rate in force at the date of the
issuance of shares) held by companies related to Grupo RBS were capitalized.
- Capital advances in the amount of
R$383,191 thousand (equivalent to US$123,470 at the exchange rate in force at the date of
the issuance of shares) made by companies related to Organizações Globo, and
capital advances of R$18,491 thousand (equivalent to US$6,171 at the exchange rate in
force at the date of the issuance of shares) made by entities related to RBS
AdministraçÃo e Cobrança Ltda. were capitalized.
- Convertible debentures in the
amount of R$365,817 thousand (equivalent to US$120,057 at the exchange rate in force at
the date of the issuance of shares) were converted into equity.

17.
          Guarantor subsidiaries  consolidating statements

The following condensed consolidating
information, prepared in accordance with USGAAP, is presented in connection with the
guarantee of the US$97,692 12.625% Notes due 2004, which are senior unsecured obligations
of Net Serviços de ComunicaçÃo S.A., ranking pari-passu in right of
payment with all its existing and future senior unsecured indebtedness, and are
unconditionally guaranteed, on a joint and several basis, by each of Net Serviços
de ComunicaçÃo S.A.s consolidated subsidiaries, except for Net
Anápolis, Net Rio, Net Brasília, Net Recife , Cabodinâmica TV Cabo
SÃo Paulo S.A. (Old Net SÃo Paulo), Net Campinas, Net Indaiatuba, Net
SÃo Carlos, Net Franca, Jaguari Telecomunicações, Vicom Ltda. and Net
Sul Comunicações Ltda .and its subsidiaries and the guarantee of the
US$80,000 LIBOR plus 3.00% to 3.625% Floating Rate Notes equal to three-month LIBOR as
quoted on display page 3750 of the Dow Jones Markets Service, plus the Applicable Margin
due 2005, which are direct, unconditional, unsecured and uncoordinated obligations of Net
Serviços de ComunicaçÃo S.A. and are jointly and severally guaranteed
by Net Sul subsidiary Guarantors. The condensed consolidated balance sheet at December 31,
2002 and 2001 and the condensed consolidated statements of operations and cash flows for
each of the three years in the period ended December 31, 2002, are presented for (i) Net
Serviços de ComunicaçÃo S.A., (ii) subsidiaries which are guarantors
of the Multicanal Senior Guaranteed Notes (all wholly-owned), (iii) subsidiaries which are
guarantors of the Floating Rate Notes (Net Sul), (iv) subsidiaries that are not guarantors
and (v) elimination entries, for purpose of showing the impact of the non-guarantor
subsidiaries in the consolidated financial statements. Investments in subsidiaries and in
equity investees are presented on the equity method of accounting in the condensed
consolidated balance sheets and statements of operations.

Net Serviços de
ComunicaçÃo S.A. holds a direct 86% interest in Multicanal
Telecomunicações S.A. and an indirect 14% interest through
CMA-Participações S.A. Accordingly, for purposes of the aforementioned
consolidated statements, Multicanal Telecomunicações S.A. and its
wholly-owned subsidiaries have been considered as included in the column
Wholly-owned subsidiaries (combined)".

|                                                      | Net Serviços  (parent company) | Wholly-ownedsubsidiaries(combined) | Net Sul non guarantors | Net Sulguarantors | Non-guarantorsubsidiary | Eliminations  | Net Serviços(consolidated)
|----------------------------------------------------- | ------------------------------ | ---------------------------------- | ---------------------- | ----------------- | ----------------------- | ------------- | --------------------------
|Balance Sheet                                        
|Current assets                                       
|Cash and cash equivalents                             | US$ 260                        | US$ 7,995                          | US$ 126                | US$ 3,905         | US$ 3,469               | US$ -         | US$ 15,755                
|Accounts receivable, net                              | -                              | 17,959                             | 952                    | 1,407             | 9,294                   | -             | 29,612                    
|Other current assets                                  | 2,055                          | 1,418                              | 359                    | 514               | 2,837                   | -             | 7,183                     
|                                                      | US$ 2,315                      | US$ 27,372                         | US$ 1,437              | US$ 5,826         | US$ 15,600              | US$ -         | US$ 52,550                
|Property and equipment, net                           | 29,606                         | 158,187                            | 35,967                 | 35,861            | 90,293                  | -             | 349,914                   
|Investments and advances to investees                 | 857                            | -                                  | -                      | -                 | -                       | -             | 857                       
|Investments and advances to consolidated subsidiaries | 72,493                         | 329,731                            | (14,028)               | 14,028            | 5                       | US$ (402,229) | -                         
|Goodwill, net (consolidated subsidiaries)             | 205,006                        | 16,680                             | -                      | -                 | -                       | -             | 221,687                   
|Other assets                                          | 76,022                         | (50,838)                           | (7,858)                | 14,878            | 3,212                   | -             | 35,415                    
|Total assets                                          | US$ 386,299                    | US$ 481,132                        | US$ 15,518             | US$ 70,593        | US$ 109,110             | US$ (402,229) | US$ 660,423               
|Current liabilities                                  
|Accounts payable to suppliers and programmers         | US$ -                          | US$ 26,255                         | US$ 5,345              | US$ 5,086         | US$ 14,374              | US$ -         | US$ 51,060                
|Short-term debt                                       | 216,521                        | 23,630                             | 72,136                 | 4,523             | 6,938                   | -             | 323,748                   
|Due to related companies                              | 48,117                         | 15,824                             | -                      | -                 | -                       | (63,941)      | -                         
|Current portion of long-term debt                     | -                              | -                                  | -                      | -                 | -                       | -             | -                         
|Other current liabilities                             | 41,056                         | 37,949                             | 7,523                  | 3,420             | 17,735                  | -             | 107,683                   
|US$ 305,694                                           | US$                            | 103,658                            | US$ 85,004             | US$ 13,029        | US$ 39,047              | US$ (63,941)  | US$ 482,491               
|Long-term liabilities                                
|Long-term debt                                        | -                              | -                                  | -                      | -                 | -                       | -             | -                         
|Due to related companies                              | 2,111                          | 370,034                            | (22,723)               | 81,862            | 168,988                 | (598,161)     | 2,111                     
|Deferred sign-on and hookup fee revenue               | -                              | 10,682                             | 24                     | 2,322             | 6,952                   | -             | 19,980                    
|Other payables and accruals                           | 42,244                         | 45,529                             | 8,325                  | 4,241             | 19,252                  | -             | 119,591                   
|                                                      | US$ 350,049                    | US$ 529,903                        | US$ 70,630             | US$ 101,454       | US$ 234,239             | US$ (662,102) | US$ 624,173               
|Minority interestes in consolidated subsidiaries      | -                              | -                                  | 119                    | -                 | -                       | (119)         | -                         
|Stockholders' equity (deficit)                       
|Capital                                               | US$ 2,315,373                  | US$ 338,935                        | US$ 67,337             | US$ 117,150       | US$ 98,685              | US$ (622,107) | US$ 2,315,373             
|Accumulated deficit                                   | (2,046,629)                    | (737,908)                          | (136,890)              | (170,003)         | (323,592)               | 1,368,393     | (2,046,629)               
|Cumulative translation adjustments                    | (232,494)                      | 350,202                            | 14,322                 | 21,992            | 99,778                  | (486,294)     | (232,494)                 
|                                                      | US$ 36,250                     | US$(48,771)                        | US$(55,231)            | US$ (30,861)      | US$ (125,129)           | US$ 259,991   | US$ 36,250                
|                                                      | US$ 386,299                    | US$ 481,132                        | US$ 15,518             | US$ 70,593        | US$ 109,110             | US$ (402,229) | US$ 660,423               

|                                                          | Net Serviços(parentcompany) | Wholly-ownedsubsidiaries(combined) | Net SulNon guarantors | GuarantorsNet Sulguarantors | Non-guarantorssubsidiary | Eliminations | Net Serviços(consolidated)
|--------------------------------------------------------- | --------------------------- | ---------------------------------- | --------------------- | --------------------------- | ------------------------ | ------------ | --------------------------
|Statement of operations                                  
|Net revenue                                               | US$ -                       | US$ 186,561                        | US$ 43,068            | US$ 35,641                  | US$ 134,775              | US$ 3,501    | US$403,546                
|Direct operating expenses                                 | -                           | (107,871)                          | (22,446)              | (21,546)                    | (80,093)                 | (3,496)      | (235,452)                 
|Selling, general and administrative expenses              | (25,914)                    | (19,686)                           | (6,912)               | (5,458)                     | (14,540)                 | (6)          | (72,516)                  
|Depreciation and amortization                             | (9,965)                     | (25,717)                           | (8,048)               | (10,993)                    | (26,742)                 | -            | (81,465)                  
|Cumulative effect of accounting change                    | (367,733)                   | -                                  | -                     | -                           | -                        | -            | (367,733)                 
|Other, net                                                | (3,367)                     | (8,816)                            | (1,930)               | (379)                       | (7,849)                  | -            | (22,341)                  
|Pre-acquisition income                                    | -                           | -                                  | -                     | -                           | -                        | -           
|Exchange gains (losses), net                              | (79,841)                    | (23,950)                           | (37,752)              | (7,309)                     | (11,168)                 | -            | (160,020)                 
|Financial expense                                         | (130,768)                   | 67,420                             | (8,399)               | (2,437)                     | (53,332)                 | (47,316)     | (174,832)                 
|Financial income                                          | 159,019                     | (187,558)                          | 202                   | 185                         | 991                      | 47,318       | 20,157                    
|Equity in results of consolidated subsidiaries            | (238,766)                   | 327,165                            | 4,225                 | -                           | 557                      | (93,181)     | -                         
|Investees                                                 | (1,162)                     | -                                  | -                     | -                           | -                        | -            | (1,162)                   
|Other, net                                                | (2,508)                     | (2,859)                            | 304                   | 252                         | 9                        | -            | (4,802)                   
|Income tax                                                | -                           | (347)                              | (703)                 | 223                         | (3,558)                  | -            | (4,385)                   
|Minority interest in results of consolidated subsidiaries | -                           | -                                  | -                     | -                           | 601                      | (601)        | -                         
|Loss for the period                                       | US$ (701,005)               | US$ 204,342                        | US$ (38,391)          | US$ (11,821)                | US$ (60,349)             | US$ (93,781) | US$ (701,005)             
|Statement of Cash Flows                                  
|Net cash provided by operating activities                 | US$ 393,445                 | US$ (769,312)                      | US$ 20,289            | US$ 20,030                  | US$ 13,743               | US$ 429,520  | US$ 107,715               
|Cash used in investing activities                        
|Acquisition of property and equipment                     | (8,731)                     | (13,504)                           | (3,152)               | (3,112)                     | (9,460)                  | -            | (37,959)                  
|Acquisition of investments and advances                   | (236,504)                   | (51,473)                           | -                     | -                           | (9)                      | 290,637      | 2,651                     
|Net cash acquired from acquisition Unicabo               
|Proceeds from sale of equipment                           | 105                         | (10,938)                           | 1,400                 | 1,383                       | 16,681                   | -            | 8,631                     
|Net cash provided by financing activities                
|Change in overdraft facilities, net                      
|Short-term debt                                          
|Issuances                                                 | 35,759                      | 7,248                              | 473                   | 466                         | 2,174                    | -            | 46,120                    
|Repayments                                                | (30,166)                    | (69,919)                           | -                     | -                           | (2,181)                  | -            | (102,266)                 
|Long-term debt                                           
|Issuances                                                 | -                           | -                                  | -                     | -                           | -                        | -            | -                         
|Repayments                                                | (684)                       | (97,673)                           | (3,943)               | (3,893)                     | (1,230)                  | -            | (107,423)                 
|Related party loans                                      
|Issuances                                                 | 320,338                     | 104,472                            | 28,707                | -                           | 94,630                   | (574,157)    | 2,332                     
|Repayments                                                | (342,142)                   | 584,694                            | (23,735)              | (19,652)                    | (54,392)                 | (146,000)    | (1,227)                   
|Capital contribution                                      | 91,961                      | -                                  | -                     | -                           | -                        | -            | 91,961                    
|Spin off                                                  | -                           | -                                  | -                     | -                           | -                        | -            | -                         
|Effect of exchange rate changes                          
|on cash and cash equivalents                              | (226,439)                   | 319,366                            | (21,072)              | (20,804)                    | (58,305)                 | -            | (7,254)                   
|Cash and cash equivalents -                              
|beginning of period                                       | 3,318                       | 5,034                              | 1,159                 | 1,145                       | 1,818                    | -            | 12,474                    
|Cash and Cash equivalents - end of period                 | US$ 260                     | US$ 7,995                          | US$ 126               | US$ 3,905                   | US$ 3,469                | US$ -        | US$15,755                 

|                                                 | Net Serviços (parent company) | Wholly-owned subsidiaries (combined) | Net Sul non guarantors | Net Sul guarantor | Non-guarantor subsidiary | Eliminations | Net Serviços (consolidated)
|------------------------------------------------ | ----------------------------- | ------------------------------------ | ---------------------- | ----------------- | ------------------------ | ------------ | ---------------------------
|                                                 |                               |                                      |                        |                   |                          |              |                            
|Balance Sheet                                    |                               |                                      |                        |                   |                          |              |                            
|Current assets                                  
|Cash and cash equivalents                        | US$3,318                      | US$5,034                             | US$38                  | US$1,921          | US$1,818                 | US$345       | US$12,474                  
|Accounts receivable, net                         | -                             | 34,516                               | 918                    | 4,416             | 6,253                    | (1,374)      | 44,729                     
|Other current assets                             | 7,509                         | 6,846                                | 2,283                  | 266               | 3,447                    | -            | 20,351                     
|                                                 |                               |                                      |                        |                   |                          |              |                            
|                                                 | US$10,827                     | US$46,396                            | US$3,239               | US$6,603          | US$11,518                | US$(1,029)   | US$77,554                  
|Property and equipment, net                      | 43,562                        | 259,238                              | 58,480                 | 69,127            | 160,934                  | -            | 591,341                    
|Investments and advances to investees            | 3,198                         | -                                    | -                      | -                 | -                        | -            | 3,198                      
|Investments and advances to                     
|consolidated subsidiaries                        | 213,951                       | 43,443                               | 181,998                | 73                | 5,826                    | US$(445,291) | -                          
|Goodwill, net (consolidated subsidiaries)        | 684,168                       | 19,125                               | -                      | -                 | -                        | -            | 703,293                    
|Other assets                                     | 13,736                        | 14,758                               | 4,644                  | 4,386             | 12,896                   | -            | 50,420                     
|                                                 |                               |                                      |                        |                   |                          |              |                            
|Total assets                                     | US$969,442                    | US$382,960                           | US$248,361             | US$80,189         | US$191,174               | US$(446,320) | US$1,425,806               
|                                                 |                               |                                      |                        |                   |                          |              |                            
|Current liabilities                             
|Accounts payable to suppliers and                | US$-                          | US$16,215                            | US$4,037               | US$2,456          | US$11,004                | US$(938)     | US$32,774                  
|programmers                                     
|Short-term debt                                  | 42,283                        | 42,795                               | -                      | 1,225             | 8,036                    | -            | 94,339                     
|Due to related companies                         | 42,527                        | 21,491                               | -                      | -                 | 5,856                    | (69,874)     | -                          
|Current portion of long-term debt                | 31,428                        | 85,171                               | 32,214                 | 12,278            | 24,007                   | -            | 185,098                    
|Other current liabilities                        | 12,940                        | 62,288                               | 12,583                 | 10,419            | 23,383                   | 87           | 121,700                    
|                                                 |                               |                                      |                        |                   |                          |              |                            
|                                                 | US$129,178                    | US$227,960                           | US$48,834              | US$26,378         | US$72,286                | US$(70,725)  | US$433,911                 
|Long-term liabilities                           
|Long-term debt                                   | 355,016                       | 230                                  | 48,062                 | 3,405             | 6,342                    | -            | 413,055                    
|Due to related companies                         | 134,383                       | 353,460                              | 245,567                | -                 | 204,432                  | (798,289)    | 139,553                    
|Deferred sign-on and hookup fee revenue          | -                             | 16,210                               | 3,012                  | -                 | 10,668                   | -            | 29,890                     
|Other payables and accruals                      | 23,490                        | 36,099                               | 8,885                  | 6,384             | 7,165                    | -            | 82,023                     
|                                                 |                               |                                      |                        |                   |                          |              |                            
|                                                 | US$642,067                    | US$633,959                           | US$354,360             | US$36,167         | US$300,893               | US$(869,014) | US$1,098,432               
|                                                 |                               |                                      |                        |                   |                          |              |                            
|Minority interestes in consolidated subsidiaries
|Stockholders' equity (deficit)                  
|Capital                                          | US$1,922,543                  | US$332,544                           | US$97,789              | US$86,698         | US$98,685                | US$(615,716) | US$1,922,543               
|Accumulated deficit                              | (1,345,623)                   | (954,852)                            | (198,242)              | (52,460)          | (262,061)                | 1,467,614    | (1,345,624)                
|Cumulative translation adjustments               | (249,545)                     | 371,309                              | (5,546)                | 9,784             | 53,657                   | (429,204)    | (249,545)                  
|                                                 | US$327,375                    | US$(250,999)                         | US$(105,999)           | US$44,022         | US$(109,719)             | US$422,694   | US$327,374                 
|                                                 |                               |                                      |                        |                   |                          |              |                            
|                                                 | US$969,442                    | US$382,960                           | US$248,361             | US$80,189         | US$191,174               | US$(446,320) | US$1,425,806               
|                                                 |                               |                                      |                        |                   |                          |              |                            

|                                                          | Net Serviços(parentcompany) | Wholly-ownedsubsidiaries(combined) | Net SulNon guarantors | GuarantorsNet Sulguarantors | Non-guarantorsubsidiary | Eliminations | Net Serviços(consolidated)
|--------------------------------------------------------- | --------------------------- | ---------------------------------- | --------------------- | --------------------------- | ----------------------- | ------------ | --------------------------
|Statement of operations                                  
|Net revenue                                               | US$ 12,897                  | US$ 225,334                        | US$ 53,641            | US$ 45,951                  | US$ 162,543             | US$ (7,293)  | US$ 493,073               
|Direct operating expenses                                 | -                           | (127,833)                          | (26,816)              | (25,543)                    | (86,494)                | 2,349        | (264,337)                 
|Selling, general and administrative expenses              | (31,881)                    | (32,172)                           | (10,346)              | (8,247)                     | (28,431)                | 4,933        | (106,144)                 
|Depreciation and amortization                             | (65,637)                    | (84,395)                           | (10,473)              | (20,012)                    | (45,631)                | -            | (226,148)                 
|Other, net                                                | (155)                       | (1,613)                            | (110)                 | (1,151)                     | 1,858                   | -            | (1,171)                   
|Pre-acquisition income                                    | -                           | -                                  | -                     | -                           | -                       | -            | -                         
|Exchange gains (losses), net                              | (60,975)                    | (29,350)                           | (15,212)              | (7,458)                     | (12,108)                | (76)         | (125,179)                 
|Financial expense                                         | (91,955)                    | (17,926)                           | (12,257)              | (3,676)                     | (37,608)                | 32,099       | (131,323)                 
|Financial income                                          | 114,630                     | (67,186)                           | 245                   | 178                         | 1,310                   | (32,099)     | 17,078                    
|Equity in results of consolidated subsidiaries            | (224,580)                   | (12,838)                           | -                     | -                           | (11,296)                | 248,714      | -                         
|Investees                                                 | (36)                        | -                                  | -                     | -                           | -                       | -            | (36)                      
|Other, net                                                | (1,781)                     | (363)                              | (668)                 | (181)                       | (889)                   | -            | (3,882)                   
|Income tax                                                | -                           | (790)                              | (610)                 | -                           | 15                      | -            | (1,385)                   
|Minority interest in results of consolidated subsidiaries | -                           | -                                  | (19)                  | -                           | -                       | -            | (19)                      
|Loss for the period                                       | US$ (349,473)               | US$ (149,132)                      | US$ (22,625)          | US$ (20,139)                | US$ (56,731)            | US$ 248,627  | US$ (349,473)             
|Statement of Cash Flows                                  
|Net cash provided by operating activities                 | US$ 143,714                 | US$ (212,411)                      | US$ 15,006            | US$ 26,905                  | US$ 60,088              | US$ -        | US$ 33,302                
|Cash used in investing activities                        
|Acquisition of property and equipment                     | (13,958)                    | (62,107)                           | (7,403)               | (3,997)                     | (44,710)                | -            | (132,175)                 
|Acquisition of investments and advances                   | (52,708)                    | (126,361)                          | -                     | -                           | 3                       | 178,348      | (718)                     
|Net cash acquired from acquisition Unicabo               
|Proceeds from sale of equipment                           | 233                         | (35,288)                           | 2,275                 | 1,228                       | 35,436                  | -            | 3,884                     
|Net cash provided by financing activities                
|Change in overdraft facilities, net                      
|Short-term debt                                          
|Issuances                                                 | 27,007                      | 67,031                             | 134                   | 134                         | 335                     | -            | 94,641                    
|Repayments                                                | (96,394)                    | (37,324)                           | (24,246)              | (2,677)                     | (14,631)                | -            | (175,272)                 
|Long-term debt                                           
|Issuances                                                 | 112,567                     | 47,711                             | -                     | -                           | -                       | -            | 160,278                   
|Repayments                                                | (107,147)                   | (11,272)                           | (4,140)               | (11,653)                    | (14,488)                | -            | (148,700)                 
|Related party loans                                      
|Issuances                                                 | 244,909                     | 491,034                            | 63,262                | -                           | 144,186                 | (788,650)    | 154,741                   
|Repayments                                                | (49,308)                    | (464,376)                          | (10,441)              | -                           | (125,381)               | 610,302      | (39,204)                  
|Capital contribution                                      | -                           | -                                  | -                     | -                           | -                       | -            | -                         
|Spin off                                                  | -                           | -                                  | -                     | -                           | -                       | -            | -                         
|Effect of exchange rate changes                          
|on cash and cash equivalents                              | (274,193)                   | 346,272                            | (34,549)              | (8,182)                     | (41,543)                | 345          | (11,850)                  
|Cash and cash equivalents -                              
|beginning of period                                       | 68,596                      | 2,125                              | 140                   | 163                         | 2,523                   | -            | 73,547                    
|Cash and cash equivalents -                              
|end of period                                             | US$ 3,318                   | US$ 5,034                          | US$ 38                | US$ 1,921                   | US$ 1,818               | US$ 345      | US$ 12,474                

|                                                          | Net Serviços(parentcompany) | Wholly-ownedsubsidiaries(combined) | Net SulNon guarantors | GuarantorsNet Sulguarantors | Non-guarantorsubsidiary | Eliminations | Net Serviços(consolidated)
|--------------------------------------------------------- | --------------------------- | ---------------------------------- | --------------------- | --------------------------- | ----------------------- | ------------ | --------------------------
|Statement of operations                                  
|Net revenue                                               | US$ 23,575                  | US$ 253,355                        | US$ 22,913            | US$ 19,439                  | US$ 177,711             | US$ (8,126)  | US$ 488,867               
|Direct operating expenses                                 | (11)                        | (142,440)                          | (6,864)               | (9,627)                     | (95,184)                | 879          | (253,247)                 
|Selling, general and administrative expenses              | (40,550)                    | (47,553)                           | (8,263)               | (7,195)                     | (32,111)                | 7,247        | (128,425)                 
|Depreciation and amortization                             | (52,305)                    | (81,290)                           | (1,862)               | (10,273)                    | (43,382)                | -            | (189,112)                 
|Other, net                                                | (117)                       | (72)                               | (5,427)               | (2,476)                     | 1,711                   | -            | (6,381)                   
|Pre-acquisition income                                    | -                           | -                                  | -                     | -                           | -                       | -            | -                         
|Exchange gains (losses), net                              | (43,856)                    | (6,601)                            | (5,090)               | (2,474)                     | (4,398)                 | -            | (62,419)                  
|Financial expense                                         | (72,153)                    | 37,648                             | (7,615)               | (1,831)                     | (30,152)                | (23,437)     | (97,540)                  
|Financial income                                          | 108,834                     | (100,722)                          | (103)                 | 103                         | 1,474                   | 23,437       | 33,023                    
|Equity in results of Consolidated subsidiaries            | (143,539)                   | 20,509                             | -                     | -                           | (10,566)                | 133,596      | -                         
|Investees                                                 | (724)                       | -                                  | -                     | -                           | -                       | -            | (724)                     
|Other, net                                                | -                           | -                                  | 34                    | (34)                        | -                       | -            | -                         
|Income tax                                                | (1,488)                     | (6,685)                            | 4,528                 | (4)                         | 448                     | (3,299)      | (6,500)                   
|Minority interest in results of consolidated subsidiaries | -                           | 29,757                             | 26                    | -                           | 488                     | (30,147)     | 124                       
|Loss for the period                                       | US$ (222,334)               | US$ (44,094)                       | US$ (7,723)           | US$ (14,372)                | US$ (33,961             | US$ 100,150  | US$ (222,334)             
|Statement of Cash Flows                                  
|Net cash provided by operating activities                 | US$ 170,344                 | US$ (329,513)                      | US$ 9,426             | US$ 16,756                  | US$ 196,985             | US$ -        | US$ 63,998                
|Cash used in investing activities                        
|Acquisition of property and equipment                     | (23,555)                    | (99,463)                           | (3,113)               | (5,534)                     | (65,601)                | -            | (197,266)                 
|Acquisition of investments and advances                   | (194,867)                   | 12,770                             | -                     | -                           | (9)                     | 131,454      | (50,652)                  
|Net cash acquired from acquisition Unicabo                | 2,292                       | -                                  | -                     | -                           | -                       | -            | 2,292                     
|Proceeds from sale of equipment                           | 171                         | 7,271                              | 72                    | 129                         | 11                      | -            | 7,654                     
|Net cash provided by financing activities                
|Change in overdraft facilities, net                      
|Short-term debt                                          
|Issuances                                                 | 27,916                      | 29,152                             | 2,829                 | 5,028                       | 31,930                  | -            | 96,855                    
|Repayments                                                | (60,581)                    | 15,771                             | (6,861)               | (12,284)                    | (65,613)                | -            | (129,568)                 
|Long-term debt                                           
|Issuances                                                 | 213,581                     | (21,084)                           | 249                   | 444                         | 18,196                  | -            | 211,386                   
|Repayments                                                | (84,481)                    | 122,199                            | (2,462)               | (4,376)                     | (76,934)                | -            | (46,054)                  
|Related party loans                                      
|Issuances                                                 | 3,655                       | 214,034                            | -                     | -                           | 88,431                  | (305,308)    | 812                       
|Repayments                                                | (2,604)                     | (128,125)                          | -                     | -                           | (62,718)                | 173,853      | (19,594)                  
|Capital contribution                                      | 24,471                      | -                                  | -                     | -                           | -                       | -            | 24,471                    
|Spin off                                                  | -                           | -                                  | -                     | -                           | -                       | -            | -                         
|Effect of exchange rate changes on                       
|cash and cash equivalents                                 | (109,723)                   | 175,890                            | -                     | -                           | (64,225)                | -            | 1,942                     
|Cash and cash equivalents - beginning of period           | 101,977                     | 3,224                              | -                     | -                           | 2,070                   | -            | 107,271                   
|Cash and cash equivalents - end of period                 | US$ 68,596                  | US$ 2,126                          | US$ 140               | US$ 163                     | US$ 2,523               | US$ (1)      | US$ 73,547                

18. Supplementary information

|                                                         | 2001                         | Year ended December 31, 2002
|-------------------------------------------------------- | ---------------------------- | ----------------------------
|Descriptions                                             | Balance at beginning of year | Charges to Expense          
|Allowance for doubtful accounts                          | US$ (10,011)                 | US$ (11,235)                
|Income tax valuation allowance                           | US$ (286,627)                | US$ (36,859)                
|Provision for losses in equity investees                
|Net Brasil S.A.                                          | US$ (44)                     | US$ (1,414)                 
|                                                         | 2000                         | Year ended December 31, 2001
|Allowance for doubtful accounts                          | US$ (9,935)                  | US$ (11,913)                
|Amortization of goodwill:                               
|CMA - Participacoes S.A.                                 | US$ (19,031)                 | US$ (26)                    
|Multicanal BH                                            | (20,632)                     | (3,119)                     
|Net Rio S.A.                                             | (19,363)                     | (3,177)                     
|Net Sao Paulo ( Old Net Sao Paulo )                      | (26,024)                     | (5,687)                     
|Net Brasilia S.A.                                        | (6,743)                      | (1,310)                     
|Net Recife S.A.                                          | (314)                        | (187)                       
|Net Campinas S.A.                                        | (8,998)                      | (7,013)                     
|Net Franca S.A.                                          | (123)                        | (96)                        
|Net Indaiatuba S.A.                                      | (21)                         | (17)                        
|Net Sao Carlos S.A.                                      | (941)                        | (731)                       
|Vicom Ltda.                                              | (1,382)                      | (2,140)                     
|Net Sul Comunicacoes Ltda.                               | (16,607)                     | (35,580)                    
|GMMD-S Comunicacoes Ltda.                                | (1)                          | (5)                         
|Consolidated subsidiaries of                            
|Multicanal Cabo                                          | (7,484)                      | (1,209)                     
|                                                         | US$ (127,664)                | US$ (60,297)                
|Income tax valuation allowance                           | US$ (233,779)                | US$ (103,499)               
|Provision for losses in equity investees                
|Net Brasil S.A.                                          | US$ (148)                    | US$ 104                     
|                                                         | 1999                         | Year ended December 31, 2000
|Allowance for doubtful accounts                          | US$ (6,252)                  | US$ (3,683)                 
|Amortization of goodwill:                               
|CMA - Participacoes S.A.                                 | US$ (15,584)                 | US$ (31)                    
|Multicanal BH                                            | (17,937)                     | (4,222)                     
|Net Rio S.A.                                             | (17,033)                     | (3,780)                     
|Net Sao Paulo (Old Net Sao Paulo)                        | (21,462)                     | (6,388)                     
|Net Brasilia S.A.                                        | (5,123)                      | (1,559)                     
|Net Recife S.A.                                          | (244)                        | (91)                        
|Unicabo Participacoes e                                 
|Comunicacoes S.A.                                        | (543)                        | -                           
|Net Campinas S.A.                                        | -                            | (8,998)                     
|Net Franca S.A.                                          | -                            | (123)                       
|Net Indaiatuba S.A.                                      | -                            | (21)                        
|Net Sao Carlos S.A.                                      | -                            | (941)                       
|Vicom Ltda.                                              | -                            | (1,382)                     
|Net Sul Comunicacoes Ltda.                               | -                            | (16,607)                    
|GMMD-S Comunicacoes Ltda.                                | -                            | (1)                         
|Consolidated subsidiaries of                            
|Multicanal Cabo                                          | (6,193)                      | (1,816)                     
|                                                         | US$ (84,119)                 | US$ (45,960)                
|Income tax valuation allowance                           | US$ (147,456)                | US$ (92,596)                
|Provision for losses in equity investees Net Brasil S.A. | US$ -                        | US$ (148)                   

19. Subsequent events

After the capital increase occurred
in 2002, the percentage of outstanding Company shares became lower than 25% of total
shares issued, contrary to the BOVESPAs Differentiated Corporate Governance
Practices Regulation. On March 25, 2003, the Company requested and was granted by BOVESPA
a period of 180 days to recompose the minimum outstanding shares percentage.

On March 19, 2003, the Company
received a notification from NASDAQ about the non-compliance with The NASDAQ
National Market listing rule, due to the offer to purchase ADSs of its issuance and
for being lower than the price of US$ 1.00 for thirty consecutive days. After the
period of 180 consecutive days from the date of the notification and if there is no
further violation, the Company may choose to transfer its securities to The NASDAQ
SmallCap Market.

20.
          Update of NASDAQ ruling

On May 6, 2003 the Company received a
notification from NASDAQ stating that the closing bid price of the Companys ADSs had
been at $1.00 per share or greater for at least 10 consecutive trading days. Accordingly,
the Company has regained compliance with the Marketplace Rule 4450(b)(4) and this matter
was closed.



|ExhibitNumber | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|             
|1.1           | By-laws of Net Servicos de Comunicacao S.A., as amended on October 30, 2002, together with an
                    English-language translation thereof.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|             
|2.1           | Indenture, dated as of June 18, 1996, among Multicanal Participacoes S.A. (predecessor in
                    interest to Net Servicos de Comunicacao S.A.), as Issuer, the Guarantors named therein, as
                    Guarantors, and The Chase Manhattan Bank N.A., as Trustee, with respect to Net Servicos de
                    Comunicacao S.A.'s issuance of its US$185 million Senior Guaranteed Notes due 2004 (incorporated
                    by reference to Exhibit 2.1 of the Registrant's annual report on Form 20-F (No. 0-28860) for the
                    fiscal year ended December 31, 2001 filed with the U.S. Securities and Exchange Commission).                                                                                                                                                                   
|             
|2.2           | Indenture, dated as of October
31, 1997, among Net Sul TV a Cabo e Participações Ltda., as Issuer, the
Guarantors named therein, as Guarantors, The Chase Manhattan Bank, New York, as Trustee,
The Chase Manhattan Bank, New York, as Registrar and Paying Agent, The Chase Manhattan
Bank, London Branch, as Transfer Agent, Calculation Agent and Paying Agent, Chase
Manhattan Bank Luxembourg, S.A,. as Paying Agent, and Chase Trust Bank, as Principal
Paying Agent.                                                                                                                                                                                                                                                                                                                                                                          
|             
|2.3           | First Supplemental Indenture,
dated as of December 18, 1998, to the Indenture, dated as of October 31, 1997, among Net
Sul Comunicações S.A. (formerly known as Net Sul TV a Cabo e
Participações Ltda.), as Issuer, the Guarantors named therein, as Guarantors
and The Chase Manhattan Bank, as Trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|             
|2.4           | Second Supplemental Indenture,
dated as of August 30, 2000, to the Indenture, dated as of October 31, 1997, as amended
and restated on December 18, 1998, among Net Sul Comunicações S.A. (formerly
known as Net Sul TV a Cabo e Participações Ltda.), as Issuer, the Guarantors
named therein, as Guarantors and The Chase Manhattan Bank, as Trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|             
|2.5           | Third Supplemental, dated as of
October 31, 2000, to the Indenture, dated as of October 31, 1997, as amended and restated
on December 18, 1998 and further supplemented as of August 30, 2000, among Net Sul
Comunicações S.A. (formerly known as Net Sul TV a Cabo e
Participações Ltda.), as Issuer the Guarantors named therein, as Guarantors
and The Chase Manhattan Bank, as Trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|             
|2.6           | Fourth Supplemental, dated as of
October 31, 2000, to the Indenture, dated as of October 31, 1997, as amended and restated
on December 18, 1998 and further supplemented as of August 30, 2000 and October 31, 2000,
among Net Sul Comunicações S.A. (formerly known as Net Sul TV a Cabo e
Participações Ltda.), as Issuer, the Guarantors named therein, as Guarantors
and The Chase Manhattan Bank, as Trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|             
|4.1           | New Shareholders' Agreement, dated as of July 11, 2002, among Distel Holding S.A., Roma
                    Participacoes Ltda., Bradesplan Participacoes S.A., BNDES Participacoes S.A.,  Microsoft B.V.,
                    RBS Participacoes S.A., Zero Hora Editora Jornalistica S.A., and, furthermore, as Intervening
                    Parties, Net Servicos de Comunicacao S.A.'s, Globo Comunicacoes e Participacoes S.A., Bradespar
                    S.A. and Microsoft Corporation, together with an English-language translation thereof.                                                                                                                                                                                                                                                                                          
|             
|4.2           | Programming Agreement (Contrato de Comissao Mercantil, Prestacao de Servicos, Licenciamento de
                    Marca e Outras Avencas), dated as of  May 14, 1996, between Net Brasil S.A. and Multicanal
                    Participacoes S.A. (predecessor in interest to Net Servicos de Comunicacao S.A.), together with
                    letters of amendment and English-language translations thereof (incorporated by reference to
                    Exhibit 4.5 of the Registrant's annual report on Form 20-F (No. 0-28860) for the fiscal year
                    ended December 31, 2001 filed with the U.S. Securities and Exchange Commission).                                                                                                                                                                             
|             
|4.3           | Protocol of Recapitalization of Globo Cabo S.A., dated as of April 10, 2002, among Distel
                    Holding S.A., Globo Comunicacoes e Participacoes S.A., Roma Participacoes Ltda., Globo Cabo
                    S.A., Bradesplan Participacoes S.A., Bradespar S.A., RBS Participacoes S.A., BNDES Participacoes
                    S.A., and, as intervening consenting party, Net Brasil S.A., together with an English-language
                    translation thereof (incorporated by reference to Exhibit 4.6 of the Registrant's annual report
                    on Form 20-F (No. 0-28860) for the fiscal year ended December 31, 2001 filed with the U.S.
                    Securities and Exchange Commission).                                                                                                        
|             
|4.4           | First Amendment to the Protocol of Recapitalization of Globo Cabo S.A., dated as of April 30,
                    2002, among Distel Holding S.A., Globo Comunicacoes e Participacoes S.A., Roma Participacoes
                    Ltda., Globo Cabo S.A., Bradesplan Participacoes S.A., Bradespar S.A., RBS Participacoes S.A.,
                    BNDES Participacoes S.A., and, as intervening consenting party, Net Brasil S.A., together with
                    an English-language translation thereof (incorporated by reference to Exhibit 4.7 of the
                    Registrant's annual report on Form 20-F (No. 0-28860) for the fiscal year ended December 31,
                    2001 filed with the U.S. Securities and Exchange Commission).                                                                                 
|             
|4.5           | Second Amendment to the Protocol of Recapitalization of Net Servicos de Comunicacao S.A.
                    (formerly Globo Cabo S.A.), dated as of June 14, 2002, among Distel Holding S.A., Globo
                    Comunicacoes e Participacoes S.A., Roma Participacoes Ltda., Net Servicos de Comunicacao S.A.,
                    Bradesplan Participacoes S.A., Bradespar S.A., RBS Participacoes S.A., BNDES Participacoes S.A.,
                    and, as intervening consenting party, Net Brasil S.A., together with an English-language
                    translation thereof (incorporated by reference to Exhibit 4.8 of the Registrant's annual report
                    on Form 20-F (No. 0-28860) for the fiscal year ended December 31, 2001 filed with the U.S.
                    Securities and Exchange Commission).
|             
|8.1           | List of our Subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|             
|12.1          | Certification of Principal
Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|             
|12.2          | Certification of Principal
Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

We hereby agree to furnish to the
Securities and Exchange Commission copies of any of our other long term debt instruments and agreements
as the Commission requests.



EXHIBIT 1.1

ESTATUTO SOCIAL ANEXO À ASSEMBLÉIA GERAL EXTRAORDINÁRIA DA NET SERVIÇOS
DE                                        COMUNICAÇÃO S.A. REALIZADA EM 28 E 30 DE
OUTUBRO DE 2002.

ANEXO DA ATA DE ASSEMBLÉIA GERAL EXTRAORDINÁRIA REALIZADA EM 28 E 30
DE OUTUBRO DE 2002

NET SERVIÇOS DE COMUNICAÇÃO S.A.
                                                        CNPJ 00.108.786/0001-65
                                                          NIRE 35.300.177.240

ESTATUTO SOCIAL

CAPÍTULO I  DENOMINAÇÃO, SEDE, OBJETO E DURAÇÃO

Art. 1o - NET SERVIÇOS DE COMUNICAÇÃO S.A. é uma sociedade anônima
que se regerá pelo presente estatuto e pela legislação aplicável.

Art.  2o - A  Companhia  tem  sede e foro na  Cidade  de São  Paulo,
 Estado  de São  Paulo e pode,  por  deliberação  do  Conselho  de Administração,
 transferir o endereço da sede social da Companhia, abrir, manter e fechar filiais,
 escritórios,  depósitos ou agências de representações, em qualquer parte do território
nacional ou no exterior.

Art. 3o - A Companhia tem por objetivo a participação  no capital de
outras  sociedades que atuem (a) na  distribuição  local de sinais de TV paga, bem como
no provimento de acesso para seus assinantes a serviços de valor  adicionado,  (b) na
prestação de outros serviços de  telecomunicações,  (c) em qualquer outra modalidade de
distribuição de sinais de qualquer  espécie,  através de sua rede local, (d) na produção
dos seus  próprios  canais  locais.  Tem também,  por  objetivo,  a prestação de todos os
serviços,  às suas  subsidiárias, inseridos no contexto de apoio corporativo,
 administrativo,  financeiro e consultivo.  A Companhia poderá, ainda, participar em
outras sociedades que tenham as mesmas atividades, assim como acessórias a estas, as de
importação, exportação e representação.

Art. 4o - O prazo de duração será por tempo indeterminado.

CAPÍTULO II  DO CAPITAL SOCIAL E AÇÕES

Art. 5o - O Capital Social é de  R$2.748.650.800,11  (dois bilhões,
 setecentos e quarenta e oito milhões,  seiscentos e cinquenta mil, oitocentos reais e
onze centavos),  dividido em 828.371.343 ações ordinárias e 1.200.484.187  ações
 preferenciais,  todas nominativas, escriturais  e  sem  valor  nominal.  O  Capital
 Social  poderá  ser  aumentado  até  R$5.000.000.000,00  (cinco  bilhões  de  reais),
independentemente de alteração estatutária,  na forma do artigo 168 da Lei 6.404/76, por
deliberação do Conselho de Administração,  que fixará as condições de emissão, nos termos
do parágrafo primeiro do artigo 170 da Lei 6.404/76.

Parágrafo  Primeiro   As ações  preferenciais  terão  direito  de
voto  exclusivamente  nas  seguintes  matérias:  (a)  transformação, incorporação,  fusão
ou cisão da Companhia;  (b) avaliação de bens destinados à integralização de aumento de
capital da Companhia;  (c) escolha de empresa  especializada  para  determinação do valor
econômico das ações da Companhia,  nos termos do artigo 9o, iv,  deste Estatuto;  e (d)
alteração ou revogação de dispositivos  deste Estatuto  Social que resultem no
 descumprimento,  pela  Companhia,  das exigências  previstas na Seção IV, item 4.1, do
Regulamento de Práticas  Diferenciadas  de Governança  Corporativa  Nível 2 (doravante
denominado Regulamento do Nível 2), instituído pela Bolsa de Valores de São Paulo (BOVESPA).

Parágrafo  Segundo - As ações  preferenciais  também  terão  direito
 de voto no que diz  respeito à  aprovação  de  contratos  entre a Companhia e seu
acionista  controlador,  diretamente  ou através de terceiros,  assim como de outras
 sociedades  nas quais o acionista controlador  tenha interesse,  sempre que, no futuro,
 por força de disposição legal ou estatutária,  a aprovação desses contratos seja
deliberada em Assembléia Geral.

Parágrafo  Terceiro  Às ações  preferenciais  é assegurado  (i) o
recebimento de dividendos em dinheiro 10% (dez por cento) maiores do que aqueles pagos às
ações  ordinárias;  (ii) a prioridade no reembolso em caso de  liquidação  da  Companhia,
 sem prêmio,  pelo valor patrimonial;  e (iii) o  tratamento  igualitário  àquele  dado
aos  acionistas  que exerçam o poder  efetivo de conduzir as  atividades sociais e
orientar o funcionamento dos órgãos da Companhia,  de forma direta ou indireta,  de fato
ou de direito (Poder de Controle), na hipótese de alienação desse Poder de Controle,
nos termos do artigo 26, caput, deste Estatuto.

Parágrafo Quarto  As ações  preferenciais,  por não terem
dividendos fixo ou mínimos, não adquirirão o exercício do direito de voto se a Companhia
deixar de pagar dividendos, sendo inaplicável o disposto no parágrafo 1o do artigo 111 da
Lei no 6.404/76.

Parágrafo  Quinto  As ações  preferenciais  participarão  em
 igualdade  de  condições  com as ações  ordinárias  na  distribuição  de bonificações  e
poderão  representar  até 2/3 (dois  terços) do total das ações  emitidas  pela
 Companhia,  podendo em sua emissão ser alterada a proporção anteriormente existente
entre ações ordinárias e preferenciais.

Parágrafo  Sexto  A emissão de ações ou debêntures  conversíveis
 em ações ou bônus de subscrição,  cuja colocação seja feita mediante venda em bolsa de
valores ou  subscrição  pública ou permuta por ações em oferta  pública de aquisição de
controle,  nos termos da Lei, poderá excluir o direito de preferência na subscrição, ou
reduzir o prazo mínimo legal.

Parágrafo  Sétimo  A  Companhia  poderá,  por deliberação  da
 Assembléia  Geral,  outorgar  opção de  compra  de ações em favor  dos administradores e
empregados, ou a pessoas naturais que prestem serviços a sociedades sob seu controle.

Parágrafo  Oitavo  As ações de emissão da  Companhia  poderão  ser
mantidas  em contas de  depósito,  em nome de seus  titulares,  em instituições
credenciadas pela Comissão de Valores Mobiliários  CVM, sob a forma de ações
escriturais,  sem a emissão de certificados, podendo o Conselho de  Administração  fixar
 prazo para que os  acionistas  apresentem  os  certificados  de ações em  circulação
 para cancelamento e  correspondente  conversão em ações  escriturais.  A Companhia ou a
instituição  depositária das ações poderá cobrar dos acionistas o custo dos serviços de
emissão de certificados ou  transferência  da propriedade das ações,  observados os
limites legais e regulamentares, conforme previsto nos artigos 34 e 35 da Lei no 6.404/76
e seus respectivos parágrafos.

CAPÍTULO III  DA ASSEMBLÉIA GERAL

Art. 6o - A Assembléia  Geral tem poderes para decidir todos os negócios
 relativos ao objeto social da Companhia e tomar as resoluções que julgar convenientes à sua
defesa e desenvolvimento, a qual deverá ser convocada com, no mínimo, 15 (quinze) dias de
antecedência.

Art. 7o - A Assembléia  Geral será instalada e presidida pelo
Presidente do Conselho de  Administração  e, em sua falta ou impedimento, por um outro
membro do Conselho de Administração, ou ainda na falta destes por qualquer dos diretores
da Companhia presentes.

Parágrafo Único  O Presidente da Assembléia escolherá um ou mais
secretários.

Art. 8o - A Assembléia  Geral  Ordinária  reunir-se-á  dentro dos
quatro  primeiros  meses  seguintes  ao término do exercício  social, cabendo-lhe decidir
sobre as matérias de sua competência, previstas em lei.

Art. 9o - A Assembléia Geral  Extraordinária  reunir-se-á  sempre
que os interesses  sociais exigirem o pronunciamento dos acionistas e nos casos
 previstos em lei e neste Estatuto,  sendo de competência da Assembléia  Geral  deliberar
 sobre as seguintes  matérias:  (i) prestação de fiança,  aval ou outra  garantia em
favor de terceiros  não  integrantes  do grupo de empresas  controladas e coligadas da
Companhia  (entendidas como coligadas apenas as Sociedades em que a Companhia e suas
controladas  participem do capital com mais de 10% (dez por cento),  excluídas aquelas
que participem do capital da Companhia e/ou de suas controladas);  (ii) cancelamento do
registro de companhia  aberta da Companhia  mantido  perante a Comissão de Valores  Mobiliários
 CVM; (iii)  cancelamento do registro da Companhia para negociação de suas ações no Nível
2 da BOVESPA;  e (iv) escolha da empresa  especializada,  dentre aquelas indicadas pelo
Conselho de  Administração,  responsável  por elaborar o laudo de avaliação  econômica
 do valor das ações da  Companhia,  para fins das ofertas públicas de que tratam o Capítulo
VIII e o Capítulo IX deste Estatuto.

Parágrafo  Único  A  deliberação  de que trata o item (iv) deste
 artigo 9o deverá  ser  tomada  pela  maioria  absoluta  de votos dos titulares das ações
em circulação de emissão da Companhia,  não se computando os votos em branco, cabendo a
cada ação,  independente da espécie ou classe,  o direito a um voto nessa  deliberação.
 Para fins da deliberação  prevista neste parágrafo  único,  não votarão os acionistas
que exerçam o Poder de Controle,  seus cônjuges,  companheiro(a)s e dependentes incluídos
em declaração de imposto de renda, suas  controladas  e coligadas,  bem como as
 controladas e coligadas da Companhia e outras  sociedades  que integrem um mesmo grupo
de fato ou de direito  com a  Companhia,  com os  acionistas  que  exerçam o Poder de
Controle  da  Companhia  e com as  controladas  e/ou coligadas de ambos.

CAPÍTULO IV  ADMINISTRAÇÃO DA COMPANHIA



Art. 10  A Companhia será administrada por um Conselho de Administração
e por uma Diretoria.

Parágrafo  Primeiro   Os  administradores  tomam  posse  mediante
 termos  lavrados  no Livro  de Atas das  Reuniões  do  Conselho  de Administração ou da
Diretoria,  conforme o caso, dos quais deverá constar declaração desses de que (i)
tomaram conhecimento dos acordos de acionistas  devidamente  registrados na sede da
Companhia,  mencionados no art. 37 deste  estatuto,  e (ii)  obrigam-se a observar o teor
integral dos mesmos.

Parágrafo  Segundo  A posse dos  administradores  estará  condicionada
 à prévia  subscrição do Termo de Anuência dos  Administradores aludido no Regulamento do
Nível 2 da BOVESPA.

Parágrafo  Terceiro  A Assembléia  Geral fixará o montante global
da remuneração dos  administradores,  que será distribuída de acordo com o disposto no
artigo 15, inciso V, deste Estatuto.

Art.  11  O Conselho  de  Administração  será  composto  de, no mínimo,
 09 (nove)  membros e, no  máximo,  12 (doze)  membros,  todos acionistas,  eleitos pela
Assembléia Geral e por ela destituíveis a qualquer tempo, com mandato  unificado de 01
(um) ano,  permitida a reeleição.

Parágrafo  Primeiro  A Assembléia Geral deverá definir o número
efetivo de membros do Conselho de  Administração a serem eleitos,  bem como eleger igual número
de suplentes para os membros do Conselho de Administração.

Parágrafo Segundo  Os membros do Conselho de Administração  tomarão
posse mediante a assinatura do termo respectivo,  lavrado em livro próprio.

Art. 12  O Conselho de Administração  terá um Presidente,  que será eleito
por maioria dos votos de seus membros  imediatamente após a sua posse.

Parágrafo Único  A substituição do Presidente do Conselho de
Administração  obedecerá o mesmo critério  estabelecido para sua eleição, nos termos do
caput deste artigo.

Art. 13  O Conselho de Administração  reunir-se-á,  ordinariamente
pelo menos uma vez a cada trimestre, e extraordinariamente,  sempre que necessário,  por
convocação de qualquer um de seus membros,  através de carta,  telegrama,  fax ou
pessoalmente,  a qual deverá ser feita com um prazo mínimo de 05 (cinco) dias de antecedência.

Art. 14  O Conselho de  Administração  instalar-se-á,  funcionará  e
 deliberará  validamente  pelo voto  favorável da maioria de seus membros eleitos.

Parágrafo Único  As decisões do Conselho de Administração constarão
de ata que será assinada pelos presentes.

Art. 15  Compete ao Conselho de Administração:

I  fixar a orientação  geral dos negócios da Companhia,  aprovando
as diretrizes,  política e objetivos  básicos,  para todas as áreas principais de atuação
da Companhia e de suas controladas.

II  aprovar os planos de negócios da Companhia e de controladas,
 os orçamentos  anuais, os planos de investimentos,  abrangendo todos os programas de
expansão da Companhia e de suas controladas,  a política e os planos financeiros,
 juntamente com regras sobre nível de endividamento  e outros  compromissos  relativos a
endividamento  e à Companhia,  incluindo  condições para contratar novas dívidas e a política
de hedge adotada pela Companhia.

III  eleger e destituir os Diretores da Companhia e fixar-lhes as
atribuições.

IV  fiscalizar a gestão dos Diretores,  examinar,  a qualquer
 tempo,  os livros e papéis da Companhia,  solicitar  informações  sobre contratos
celebrados ou em via de celebração, e sobre quaisquer outros atos.

V  atribuir,  no montante  global da  remuneração  fixada pela
 Assembléia  Geral,  os  honorários  mensais,  a cada um dos membros da Administração da
Companhia.

VI  atribuir aos membros da  Administração  a sua parcela de
participação  nos lucros apurados em balanços  levantados pela Companhia, inclusive
intermediários, respeitadas as limitações e disposições estatutárias e legais.

VII   manifestar-se  sobre o  relatório  da  Administração  e as
contas  da  Diretoria,  e  autorizar  a  distribuição  de  dividendos intermediários e,
se distribuídos estes com base em resultados apurados em balanço  intermediário,  fixar a
participação nos lucros que farão jus os administradores.

VIII  escolher e destituir os auditores independentes.

IX  convocar a Assembléia Geral quando julgar conveniente ou por
exigência legal ou estatutária.

X  fixar o voto a ser dado pela Companhia nas Assembléias Gerais e
aprovar  previamente  alterações  contratuais das Sociedades em que participe como sócia,
 Acionista ou Cotista,  inclusive aprovando a escolha dos administradores de sociedades
 controladas ou coligadas a serem eleitos com o voto dos representantes da Companhia,
respeitado sempre o disposto no parágrafo primeiro do artigo anterior.

XI  submeter à deliberação da Assembléia Geral proposta de alteração
deste Estatuto.

XII  estabelecer os critérios  gerais de remuneração da  administração
e dos  funcionários de escalão superior (como tal entendidos os superintendentes  ou
ocupantes de cargos de direção  equivalentes) de sociedade em que a Companhia houver
efetuado  investimento ou das Companhias controladas, direta ou indiretamente, pela
Companhia.

XIII  fixar a política de remuneração e de benefícios (benefícios
 indiretos,  participação no lucro e/ou nas vendas) da administração e dos  funcionários
em geral da Sociedade em que a Companhia  houver efetuado  investimento  ou das
Companhias  controladas,  direta ou indiretamente, pela Companhia, ou coligadas às suas
controladas, respeitado o que estiver previsto nos acordos existentes.

XIV  tomar  decisões  relativas  à política de  investimentos  da
 Companhia  e das  Sociedades  em que a  Companhia  houver  efetuado investimento ou das
Companhias controladas, direta ou indiretamente, pela Companhia ou coligadas às suas
controladas.

XV  decidir  sobre a estrutura  de capital da  Companhia e das
 Sociedades  em que a Companhia  houver  efetuado  investimento  ou das Companhias
controladas, direta ou indiretamente, pela Companhia, ou coligadas à mesma ou às suas
controladas.

XVI  escolher o executivo  principal da Companhia e das Sociedades
em que a Companhia  houver efetuado  investimento ou das Companhias controladas, direta
ou indiretamente, pela Companhia, ou coligadas à mesma ou às suas controladas.

XVII  designar um dos membros da Diretoria para  representar a
Companhia em atos e operações no País ou no Exterior,  ou autorizar que seja  constituído
 um  procurador  apenas para a prática de ato  específico,  devendo a ata que  contiver a
resolução  do Conselho  ser arquivada na Junta Comercial, se necessário.

XVIII  autorizar a aquisição de ações de emissão da própria
 Companhia,  para efeito de  cancelamento  ou  permanência em tesouraria e posterior
alienação, observadas as disposições legais pertinentes.

XIX  aprovar a emissão de debêntures simples, não conversíveis em ações
e sem garantia real.

XX  definir e apresentar à Assembléia Geral a lista tríplice de
empresas  especializadas  em avaliação  econômica de empresas,  para a preparação do
laudo de avaliação das ações da Companhia pelo valor econômico de que trata o artigo 32
deste Estatuto.

XXI - aprovar a celebração de contratos  entre a Companhia e
acionista  controlador,  partes  direta ou  indiretamente  controladas  ou controladoras
de acionista controlador.

XXII  aprovar política de contratação  envolvendo acionista
controlador,  partes direta ou indiretamente  controladas ou controladoras de acionista
controlador.

XXIII  aprovar a celebração,  pela  Companhia,  de contratos de
conteúdo e de programação,  bem como a manutenção ou renovação  desses contratos.

Art. 16  A Diretoria será composta de no mínimo 02 (dois) e no máximo
04 (quatro)  Diretores,  acionistas ou não,  residentes no País, eleitos pelo Conselho de
 Administração e por ele destituíveis a qualquer tempo,  sendo um Diretor Geral, um
Diretor  Financeiro e dois diretores sem  designação  específica,  cujos títulos e funções
serão  definidos pelo Conselho de  Administração  quando da eleição dos mesmos, todos com
mandato de 02 (dois) anos, podendo ser reeleitos.

Parágrafo  Primeiro  As  atribuições  dos Diretores  serão
 especificadas  pelo Conselho de  Administração  que também  estabelecerá a remuneração
fixa de cada membro da Diretoria e distribuirá, quando for o caso, a participação nos
lucros fixada pela Assembléia Geral.

Parágrafo Segundo  Ocorrendo  vacância de cargo de Diretor,  ou
impedimento do titular,  caberá ao Conselho de Administração  eleger o novo Diretor ou
designar o substituto, fixando, em quaisquer dos casos, o prazo da gestão e os
respectivos vencimentos.

Parágrafo  Terceiro  Compete à  Diretoria  exercer as  atribuições
 que a Lei, o Estatuto  Social e o Conselho  de  Administração  lhe conferirem para a prática
dos atos necessários ao funcionamento regular da Companhia.

Parágrafo  Quarto  Os mandatos  serão  sempre  assinados  por 02
(dois)  Diretores e  outorgados  para fins  específicos  ou por prazo determinado, não
excedente de um ano, salvo os que contemplarem os poderes da cláusula ad judicia.

Parágrafo  Quinto  A Diretoria  reunir-se-á  sempre que  necessário,
 mas pelo menos uma vez a cada mês e a convocação cabe ao Diretor Geral, que também
presidirá a reunião.

Parágrafo Sexto  A reunião instalar-se-á com a presença de
Diretores que representem a maioria dos membros da Diretoria.

Parágrafo Sétimo  As atas das reuniões e as deliberações da
Diretoria serão registradas em livro próprio.

Parágrafo Oitavo  A Diretoria terá  competência para deliberar
sobre a emissão,  pela Companhia,  de Notas  Promissórias  (commercial papers), a serem
negociadas no Brasil ou no Exterior.

Art. 17  Compete especificamente ao Diretor Geral:

I  submeter à aprovação  do Conselho de  Administração  os planos
de trabalho e orçamentos  anuais,  os planos de  investimentos  e os novos programas de
expansão da Companhia e de suas empresas controladas, promovendo a sua execução nos
termos aprovados.

II  formular  as  estratégias  e  diretrizes  operacionais  da
 Companhia,  bem como  estabelecer  os  critérios  para a execução  das deliberações da
Assembléia Geral e do Conselho de Administração, com a participação dos demais Diretores.

III  exercer a supervisão de todas as atividades da Companhia.

IV  coordenar e superintender as atividades da Diretoria,
convocando e presidindo as suas reuniões.

V  exercer as demais atribuições que lhe forem conferidas pelo
Conselho de Administração.

Art. 18  Competem aos demais Diretores as atribuições específicas
que lhe forem conferidas pelo Conselho de Administração.

Art. 19  Todos os atos que criarem  responsabilidade  para com a
Companhia,  ou  dispensarem  obrigações de terceiros para com ela, sóserão válidos se
tiverem:

I)       A assinatura conjunta de dois membros da Diretoria. II)
     A assinatura conjunta de um membro da Diretoria e de um procurador da Companhia.
III)     A assinatura conjunta de dois procuradores da Companhia.

Parágrafo Único  A Companhia será  representada  isoladamente  por
quaisquer dos membros da Diretoria,  sem as formalidades  previstas neste artigo, nos
casos de recebimento de citações ou notificações judiciais e na prestação de depoimento
pessoal.

CAPÍTULO V  CONSELHO FISCAL

Art.  20  A Companhia  terá um Conselho  Fiscal,  composto de no mínimo
3 (três) e no máximo 05 (cinco)  membros e suplentes  em igual número, não tendo caráter
permanente e só será eleito e instalado pela Assembléia Geral a pedido de acionistas,
 nos casos previstos em lei.

Art. 21  O funcionamento  do Conselho Fiscal terminará na primeira
 Assembléia Geral Ordinária após a sua instalação,  podendo os seus membros serem
reeleitos.

Art. 22  A remuneração dos membros do Conselho Fiscal será fixada
pela Assembléia Geral que os eleger.

CAPÍTULO VI  EXERCÍCIO SOCIAL, BALANÇO E RESULTADOS

Art. 23  O exercício social terá a duração de um ano e terminará no
último dia do mês de dezembro de cada ano.

Art. 24  Ao fim de cada  exercício  social serão  elaboradas,  com
base na  escrituração  mercantil  da  Companhia,  as  demonstrações financeiras previstas
em lei.

Parágrafo  Primeiro  O Conselho de Administração  poderá determinar
o levantamento de balanço  semestral ou,  respeitados os preceitos legais, em períodos
menores e aprovar a distribuição de dividendos com base nos lucros apurados.

Parágrafo  Segundo  A qualquer tempo o Conselho de Administração
 também poderá deliberar a distribuição de dividendos  intermediários à conta de lucros
acumulados ou de reservas de lucros existentes no último balanço anual ou semestral.

Art. 25  Do resultado do exercício serão deduzidos,  antes de
qualquer participação,  eventuais prejuízos acumulados e a provisão para o imposto de
renda.

Parágrafo Primeiro  Sobre o lucro remanescente  apurado na forma do
caput deste artigo, será calculada a participação  estatutária dos administradores, até o
limite máximo legal.

Parágrafo  Segundo  Do lucro  líquido do  exercício,  obtido após a
dedução de que trata o parágrafo  anterior,  destinar-se-á:  a) 5% (cinco por cento) para
Reserva  Legal,  até atingir 20% (vinte por cento) do capital  social  integralizado;  b)
25% (vinte e cinco por cento),  após os  ajustes  de que  trata o  artigo  202 da Lei
 6.404/76,  para  pagamento  de  dividendo  obrigatório  a todos os seus acionistas,
respeitado o disposto no parágrafo 3o do artigo 5o do presente Estatuto.

Parágrafo  Terceiro  Atendida a distribuição  prevista no parágrafo
 anterior,  o saldo,  por proposta do Conselho de  Administração e aprovação da Assembléia
 Geral, será destinado a uma reserva  suplementar para reforço de capital de giro e para
apropriação  futura ao Capital Social. O saldo desta reserva não excederá o equivalente
ao capital social.

CAPÍTULO VII  DA ALIENAÇÃO DO PODER DE CONTROLE

Art. 26.  A alienação  de ações que  assegurem ao acionista
 controlador  o Poder de Controle,  tanto por meio de uma única  operação, como por meio
de operações  sucessivas,  deverá ser contratada sob a condição suspensiva ou resolutiva
de que o adquirente se obrigue a concretizar,  no prazo máximo de 90 (noventa)  dias
 contados da data da aquisição  dessas ações,  uma oferta  pública de aquisição das ações
de todos os demais acionistas da Companhia, de forma a assegurá-los tratamento igualitário
àquele dado ao acionista alienante.

Parágrafo  Primeiro - Há presunção  relativa de  titularidade  do
Poder de Controle em relação a pessoa,  ao acionista  controlador  ou grupo de  pessoas
 sob  controle  comum que sejam  titulares  de ações que lhes  tenham  assegurado  a
maioria  absoluta  dos votos dos acionistas  presentes  nas três  últimas  Assembléias
 Gerais  de  acionistas  da  Companhia,  ainda  que não seja  titular  das  ações
representantes da maioria do capital votante da Companhia.

Parágrafo  Segundo - A negociação  de ações entre  acionistas  que
exerçam o Poder de Controle,  mesmo que implique a  consolidação  do Poder de Controle em
apenas um acionista,  não constitui  transferência do Poder de Controle, não dando causa,
portanto, à obrigação de realizar oferta pública nos termos do caput deste artigo.

Parágrafo  Terceiro - No caso de aquisição de ações  pertencentes a
um ou mais acionistas que exerçam o Poder de Controle por terceiro, a oferta pública
 prevista no caput deste artigo somente será exigida a partir da aquisição do número de ações
 necessário ao exercício do Poder de Controle.

Parágrafo  Quarto  Na hipótese de o Poder de Controle da  Companhia
 ser exercido por mais de um  acionista,  a obrigação  prevista no caput deste  artigo não
será exigida caso o  adquirente  passe a deter o Poder de Controle em conjunto com o(s)
 outro(s)  acionista(s) que já exercia(m) o Poder de Controle, mas não detenha os votos
necessários para o exercício individual do Poder de Controle.

Parágrafo  Quinto - Para fins do disposto nos parágrafos 3o e 4o deste
artigo,  entende-se como número de ações e/ou votos  necessários para o exercício do
Poder de Controle,  o percentual  equivalente ao quorum  qualificado  para  deliberações
 estabelecido em acordo de acionistas arquivado na sede da Companhia.

Art. 27  A oferta  pública de aquisição de ações,  referida no
artigo 26 deste  Estatuto,  também será exigida  quando  houver  cessão onerosa de
direitos de  subscrição  de ações e de outros  títulos ou direitos  relativos a valores
 mobiliários  conversíveis  em ações emitidos pela Companhia, que venha a resultar na
alienação de ações que assegurem o Poder de Controle da Companhia.

Parágrafo  Único  A verificação  da ocorrência  da  transferência
 do Poder de Controle nos termos deste artigo será feita com base no disposto nos parágrafos
2o, 3o, 4o e 5o do artigo 26.

Art. 28  Observado o disposto no parágrafo  único deste  artigo,  a
oferta  pública de  aquisição de ações  referida no artigo 26 seráexigida,  ainda,  em
caso de alienação do controle do acionista  controlador da Companhia para terceiro.
 Nessa  hipótese,  o acionista controlador  ficará  obrigado a declarar à BOVESPA o valor
 atribuído à Companhia,  pela  alienação do seu Poder de Controle,  enviando ainda a
documentação que comprove esse valor.

Parágrafo  Único - A verificação  da ocorrência  da  transferência
 do Poder de Controle nos termos deste artigo será feita com base no disposto nos parágrafos
2o, 3o, 4o e 5o do artigo 26.

Art. 29 - O acionista  que possuir  ações da Companhia e que vier a
adquirir o seu Poder de Controle,  em razão de contrato  particular de compra de ações
celebrado com o acionista  controlador,  titular de ações que  representem o Poder de
Controle da Companhia,  estaráobrigado a (i) concretizar  oferta pública nos termos do
artigo 26 deste Estatuto  Social, e (ii) ressarcir os acionistas de quem tenha comprado  ações
em bolsa nos 6 (seis)  meses  anteriores  à data da  aquisição  das ações que lhe
 asseguraram  o Poder de  Controle da Companhia,  a quem deverá pagar a diferença entre o
preço pago ao acionista  controlador que detinha o Poder de Controle da Companhia e o
valor pago em bolsa, pelas ações da Companhia neste período, devidamente atualizado.

Parágrafo  Único - A  verificação  da  ocorrência  da  aquisição  do
Poder de Controle  nos termos  deste artigo será feita com base no disposto nos parágrafos
2o, 3o, 4o e 5o do artigo 26.

CAPÍTULO VIII  DO CANCELAMENTO DE REGISTRO DE COMPANHIA ABERTA

Art. 30  Sem prejuízo das disposições  legais e regulamentares,  o
cancelamento de registro da Companhia como companhia aberta perante a Comissão de Valores
 Mobiliários  CVM deverá ser  precedido de oferta  pública de aquisição de ações e deverá ter
como preço mínimo, obrigatoriamente,  o valor da Companhia e de suas ações que vier a ser
 determinado  em laudo de avaliação  por empresa  especializada, mediante a utilização de
metodologia reconhecida ou com base em outro critério que venha a ser definido pela CVM.

Parágrafo Único  O cancelamento deverá ser precedido de Assembléia
Geral Extraordinária em que se delibere  especificamente  sobre tal cancelamento.

Art. 31  Caso o laudo de  avaliação a que se refere o artigo 30 não
esteja  pronto até a  Assembléia  Geral  Extraordinária  convocada para deliberar  sobre
o  cancelamento  do registro de companhia  aberta,  o acionista que detiver o Poder de
Controle  deverá  informar nessa assembléia o valor por ação ou lote de mil ações pelo
qual formulará a oferta pública.

Parágrafo  Primeiro  A oferta pública ficará  condicionada a que o
valor apurado no laudo de avaliação a que se refere o artigo 30 não seja superior ao
valor divulgado pelo acionista que detiver o Poder de Controle na assembléia referida no
caput deste artigo.

Parágrafo  Segundo   Caso o valor das ações  determinado  no laudo
de  avaliação  seja  superior  ao valor  informado  pelo  acionista controlador,  a
deliberação referida no caput deste artigo ficará  automaticamente  cancelada,  devendo
ser dada ampla divulgação desse fato ao mercado,  exceto se o acionista  que detiver o
Poder de Controle  concordar  expressamente  em formular a oferta  pública  pelo valor
apurado no laudo de avaliação.

Art. 32  O laudo de avaliação deverá ser elaborado por empresa
 especializada,  com experiência  comprovada e independência  quanto ao poder de decisão
da Companhia,  seus  administradores e/ou acionista  controlador,  bem como satisfazer os
demais requisitos legais. Os custos  incorridos com a elaboração do laudo serão arcados
pelo acionista que detiver o Poder de Controle,  conforme  previsto no caput deste artigo.

CAPÍTULO IX  SAÍDA DO NÍVEL 2

Art. 33  Caso os  acionistas  da Companhia  reunidos em  Assembléia
 Geral  Extraordinária  aprovem a saída da Companhia do Nível 2 da BOVESPA,  o acionista
 controlador da Companhia  deverá  realizar uma oferta pública de aquisição de ações por
valor apurado nos termos do artigo 30 deste  Estatuto  Social,  (i) no prazo de 90
(noventa)  dias,  na hipótese de a saída da Companhia do Nível 2 ocorrer para que suas ações
 passem a ser  registradas  para  negociação  fora do Nível 2, ou (ii) no prazo de 120
(cento e vinte) dias  contados da data da  Assembléia  Geral dos  acionistas  da
 Companhia  que  aprovar a operação  de  reorganização  societária,  na qual as ações da
companhia resultante de tal reorganização não sejam admitidas para negociação no Nível 2.

Parágrafo  Primeiro   A oferta  pública  prevista  neste  artigo
 observará,  no que for  cabível,  as regras de oferta  pública  para cancelamento de
registro de companhia aberta perante a CVM, nos termos dos artigos 30, 31 e 32 deste
Estatuto.

Parágrafo  Segundo  O acionista  controlador  da Companhia  estará  dispensado
de proceder à oferta  pública  prevista neste artigo na hipótese de a saída da Companhia
do Nível 2 ocorrer em função da listagem de suas ações para negociação no Novo Mercado da
BOVESPA.

CAPÍTULO X  LIQUIDAÇÃO

Art.  34  A  Companhia  entrará em  liquidação  nos casos
 previstos  em lei ou em virtude de  deliberação  da  Assembléia  Geral e se extinguirá pelo
encerramento da liquidação.

Parágrafo Único  O Conselho de Administração nomeará o liquidante e
as formas e diretrizes a seguir e fixará os seus honorários.

CAPÍTULO XI  JUÍZO ARBITRAL

Art. 35  As disputas e  controvérsias  decorrentes ou relacionadas
a este Estatuto  Social,  ao Regulamento do Nível 2, às disposições da Lei no 6.404/76,  às
normas  editadas  pelo  Conselho  Monetário  Nacional,  pelo Banco Central do Brasil e
pela Comissão de Valores Mobiliários,  aos  regulamentos da BOVESPA e às demais normas
 aplicáveis ao  funcionamento do mercado de capitais em geral deverão ser solucionadas
por arbitragem, a ser conduzida na forma do Regulamento da Câmara de Arbitragem do
Mercado, instituída pela BOVESPA.

CAPÍTULO XII  DISPOSIÇÕES GERAIS

Art. 36  Os dividendos  não recebidos ou reclamados  prescreverão
 no prazo de três anos,  contado da data em que tenham sido postos àdisposição do
Acionista e reverterão em favor da Companhia.

Art. 37  Os acordos de acionistas devidamente  registrados na sede
da Companhia que, dentre outras disposições,  estabeleçam cláusulas e condições  para
 alienação de ações de emissão da Companhia,  disciplinem o direito de  preferência ou
regulem o exercício do direito de voto dos acionistas, serão respeitados pela Companhia e
por sua Administração.

Parágrafo  Único - As obrigações e  responsabilidades  resultantes
 de tais acordos serão válidas e oponíveis a terceiros tão logo tais acordos  tenham
 sido  devidamente  averbados  nos livros de registro  da  Companhia  e nos  certificados
 de ações,  se  emitidos.  Os administradores  da Companhia  zelarão pela  observância
 desses acordos e o presidente da Assembléia Geral ou das reuniões do Conselho de
 Administração,  conforme o caso, deverá declarar a invalidade do voto proferido pelo
acionista ou pelo conselheiro em contrariedade com os termos de tais  acordos,  ou ainda,
 no caso de ausência ou  abstenção  de  acionistas  ou  conselheiros,  os outros
 acionistas prejudicados ou conselheiros  eleitos pelos acionistas  prejudicados poderão
votar com as ações ou votos pertencentes aos acionistas ou conselheiros ausentes ou
omissos, conforme o caso, nos termos do art. 118, parágrafos 8o e 9o da Lei no 6.404/76.

Art. 38  A Companhia  observará os procedimentos de política
interna de auto-regulação em relação à negociação de valores  mobiliários de emissão da
Companhia.

Art. 39  Fica expressamente vedada a emissão de Partes Beneficiárias
pela Companhia.

São Paulo  SP, 30 de outubro de 2002.

Marco Aurélio dos Anjos Ferreira
Presidente

Arnaldo Cordeiro Pacheco de Medeiros Montenegro
Secretário

ATTACHMENT OF THE MINUTES OF THE BOARD OF DIRECTORS
MEETING HELD ON OCTOBER 28TH AND 30TH 2002

NET SERVIÇOS DE COMUNICAÇÃO S.A.
National Register of Legal Persons (CNPJ)00.108.786/0001-65 
 Board of Trade (NIRE)35.300.177.240

BYLAWS

CHAPTER I  NAME, HEADQUARTERS, PURPOSE AND DURATION

Art. 1.  NET SERVIÇOS DE COMUNICAÇÃO S.A. is a
corporation [sociedade anônima] governed by these bylaws and applicable legislation.

Art. 2°. - The Company is  headquartered  and has its
venue in the City of São Paulo,  State of São Paulo and may, by  deliberation  of the
Board of Directors,  transfer the address of the Company headquarters,  open, maintain
and close branches,  offices,  warehouses or representation agencies in any part of the
national territory or abroad.

Art. 3  The purpose of the Company is to hold  interests
 in other  companies  that do  business in (a) local  distribution  of pay TV signals,
and provision to subscribers of access to added value services,  (b) provision of other
 telecommunications  services, (c) any other means of distribution  of signals of any
kind,  through their local  networks,  (d) production of their own local  channels.  The
Company  also has as its purpose  the  provision  of  corporate  support,
 administrative,  financial  and  consulting  services to its subsidiaries.  The Company
may hold  interests in companies  that have the same  purposes  and, as  accessories  to
such  purposes,  do business in importation, exportation and representation.

Art. 4  The Company has an indefinite term of duration.

CHAPTER II  CAPITAL AND SHARES

Art. 5o. - The Capital  Stock is  R$ 2,748,650,800.11
 (two  billion,  seven  hundred and  forty-eight  million,  six hundred and fifty
thousand,  eight hundred Reals and eleven cents of Real),  divided into 828,371,343
 common shares and 1,200,484,187  preferred shares, all  nominative,  book-entry  shares,
 no-par value.  The Capital Stock may be increased to  R$ 5,000,000,000.00  (five billion
reais), regardless of amendment to the statutes,  as provided for in article 168 of Law
6,404/76,  by  deliberation  of the Board of Directors, which will determine the
conditions for the issuing, in the terms of paragraph one of article 170 of Law 6,404/76.

First  Paragraph  Preferred  shares  shall have voting
 rights  solely with  respect to the  following  matters:  (a)  transformation, merger,
 amalgamation  or corporate  split of the Company;  (b)  evaluation of property to be
used to pay in a capital  increase of the Company;  (c) selection of a  specialized  firm
to determine  the economic  value of the shares in the Company,  under article 9(iv) of
these Bylaws;  and (d)  modification or revocation of provisions under these Bylaws that
result in  non-compliance  by the Company with the  requirements  under  Section IV, item
4.1 of the Level 2  Differentiated  Corporate  Governance  Practices  Regulation
 (hereafter referred to as the Level 2 Regulation) issued by the São Paulo Stock
Exchange (BOVESPA).

Second  Paragraph  Preferred  shares shall also have
voting  rights with respect to the approval of contracts  between the Company and its
controlling  shareholder,  directly or through third parties, and with other companies in
which the controlling  shareholder has an interest if, in future, approval of such
contracts by the shareholders in General Meeting is required by law or under these Bylaws.

Third  Paragraph  Preferred  shares carry the right to:
(i) receipt of cash  dividends  10% (ten  percent)  greater than those paid to common
shares;  (ii) priority on  reimbursement,  in the event of liquidation of the Company,
 without premium and at net equity value; and (iii)  equal  treatment  with  shareholders
 that  exercise  effective  power to direct the  business of the Company and direct the
workings of the bodies of the Company,  directly or  indirectly,  in fact or by law  (Control
 Power) in the event of  alienation  of Control Power within the terms of article 26,
introductory paragraph, of these Bylaws.

Fourth  Paragraph  Because they do not carry rights to
fixed or minimum  dividends,  preferred  shares shall not acquire voting rights if the
Company fails to pay dividends, and article 111§1 of Law no. 6.404/76 shall not,
therefore, apply.

Fifth Paragraph  Preferred  shares shall  participate on
the same  conditions as common shares in  distribution of bonuses.  Preferred shares may
represent up to 2/3 (two thirds) of the total number of shares  issued by the Company and
the issue of preferred  shares may change the then existing proportions between the
common shares and preferred shares of the Company.

Sixth Paragraph  An issue of shares,  debentures
 convertible  into shares or  subscription  bonuses to be placed by sale on the stock
exchange,  by public  subscription or through exchange for shares in a public offer for
acquisition of control,  under the terms of the Law, may exclude preemptive subscription
rights or reduce the minimum time period [for exercise of preemptive rights].

Seventh  Paragraph  The Company may, by  resolution of
the Board of Directors,  authorize the grant of share  purchase  options to its
administrators and employees or to natural persons who provide services to companies
under its control.

Eighth  Paragraph  Shares  issued by the  Company  may be
kept in deposit  accounts  in the name of their  holders  with  institutions accredited
 by the  Brazilian  Securities  Commission  [Comissão de Valores  Mobiliários  - CVM],
 as book shares and without  issue of certificates.  The  Board  of  Directors  may fix
the  period  of time in  which  all  shareholders  shall  present  outstanding  share
certificates for cancellation and conversion into book shares.  The Company or the
depositary  institution may charge  shareholders for the cost of issuing  certificates
 and  transferring  ownership of shares,  subject to limits under  legislation  and
 regulations,  in accordance with articles 34 and 35 of Law no. 6.404/76.

CHAPTER III  GENERAL MEETINGS OF SHAREHOLDERS

Art. 6  The  shareholders  in General  Meeting have
powers to decide all matters  relating to the purposes of the Company and to adopt such
 resolutions  as they deem  appropriate to defend and develop the Company.  General
 Meetings of  shareholders  shall be called at least 15 (fifteen) days in advance of the
date set for the meeting.

Art. 7  General  Meetings  shall be convened and chaired
by the Chairman of the Board of Directors  or, in the event of his absence or incapacity,
 by another  member of the Board of Directors  or, in the absence of the members of the
Board of  Directors,  by any of the officers of the Company.

Sole Paragraph  The Chairman of the General Meeting shall
appoint one or more secretaries.

Art. 8  An Ordinary  General  Meeting shall be held
within the first four months  following  the end of the corporate  year, to decide the
matters provided for by law.

Art. 9  An  Extraordinary  General Meeting shall be held
whenever the interests of the Company require a decision by the  shareholders and in the
cases provided for by law and under these Bylaws.  The  shareholders  in General Meeting
have powers to decide the following matters:  (i) the grant of  guaranties  and other
 security in favor of third  parties  that are not members of the group of  companies
controlled  by or  related  to the  Company  (related  companies  being only those
 companies  in which the  Company or its  controlled companies  hold more than 10% (ten
percent) of their  capital,  excluding  those  companies that hold an interest in the
Company and/or its controlled companies);  (ii) cancellation of the Companys
registration as a publicly-traded  company with the Brazilian Securities Commission;
 (iii)  cancellation  of  registration  for trading of shares in the Company on BOVESPA
 Level 2; and (iv)  selection  of a specialized  firm,  from among those  indicated by
the Board of  Directors,  to be  responsible  for preparing a report on the economic
value of the shares in the Company for the purposes of the public offerings dealt with in
Chapter VIII and Chapter IX of these Bylaws.

Sole  Paragraph  A  resolution  on the matter  referred
to in item (iv) of this  article 9 shall be adopted by votes  representing  an absolute
majority of the outstanding  shares in the Company,  excluding votes cast in blank.  Each
share,  regardless of type or class, shall  carry the right to one vote on such  matter.
 In the voting on the matter  referred  to in this sole  paragraph,  the  following shall
not vote:  shareholders  that exercise Control Power,  their spouses,  companions and
dependents  included on income tax returns, their  controlled  companies and related
 companies,  and other  companies that, in fact or in law, form part of a corporate group
with the Company,  with  shareholders  that exercise  Control Power,  or with controlled
 and/or related  companies of either the Company or shareholders that exercise Control
Power.

CHAPTER IV  MANAGEMENT OF THE COMPANY

Art. 10  The Company shall be managed by a Board of
Directors and a Board of Officers [Diretoria].

First  Paragraph  The members of the  management of the
Company shall be invested in office upon signing  instruments of investment in office
drawn up in the Book of Minutes of Meetings of the Board of  Directors  or of the Board
of  Officers,  as the case may be, which instruments shall contain  declarations to the
effect that: (i) they are aware of the shareholders  agreements,  duly registered at the
headquarters  of the Company,  referred to in art. 37 of these Bylaws and (ii) they
 undertake to comply fully with the  provisions  of those agreements.

Second  Paragraph  Investment in office of the members of
management of the Company is  conditional  upon their signing the Instrument of Consent
by Members of Management referred to in the BOVESPA Level 2 Regulation.

Third Paragraph  The  shareholders in General Meeting
shall fix the global amount of remuneration of the members of management,  which shall be
distributed in accordance with article 15(V) of these Bylaws.

Art. 11  The Board of  Directors  shall be composed no
fewer than 9 (nine) and no more than 12  (twelve)  members,  all  shareholders, elected
by the  shareholders  in General  Meeting  and  removable  by them at any time,  for a
common  term of office of 1 (one)  year, reelection being permitted.

First  Paragraph  The  shareholders  in General  Meeting
 shall fix the  effective  number of members of the Board of  Directors to be elected,
and shall elect a like number of alternates for the members of the Board of Directors.

Second  Paragraph  The members of the Board of Directors
shall be invested in office upon signing an instrument to that effect,  drawn up in the
appropriate book.

Art. 12  The Board of Directors shall have a Chairman
 elected by a majority of votes of the members of the board,  immediately  after their
investment in office.

Sole  Paragraph   The  Chairman of the Board of
 Directors  shall be replaced in the manner  established  for his  election  under the
introductory paragraph of this article.

Article 13  The Board of Directors shall meet,
ordinarily,  at least once in every quarter and extraordinarily  whenever necessary, at
the call of any of its members by letter, telegram, fax or in person, at least 5 (five)
days in advance.

Art. 14  The Board of Directors shall be convened,
 function and adopt  resolutions by the favorable vote of a majority of its elected
members.

Sole Paragraph  Resolutions  of the Board of Directors
 shall be set out in minutes of meeting,  signed by all members  present at the meeting.

Art. 15  The Board of Directors has powers to:

I  establish the general  orientation of the business of
the Company,  approving the basic  directives,  policy and objectives for all areas in
which the Company and its controlled companies do business.

II  approve the business plans of the Company and its
controlled  companies,  annual budgets,  investment plans covering all expansion programs
 for the  Company  and its  controlled  companies,  financial  policy  and  plans,  as
well as rules  concerning  the level of indebtedness and other  commitments  related to
indebtedness  and the Company,  including terms and conditions for contracting new debt
and the hedge policy adopted by the Company.

III  elect and remove Officers and establish their duties
and powers.

IV  supervise the Officers  management,  examine,  at
any time,  the books and  documents of the Company and request  information  on existing
contracts or contracts about to be executed or on any other acts and instruments.

V  allocate,  from the global amount of remuneration
 established by the  shareholders in General  Meeting,  the monthly  honoraria of each of
the members of management of the Company.

VI  allocate to the  members of  management  of the
 Company  their share of the  profits  shown on the  financial  statements  of the
Company, including interim financial statements, subject to the limitations and
provisions established by law and in these Bylaws.

VII  give its  opinion on the report of  Management  and
the  accounts  of the Board of  Officers,  authorize  the  payment of interim dividends
 and,  if  dividends  are paid on the basis of  interim  financial  statements,
 establish  the share in profits to which the members of management shall be entitled.

VIII  select and remove independent auditors.

IX  call a General Meeting of shareholders when
convenient or when required by law or these Bylaws.

X  establish  how the Company will vote at  shareholders  meetings,
 and approve in advance  amendments  to the bylaws or articles of association, of
companies in which the Company participates as partner,  shareholder or quotaholder,
 including approval of the members of management of controlled or related  companies
 that are to be elected by vote of the Company,  subject  always to the provisions of the
first paragraph of the preceding article.

XI  submit proposals for amendments to these Bylaws to
the shareholders in General Meeting.

XII  establish  general  criteria for remuneration of the
members of management and upper level employees (upper level employees being
superintendents  and those who occupy  equivalent  management  positions)  of  companies
 in which the Company has  invested and of the companies controlled, directly or
indirectly, by the Company.

XIII  establish the remuneration  and benefits policy
 (including  indirect  benefits and sharing in profits and/or sales) for members of
 management  and  employees in general of companies in which the Company has  invested,
 of the  companies  controlled,  directly or indirectly, by the Company, and of companies
related to its controlled companies, subject to existing agreements.

XIV  make  decisions  relating to the  investment
 policies of the Company,  of companies  in which the Company has  invested,  of the
companies controlled, directly or indirectly, by the Company and of companies related to
the Company or its controlled companies.

XV  decide upon the capital  structure of the Company,
 of companies in which the Company has invested,  of the companies  controlled, directly
or indirectly, by the Company and of companies related to the Company or its controlled
companies.

XVI  choose the  principal  executive of the Company,  of
companies in which the Company has invested,  of the  companies  controlled, directly or
indirectly, by the Company and of companies related to the Company or its controlled
companies.

XVII  designate  one of the members of the Board of
Officers to represent  the company in acts and  transactions  in Brazil or abroad, or
authorize the grant of powers to an attorney to perform  specific  acts,  with the
minutes of the meeting at which such  resolutions are adopted being filed at the Board of
Trade [Junta Comercial], if necessary.

XVIII  authorize the Company to acquire shares issued by
it, for cancellation or keeping in treasury for subsequent  sale,  subject to applicable
law.

XIX  approve the issue of simple debentures, which are
not convertible into shares and do not carry real security.

XX  establish  and submit to the  shareholders  in
General  Meeting  the list of three firms  specialized  in  economic  valuation  of
companies,  in connection with the preparation of the report on the economic value of the
shares in the Company  referred to in article 32 of these Bylaws.

XXI  approve execution of contracts between the Company
and its controlling  shareholders,  parties directly or indirectly  controlled by its
controlling shareholders or controlling shareholders of the Companys controlling
shareholders.

XXII  approve policy for contracts  with the Companys
 controlling  shareholders,  parties  directly or indirectly  controlled by its
controlling shareholders or controlling shareholders of the Companys controlling
shareholders.

XXIII  approve execution by the Company of content and
programming contracts and the maintenance and renewal of such contracts.

Art. 16  The Board of Officers  [Diretoria]  shall be
composed of no fewer than 2 (two) and no more than 4 (four)  Officers,  who may, but need
not, be shareholders,  all resident in Brazil,  elected by the Board of Directors and
removable by it at any time, one of whom shall the General Manager,  one the Financial
 Officer and the others officers without  portfolio,  whose titles and functions shall be
defined by the Board of Directors  at the time of their  election.  All  officers  shall
have a term of office of 2 (two) years and may be reelected.

First  Paragraph  The powers and duties of the Officers
 shall be specified by the Board of Directors,  which shall also establish the fixed
 remuneration of each member of the Board of Officers and shall  distribute,  when
applicable,  the share in profits fixed by the shareholders in General Meeting.

Second  Paragraph  In the event of a vacancy on the Board
of Officers,  or  incapacity  of any member,  the Board of  Directors  shall elect the
new Officer or  designate a  substitute  and shall fix, in both cases,  his term of
office and amounts owed in respect of his office.

Third  Paragraph  The Board of  Directors  shall have the
powers and duties  conferred  upon it by Law,  these Bylaws and the Board of Directors to
perform all acts required for the regular operation of the Company.

Fourth  Paragraph   Powers-of-attorney  shall be executed
by 2 (two)  Officers  and shall be granted for  specific  purposes and for a defined
term, not exceeding one year, except in the case of powers granted ad judicia.

Fifth  Paragraph  The Board of Officers  shall meet
whenever  necessary but at least once in every month.  Meetings shall be called by the
General Manager, who shall chair the meeting.

Sixth Paragraph  Meetings shall be convened with the
presence of a majority of the Officers.

Seventh  Paragraph  Minutes of meetings and  resolutions
 adopted by the Board of Directors  shall be drawn up in a book kept for that purpose.

Eighth  Paragraph  The Board of Directors  shall have
powers to decide upon the issue by the Company of Promissory  Notes  (commercial paper)
to be traded in Brazil or abroad.

Art. 17  The General Manager shall have powers to:

I  submit for approval by the Board of Directors working
plans,  annual budgets,  investment plans and new expansion  programs for the Company and
its controlled companies and cause them to be carried out on the terms approved.

II  formulate the Companys  operational  strategies and
directives and establish  principles and methods for carrying out resolutions adopted by
the shareholders in General Meeting and by the Board of Directors, with the participation
of the other Officers.

III  supervise all the activities of the Company.

IV  coordinate and supervise the activities of the Board
of Officers, calling and chairing its meetings.

V  exercise such other functions as may be attributed by
the Board of Directors.

Art. 18  The other Officers shall have the powers and
duties assigned to them by the Board of Directors.

Art. 19  All acts that create  obligations for the
Company,  or release third parties from obligations to the Company,  shall be valid only
if:

I)       signed by two members of the Board of Officers.
II)      signed by one member of the Board of Officers together with one attorney-in-fact
of the Company. III)     signed by two attorneys-in-fact of the Company.

Sole  Paragraph  The Company may be  represented  by any
one of the  members of the Board of  Officers,  acting  alone and without the formalities
 provided for in this article,  for the purpose of receiving  service of process and
other judicial  notifications  and for giving testimony.

CHAPTER V  AUDIT COMMITTEE

Art. 20  The Company shall have an Audit Committee
 [Conselho  Fiscal],  composed of no fewer than 3 (three) and no more than 5 (five)
members and an equal number of  alternates,  which shall not operate on a permanent
 basis and which shall be elected and  installed by the shareholders in General Meeting
at the request of shareholders, in the cases provided for by law.

Art. 21  The Audit Committee shall cease to function on
the date of the first Ordinary  General  Shareholders  Meeting  following its
installation.  Members of the Audit Committee may be reelected.

Art. 22  The  remuneration of the members of the Audit
 Committee  shall be fixed by the  shareholders at the General Meeting at which they are
elected.

CHAPTER VI  CORPORATE YEAR, BALANCE SHEET AND RESULTS

Art. 23  The corporate year shall have a duration of one
year and shall terminate on the last day of December in each year.

Art.  24  At the end of each  corporate  year the
 financial  statements  provided  for by law shall be  prepared  on the basis of the
commercial books of the Company.

First  Paragraph  The Board of Directors may determine
 that balance  sheets be drawn up on a half-yearly  basis or,  subject to legal
principles, for lesser periods and approve the payment of dividends on the basis of
profits shown on such balance sheets.

Second  Paragraph   The Board of  Directors  may also,
 at any time,  determine  that  interim  dividends  shall be paid on account of
accumulated profits or profit reserves shown on the last annual or half-yearly balance
sheet.

Art. 25  From the results of the year there shall be
 deducted,  before any  participation  in  profits,  any  accumulated  losses and
provision for income tax.

First Paragraph  The share in profits of the members of
management,  fixed in accordance  with these Bylaws,  shall be calculated over the
profits determined in accordance with the introductory paragraph of this article, subject
to the limit imposed by law.

Second Paragraph  Of the net profits of the year,  after
the deduction  referred to in the preceding  paragraph,  a) 5% (five percent) shall be
allocated to the Legal Reserve,  provided,  however, that the Legal Reserve shall not
exceed 20% of the paid-in capital of the Company;  b) 25%  (twenty-five  percent),  after
 adjustment in accordance with article 202 of Law no. 6.40476,  shall be allocated for
payment of mandatory dividends to all Shareholders, subject to the provisions of article 5§3
of these Bylaws.

Third Paragraph  After allocation in the manner provided
for in the preceding  paragraph,  the remaining  balance shall, upon proposal submitted
by the Board of Directors and approved by the  shareholders in General  Meeting,  be
allocated to a supplementary  reserve to support working  capital and for future
 appropriation  to the capital of the Company.  The amount of such reserve shall not
exceed the capital of the Company.

CHAPTER VII  SALE OF CONTROL

Art. 26  Alienation of shares that give Control Power to
the controlling  shareholder,  in a single  transaction or through successive
transactions,  shall be made  subject to a condition  precedent or condition  subsequent
 to the effect that the acquiror  undertake to realize,  within a period of no more than
90 (ninety) days from the date of  acquisition  of the shares,  a public offer to acquire
the shares  held by all other  shareholders  of the  Company,  so as to ensure that the
other  shareholders  of the COMPANY are given equal treatment to that given to the
shareholder that has alienated Control Power.

First Paragraph  There is a rebuttable presumption that
any person,  controlling  shareholder or group of persons under common control that holds
 shares  that give an absolute  majority  of the votes of the  shareholders  present at
the last three  General  Meetings of shareholders  of the Company have Control  Power,
 even though the person,  controlling  shareholder  or group of persons  under common
control does not hold shares representing a majority of the voting capital of the Company.

Second  Paragraph  The negotiation of shares between
 shareholders  that exercise Control Power,  even if such negotiation  results in
consolidation  of Control Power in a single  shareholder,  does not constitute a transfer
of Control Power and,  accordingly,  does not give rise to the obligations to carry out a
public offer within the terms of the introductory paragraph of this article.

Third  Paragraph  In the case of acquisition  of shares
by a third party from one or more  shareholders  that exercise  Control Power, the public
offer  referred to in the  introductory  paragraph of this article shall be required only
after the third party has acquired the number of shares necessary to exercise Control
Power.

Fourth  Paragraph   In the event that  Control  Power
over the  Company is  exercised  by more than one  shareholder,  the  obligation provided
for in the  introductory  paragraph of this article shall not be required if the acquiror
 comes to hold Control Power jointly with the other  shareholder(s)  that already
 exercised  Control Power,  but does not hold sufficient  votes to exercise  Control
Power alone.

Fifth  Paragraph  For the  purposes of  paragraphs  3 and
4 of this  article,  the number of shares  and/or  votes  necessary  for the exercise  of
 Control  Power  shall  be a number  equal  to the  special  majorities  for  adopting
 resolutions,  established  under a shareholders agreement filed at the headquarters of
the Company.

Art. 27  The public offer for  acquisition of shares
 referred to in article 26 of these Bylaws shall also be required  whenever there is an
assignment  for  consideration  of share  subscription  rights,  or other rights or
 instruments  in connection  with  securities convertible into shares issued by the
Company, that results in alienation of shares that confer Control Power over the Company.

Sole  Paragraph  The  determination  as to whether a
transfer of Control  Power has occurred  under the terms of this article shall be made on
the basis of the provisions of article 26§§2, 3, 4 and 5.

Art. 28  Subject to the sole paragraph of this article,
 the public offer for  acquisition  of shares  referred to in article 26 shall also be
required in the event of  alienation  of control over the  controlling  shareholder  of
the Company to a third  party.  In that event,  the  controlling  shareholder  shall be
obliged to declare to BOVESPA the value  attributed to the Company in  connection  with
alienation of Control Power over the Company and shall provide BOVESPA with documentation
to support the declared value.

Sole  Paragraph  The  determination  as to whether a
transfer of Control  Power has occurred  under the terms of this article shall be made on
the basis of the provisions of article 26§§2, 3, 4 and 5.

Art. 29  Any  shareholder  that holds  shares in the
 Company  and that  acquires  Control  Power over the  Company  through a private
contract for purchase of shares with the controlling  shareholder that owns shares that
represent  Control Power over the Company shall be obligated  to: (i) make a public offer
on the terms set out in article 26 of these  Bylaws,  and (ii) pay to any  shareholders
 from whom the acquiror of Control  Power had  purchased  shares on the stock  exchange
 within the 6 (six) months  prior to  acquisition  of shares  representing  Control Power
over the Company,  the difference  between the price paid to the  controlling
 shareholder who held Control  Power over the Company and the amount  paid on the stock
 exchange  for shares in the  Company  during the said  period,  duly adjusted.

Sole  Paragraph  The  determination  as to whether a
transfer of Control  Power has occurred  under the terms of this article shall be made on
the basis of the provisions of article 26§§2, 3, 4 and 5.

CHAPTER VIII  CANCELLATION OF REGISTRATION AS A
                                                        PUBLICLY-TRADED COMPANY

Art. 30  Without  prejudice to applicable  provisions
under  legislation and regulations,  cancellation of registration of the Company as a
publicly-traded  company with the Brazilian  Securities  Commission [Comissão de Valores
Mobiliários  CVM] shall be preceded by a public  offer for  acquisition  of shares at a
price that is no less than the value of the Company and its shares as  determined  in an
valuation  report  prepared by a specialized  firm, on the basis of a recognized
 methodology  or other criteria that may be defined by the CVM.

Sole Paragraph  Cancellation  shall be preceded by a
specific  resolution to that effect adopted by the  shareholders in Extraordinary General
Meeting.

Art. 31  In the event that the valuation report referred
to in article 30 is not ready at the time the  Extraordinary  General Meeting of
 shareholders  is convened to consider  cancellation  of registration  as a
 publicly-traded  company,  the shareholder  which holds Control  Power  shall  inform
the meeting of the amount per share or per lot of one  thousand  shares that it will pay
under the public offer.

First Paragraph  The public offer shall be subject to the
condition that the value  determined in the valuation  report referred to in article 30
is not greater than the amount  disclosed by the  shareholder  which holds Control  Power
at the meeting  referred to in the introductory paragraph of this article.

Second  Paragraph   If the value of the shares
 determined  in the  valuation  report is  greater  than the  amount  disclosed  by the
controlling  shareholder,  the resolution  referred to in the introductory  paragraph of
this article shall  automatically be cancelled and this fact shall be given broad
 disclosure in the market,  unless the shareholder that holds Control Power expressly
agrees to make the public offer at the price determined in the valuation report.

Art. 32  The valuation  report shall be prepared by a
specialized  firm that has proven  experience and is independent with respect to the
decision-making  powers of the Company,  the members of its management and/or the
controlling  shareholder,  in addition to meeting all other legal  requirements.  The
costs incurred in connection  with the  preparation of the report shall be borne by the
shareholder that holds Control Power referred to in the introductory paragraph of this
article.

CHAPTER IX  EXITING LEVEL 2

Art.  33  Should the  shareholders  in  Extraordinary
 General  Meeting  approve  the exit of the Company  from  BOVESPA  Level 2, the
controlling  shareholder  of the Company  shall make a public offer to acquire  shares
for the amount  determined  in  accordance  with article 30 of these Bylaws (i) within a
period of 90 (ninety)  days,  in the event that the Company exits Level 2 so that shares
in the Company  may be traded  outside  Level 2 and (ii)  within a period of 120 (one
 hundred  and twenty  days) from the date of the General Meeting of shareholders at which
a transaction for corporate  reorganization  is approved,  if the shares in the company
resulting from such reorganization are not admitted for trading on Level 2.

First Paragraph  The public offer provided for under this
article shall follow, to the extent  applicable,  the rules for public offer upon
cancellation of registration as a publicly-traded company with the CVM established under
articles 30, 31 and 32 of these Bylaws.

Second  Paragraph  The  controlling  shareholder  shall
be relieved of the obligation to make the public offer provided for under this article in
the event that the  Companys  exit from  Level 2 results  from the  listing  of shares
in the  Company  for  trading on the BOVESPA New Market.

CHAPTER X  LIQUIDATION

Art. 34  The Company shall enter into  liquidation in the
 circumstances  contemplated by law or on resolution of the  shareholders in General
Meeting, and shall be extinguished upon termination of liquidation.

Sole Paragraph  The Board of Directors  shall appoint the
 liquidator,  establish the form of, and directives for, the liquidation and fix the
liquidators fees.

CHAPTER XI  ARBITRATION

Art. 35  Disputes and controversies  arising out of or in
connection with these Bylaws, the Level 2 Regulation,  the provisions of Law no.
 6.404/76,  rules issued by the National  Monetary  Council,  the Central Bank of Brazil
or the  Brazilian  Securities  Commission, BOVESPA  regulations  and other rules
 applicable to the  functioning of the capital market in general shall be resolved by
arbitration conducted in accordance with the regulations of Market Arbitration Chamber
created by BOVESPA.

CHAPTER XII  GENERAL PROVISIONS

Art. 36  Dividends  that have not been received or
claimed  within three years from the date on which they were made  available to the
shareholder shall revert to the Company.

Art. 37  Shareholders  agreements that have been duly
filed at the  headquarters of the Company and that contain terms and conditions for the
alienation of shares in the Company,  govern  preemptive  rights or regulate the exercise
of shareholders  voting rights shall be complied with by the Company and the members of
its management.

Sole Paragraph  The  obligations and liabilities  under
such  agreements  shall be opposable  against third parties from the time that such
agreements are duly registered on the registers of the Company and share  certificates,
 if issued.  The members of the management of the Company shall endeavor to ensure
 compliance  with such  agreements and the chairman of General  Meetings of  shareholders
or of meetings of the Board of Directors,  as the case may be, shall declare  invalid any
vote cast by a shareholder or director  contrary to the terms of such  agreements.  In
cases of absence of, or abstention by,  shareholders or directors,  the injured
 shareholders or the directors elected by the injured shareholders may cast the votes
pertaining to the absent or abstaining  shareholders or directors,  as the case may be,
within the terms of art. 118§§8 and 9 of Law no. 6.404/76.

Art. 38  The Company  shall  comply with the  procedures
 under its  internal  self-regulation  policy in  connection  with trading of securities
issued by the Company.

Art. 39  The issuing of founders shares [partes
beneficiaries] by the Company is expressly prohibited.

São Paulo, October 30th, 2002.

Marco Aurélio dos Anjos Ferreira Chairman

Arnaldo Cordeiro Pacheco de Medeiros Montenegro Secretary



EXHIBIT 2.2

CONFORMED COPY

---

NET SUL TV A CABO E PARTICIPAÇÕES LTDA., as Issuer,

THE CHASE MANHATTAN BANK, NEW YORK as Registrar and Paying Agent,

THE CHASE MANHATTAN
BANK, LONDON BRANCH as Transfer Agent,
Calculation Agent and Paying Agent,

CHASE MANHATTAN BANK
LUXEMBOURG, S.A.as Paying Agent,

CHASE TRUST BANK as Principal Paying Agent,

TV A CABO DE
CAPÃO DA CANOA LTDA.

HORIZONTE SUL
COMUNICAÇÕES LTDA.

DR  EMPRESA DE
DISTRIBUIÇÃO E RECEPÇÃO DE TV LTDA.

DR MULTI CABO SANTA
MARIA LTDA.

TV CABO DO SUL LTDA.

ANTENAS
COMUNITÁRIAS SUL BRASIL LTDA.

TV CABO CRICIÚMA
LTDA.

CHAPECÓ EMPRESA
DE TV POR ASSINATURA LTDA.

MULTICANAL
FLORIANÓPOLIS S.A.

HTV
COMUNICAÇÕES LTDA.

TVC DO PARANÁ
DISTRIBUIDORA DE SINAIS DE TELEVISÃO LTDA.

ANTENAS
COMUNITÁRIAS BRASILEIRAS LTDA.

TV CABO DO NORTE DO
PARANÁ COMERCIAL LTDA.

VTV TELEVISÃO A
CABO LTDA. and TV A CABO SERRANA LTDA., as Guarantors

+ and +

THE CHASE MANHATTAN BANK, NEW YORK as Trustee

INDENTURE

Dated as of October
31, 1997

U.S.$48,000,000 Series
A Floating Rate Notes due 2005

U.S.$11,000,000 Series B
Floating Rate Notes due 2005

U.S.$21,000,000 Series
C Floating Rate Notes due 2005

---

TABLE OF CONTENTS

ARTICLE 1

DEFINITIONS AND OTHER
PROVISIONS OF GENERAL APPLICATION

|             |                                                                            | Page
|------------ | -------------------------------------------------------------------------- | ----
|SECTION 1.1  | Definitions                                                                | 2   
|SECTION 1.2  | Compliance Certificates and Opinions                                       | 26  
|SECTION 1.3  | Form of Documents Delivered to Trustee                                     | 27  
|SECTION 1.4  | Acts of Noteholders; Record Dates                                          | 27  
|SECTION 1.5  | Notices, Etc. to Trustee, Company and the Guarantor                        | 29  
|SECTION 1.6  | Notice to Noteholders; Waiver                                              | 30  
|SECTION 1.7  | Effect of Headings and Table of Contents                                   | 31  
|SECTION 1.8  | Successors and Assigns                                                     | 31  
|SECTION 1.9  | Separability Clause                                                        | 31  
|SECTION 1.10 | Benefits of Indenture                                                      | 31  
|SECTION 1.11 | Governing Law                                                              | 31  
|SECTION 1.12 | Legal Holidays                                                             | 31  
|SECTION 1.13 | Submission to Jurisdiction; Agent for Service; Waiver of Immunities        | 32  
|SECTION 1.14 | Currency of Account; Conversion of Currency: Foreign Exchange Restrictions | 33  

ARTICLE 2

FORMS OF NOTES

|SECTION 2.1 | Forms Generally                                 | 36
|----------- | ----------------------------------------------- | --
|SECTION 2.2 | Form of Face of Note                            | 37
|SECTION 2.3 | Form of Reverse of Note                         | 40
|SECTION 2.4 | Form of Trustee's Certificate of Authentication | 43

ARTICLE 3

THE NOTES

|SECTION 3.1  | Title and Terms                                                           | 44
|------------ | ------------------------------------------------------------------------- | --
|SECTION 3.2  | Denominations                                                             | 44
|SECTION 3.3  | Execution, Authentication, Delivery and Dating                            | 44
|SECTION 3.4  | Global Notes; Registration, Registration of Transfer and Exchange         | 45
|SECTION 3.5  | Mutilated, Destroyed, Lost and Stolen Notes                               | 49
|SECTION 3.6  | Computation and Payment of Interest                                       | 50
|SECTION 3.7  | Persons Deemed Owners                                                     | 52
|SECTION 3.8  | Cancellation                                                              | 52
|SECTION 3.9  | CUSIP and ISIN Numbers                                                    | 52
|SECTION 3.10 | Paying Agents; Discharge of Payment Obligations; Indemnity of Noteholders | 53

ARTICLE 4

SATISFACTION AND
DISCHARGE

|SECTION 4.1 | Satisfaction and Discharge of Indenture | 55
|----------- | --------------------------------------- | --
|SECTION 4.2 | Application of Trust Money              | 56
|SECTION 4.3 | Set-Off; Sharing of Payments            | 56

ARTICLE 5

DEFAULTS AND REMEDIES

|SECTION 5.1  | Events of Default                                                    | 58
|------------ | -------------------------------------------------------------------- | --
|SECTION 5.2  | Collection of Indebtedness and Suits for Enforcement by Trustee      | 61
|SECTION 5.3  | Trustee May File Proofs of Claim                                     | 62
|SECTION 5.4  | Trustee May Enforce Claims Without Possession of Notes               | 63
|SECTION 5.5  | Application of Money Collected                                       | 63
|SECTION 5.6  | Limitation on Suits                                                  | 63
|SECTION 5.7  | Unconditional Right of Noteholders to Receive Principal and Interest | 64
|SECTION 5.8  | Restoration of Rights and Remedies                                   | 64
|SECTION 5.9  | Rights and Remedies Cumulative                                       | 64
|SECTION 5.10 | Delay or Omission Not Waiver                                         | 65
|SECTION 5.11 | Control by Noteholders                                               | 65
|SECTION 5.12 | Waiver of Past Defaults                                              | 65
|SECTION 5.13 | Undertaking for Costs                                                | 66
|SECTION 5.14 | Waiver of Stay, Extension or Usury Laws                              | 66

ARTICLE 6

THE TRUSTEE

|SECTION 6.1  | Certain Duties and Responsibilities                         | 67
|------------ | ----------------------------------------------------------- | --
|SECTION 6.2  | Notice of Defaults                                          | 68
|SECTION 6.3  | Certain Rights of Trustee                                   | 68
|SECTION 6.4  | Not Responsible for Recitals or Issuance of Notes           | 69
|SECTION 6.5  | May Hold Notes                                              | 69
|SECTION 6.6  | Money Held in Trust                                         | 69
|SECTION 6.7  | Reimbursement and Indemnification                           | 70
|SECTION 6.8  | Disqualification; Conflicting Interests                     | 70
|SECTION 6.9  | Corporate Trustee Required; Eligibility                     | 71
|SECTION 6.10 | Resignation and Removal; Appointment of Successor           | 71
|SECTION 6.11 | Acceptance of Appointment by Successor                      | 72
|SECTION 6.12 | Merger, Conversion, Consolidation or Succession to Business | 72
|SECTION 6.13 | Preferential Collection of Claims Against the Company       | 73
|SECTION 6.14 | Appointment of Authenticating Agent                         | 76

ARTICLE 7

NOTEHOLDERS, LISTS AND
REPORTS BY TRUSTEE AND THE COMPANY

|SECTION 7.1 | Company to Furnish Trustee Names and Addresses of Noteholders | 79
|----------- | ------------------------------------------------------------- | --
|SECTION 7.2 | Preservation of Information; Communications to Noteholders    | 79
|SECTION 7.3 | Reports by Trustee                                            | 80

ARTICLE 8

MERGER, CONSOLIDATION, ETC.

|SECTION 8.1 | Mergers, Consolidations and Certain Sales of Assets | 82
|----------- | --------------------------------------------------- | --
|SECTION 8.2 | Successor Substituted                               | 83

ARTICLE 9

SUPPLEMENTAL INDENTURES

|SECTION 9.1 | Supplemental Indentures Without Consent of Noteholders | 84
|----------- | ------------------------------------------------------ | --
|SECTION 9.2 | Supplemental Indentures with Consent of Noteholders    | 84
|SECTION 9.3 | Execution of Supplemental Indentures                   | 85
|SECTION 9.4 | Effect of Supplemental Indentures                      | 85
|SECTION 9.5 | Reference in Notes to Supplemental Indentures          | 85

ARTICLE 10

COVENANTS

|SECTION 10.1  | Payment of Principal and Interest                                  | 87
|------------- | ------------------------------------------------------------------ | --
|SECTION 10.2  | Maintenance of Office or Agency                                    | 87
|SECTION 10.3  | Money for Note Payments to Be Held in Trust                        | 87
|SECTION 10.4  | Maintenance of Financial Condition                                 | 88
|SECTION 10.5  | Existence                                                          | 89
|SECTION 10.6  | Maintenance of Licenses                                            | 89
|SECTION 10.7  | Maintenance of Properties and Insurance                            | 89
|SECTION 10.8  | Provision of Financial Information                                 | 90
|SECTION 10.9  | Compliance Certificate                                             | 90
|SECTION 10.10 | Payment of Taxes and Other Liabilities                             | 91
|SECTION 10.11 | Waiver of Certain Covenants                                        | 91
|SECTION 10.12 | Compliance with Laws                                               | 91
|SECTION 10.13 | Maintenance of Books and Records                                   | 92
|SECTION 10.14 | Limitation on Indebtedness                                         | 92
|SECTION 10.15 | Limitation on Restricted and Other Payments                        | 93
|SECTION 10.16 | Restriction on Payments on Specified Subordinated Indebtedness     | 93
|SECTION 10.17 | Limitation on Liens                                                | 94
|SECTION 10.18 | Limitation on Sale and Leaseback Transactions                      | 94
|SECTION 10.19 | Limitation on Asset Dispositions                                   | 94
|SECTION 10.20 | Limitation on Issuances and Sales of Capital Stock of Subsidiaries | 95
|SECTION 10.21 | Limitation on Transactions with Affiliates                         | 95
|SECTION 10.22 | Limitation on Lines of Business                                    | 96
|SECTION 10.23 | Limitation on Change of Control                                    | 96
|SECTION 10.24 | Payments for Consent Prohibited                                    | 98
|SECTION 10.25 | Use of Proceeds                                                    | 98
|SECTION 10.26 | Additional Subsidiaries as Guarantors                              | 98
|SECTION 10.27 | Consularization and Registration                                   | 99
|SECTION 10.28 | Notice of Dissolution, etc. of any Member of the Net Sul Group     | 99

ARTICLE 11

REPRESENTATIONS AND
WARRANTIES

|SECTION 11.1 | Representations and Warranties of the Company and the Guarantors | 100
|------------ | ---------------------------------------------------------------- | ---

ARTICLE 12

TAXES AND INCREASED COSTS

|SECTION 12.1 | Payment of Additional Noteholder Costs | 108
|------------ | -------------------------------------- | ---
|SECTION 12.2 | Payment of Covered Taxes               | 109

ARTICLE 13

REDEMPTION OF NOTES

|SECTION 13.1 | Redemption For Tax Reasons                      | 112
|------------ | ----------------------------------------------- | ---
|SECTION 13.2 | Early Redemption at Noteholder's Option         | 112
|SECTION 13.3 | Early Redemption at Company's Option            | 113
|SECTION 13.4 | Redemption Resulting From Noteholder Illegality | 113
|SECTION 13.5 | Applicability of Article                        | 113
|SECTION 13.6 | Election to Redeem                              | 113
|SECTION 13.7 | Notice of Redemption                            | 114
|SECTION 13.8 | Deposit of Redemption Price                     | 114
|SECTION 13.9 | Notes Payable on Redemption Date                | 114

ARTICLE 14

GUARANTEE

|SECTION 14.1 | Guarantee                                                                                           | 116
|------------ | --------------------------------------------------------------------------------------------------- | ---
|SECTION 14.2 | Delivery of the Guarantee                                                                           | 118
|SECTION 14.3 | Guarantors May Consolidate, Etc., on Certain Terms                                                  | 118
|SECTION 14.4 | Release of Guarantor                                                                                | 118
|             |                                                                                                     |    
|EXHIBIT A    | FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OFRESTRICTED GLOBAL NOTE TO REGULATION S GLOBAL NOTE | A-1
|EXHIBIT B    | FORM OF PUT NOTICE                                                                                  | B-1
|EXHIBIT C    | FORM OF SUBORDINATION AGREEMENT FOR SPECIFIED SHORTTERM INDEBTEDNESS                                | C-1

INDENTURE , dated as of October
31, 1997, among  NET SUL TV A CABO E PARTICIPAÇÕES LTDA. , a
corporation duly organized and existing under the laws of the Federative Republic of
Brazil (the  Company ), having its principal office at Avenida
Érico Veríssimo, 400, 90160-180 Porto Alegre+RS, Brazil,  TV A CABO DE
CAPÃO DA CANOA LTDA., HORIZONTE SUL COMUNICAÇÕES LTDA., DR 
EMPRESA DE DISTRIBUIÇÃO E RECEPÇÃO DE TV LTDA., DR MULTICABO
SANTA MARIA LTDA., TV CABO DO SUL LTDA., ANTENAS COMUNITÁRIAS SUL BRASIL LTDA., TV
CABO CRICIÚMA LTDA., CHAPECÓ EMPRESA DE TV POR ASSINATURA LTDA., MULTICANAL
FLORIANÓPOLIS S.A., HTV COMUNICAÇÕES LTDA., TVC DO PARANÁ
DISTRIBUIDORA DE SINAIS DE TELEVISÃO LTDA., ANTENAS COMUNITÁRIAS BRASILEIRAS
LTDA., TV CABO DO NORTE DO PARANÁ COMERCIAL LTDA., VTV TELEVISÃO A CABO
LTDA.  and  TV A CABO SERRANA LTDA. , each a corporation incorporated under the
laws of the Federative Republic of Brazil (each a  Guarantor  and,
collectively, the  Guarantors ),  THE CHASE MANHATTAN BANK, NEW
YORK , a New York banking corporation, as Trustee (the  Trustee ),
 THE CHASE MANHATTAN BANK, NEW YORK  as Registrar and Paying Agent,  THE CHASE
MANHATTAN BANK, LONDON BRANCH  as Transfer Agent, Calculation Agent and Paying Agent,
 CHASE MANHATTAN BANK LUXEMBOURG, S.A.  as Paying Agent, and  CHASE TRUST BANK
 as Principal Paying Agent.

RECITALS OF THE
COMPANY AND THE GUARANTORS

The Company has duly authorized the
issue of U.S.$48,000,000 Series A Floating Rate Notes due 2005, U.S.$11,000,000 Series B
Floating Rate Notes due 2005 and U.S.$21,000,000 Series C Floating Rate Notes due 2005
(the  Notes ) of substantially the tenor and amount hereinafter set
forth, and to provide therefor the Company has duly authorized the execution and delivery
of this Indenture.

The Guarantors have duly authorized
the execution and delivery of this Indenture to provide for their joint and several
Guarantee with respect to the Notes as set forth in this Indenture. All things necessary
(i) to make the Notes, when executed by the Company and authenticated and delivered
hereunder and duly issued by the Company, the valid obligations of the Company, and (ii)
to make the Guarantee, which when executed by the Guarantors and endorsed on the Notes
executed, authenticated and delivered hereunder, the valid obligations of each of the
Guarantors and (iii) to make this Indenture a valid agreement of the Company and the
Guarantors, in accordance with its terms, have been done.

NOW, THEREFORE, THIS
INDENTURE WITNESSETH:

For and in consideration of the
premises and the purchase of the Notes by the Noteholders thereof, it is mutually agreed,
for the equal and proportionate benefit of all Noteholders, as follows:

ARTICLE 1

DEFINITIONS AND OTHER
PROVISIONS OF GENERAL APPLICATION

SECTION 1.1 Definitions

For all purposes of this Indenture,
except as otherwise expressly provided herein or unless the context otherwise requires:

(1)    
           the terms defined in this Article have the meanings assigned to them in this
          Article and include the plural as well as the singular;

(2)    
           all other terms used herein that are defined in the Trust Indenture Act,
          either directly or by reference therein, have the meanings assigned to them
          therein;

(3)    
           all accounting terms not otherwise defined herein have the meanings assigned
          to them in accordance with Brazilian GAAP, and except as otherwise expressly
          provided herein, the term  Brazilian GAAP , with respect to any
          computation required or permitted hereunder, shall mean Brazilian GAAP as is
          generally accepted at the date of such computation;

(4)    
           calculations of ratios and other financial data with respect to quarters
          ending prior to July 1, 1997, shall be derived from (i) the pro-forma Special
          Purpose Combined Financial Statements of Rede Net Sul at and for the three
          months ended June 30, 1997 (unaudited), stated in constant Reais of June 30,
          1997, and (ii) the individual and consolidated financial statements of HTV
          Comunicações Ltda. at and for the three months ended June 30, 1997
          (unaudited), stated in constant Reais of June 30, 1997 (collectively, the
           Combined Financial Statements );

(5)    
           the words  herein ,  hereof  and
           hereunder  and other words of similar import refer to this
          Indenture as a whole and not to any particular Article, Section or other
          subdivision;

(6)    
           all references in this Indenture, the Notes and the Guarantee to interest in
          respect of any Note shall be deemed to include all Additional Amounts in respect
          thereof, if any, unless the context otherwise requires; all references in this
          Indenture, the Notes and the Guarantee to principal in respect of any Note shall
          be deemed to include any Additional Amounts, Breakage Costs and/or Redemption
          Price in respect thereof (and all such references to the Stated Maturity of the
          principal in respect of any Note shall be deemed to include the Redemption Date
          with respect to any such Redemption Price); express mention of the payment of
          Additional Amounts, Breakage Costs and or Redemption Price in any provision
          hereof or of the Notes or the Guarantee shall not be construed, without more, as
          excluding reference to Additional Amounts and/or Breakage Costs in those
          provisions hereof or thereof where such express mention is not made and

(7)    
           all references in this Indenture to  $" ,
           U.S.$" ,  U.S. dollars ,
           dollars  or  United States dollars  shall
          refer to the lawful currency of the United States of America.

Acquired Indebtedness
 means, with respect to any specified Person, (i) Indebtedness of any other Person
existing at the time such Person merges with or into or consolidates with or becomes a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien encumbering
any asset acquired by such specified Person, which Indebtedness was not incurred in
anticipation of, and was outstanding prior to, such merger, consolidation or acquisition.

Act , when used
with respect to any Noteholder, has the meaning specified in Section 1.4.

Additional Amounts  has
the meaning specified in Section 12.2.

Affiliate  of any
Person means any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person. For the purposes of this definition,
 control , when used with respect to any Person, means the power, to
direct or cause the direction of the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or otherwise;
and the terms  controlling  and  controlled  have
meanings correlative to the foregoing. Notwithstanding the foregoing, any entity which is
a joint venture partner or a co-investor in a business with the Company or a Subsidiary of
the Company shall not be deemed to be an Affiliate solely by reason of such joint venture
or business relationship.

Agent Member  means
any member of, or participant in, the Depositary.

Applicable Interest
Rate  means for a series of Notes and an Interest Period, a per annum rate equal
to the aggregate of LIBOR plus the Applicable Margin with respect to such series of Notes
for such Interest Period.

Applicable Margin
 means, for the first Interest Period, 2.375%, 2.625% and 2.875% for the Series A
Notes, Series B Notes and Series C Notes, respectively. For each Interest Period
thereafter, the Applicable Margin shall be as set forth in the following grid, based on
the ratio of Consolidated Total Senior Indebtedness as per the quarterly or annual balance
sheet most recently available prior to the first day of such Interest Period to
Consolidated Adjusted EBITDA for the period of four fiscal quarters ending on the date of
such balance sheet:

|Consolidated Total    | Series A | Series B | Series C
|--------------------- | -------- | -------- | --------
|Senior Indebtedness/  | Notes    | Notes    | Notes   
|Consolidated Adjusted |          |          |         
|EBITDA                |          |          |         
|4.5 and above         | 2.750    | 3.000    | 3.250%  
|4.0 to 4.5            | 2.500    | 2.750    | 3.000%  
|3.5 to 4.0            | 2.375    | 2.625    | 2.875%  
|3.0 to 3.5            | 2.250    | 2.500    | 2.750%  
|2.5 to 3.0            | 2.125    | 2.375    | 2.625%  
|2.0 to 2.5            | 2.000    | 2.250    | 2.500%  
|Less than 2.0         | 1.875    | 2.125    | 2.375%  

For the purposes of expressing the
ranges of the ratio of Consolidated Total Senior Indebtedness to Consolidated Adjusted
EBITDA in this definition of Applicable Margin, to shall mean up to but
not including.

Applicable Procedures
 has the meaning set forth in Section 3.4(c)(2).

Applicable Purchasing
Office  means, for each Noteholder, the Purchasing Office of such
Noteholder (or of an affiliate of such Noteholder) designated on the signature pages of
the Purchase Agreement or other agreement pursuant to which such Noteholder acquired such
Notes, or such other office of such Noteholder (or of an affiliate of such Noteholder) as
such Noteholder may from time to time specify to the Trustee and the Company as the office
by which its purchase of Notes is to be made and through which its interest in the Notes
is maintained.

Asset Disposition
 by any Person means any transfer, conveyance, sale, lease or other disposition by such
Person or any of its Subsidiaries (including a consolidation or merger or other sale of
any such Subsidiary with, into or to another Person in a transaction in which such
Subsidiary ceases to be a Subsidiary of the specified Person, but excluding a disposition
by a Subsidiary of such Person to such Person or a Wholly Owned Subsidiary of such Person
or by such Person to a Wholly Owned Subsidiary of such Person) of (i) shares of Capital
Stock, quotas or other ownership interests of a Subsidiary of such Person, or (ii) other
assets or rights of such Person or any of its Subsidiaries other than (A) in the ordinary
course of business or (B) that constitutes a Restricted Payment which is permitted under
Section 10.15.

Attributable Value
 means, as to any particular lease under which any person is at the time liable other
than a Capital Lease Obligation, and at any date as of which the amount thereof is to be
determined, the total net amount of rent required to be paid by such Person under such
lease during the initial term thereof as determined in accordance with Brazilian GAAP,
discounted from the last date of such initial term to the date of determination at a rate
per annum equal to the discount rate which would be applicable to a Capital Lease
Obligation with like term in accordance with Brazilian GAAP. The net amount of rent
required to be paid under any such lease for any such period shall be the aggregate amount
of rent payable by the lessee with respect to such period after excluding amounts required
to be paid on account of insurance, taxes, assessments, utility, operating and labor costs
and similar charges. In the case of any lease which is terminable by the lessee upon the
payment of a penalty, such net amount shall also include the lesser of the amount of such
penalty (in which case no rent shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated) or the rent which would
otherwise be required to be paid if such lease is not so terminated. Attributable
Value means, as to a Capital Lease Obligation, the principal amount thereof.

Base Currency  has
the meaning set forth in Section 1.14(b).

Board of Directors
 means the Board of Directors of the Company or a Subsidiary, as the context requires,
or any committee thereof duly authorized to act on behalf of such Board of Directors.

Board Resolution
 means a copy of a duly adopted resolution of the Board of Directors in full force and
effect at the time of determination and certified by the Secretary or Assistant Secretary
of the Company (or another Officer of the Company performing corporate secretarial
functions for the Company) to have been duly adopted by the Board of Directors and to be
in full force and effect on the date of such certification and delivered to the Trustee.

Brazil  means the
Federative Republic of Brazil and any ministry, department, authority (including the
Central Bank) or statutory corporation or other entity (including a trust), owned or
controlled directly or indirectly by the Federative Republic of Brazil or any of the
foregoing.

Brazilian GAAP
 means accounting principles generally accepted in Brazil from time to time.

Breakage Costs  means
such amount or amounts (if any), payable by the Company to the Trustee for the account of
each Noteholder, upon the request of such Noteholder through the Trustee, sufficient (in
the reasonable opinion of such Noteholder) to compensate it for any loss, cost or expense
(excluding loss of anticipated profits) that such Noteholder reasonably determines results
from or is based on the payment for whatever reason of the Notes held by such Noteholder
on a date other than an Interest Payment Date. Each Noteholder will furnish to the Company
a certificate setting forth the basis and amount of each request by such Noteholder for
Breakage Costs, which certificate shall provide reasonable detail as to the calculation of
such loss, cost or expense and shall be conclusive and binding for all purposes, absent
manifest error,  provided  that the determination of Breakage Costs is made on a
reasonable basis.

Business Day  means
any day (other than a Saturday or a Sunday) on which banks are open for business in the
city where the Registrar has its specified office, New York City, and the city of
São Paulo, Brazil, and, in the case of presentation and/or surrender of any Note,
in the place in which such Note is to be presented or surrendered.

Call Settlement Date
 has the meaning set forth in Section 13.3.

Call Settlement Price
 has the meaning set forth in Section 13.3.

Capital Expenditure
 means any expenditure for equipment, fixed assets, real property or improvements or
for replacements or substitutions therefor or additions thereto that have a useful life of
more than one year.

Capital Lease  is
defined in the definition of Capital Lease Obligation.

Capital Lease
Obligation  of any Person means the obligation to pay rent or other payment
amounts under a lease of (or other Indebtedness arrangements conveying the right to use)
real or personal property of such Person which is required to be classified and accounted
for as a capital lease or a liability set forth on a balance sheet of such Person in
accordance with Brazilian GAAP (a  Capital Lease ). The stated maturity
of such obligation shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease may be terminated by the
lessee without payment of a penalty. The principal amount of such obligation shall be the
capitalized amount thereof that would appear on the face of a balance sheet of such Person
in accordance with Brazilian GAAP.

Capital Stock  of
any Person means any and all shares, interests, participations or other equivalents
(however designated) of corporate stock or other equity participations, including quotas
in a Brazilian limited liability quota company ( limitada ) or partnership interests,
whether general or limited, of such Person.

Cash Equivalents
 means (i) any evidence of Indebtedness with a maturity of 365 days or less issued or
directly and fully guaranteed or insured by the Federative Republic of Brazil or the
United States of America or any agency or instrumentality thereof ( provided  that
the full faith and credit of the Federative Republic of Brazil or the United States of
America, as the case may be, is pledged in support thereof or such Indebtedness
constitutes a general obligation of it); (ii) deposits, certificates of deposit or
acceptances with a maturity of 365 days or less of any institution which is a Brazilian
regulated bank or a member of the Federal Reserve System having combined capital and
surplus and undivided profits (or any similar capital concept) of not less than U.S.$100.0
million (or, to the extent non-U.S. dollar denominated, the U.S. Dollar Equivalent of such
amount) at the time of deposit; (iii) commercial paper with a maturity of 365 days or less
issued by a corporation (other than an Affiliate of the Company) incorporated or organized
under the laws of the Federative Republic of Brazil or any jurisdiction thereof or the
United States or any state thereof or the District of Columbia and rated at least
A-1 by S&P or P-1 by Moodys or their respective
Brazilian affiliates; (iv) investments with a maturity of 365 days or less of any person
that is fully and unconditionally guaranteed by a bank referred to in clause (ii); and (v)
repurchase agreements and reverse repurchase agreements relating to marketable direct
obligations issued or unconditionally guaranteed by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United States
Government, in each case maturing within one year from the date of acquisition.

CEDEL  means Cedel
Bank, société anonyme (or any successor securities clearing agency).

Central Bank  means
the Central Bank of Brazil  (Banco Central do Brasil)  or any successor entity.

Certificate of
Registration  is defined in Section 10.27.

Change of Control
 shall mean any event or transaction or series of events or transactions by which RBS
Participações S.A. and its Affiliates together shall cease to control the
Issuer.

Combined Financial
Statements  is defined in introductory paragraph (4) of this Section 1.1.

Commission  means
the United States Securities and Exchange Commission.

Common Equity  of any
Person means Capital Stock of such Person that is not Disqualified Stock.

Company  means the
Person named as the  Company  in the first paragraph of this instrument
until a successor Person shall have become such pursuant to the applicable provisions of
this Indenture and thereafter  Company  shall mean such successor Person.
 Company Request  or  Company Order  means a written
request or order signed in the name of the Company by two Officers of the Company and
delivered to the Trustee.

Consolidated Adjusted
Available Cash Flow  for any period means the Consolidated Net Income of the
Company and its Subsidiaries for such period decreased by an amount equal to the aggregate
of (a) an amount equal to the higher of Consolidated Debt Service for such period and the
amount actually paid by the Company and its Subsidiaries in respect thereof for such
period (including any charge related to any premium or penalty paid in connection with
redeeming or retiring any Indebtedness prior to its stated maturity); plus (b) an amount
equal to Capital Expenditure for such period plus any amount in respect thereof which, by
the terms of any agreement or otherwise, the Company or any of its Subsidiaries is obliged
to expend; plus (c) any amounts due in respect of taxes for such period and not already
taken into account in determining Consolidated Net Income;  provided, however , that
there shall be excluded from the Consolidated Adjusted Available Cash Flow (if positive)
of any Subsidiary of the Company (calculated separately for such Subsidiary in the same
manner as provided above for the Company) that is subject to a restriction which prevents
the payment of dividends or the making of distributions to the Company or another
Subsidiary of the Company to the extent of such restriction.  Consolidated
Adjusted EBITDA  for any period, means the Consolidated Net Income of the Company
and its Subsidiaries for such period (but deducting therefrom any interest income)
increased by the sum of the following to the extent deducted in calculating such
Consolidated Net Income: (i) Consolidated Adjusted Gross Interest Expense of the Company
and its Subsidiaries for such period, plus (ii) Consolidated Income Tax Expense of the
Company and its Subsidiaries for such period, plus (iii) the consolidated depreciation and
amortization expense included in the same income statement of the Company and its
Subsidiaries for such period determined on a consolidated basis in accordance with
Brazilian GAAP, plus, (iv) any charge related to any premium or penalty paid in connection
with redeeming or retiring any Indebtedness prior to its stated maturity;  provided,
however , that (A) there shall be excluded therefrom the Consolidated Adjusted EBITDA
(if positive) of any Subsidiary of the Company (calculated separately for such Subsidiary
in the same manner as provided above for the Company) that is subject to a restriction
which prevents the payment of dividends or the making of distributions to the Company or
another Subsidiary of the Company to the extent of such restriction; and (B) in respect of
the period of four fiscal quarters ending on the last day of (a) the Companys second
fiscal quarter of 1997, it shall be equal to the product of Consolidated Adjusted EBITDA
for the period equal to the second fiscal quarter of 1997 multiplied by four; (b) the
Companys third fiscal quarter of 1997, it shall be equal to the product of
Consolidated Adjusted EBITDA for the period equal to the second and third fiscal quarters
of 1997 multiplied by two; and (c) the Companys fourth fiscal quarter of 1997, it
shall be equal to the product of Consolidated Adjusted EBITDA for a period equal to the
second, third and fourth fiscal quarters of 1997 multiplied by four and divided by three.

Consolidated Adjusted Gross
Intere st Expense  means for any period the consolidated gross interest expense
(including any additional amounts payable in respect of any such interest bearing
obligations) included in a consolidated income statement, without deducting therefrom any
interest income of the Company and its Subsidiaries for such period calculated on a
consolidated basis in accordance with Brazilian GAAP, including without limitation or
duplication (or, to the extent not so included, with the addition of), (i) the
amortization of Indebtedness discounts; (ii) any payments or fees with respect to letters
of credit, bankers acceptances or similar facilities; (iii) fees with respect to
interest rate swap or similar agreements or foreign currency hedge, exchange or similar
agreements; (iv) Preferred Stock dividends of the Company and its Subsidiaries declared
and paid or payable; (v) accrued Disqualified Stock dividends of the Company and its
Subsidiaries, whether or not declared or paid; (vi) interest on Indebtedness guaranteed by
the Company and its Subsidiaries; and (vii) the portion of any Capital Lease Obligation
paid during such period that is allocable to interest expense during such period as
determined on a consolidated basis in accordance with Brazilian GAAP, but excluding
therefrom any amounts payable in respect of interest on any Subordinated Indebtedness;
 provided  that in respect of the period of four fiscal quarters ending on the last
day of (a) the Companys second fiscal quarter of 1997, it shall be equal to the
product of Consolidated Adjusted Gross Interest Expense for the period equal to the second
fiscal quarter of 1997 multiplied by four, (b) the Companys third fiscal quarter of
1997, it shall be equal to the product of Consolidated Adjusted Gross Interest Expense for
the period equal to the second and third fiscal quarters multiplied by two and (c) the
Companys fourth fiscal quarter of 1997, it shall be equal to the product of
Consolidated Adjusted Gross Interest Expense for a period equal to the second, third and
fourth fiscal quarters multiplied by four and divided by three.

Consolidated Debt
Service  for any period means all amounts payable or paid by the Company and its
Subsidiaries in such period in respect of any Indebtedness.

Consolidated Income Tax
Expense  for any period means the consolidated provision for income taxes of the
Company and its Subsidiaries for such period calculated in accordance with Brazilian GAAP.

Consolidated Net
Income  for any period means the consolidated net income (or loss) of the Company
and its Subsidiaries for such period determined on a consolidated basis in accordance with
Brazilian GAAP;  provided  that there shall be excluded therefrom (a) the net income
(or loss) of any Person prior to the date it became a Subsidiary of the Company or is
merged into or consolidated with the Company or any of its Subsidiaries or such
Persons assets are acquired by the Company or any of its Subsidiaries except to the
extent of the amount of dividends or distributions actually paid by such Person to the
Company or a Subsidiary of the Company in respect of such period, (b) the net income (or
loss) of any Person that is not a Subsidiary of the Company except to the extent of the
amount of dividends or other distributions actually paid to the Company or a Subsidiary of
the Company by such Person during such period, (c) gains or losses on Asset Dispositions
by the Company or its Subsidiaries, (d) all extraordinary gains but not extraordinary
losses, (e) the cumulative effect of changes in accounting principles, (f) any gains but
not losses resulting from fluctuations in currency exchange rates, (g) any gain or loss
realized on the termination of any employee pension benefit plan, (h) net income from
discontinued operations and (i) the tax effect of any of the items described in clauses
(a) through (g) above;  provided, further,  that for purposes of any determination
pursuant to Section 10.15, there shall further be excluded therefrom the net income (but
not net loss) of any Subsidiary of the Company that is subject to a restriction which
prevents the payment of dividends or the making of distributions to the Company or another
Subsidiary of the Company to the extent of such restriction.

Consolidated Total
Indebtedness  at any time means the aggregate principal amount outstanding of
Indebtedness of the Company and its Subsidiaries on a consolidated basis.

Consolidated Total Senior
Indebtedness  at any time means Consolidated Total Indebtedness minus the
aggregate principal amounts outstanding of Subordinated Indebtedness.

Contract  of a
Person means any indenture, mortgage, deed of trust, loan agreement, note, lease, license,
concession agreement, authorization, permit, certificate or other agreement or instrument
to which such Person is a party, or to which any of such Persons assets or
properties are subject.

control  is defined
in the definition of Affiliate.

Corporate Trust Office  means
the principal corporate trust office of the Trustee at which at any particular time its
corporate trust business shall be administered, which office at the date of execution of
this Indenture is located at The Chase Manhattan Bank, Global Trust Services, 450 West
33rd Street, 15th Floor, New York, New York 10001-2697.

corporation  means
a corporation, association, company, limited liability company, joint-stock company or
business trust.

Covered Taxes  has
the meaning set forth in Section 12.2.

Cutoff Date  has
the meaning set forth in Section 1.4.

CVM  means the
Brazilian Securities Commission  (Comissão de Valores Mobiliários)  of
Brazil or any successor agency thereto.

Default  means any
event which is, or after the passing of time or the giving of notice or both would be, an
Event of Default.

Default Interest
 has the meaning specified in Section 3.6.

Default Rate  means
for a series of Notes, a per annum rate equal to the Applicable Rate plus one (1) percent.

Depositary  means
DTC for so long as it shall be a clearing agency registered under the Exchange Act, or
such successor as the Company shall designate from time to time in an Officers
Certificate delivered to the Trustee.

Determination Date
 means the day that is two London Business Days preceding a Reset Date.

Disinterested Board of
Directors Member  means, with respect to any transaction or series of
transactions, a member of the Board of Directors of the Company other than a Board of
Directors member who has any material direct or indirect financial interest in or with
respect to such transaction or series of transaction or is an Affiliate, beneficial holder
of 10% or more of any class of Capital Stock or officer, director, Board of Directors
member or employee of any person who has any direct or indirect financial interest in or
with respect to such transaction or series of transactions.

Disqualified Stock
 of any Person means any Capital Stock of such Person which, by its terms (or by the
terms of any security into which it is convertible or for which is exchangeable), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking
fund obligation or otherwise, or is redeemable at the option of such Person, any
Subsidiary of such Person or the holder thereof, in whole or in part, on or prior to the
final Stated Maturity of the Notes;  provided, however,  that any Preferred Stock
which would not constitute Disqualified Stock but for provisions thereof giving holders
thereof the right to require the Company to repurchase or redeem such Preferred Stock upon
the occurrence of a Change of Control occurring prior to the final Stated Maturity of the
Notes shall not constitute Disqualified Stock if the change of control provisions
applicable to such Preferred Stock are not more favorable to the holders of such Preferred
Stock than the provisions applicable to the Notes contained in Section 10.23 and such
Preferred Stock specifically provides that the Company will not repurchase or redeem any
such stock pursuant to such provisions prior to the Companys repurchase of such
Notes as are required to be repurchased pursuant to Section 10.23.

DTC means The
Depository Trust Company.

Enforceability
Exceptions  has the meaning specified in Section 11.1(g).

Environmental Laws
 means all Federal, state, district, local and foreign laws, rules, regulations,
ordinances, and consent decrees relating to health, safety, hazardous substances,
pollution and environmental matters, as now or at any time hereafter in effect, applicable
to the Companys or any Guarantors business and/or facilities (whether or not
owned by it) including all laws relating to emissions, discharges, releases or threatened
releases of pollutants, contamination, chemicals, or hazardous, toxic or dangerous
substances, materials or wastes into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata) or otherwise
relating to the generation, manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, chemicals, or
hazardous, toxic or dangerous substances, materials or wastes.

Euroclear  means
Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear
System.

Event of Default
 has the meaning specified in Section 5.1.

Exchange Act  means
the United States Securities Exchange Act of 1934, as amended (or any successor act) and
the rules and regulations thereunder.

Existing Accounting
Policies  means the present accounting policies and principles adopted by the
Company or a Guarantor, as the case may be, as at the Issue Date.

Expiration Date
 has the meaning set forth in the definition of Offer to Purchase.

Global Note  means,
as the context may require, any or all of the Regulation S Global Note(s) and the
Restricted Global Note(s).

Governmental Authority
 means any nation or government, any state or municipality or other political
subdivision thereof and any entity exercising executive, legislative, judicial, monetary,
regulatory (including, without limitation, any bank regulatory authority) or
administrative functions of or pertaining to government.

guarantee  by any
Person means any obligation, contingent or otherwise, of such Person guaranteeing, or
having the economic effect of guaranteeing, any Indebtedness of any other Person (the
primary obligor) in any manner, whether directly or indirectly, and including,
without limitation, any obligation of such Person, (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of such
Indebtedness, (ii) to purchase property, securities or services for the purpose of
assuring the holder of such Indebtedness of the payment of such Indebtedness, or (iii) to
maintain working capital, equity capital or other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness (and guaranteed, guaranteeing and
guarantor shall have meanings correlative to the foregoing);  provided ,
 however , that a guarantee by any Person shall not include endorsements by such
Person for collection or deposit, in either case, in the ordinary course of business.

Guarantee  means
the joint and several, unconditional and irrevocable guarantee by the Guarantors of the
due and punctual payment of the principal of and premium, if any, and interest (including
any Additional Amounts) on, the Notes.

Guarantor  means
each Subsidiary of the Company identified as such in the first paragraph of this Indenture
and each Subsidiary of the Company that becomes a Guarantor after the date hereof pursuant
to the terms of a supplemental indenture delivered in accordance with Section 10.26
hereof.

Incur  means, with
respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by
conversion, exchange or otherwise), assume, guarantee or otherwise become liable in
respect of such Indebtedness or other obligation including by acquisition of Subsidiaries
or the recording, as required pursuant to Brazilian GAAP or otherwise, of any such
Indebtedness or other obligation on the balance sheet of such Person (and
Incurrence, Incurred, Incurrable and
Incurring shall have meanings correlative to the foregoing);  provided ,
 however , that a change in Brazilian GAAP that results in an obligation of such
Person that exists at such time becoming Indebtedness shall not be deemed an Incurrence of
such Indebtedness and that neither the accrual of interest nor the accretion of original
issue discount shall be deemed an Incurrence of Indebtedness;  provided further ,
 however , that the Company or the Guarantors may elect to treat all or any portion
of a revolving credit debt commitment, whether or not then outstanding, of the Company, a
Guarantor or a Subsidiary as being incurred from and after any date beginning the date the
revolving credit commitment is extended to the Company, a Guarantor or a Subsidiary, by
furnishing notice thereof to the Trustee, and any borrowings or reborrowings by the
Company, a Guarantor or a Subsidiary under such commitment up to the amount of such
commitment designated by the Company or the Guarantors as Incurred shall not be deemed to
be new Incurrences of Indebtedness by the Company, such Guarantor or such Subsidiary.

Indebtedness  means
(without duplication), with respect to any Person, whether recourse is to all or a portion
of the assets of such Person and whether or not contingent, (i) every obligation of such
Person for money borrowed, (ii) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including any such obligations Incurred in
connection with the acquisition of property, assets or businesses, (iii) every
reimbursement obligation of such Person with respect to letters of credit, bankers
acceptances or similar facilities issued for the account of such Person, (iv) every
obligation of such Person issued or assumed as the deferred purchase price of property or
services (including securities repurchase agreements but excluding trade accounts payable
or accrued liabilities arising in the ordinary course of business which are not overdue or
which are being contested in good faith), (v) all Receivables Sales of such Person,
together with any obligation of such Person to pay any discount, interest, fees,
indemnities, penalties, recourse, expenses or other amounts in connection therewith, (vi)
every Capital Lease Obligation of such Person and all Attributable Values in respect of
Sale and Leaseback Transactions entered into by such Person, (vii) all obligations to
redeem Disqualified Stock issued by such Person, (viii) every obligation of such Person
with respect to Preferred Stock other than Qualified Preferred Stock, (ix) every
obligation under Interest Rate and Currency Protection Agreements of such Person, (x)
every obligation of the type referred to in Clauses (i) through (ix) of another Person and
all dividends of another Person the payment of which, in either case, such Person has
guaranteed, and (x) every obligation or guarantee of such obligation of the type referred
to in clauses (i) through (viii) of another Person and all dividends of another Person
where such Person has created a Lien over any of its property to secure such obligation or
a guarantee of such obligation or such dividend payment.

The  amount  or
 principal amount  of Indebtedness at any time of determination
represented by (a) any Indebtedness issued at a price that is less than the principal
amount at maturity thereof, shall be the amount of the liability in respect thereof
determined in accordance with Brazilian GAAP, (b) any Receivables Sale, shall be the
amount of the unrecovered capital or principal investment of the purchaser (other than the
Company, any Guarantor or any Wholly Owned Subsidiary of the Company or any such
Guarantor) thereof for which the Seller of the Receivables remains obligated, excluding
amounts representative of yield or interest earned on such investment, (c) any
Disqualified Stock, shall be the maximum fixed redemption or repurchase price in respect
thereof, (d) any Preferred Stock which is not Qualified Preferred Stock, shall be the
amount subscribed therefor, and (e) any Capital Lease Obligation, shall be determined in
accordance with the definition thereof. In no event shall Indebtedness include any
liability for taxes.

Indenture  means
this instrument as originally executed or as it may from time to time be supplemented or
amended by one or more indentures supplemental hereto entered into pursuant to the
applicable provisions hereof.

Independent Auditor
 shall have the meaning set forth in Section 10.8 hereof.

Interest Payment Date
 shall have the meaning set forth in Section 3.6 hereof.

Interest Period
 means, (i) with respect to an Interest Payment Date (other than with respect to the
Interest Payment Date in January 1998) the period beginning on (and including) the
immediately preceding Interest Payment Date and ending on (and including) the calendar day
immediately preceding such Interest Payment Date; and (ii) with respect to the Interest
Payment Date in January 1998, the period beginning on (and including) the Issue Date and
ending on (and including) the calendar day immediately preceding such Interest Payment
Date.

Interest Rate or Currency
Protection Agreement  of any Person means any forward contract, futures contract,
swap, option, hedge or other financial agreement or arrangement (including, without
limitation, caps, floors, collars and similar agreements) relating to, or the value of
which is dependent upon, interest rates or indices, currency exchange rates or indices or
commodity prices or indices.

Investment  by any
Person means any direct or indirect loan, advance or other extension of credit or capital
contribution (by means of transfers of cash or other property to others or payments for
property or services for the account or use of others, or otherwise) to, or purchase or
acquisition of Capital Stock, bonds, notes, debentures or other securities or evidence of
Indebtedness issued by, any other Person, including any payment on a guarantee of any
obligation of such other Person, but excluding any loan, advance or extension of credit to
an employee of the Company or a Guarantor in the ordinary course of business, accounts
receivables and other commercially reasonable extensions of trade credit.

Issue Date  means
the date on which the Notes are first authenticated and delivered under this Indenture.

Judgment Currency
 has the meaning set forth in Section 1.14(b).

LIBOR  means a per
annum rate determined by the Trustee in accordance with the following:

(a)    
          LIBOR on a Reset Date shall be the rate for deposits in U.S. dollars for a
          period of three months which appears on page 3750 of the Dow Jones Markets
          Service as of 11:00 a.m. London time, on the Determination Date immediately
          preceding such Reset Date (which rate shall have the number of decimal places
          set forth on such Dow Jones Markets Service page); or

(b)    
          If on any Determination Date no quotation is given on page 3750 of the Dow Jones
          Markets Service, LIBOR shall be determined on the basis of the rate for deposits
          in U.S. dollars for a period of three months which appears on the Reuters Screen
          LIBO Page (or such other page as may replace the LIBO page on that service for
          the purpose of displaying London Interbank Offered Rates of major banks) (such
          rates to be averaged and rounded upwards to four decimal places), and if no
          quotations are given on the Reuters Screen LIBO Page, LIBOR shall be determined
          on the basis of the rates at which deposits in U.S. dollars are offered by the
          Reference Banks, as of approximately 11:00 a.m., London time, on the
          Determination Date to prime banks in the London interbank market for a period of
          three months commencing on that Reset Date and in a principal amount equal to an
          amount of not less than U.S.$1,000,000. The Trustee shall request the principal
          London office of such Reference Banks to provide quotations of their rates. If
          at least two such quotations are provided, LIBOR for that Reset Date shall be
          the arithmetic mean of the quotations rounded to four decimal places. If fewer
          than two quotations are provided as requested, LIBOR for that Reset Date shall
          be the arithmetic mean of the rates quoted by major banks in New York City as of
          approximately 11:00 a.m., New York City time, on that Determination Date for
          loans in U.S. dollars to leading European banks for a period of one month
          commencing on that Reset Date rounded to four decimal places;  provided
           that if the banks selected as aforesaid by the Trustee are not quoting as
          mentioned above, LIBOR shall be the arithmetic mean (rounded to four decimal
          places) of the rate notified by each Noteholder to the Trustee before the last
          day of such Interest Period to which such Determination Date relates to be the
          percentage rate which expresses the cost to such Noteholder of funding from
          whatever sources it may select its participation in the Notes during such
          Interest Period.

Lien  means, with
respect to any property, assets, revenues or income, any mortgage or deed of trust,
pledge, hypothecation, assignment, Receivables Sale, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially impairing
usefulness or marketability), Sale and Leaseback Transaction, encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such property, assets, revenues or income (including,
without limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).

London Business Day
 means any day (other than a Saturday or Sunday) on which banks are open for business
in London.

Margin Stock  shall
have the meaning accorded to such term in Regulation G of the Board of Governors of the
Federal Reserve System (or any successor), as amended.

Material Adverse
Effect  with respect to a Person, means a material adverse effect on its
condition, financial or otherwise, results of operations, business, properties or assets.

Maturity , when
used with respect to any Note, means the date on which the principal of such Note becomes
due and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.

Net Available Proceeds
 from any Asset Disposition by any Person means cash or readily marketable cash
equivalents received (including by way of sale or discounting of a note, installment
receivable or other receivable, but excluding any other consideration received in the

form of assumption by the acquiror of
Indebtedness or other obligations relating to such properties or assets) therefrom by such
Person, net of (i) all legal, title and recording tax expenses, commissions and other fees
and expenses Incurred and all federal, state, provincial, foreign and local taxes
(including taxes payable upon payment or other distribution of funds from a foreign
subsidiary to the Company or another subsidiary of the Company) required to be accrued as
a liability as a consequence of such Asset Disposition, (ii) all payments made by such
Person or its Subsidiaries on any Indebtedness which is secured by, such assets in
accordance with the terms of any Lien upon or with respect to such assets or which must by
the terms of such Lien, or in order to obtain a necessary consent to such Asset
Disposition or by applicable law, be repaid out of the proceeds from such Asset
Disposition, (iii) all distributions and other payments made to minority interest holders
in Subsidiaries of such Person or joint ventures as a result of such Asset Disposition,
(iv) appropriate amounts to be provided by such Person or any Subsidiary thereof, as the
case may be, as a reserve in accordance with Brazilian GAAP against any liabilities
associated with such assets and retained by such Person or any Subsidiary thereof, as the
case may be, after such Asset Disposition, including, without limitation, liabilities
under any indemnification obligations and severance and other employee termination costs
associated with such Asset Disposition, in each case as determined by the Board of
Directors, in its reasonable good faith judgment evidenced by a certificate of such Board
of Directors filed with the Trustee;  provided, however,  that any reduction in such
reserve within twelve months following the consummation of such Asset Disposition will be
treated for all purposes of this Indenture and the Notes as a new Asset Disposition at the
time of such reduction with Net Available Proceeds equal to the amount of such reduction,
and (v) any consideration for an Asset Disposition (which would otherwise constitute Net
Available Proceeds) that is required to be held in escrow pending determination of whether
a purchase price adjustment will be made, but amounts under this clause (v) shall become
Net Available Proceeds at such time and to the extent such amounts are released to such
Person.

Net Obligation  at
any date of determination means the net amount, exclusive of any commissions or
administrative fees that a Person would be obligated to pay upon the termination of an
Interest Rate or Currency Protection Agreement as of such date.

Net Sul Group
 means the Company, each of the Guarantors, and all direct and indirect Subsidiaries of
the Company or any of the Guarantors.

Net Sul Shareholder
 means any holder of the Capital Stock of the Company.

Noteholder  means a
Person in whose name a Note is registered in the Note Register (or, in the case of a joint
holding, the first named thereof).

Note Register  and
 Note Registrar  have the respective meanings specified in Section
3.4(b).

Notes  means the
notes issued pursuant to this Indenture.

Offer  has the
meaning set forth in the definition of Offer to Purchase.

Offer to Purchase  means
a written offer (the  Offer ) sent by the Company by first class mail,
postage prepaid, to each Noteholder at his address appearing in the Note Register on the
date of the Offer offering to purchase up to the principal amount of Notes specified in
such Offer at the purchase price specified in such Offer (as determined pursuant to this
Indenture). Unless otherwise required by applicable law, the Offer shall specify an
expiration date (the  Expiration Date ) of the Offer to Purchase which
shall be, subject to any contrary requirements of applicable law, not less than 30 days or
more than 60 days after the date of such Offer and a settlement date (the
 Purchase Date ) for purchase of Notes within five Business Days after
the Expiration Date. The Company shall notify the Trustee at least 15 Business Days (or
such shorter period as is acceptable to the Trustee) prior to the mailing of the Offer of
the Companys obligation to make an Offer to Purchase, and the Offer shall be mailed
by the Company or, at the Companys request, by the Trustee in the name and at the
expense of the Company. The Offer shall contain all instructions and materials necessary
to enable such Noteholders to tender Notes pursuant to the Offer to Purchase. The Offer
shall also state:

| | (a) | the Section of this Indenture pursuant to which the Offer to Purchase is being made;                                                                                                                                         
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) | the Expiration Date and the Purchase Date;                                                                                                                                                                                   
|
| | (c) | the aggregate principal amount of the Outstanding Notes offered to be purchased by the Company pursuant to the Offer to Purchase (including, if less than 100%, the manner by which such has been determined pursuant to this
|
| | (d) | the purchase price to be paid by the Company for each U.S.$1,000 aggregate principal amount of Notes accepted for payment (as specified pursuant to this Indenture) (the Purchase Price );                                 
|
| | (e) | that the Noteholder may tender all or any portion of the Notes registered in the name of such Noteholder and that any portion of a Note tendered must be tendered in an integral multiple of U.S.$1,000 principal            
|
| | (f) | the place or places where Notes are to be surrendered for tender pursuant to the Offer to Purchase;                                                                                                                          
|
| | (g) | that interest on any Note not tendered or tendered but not purchased by the Company pursuant to the Offer to Purchase will continue to accrue;                                                                               
|
| | (h) | that on the Purchase Date the Purchase Price will become due and payable upon each Note being accepted for payment pursuant to the Offer to Purchase and that interest thereon shall cease to accrue on and after            
|
| | (i) | that each Noteholder electing to tender a Note pursuant to the Offer to Purchase will be required to surrender such Note at the place or places specified in the Offer prior to the close of business on                     
| | (j) | that Noteholders will be entitled to withdraw all or any portion of Notes tendered if the Company (or their Paying Agent), receive, not later than the close of business on the Expiration Date, a telegram, telex, facsimile
| | (k) | that (a) if Notes in an aggregate principal amount less than or equal to the Purchase Amount are duly rendered and not withdrawn pursuant to the Offer to Purchase, the Company shall purchase all such Notes and            
| | (l) | that in the case of any Noteholder whose Note is purchased only in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Noteholder of such Note without service charge, a new Note         

Any Offer to Purchase shall be
governed by and effected in accordance with the Offer for such Offer to Purchase. The
Company will comply with any tender offer rules under the Exchange Act which may then be
applicable, including, but not limited to, Rule 14e-1 thereunder, and any other applicable
laws, rules and regulations, in connection with any Offer to Purchase. To the extent that
the provisions of any United States federal or state securities laws and regulations
conflict with the provisions herein set forth with respect to an Offer to Purchase, the
Company will comply with such applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Indenture by virtue thereof.

Officer  of a
corporation means the President and Chief Executive Officer, the Chief Financial Officer,
or any other executive officer performing decisionmaking functions for such corporation
and having the power to represent such corporation (including, in the case of the Company,
any member of the  Diretoria  of the Company).

Officers
Certificate  means a certificate signed by any two Officers of the Company or a
Guarantor, as the case may be.

Opinion of Counsel
 means a written opinion of legal counsel, who may be counsel for the Company or the
Guarantors, and containing the statements provided for in Section 1.2.

Organization Documents
 of the Company or a Guarantor means the articles of incorporation, by-laws and/or
other charter documents of such entity.

Other Applicable Taxes
 is defined in Section 12.2.

Outstanding , when
used with respect to the Notes, means, as of the date of determination, all the Notes
theretofore authenticated and delivered under this Indenture (including, as of such date,
all the Notes represented by Global Notes authenticated and delivered under this
Indenture), except the reduced portion or portions of any Global Notes, as such reduction
or reductions shall have been endorsed on such Global Notes by the Trustee as provided
herein and, except:

| | (i)   | The Notes theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;                                                                                                                                   
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii)  | The Notes, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated
| | (iii) | Notes which have been issued pursuant to Section 3.5 or in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of              

provided ,  however , that
in determining whether the Noteholders of the requisite principal amount of the
Outstanding Notes have given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Notes owned by the Company, any Guarantor or any other
obligor upon the Notes or any Affiliate of the Company, such Guarantor or of such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes which a Responsible
Officer of the Trustee actually knows to be so owned shall be so disregarded. Notes so
owned which have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgees right so to act with
respect to such Notes and that the pledgee is not the Company, any Guarantor or any other
obligor upon the Notes or any Affiliate of the Company, any Guarantor or of such other
obligor.

Paying Agent  means
any Person authorized by the Company to pay the principal of and premium, if any, or
interest on any Notes on behalf of the Company. The Company has initially appointed The
Chase Manhattan Bank, New York; The Chase Manhattan Bank, London Branch; Chase Manhattan
Bank Luxembourg, S.A.; and the Principal Paying Agent to act as Paying Agents.

Payment Date  has
the meaning set forth in Section 3.10.

Permits  means all
permits, licenses, consents, orders, approvals, franchises and authorizations of
governmental or regulatory authorities including, without limitation, cable and
Multi-Point, Multi-Channel Distribution Service television operating licenses.

Permitted Interest Rate or
Currency Protection Agreement  of any Person means any Interest Rate or Currency
Protection Agreement entered into in the ordinary course of business and not for purposes
of speculation with one or more financial institutions that is designed to protect such
Person against or relating to (i) fluctuations in interest rates, currency exchange rates
or interest rate indices or (ii) fluctuations in foreign currency exchange rates or
commodity prices with respect to Indebtedness Incurred, but only to the extent the Person
is not obligated to make payments in an aggregate amount greater than the payments due
with respect to the Indebtedness being hedged thereby.

Permitted Liens
 means (a) Liens for taxes, assessments, governmental charges or claims which are not
yet delinquent or which are being contested in good faith by appropriate proceedings, if a
reserve or other appropriate provision, if any, as shall be required in the conformity
with generally accepted accounting principles shall have been made therefor; (b) Liens
securing the Notes; (c) Liens with respect to assets of a Subsidiary granted by such
Subsidiary to the Company or a Guarantor to secure Indebtedness owing to the Company or
such Guarantor, as the case may be, and Liens with respect to assets of the Company
granted by the Company to a Guarantor to secure Indebtedness owing to such Guarantor; (d)
pledges and deposits made in the ordinary course of business in connection with
workers compensation, unemployment insurance and other types of statutory
obligations (including to secure government contracts); (e) deposits made to secure the
performance of tenders, bids, leases, and other obligations of like nature incurred in the
ordinary course of business (exclusive of obligations for the payment of borrowed money);
(f) zoning restrictions, servitudes, easements, rights-of-way, restrictions and other
similar charges or encumbrances incurred in the ordinary course of business which, in the
aggregate, do not materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of the Company or its Subsidiaries;
(g) Liens arising out of judgments or awards against the Company or any Subsidiary with
respect to which the Company or such Subsidiary is prosecuting an appeal or proceeding for
review and the Company or such Subsidiary is maintaining adequate reserves in accordance
with Brazilian GAAP; (h) any interest or title of a lessor in the property subject to any
lease other than a Capital Lease; (i) Liens existing on the Issue Date; (j) Liens securing
Indebtedness which is Incurred and otherwise permitted under this Indenture in respect of
the purchase of equipment, real property or other assets or for improvements or
replacements or substitutions therefor or additions thereto provided that the principal
amount of Indebtedness secured by such Lien does not exceed 100% of the purchase price
thereof and such Lien does not extend to or cover any other equipment, property or other
asset; (k) Liens securing Acquired Indebtedness,  provided, however,  that (i) such
Lien attached to the acquired asset prior to the time of the acquisition of such asset and
(ii) such Lien does not extend to or cover any other asset; (l) any statutory
warehousemens, materialmens or other similar Liens for sums not then due and
payable (or which, if due and payable, are being contested in good faith and with respect
to which adequate reserves are being maintained to the extent required by Brazilian GAAP);
(m) other Liens incidental to the conduct of the Companys and its Subsidiaries
business or the ownership of its property and assets not securing any Indebtedness, and
which do not in the aggregate materially detract from the value of the Companys and
its Subsidiaries property or assets when taken as a whole, or materially impair the
use thereof in the operation of its business; (n) Liens to secure Indebtedness which is
Incurred to extend, renew or refinance (or successive extensions, renewals or
refinancings), in whole or in part, Indebtedness secured by any Lien referred to in the
foregoing clauses (i), (j) and (k) so long as such Lien does not extend to any other
property and the principal amount of Indebtedness so secured (i) is not increased and (ii)
other than with respect to Liens permitted pursuant to clause (k), does not exceed 100% of
the purchase price of such asset; and (o) Liens Incurred in the ordinary course of
business with respect to obligations that do not exceed, in the principal amount thereof,
10 percent of the consolidated total assets of the Company determined as of the most
recent fiscal quarter for which financial statements are available.

Person  means any
individual, corporation, partnership, joint venture, association, trust, unincorporated
organization, government or agency or political subdivision thereof or any other entity.

Preferred Stock  of
any Person means Capital Stock of such Person of any class or classes (however designated)
that ranks prior, as to the payment of dividends or as to the distribution of assets upon
any voluntary or involuntary liquidation, dissolution or winding up of such Person, to
shares of Capital Stock of any other class of such Person.

Predecessor Note
 of any particular Note means every previous Note issued before, and evidencing all or
a portion of the same Indebtedness as that evidenced by, such particular Note; and, for
the purposes of this definition, any Note authenticated and delivered under Section 3.5 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Note shall be deemed to
evidence the same Indebtedness as the mutilated, destroyed, lost or stolen Note.

Principal Paying Agent
 means Chase Trust Bank or any successor thereto in its capacity as Principal Paying
Agent.

Purchase Agreement
 means the Purchase Agreement, dated October 28, 1997, between the Company, the
Guarantors and the Purchasers listed thereon.

Purchase Amount
 has the meaning set forth in the definition of Offer to Purchase.

Purchase Date  has
the meaning set forth in the definition of Offer to Purchase.

Purchase Price  has
the meaning set forth in the definition of Offer to Purchase.

Purchaser  means a
Person purchasing Notes from the Company under and in accordance with the terms and
conditions of the Purchase Agreement.

Put Notice  has the
meaning set forth in Section 13.2.

Put Settlement Date
 has the meaning set forth in Section 13.2.

Put Settlement Price
 has the meaning set forth in Section 13.2.

Qualified Preferred
Stock  of the Company or any direct or indirect Subsidiary thereof means
Preferred Stock of such Person which is not Disqualified Stock and (a) which bears no
preferential or stated return or other payment obligation or preference, upon liquidation
or otherwise, other than a preference (if any) for return of capital upon liquidation to
the holders thereof as against the holders of other Capital Stock of such Person; (b) the
holders of which have no rights to fixed dividends (whether on a cumulative basis or
otherwise); and (c) as to which all obligations to the holders thereof are and shall be at
all times and in all respects subordinate to the Indebtedness under the Notes.

RBS Treasury  means
RBS Administração e Cobranças Ltda., a corporation providing
shortterm loans for certain short-term financing requirements of the Company and its
Subsidiaries and certain Affiliates thereof.

rates of exchange
 has the meaning set forth in Section 1.14.

Receivables  means
receivables, chattel paper, instruments, documents or intangibles evidencing or relating
to the right to payment of money in respect of the sale of goods or services.

Receivables Sale
 of any Person means any sale of Receivables of such Person (pursuant to a purchase
facility or otherwise), other than (i) in connection with a disposition of the business
operations of such Person relating thereto or (ii) a disposition of defaulted Receivables
for purpose of collection and not as a financing arrangement.

Redemption Date
 when used with respect to any Note to be redeemed, means any Put Settlement Date or
Call Settlement Date.  Redemption Price  when used with respect to any
Note to be redeemed, means the price at which it is to be redeemed pursuant to Article 13
of this Indenture.

Reference Banks
 means the principal London offices of leading banks engaged in transactions in
Eurodollar deposits in the international Eurocurrency market.

Regular Record Date
 for the interest payable on any Interest Payment Date means the 15th calendar day
(whether or not a Business Day) next preceding such Interest Payment Date.

Regulation S  means
Regulation S under the Securities Act (or any successor provision), as it may be amended
from time to time.

Regulation S Global
Note  has the meaning set forth in Section 2.1.

Requirement of Law
 means, as to any Person, any statute, law, treaty, rule or regulation or
determination, order, injunction or judgment of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person or any of
its properties, assets or revenues.

Reset Date  means
the first day of each Interest Period, which, in the case of the first Interest Period
shall be the Issue Date.

Responsible Officer
 means any officer assigned to the Corporate Trust Office, including any managing
director, vice president, assistant vice president, assistant treasurer, assistant
secretary or any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and having direct responsibility
for the administration of this Indenture, and also, to whom such matter is referred
because of such officers knowledge of and familiarity with the particular subject.

Restricted Global Note
 has the meaning set forth in Section 2.1.

Restricted Notes
 means the Restricted Global Note and any Successor Note, other than (i) any Note
issued upon a transfer or exchange for which a certificate substantially in the form set
forth in Exhibit A is required to be provided and is provided pursuant to Section
3.4(c)(2), or (ii) any Note issued in exchange for or in lieu of any Note specified in
Clause (i) or any Note issued in exchange therefor or in lieu thereof.

Restricted Payment
 has the meaning set forth in Section 10.15.

Rule 144A  means
Rule 144A under the Securities Act (or any successor provision), as it may be amended from
time to time.

Sale and Leaseback
Transaction  by any Person means any arrangement, direct or indirect, whereby it
shall sell or transfer any property, real or personal, used or useful in its business,
whether now owned or hereafter acquired, and thereafter rent or lease such property or
other property that it intends to use for substantially the same purpose or purposes as
the property being sold or transferred. The stated maturity of such arrangement shall be
the date of the last payment of rent or any other amount due under such arrangement prior
to the first date on which such arrangement may be terminated by the lessee without
payment of a penalty.

Secured Obligations
 means the unpaid principal of and premium, if any, and interest (including any
Additional Amounts) on the Notes (including, without limitation, interest accruing after
the maturity of the Notes and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like proceeding,
relating to the Company whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding); all the obligations of the Company to the Noteholders
pursuant to this Indenture and the Purchase Agreement and all other obligations and
liabilities of the Company to the Noteholders whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, the Notes, the Purchase Agreement or this Indenture,
as the case may be, and any other document made, delivered or given in connection
therewith or herewith, and each other obligation and liability, whether direct or
indirect, absolute or contingent, due or to become due, or now existing, or hereafter
incurred, of the Company to the Trustee whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses (including, without
limitation, all fees and disbursements of counsel to the Purchasers and the Trustee) or
otherwise.

Securities Act
 means the United States Securities Act of 1933, as amended (or any successor act) and
the rules and regulations thereunder.

Senior Officer
 means the chief executive officer, president or chief financial officer of the
relevant entity.

Series A Note
 shall mean any Note designated on its face as a Series A Note.

Series B Note  shall
mean any Note designated on its face as a Series B Note.

Series C Note
 shall mean any Note designated on its face as a Series C Note.

Significant Subsidiary
 means any Subsidiary which, together with the Subsidiaries of such Subsidiary, meets
any of the following conditions:

|(1) | The Companys and its other Subsidiaries investments in and advances to the Subsidiary exceed 15% of the total assets of the Company and its Subsidiaries consolidated as of the end of the most recently completed fiscal year for                     
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | The Companys and its other Subsidiaries proportionate share of the total assets (after intercompany eliminations) of the Subsidiary exceeds 15% of the total assets of the Company and its Subsidiaries consolidated as of the end of the most         
|   
|(3) | The Companys and its other Subsidiaries equity in the income from continuing operations before income taxes, extraordinary items and cumulative effect of a change in accounting principles of the Subsidiary exceeds 15% of such income of the Company

Special Record Date
 for the payment of any Default Interest means a date fixed by the Trustee pursuant to
Section 3.6.

Specified Subordinated
Indebtedness  means Indebtedness (i) which is Incurred by the Company, a
Guarantor or any Subsidiary in respect of money borrowed by the Company, such Guarantor or
such Subsidiary from RBS Treasury or any Net Sul Shareholder and owing by the Company,
such Guarantor or such Subsidiary to RBS Treasury or such Net Sul Shareholder, (ii) in
respect of which neither the Company, any Guarantor or any Subsidiary shall make nor be
obliged to make any payment of principal, interest or any other payment if a Default or
Event of Default with respect to any payment referred to in Section 5.1(a), (b) or (c)
shall have occurred and shall be continuing, (iii) as to which all obligations to the RBS
Treasury or Net Sul Shareholders shall be subordinate in all respects to the Notes in a
liquidation or reorganization, pursuant to a bankruptcy or otherwise, of the Company, such
Guarantor or such Subsidiary, as the case may be and (iv) in respect of which the Company,
such Guarantor or such Subsidiary, as the case may be, and the RBS Treasury and relevant
Net Sul Shareholders, as the case may be, shall have entered into a subordination
agreement in the form of Exhibit C hereto.

Stated Maturity ,
when used with respect to any Note or any installment of interest thereon, means the date
specified in such Note as the fixed date on which the principal of such Note or such
installment of interest, as the case may be, is due and payable.

Subordination
Agreement  means an agreement in the form attached as Exhibit C to this
Indenture.

Subordinated
Indebtedness  means (I) any Specified Subordinated Indebtedness and (II) any
other Indebtedness of any member of the Net Sul Group as to which the payment of principal
of (and premium, if any) and interest and other payment obligations in respect of such
Indebtedness shall be subordinate to the prior payment in full of the Notes to at least
the following extent: (i) no payments of principal of (or premium, if any) or interest on
or otherwise due in respect of such Indebtedness may be permitted for so long as any
Default or Event of Default exists with respect to the Notes, (ii) such Indebtedness may
not (x) provide for payments of principal of such Indebtedness at the stated maturity
thereof or by way of a sinking fund applicable thereto or by way of any mandatory
redemption, defeasance, retirement or repurchase thereof by any member of the Net Sul
Group (including any redemption, retirement or repurchase which is contingent upon event
or circumstances, but excluding any retirement required by virtue of acceleration of such
Indebtedness upon an event of default thereunder), in each case prior to the Put
Settlement Date of the Series C Notes or (y) permit redemption or other retirement
(including, in the case of the Company, pursuant to an Offer to Purchase made by the
Company) of such other Indebtedness at the option of the holder thereof prior to the Put
Settlement Date of the Series C Notes, other than a redemption or other retirement at the
option of the holder of such Indebtedness (including, in the case of the Company, pursuant
to an Offer to Purchase made by the Company) which is conditioned upon a Change of Control
of such member of the Net Sul Group pursuant to provisions substantially similar to those
described in Section 10.23 (and which shall provide that such Indebtedness will not be
repurchased pursuant to such provisions prior to the Companys repurchase of the
Notes required to be repurchased by the Company pursuant to the provisions of Section
10.23), and (iii) such Indebtedness must provide (x) that prior to any payment or
distribution of any assets by such member of the Net Sul Group of any kind or character,
whether in cash, property or securities, by set-off or otherwise, to creditors upon any
dissolution, winding-up, or liquidation, or reorganization, arrangement, adjustment,
composition or readjustment of such member of the Net Sul Group, or its respective
securities or debt (whether voluntary or involuntary, or in bankruptcy, insolvency,
reorganization, liquidation, receivership proceedings, or upon an assignment for the
benefit of creditors, or any other marshalling of the assets and liabilities of such
member of the Net Sul Group, or otherwise), all such assets shall first be applied to the
payment or prepayment of the Notes until all Notes have been paid in full in cash and (y)
for the reclamation (and prior to such reclamation, the holding in trust as the property
of the Noteholders) for the benefit of the Noteholders of any assets distributed in a
manner contrary to that required by the immediately preceding clause (x).

Subscriber TV Assets
 means all assets, rights (contractual or otherwise) and properties, whether tangible
or intangible, used or intended for use in connection with a Subscriber Television
Business.

Subscriber Television
Business  means the business of (i) developing, operating, or providing
subscriber television systems and services in Brazil and activities to accomplish the
foregoing, including the acquisition of the rights to exhibit subscription programming
services and channels throughout Brazil or (ii) evaluating, participating in or pursuing
any other activity or opportunity that is primarily related to those activities identified
above and shall, in any event, include all businesses in which the Company and each of its
Subsidiaries is engaged on the Issue Date;  provided  that the determination of what
constitutes a Subscriber Television Business shall be made in good faith by the Board of
Directors of the Company, which determination shall be conclusive.

Subsidiary  of any
Person means (i) a corporation more than 50% of the combined voting power of the
outstanding Voting Stock of which is owned, directly or indirectly, by such Person or by
one or more other Subsidiaries of such Person or by such Person and one or more other
Subsidiaries thereof or (ii) any other Person (other than a corporation) in which such
Person, or one or more other Subsidiaries of such Person or such Person and one or more
other Subsidiaries thereof, directly or indirectly, has at least a majority ownership and
power to direct the policies, management and affairs thereof.

Successor Note  of
any particular Note means every Note issued after, and evidencing all or a portion of the
same debt as that evidenced by, such particular Note; and, for the purposes of this
definition, any Note authenticated and delivered under Section 3.5 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same
debt as the mutilated, destroyed, lost or stolen Note.

Transfer Agent
 means the agents designated by the Company (not including the Note Registrar) for the
registration of transfer of securities as provided in Section 10.2.

Transaction Documents
 means the Notes, this Indenture, the Guarantee, all Subordination Agreements entered
into in accordance with the requirements therefor set forth in the definition of
Subordinated Indebtedness and all other agreements entered into in connection therewith.

Trust Indenture Act
 means the Trust Indenture Act of 1939 as in force at the date hereof.

Trustee  means the
Person named as the Trustee in the first paragraph of this instrument until a
successor Trustee shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter Trustee shall mean such successor Trustee.

UCC  means the New
York Uniform Commercial Code, as may be amended from time to time.

U.S.    
          Dollar Equivalent  means, with respect to any monetary amount in a
          currency other than the U.S. Dollar, at any time for the determination thereof,
          the amount of U.S. Dollars obtained by converting such foreign currency involved
          in such computation into U.S. Dollars at the spot rate for the purchase of U.S.
          Dollars with the applicable foreign currency as quoted by Reuters at
          approximately 11:00 a.m. (New York time) on the date two business days prior to
          such determination.

Vice President
 means any vice president, whether or not designated by a number or a word or words
added before or after the title vice president.

Voting Stock  of
any Person means Capital Stock of such Person which ordinarily has voting power for the
election of directors (or persons performing similar functions) of such Person, whether at
all times or only so long as no senior class of securities has such voting power by reason
of any contingency.

Wholly Owned
Subsidiary  of any Person means a Subsidiary of such Person 99% or more of the
outstanding Capital Stock or other ownership interests of which (other than
directors qualifying shares) shall at the time be owned by such Person, by one or
more Wholly Owned Subsidiaries of such Person or by such Person and one or more Wholly
Owned Subsidiaries of such Person.

SECTION 1.2 Compliance Certificates and Opinions

Upon any application or request by
the Company or the Guarantors to the Trustee to take any action under any provision of
this Indenture, the Company or the Guarantors shall furnish to the Trustee such
certificates and opinions as may be required under this Indenture. Each such certificate
or opinion, and any certificate evidencing a determination required to be made by the
Company or the Guarantors under this Indenture, shall be given in the form of an
Officers Certificate, if to be given by an Officer of the Company or a Guarantor, or
an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements
set forth in this Indenture.

Every certificate or opinion with
respect to compliance by or on behalf of the Company or the Guarantors with a condition or
covenant provided for in this Indenture shall include

| | (1) | a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;                                                               
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) | a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;                                          
|
| | (3) | a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition
|
| | (4) | a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.                                                                                               

SECTION 1.3 Form of
Documents Delivered to Trustee

In any case where several matters are
required to be certified by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by the opinion of, only one
such Person, or that they be so certified or covered by only one document, but one such
Person may certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.

Any certificate of an Officer of the
Company or a Guarantor may rely, insofar as it relates to legal matters, upon an Opinion
of Counsel submitted therewith, unless such Officer knows, or in the exercise of
reasonable care should know, that the opinion with respect to the matters upon which his
certificate is based is erroneous. Any Opinion of Counsel may rely, insofar as it relates
to factual matters, upon an Officers Certificate of the Company or a Guarantor
submitted therewith stating the information on which counsel is relying, unless such
counsel knows, or in the exercise of reasonable care should know, that the certificate
with respect to such matters is erroneous.

Where any Person is required to make,
give or execute two or more applications, requests, consents, certificates, statements,
opinions or other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.

SECTION 1.4 Acts of
Noteholders; Record Dates

Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to be given
or taken by Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such action
shall become effective when such instrument or instruments are delivered to the Trustee
and, where it is hereby expressly required, to the Company. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein sometimes referred to
as the  Act  of the Noteholders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in
favor of the Trustee and the Company, if made in the manner provided in this Section.

The fact and date of the execution by
any Person of any such instrument or writing pursuant to this Section 1.4 may be proved by
the affidavit of a witness of such execution or by a certificate of a notary public or
other officer authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution thereof.
Where such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in any other manner which
the Trustee deems sufficient.

The ownership of Notes shall be
proved by the Note Register.

Any request, demand, authorization,
direction, notice, consent, waiver or other Act of the Noteholder of any Note shall bind
every future Noteholder of the same Note and the Noteholder of every Note issued upon the
registration of transfer thereof or in exchange therefore or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Note.

The Company may set any day as a
record date for the purpose of determining the Noteholders of Outstanding Notes entitled
to give, make or take any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Indenture to be given, made or taken
by Noteholders of Notes,  provided  that the Company may not set a record date for,
and the provisions of this paragraph shall not apply with respect to, the giving or making
of any notice, declaration, request or direction referred to in the next paragraph. If not
set by the Company prior to the first solicitation of a Noteholder made by any Person in
respect of any such matter referred to in the foregoing sentence, the record date for any
such matter shall be the 30th day (or, if later, the date of the most recent list of
Noteholders required to be provided pursuant to Section 7.1) prior to such first
solicitation. If any record date is set pursuant to this paragraph, the Noteholders of
Outstanding Notes on such record date, and no other Noteholders, shall be entitled to take
the relevant action, whether or not such Noteholders remain Noteholders after such record
date;  provided  that no such action shall be effective hereunder unless taken on or
prior to the applicable Cutoff Date (as defined below) by Noteholders of the requisite
principal amount of Outstanding Notes on such record date. Nothing in this paragraph shall
be construed to prevent the Company from setting a new record date for any action for
which a record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person be
cancelled and of no effect), and nothing in this paragraph shall be construed to render
ineffective any action taken by Noteholders of the requisite principal amount of
Outstanding Notes on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Company, at its own expense, shall cause notice of such
record date, the proposed action by Noteholders and the applicable Cutoff Date to be given
to the Trustee in writing and to each Noteholder of Notes in the manner set forth in
Section 1.6.

The Trustee may set any day as a
record date for the purpose of determining the Noteholders of Outstanding Notes entitled
to join in the giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 5.2, (iii) any request to institute proceedings
referred to in Section 5.6(2) or (iv) any direction referred to in Section 5.11 or 5.12.
If any record date is set pursuant to this paragraph, the Noteholders of Outstanding Notes
on such record date, and no other Noteholders, shall be entitled to join in such notice,
declaration, request or direction, whether or not such Noteholders remain Noteholders
after such record date;  provided  that no such action shall be effective hereunder
unless taken on or prior to the applicable Cutoff Date by Noteholders of the requisite
principal amount of Outstanding Notes on such record date. Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new record date for any action for
which a record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person be
cancelled and of no effect), and nothing in this paragraph shall be construed to render
ineffective any action taken by Noteholders of the requisite principal amount of
Outstanding Notes on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Trustee, at the Companys expense, shall cause notice
of such record date, the proposed action by Noteholders and the applicable Cutoff Date to
be given to the Company in writing and to each Noteholder of Notes in the manner set forth
in Section 1.6.

With respect to any record date set
pursuant to this Section, the party hereto which sets such record date may designate any
day as the  Cutoff Date , and from time to time may change the Cutoff
Date to any earlier or later day;  provided  that no such change shall be effective
unless notice of the proposed new Cutoff Date is given to the other parties hereto in
writing, and to each Noteholder of Notes in the manner set forth in Section 1.6, on or
prior to the existing Cutoff Date. If a Cutoff Date is not designated with respect to any
record date set pursuant to this Section, the party hereto which set such record date
shall be deemed to have initially designated the 180th day after such record date as the
Cutoff Date with respect thereto, subject to its right to change the Cutoff Date as
provided in this paragraph. Notwithstanding the foregoing, no Cutoff Date shall be later
than the 180th day after the applicable record date.

Without limiting the foregoing, a
Noteholder entitled hereunder to take any action hereunder with regard to any particular
Note may do so with regard to all or any part of the principal amount of such Note or by
one or more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.

SECTION 1.5 Notices,
Etc. to Trustee, Company and the Guarantors

Any request, demand, authorization,
direction, notice, consent, waiver or Act of Noteholders or other document provided or
permitted by this Indenture to be made upon, given or furnished to, or filed with,

| | (1) | the Trustee by any Noteholder or by the Company or the Guarantors shall be sufficient for every purpose hereunder if made, given, furnished or filed, in writing, to or with the Trustee at its corporate Trust Office,                         
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) | the Company by the Trustee or by any Noteholder shall be sufficient for every purpose (except as otherwise expressly provided herein) hereunder if in writing and mailed, first-class postage prepaid, to the Company addressed to it at        
|
| | (3) | each of the Guarantors by the Trustee or by any Noteholder shall be sufficient for every purpose (except as otherwise expressly provided herein) hereunder if in writing and mailed, first-class postage prepaid, to such Guarantor addressed to

SECTION 1.6 Notice to
Noteholders; Waiver

Where this Indenture provides for
notice to Noteholders of any event, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if (i) in the case of a Global Note, in writing by
facsimile and/or by overnight mail to the Depositary, and (ii) in the case of securities
other than Global Notes, in writing and mailed, first-class postage prepaid, to each
Noteholder affected by such event, at his address as it appears in the Note Register, not
later than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Noteholders is given
by mail, neither the failure to mail such notice, nor any defect in any notice so mailed,
to any particular Noteholder shall affect the sufficiency of such notice with respect to
other Noteholders. Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of notice by
Noteholders shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.

In case by reason of the suspension
of regular mail service or by reason of any other cause it shall be impracticable to give
such notice by mail, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose hereunder.

In addition, so long as the Notes are
listed on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange so
require, notices to Noteholders will be published in a leading newspaper having general
circulation in Luxembourg (which is expected to be the  Luxemburger Wort ) or, if
such publication is not practicable, in an English language newspaper having general
circulation in Europe. Such notices shall be deemed to be given on the date of such
publication or, if published more than once, on the date of the first such publication. If
publication is not practicable in any newspaper in accordance with this paragraph, notice
will be given in such other manner, and shall be deemed to have been given on such date,
as the Trustee may, in its sole discretion, determine.

SECTION 1.7 Effect of
Headings and Table of Contents

The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect the
construction hereof.

SECTION 1.8 Successors
and Assigns

All covenants and agreements in this
Indenture by the Company or the Guarantors shall bind their successors and assigns,
whether so expressed or not.

SECTION 1.9 Separability
Clause

In case any provision in this
Indenture, the Notes or the Guarantee shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

SECTION 1.10 Benefits of
Indenture

Nothing in this Indenture, the Notes
or the Guarantee, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder and the Noteholders of Notes, any benefit or any
legal or equitable right, remedy or claim under this Indenture.

SECTION 1.11 Governing
Law

THIS INDENTURE, THE NOTES AND THE
GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. For the purposes of
Article 9, Paragraph 2 of the Decree  Law No. 4657 of September 4, 1942, the
transactions contemplated in this Purchase agreement have been proposed to the Company and
the Guarantors by Citibank International plc, as Lead Manager.

SECTION 1.12 Legal
Holidays

In any case where any Interest
Payment Date, Redemption Date, or at Stated Maturity or Maturity of any Note will not be a
Business Day, then (notwithstanding any other provision of this Indenture or of the Notes
or the Guarantee) payment of interest or principal need not be made on such date, but may
be made on the next succeeding Business Day unless such payment would thereby be made in
the next calendar month, in which case it shall be made on the immediately preceding
Business Day;  provided, however,  that interest shall continue to accrue for the
period from and after such Interest Payment Date, Redemption Date, Stated Maturity or
Maturity, as the case may be, on the basis specified in Section 3.6 and the amount payable
on any such date adjusted accordingly.

SECTION 1.13 Submission
to Jurisdiction; Agent for Service; Waiver of Immunities

(a)    
          The Company and the Guarantors irrevocably agree, for themselves and in respect
          of their property, generally and unconditionally, that any suit, action or
          proceeding or arbitral award against it brought by any Noteholder or the Trustee
          arising out of or relating to this Indenture, the Notes or the Guarantee may be
          instituted in any state or Federal court in the Borough of Manhattan in The City
          of New York, New York, and waive any objection which it may now or hereafter
          have to the laying of venue of any such proceeding, and irrevocably submits to
          the non-exclusive jurisdiction of such courts in any suit, action or proceeding
          or arbitral award.

(b)    
          By the execution and delivery of this Indenture or any amendment or supplement
          hereto, the Company and each of the Guarantors (i) acknowledges that it has, by
          separate written instrument, designated and appointed CT Corporation System,
          currently located at 1633 Broadway, New York, New York 10019, as its authorized
          agent upon which process may be served in any suit, action or proceeding or
          arbitral award with respect to, arising out of, or relating to, the Notes, this
          Indenture or the Guarantee or any transaction contemplated hereby or thereby,
          that may be instituted in any Federal or state court sitting in the Borough of
          Manhattan in The City of New York, or brought under Federal or state securities
          laws or brought by the Trustee (whether in its individual capacity or in its
          capacity as Trustee hereunder), and acknowledges that CT Corporation System has
          accepted such designation, (ii) submits to the jurisdiction of any such court in
          any such suit, action or proceeding, and (iii) agrees that service of process
          upon CT Corporation System shall be deemed in every respect effective service of
          process upon the Company or such Guarantor, as the case may be, in any such
          suit, action or proceeding or arbitral award. The Company and the Guarantors
          further agree to take any and all action, including the execution and filing of
          any and all such documents and instruments as may be necessary to continue such
          designation and appointment of CT Corporation System in full force and effect so
          long as this Indenture shall be in full force and effect;  provided  that
          the Company and each Guarantor may and shall (to the extent CT Corporation
          System ceases to be able to be served on the basis contemplated herein), by
          written notice to the Trustee, designate such additional or alternative agents
          for service of process under this Section 1.13 that (i) maintain an office
          located in the Borough of Manhattan, The City of New York in the State of New
          York, (ii) are either (x) counsel for the Company and the Guarantors or (y) a
          corporate service company which acts as agent for service of process for other
          persons in the ordinary course of its business and (iii) agree to act as agent
          for service of process in accordance with this Section 1.13. Such notice shall
          identify the name of such agent for service of process and the address of such
          agent for service of process in the Borough of Manhattan, The City of New York,
          State of New York. Upon the request of any Noteholder, the Trustee shall deliver
          such information to such Noteholder. Notwithstanding the foregoing, there shall,
          at all times, be at least one agent for service of process for the Company and
          the Guarantors appointed and acting in accordance with this Section 1.13.

(c)    
          To the extent that the Company or any of the Guarantors has acquired or
          hereafter may acquire any immunity from jurisdiction of any court or from any
          legal process (whether through service of notice, attachment prior to judgment,
          attachment in aid of execution, execution or otherwise) with respect to itself
          or its property, the Company and the Guarantors hereby irrevocably waive such
          immunity in respect of their obligations under this Indenture, the Notes and the
          Guarantee, to the full extent permitted by law.

SECTION 1.14 Currency of
Account; Conversion of Currency: Foreign Exchange Restrictions

(a)    
          U.S. dollars are the sole currency of account and payment for all sums payable
          by the Company and the Guarantors under or in connection with the Notes, the
          Guarantee or this Indenture, including damages. Any amount received or recovered
          in a currency other than U.S. dollars (whether as a result of, or of the
          enforcement of, a judgment or order of a court of any jurisdiction, in the
          winding-up or dissolution of the Company or a Guarantor or otherwise) by any
          Noteholder or the Trustee or any Paying Agent in respect of any sum expressed to
          be due to it from the Company and the Guarantors will only constitute a
          discharge to the Company and the Guarantors to the extent of the dollar amount
          which the recipient is able to purchase with the amount so received or recovered
          in that other currency on the date of that receipt or recovery (or, if it is not
          practicable to make that purchase on that date, on the first date on which it is
          practicable to do so). If that dollar amount is less than the dollar amount
          expressed to be due to the recipient under any Note, the Guarantee or this
          Indenture, the Company and the Guarantors shall, jointly and severally,
          indemnify it against any loss sustained by it as a result as set forth in
          Section 1.14(b). In any event, the Company and the Guarantors shall, jointly and
          severally, indemnify the recipient against the cost of making any such purchase.
          For the purposes of this Section 1.14, it will be sufficient for the Noteholder
          of a Note, the Trustee or any Paying Agent, as the case may be, to certify in a
          satisfactory manner (indicating sources of information used) that it would have
          suffered a loss had an actual purchase of dollars been made with the amount so
          received in that other currency on the date of receipt or recovery (or, if a
          purchase of dollars on such date had not been practicable, on the first date on
          which it would have been practicable, it being required that the need for a
          change of date be certified in the manner mentioned above). The indemnities set
          forth in this Section 1.14 constitute separate and independent obligations from
          other obligations of the Company and the Guarantors, shall give rise to a
          separate and independent cause of action, shall apply irrespective of any
          indulgence granted by any Noteholder and shall continue in full force and effect
          despite any other judgment, order, claim or proof for a liquidated amount in
          respect of any sum due under the Notes.

(b)    
          The Company and the Guarantors covenant and agree that the following provisions
          shall apply to conversion of currency in the case of the Notes, the Guarantee
          and this Indenture:

| | (i)   | (A) | If for the purpose of obtaining judgment in, or enforcing the judgment of, any court in any country, it becomes necessary to convert into a currency (the Judgment Currency ) an amount due in any other                                            
| | ----- | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |       | (B) | if there is a change in the rate of exchange prevailing between the Business Day before the day on which the judgment is given or an order of enforcement is made, as the case may be                                                                 
|
| | (ii)  |     | In the event of the winding-up of the Company or any Guarantor at any time while any amount or damages owing under the Notes, the Guarantee and this Indenture, or any judgment or order rendered in                                                  
| |       |     | otherwise in accordance with the relevant provisions of applicable law as being the latest practicable date as at which liabilities of the Company or such Guarantor, as the case may be, may be ascertained for such                                 
|
| | (iii) |     | The obligations contained in Subsections (a), (b)(i)(B), (b)(ii) and (b)(v) of this Section 1.14 shall constitute separate and independent obligations from the other obligations of the Company and the Guarantors under the terms of this Indenture,
| |       |     | required by the Company or the Guarantors or the liquidator or otherwise or any of them. In the case of Subsection (b)(ii) above, the amount of such deficiency shall not be deemed to be reduced by                                                  
|
| | (iv)  |     | The term rate(s) of exchange shall mean the rate of exchange quoted by Reuters at 11:00 a.m. (New York time) for spot purchases of the Base Currency with the Judgment Currency and includes any premiums and                                       

(c)    
          In the event that on any payment date in respect of the Notes or the Guarantee
          any restrictions or prohibition of access to the Brazilian foreign exchange
          market exists, the Company and the Guarantors agree to pay all amounts payable
          under the Notes and the Guarantee in the currency of the Notes by means of any
          legal procedure existing in Brazil (except commencing legal proceedings against
          the Central Bank of Brazil), on any due date for payment under the Notes, for
          the purchase of the currency of such Notes. All costs and taxes payable in
          connection with the procedures referred to in this Section 1.14 shall be borne
          by the Company and the Guarantors.

ARTICLE 2

FORMS OF NOTES

SECTION 2.1 Forms
Generally

The Notes, the Trustees
certificates of authentication thereof and the Guarantee with respect thereto shall be in
substantially the forms set forth in this Article, with such appropriate legends,
insertions, omissions, substitutions and other variations as are required or permitted by
this Indenture, and may have such letters, numbers or other marks of identification and
such notations, legends or endorsements placed thereon as may be required to comply with
any law, stock exchange rule, agreement to which the Company is subject, if any, or as
may, consistently herewith, be determined by the officers executing such Notes or
Guarantee, as the case may be, as evidenced by their execution of the Notes. Each Global
Note will be dated the Issue Date.

Notes offered and sold in their
initial distribution outside the United States to non-U.S persons in reliance on
Regulation S will be initially issued in the form of one or more Global Notes
(collectively, and, together with their Successor Notes, the  Regulation S Global
Note ) in fully registered form without interest coupons, substantially in the
form of Note set forth in Sections 2.2 and 2.3, with such applicable legends as are
provided for in Section 2.2, which shall be registered in the name of the Depositary or
its nominee and deposited with the Trustee, at its Corporate Trust Office, as custodian
for the Depositary, duly executed by the Company and the Guarantors and authenticated by
the Trustee as hereinafter provided, for credit by the Depositary to the respective
accounts of the beneficial owners of the Notes represented thereby (or such other accounts
as they may direct),  provided  that upon such deposit all such Notes shall be
credited to or through accounts maintained at the Depositary by or on behalf of Euroclear
or CEDEL.

Notes offered and sold in their
initial distribution in the United States to Qualified Institutional Buyers within the
meaning of Rule 144A in accordance with an exemption from the registration requirements of
the Securities Act shall be issued in the form of one or more Global Notes (collectively,
and, together with their Successor Notes, the  Restricted Global Note )
in fully registered form without interest coupons, substantially in the form of Note set
forth in Sections 2.2 and 2.3, with such applicable legends as are provided for in Section
2.2. Such Restricted Global Note shall be registered in the name of the Depositary or its
nominee and deposited with the Trustee, at its Corporate Trust Office, as custodian for
the Depositary, duly executed by the Company and each of the Guarantors and authenticated
by the Trustee as hereinafter provided, for credit by the Depositary to the respective
accounts of beneficial owners of the Notes represented thereby (or such other accounts as
they may direct). The aggregate principal amount of the Restricted Global Note may be
increased or decreased from time to time by adjustments made on the records of the
Trustee, as custodian for the Depositary, in connection with a corresponding decrease or
increase in the aggregate principal amount of the Regulation S Global Note, as hereinafter
provided.

SECTION 2.2 Form of Face
of Note

IF THIS REGISTERED GLOBAL NOTE IS
REGISTERED IN THE NAME OF CEDE & CO. (OR SUCH OTHER PERSON AS MAY BE NOMINATED BY THE
DEPOSITORY TRUST COMPANY (DTC) FOR THE PURPOSE) (COLLECTIVELY, CEDE
& CO.) AS NOMINEE FOR DTC, THEN, UNLESS THIS REGISTERED GLOBAL NOTE IS PRESENTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT AND ANY REGISTERED GLOBAL NOTE OR REGISTERED DEFINITIVE NOTE
ISSUED UPON REGISTRATION OF TRANSFER OR EXCHANGE OF THIS REGISTERED GLOBAL NOTE IS
REGISTERED IN THE NAME OF CEDE & CO. (OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) AND ANY PAYMENT HEREUNDER IS MADE TO CEDE & CO. (OR,
AS THE CASE MAY BE, SUCH OTHER PERSON), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, SINCE THE REGISTERED OWNER HEREOF, CEDE
& CO. (OR, AS THE CASE MAY BE, SUCH OTHER PERSON), HAS AN INTEREST HEREIN.

TRANSFERS OF THE NOTES REPRESENTED BY
THIS REGISTERED GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE TO NOMINEES OF DTC OR
TO A SUCCESSOR THEREOF OR SUCH SUCCESSORS NOMINEE, AND TRANSFERS OF PORTIONS OF THE
NOTES REPRESENTED BY THIS REGISTERED GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS ON SUCH TRANSFERS SET FORTH HEREIN.

NEITHER THIS RESTRICTED REGISTERED
GLOBAL NOTE NOR THE GUARANTEE HAS BEEN OR WILL BE REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933 (THE  SECURITIES ACT ), OR ANY STATE SECURITIES LAW. THE
NOTEHOLDER HEREOF, BY PURCHASING THIS RESTRICTED REGISTERED GLOBAL NOTE, AGREES FOR THE
BENEFIT OF THE COMPANY AND THE GUARANTORS THAT THIS RESTRICTED REGISTERED GLOBAL NOTE MAY
BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT.

NET SUL TV A CABO E PARTICIPAÇÕES LTDA.,  (incorporated under the laws of Brazil)

[UNRESTRICTED GLOBAL
NOTE/RESTRICTED GLOBAL NOTE]  representing up to

[U.S.$48,000,000 SERIES A FLOATING RATE NOTES DUE 2005]  [U.S.$11,000,000 SERIES B FLOATING RATE NOTES DUE 2005]  [U.S.$21,000,000 SERIES C FLOATING RATE NOTES DUE 2005]

jointly and severally, and unconditionally and irrevocably guaranteed by

TV A CABO DE CAPÃO DA CANOA LTDA.  HORIZONTE SUL COMUNICAÇÕES LTDA.  DR  EMPRESA DE DISTRIBUIÇÃO E RECEPÇÃO DE TV LTDA.  DR MULTI CABO SANTA MARIA LTDA.  TV CABO DO SUL LTDA.  ANTENAS COMUNITÁRIAS SUL BRASIL LTDA.  TV CABO CRICIÚMA LTDA. 
CHAPECÓ EMPRESA DE TV POR ASSINATURA LTDA.
MULTICANAL FLORIANÓPOLIS S.A.
HTV COMUNICAÇÕES LTDA.
TVC DO PARANÁ DISTRIBUIDORA DE SINAIS DE TELEVISÃO LTDA.
ANTENAS COMUNITÁRIAS BRASILEIRAS LTDA.
TV CABO DO NORTE DO PARANÁ COMERCIAL LTDA.
VTV TELEVISÃO A CABO LTDA.
TV A CABO SERRANA LTDA.,
(each incorporated under the laws of the Federative Republic of Brazil)

NET SUL TV A CABO E
PARTICIPAÇÕES LTDA., a corporation organized under the laws of Brazil
(herein called the  Company , which term includes any successor Person
under the Indenture hereinafter referred to), for value received, hereby promises to pay
to Cede & Co. or its registered assigns, the principal sum of $_________________
Dollars (or such other principal sum as is noted in the records of the custodian for the
Depositary as being the principal amount of this [Restricted][Regulation S] Global Note
for the time being) on October 31, 2005, and to pay interest thereon from October 31, 1997
or from the most recent Interest Payment Date to which interest has been paid or duly
provided for, quarterly on January 31, April 30, July 31 and October 31 in each year,
commencing on January 31, 1998, and to pay interest thereon at the rate of interest and in
accordance with such other terms and provisions, all as set forth in the Indenture, until
the principal hereof is paid or made available for payment.

Payment of the principal of (and
premium, if any) and interest on this Note will be made at the corporate trust office of
the Trustee, at the offices of a Paying Agent, at the office or agency of the Company
maintained for that purpose in the City of New York, New York, and at any other office or
agency maintained by the Company for such purpose, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of public and
private debts.

As provided in the Indenture and
subject to certain limitations therein set forth, the obligations of the Company under the
Indenture and this Note are guaranteed pursuant to the Guarantee set forth in the
Indenture. Each Holder, by holding this Note, agrees to all of the terms and provisions of
said Guarantee. The Indenture provides that the Guarantors shall be released from the
Guarantee upon compliance with certain conditions. Reference is hereby made to the
Indenture for a statement of the respective rights, limitations of rights, duties and
obligations thereunder of the Guarantors, the Trustee and the Holders.

Reference is hereby made to the
further provisions of this Note set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at this place.

Unless the certificate of
authentication hereon has been executed by the Trustee referred to on the reverse hereof
by manual signature, this Note shall not be entitled to any benefit under the Indenture or
be valid or obligatory for any purpose.

IN WITNESS WHEREOF , the
Company has caused this instrument to be duly executed.

Dated: October 31, 1997

Porto Alegre, Brazil

NET SUL TV A CABO E
PARTICIPAÇÕES LTDA.,

By:
_____________________________________Name:                                Title:

By: _____________________________________Name:                                Title:

Witness:

1.
___________________________

2. ___________________________

SECTION 2.3 Form of Reverse of Note

This Note is one of a duly authorized
issue of Notes of the Company designated as its U.S.[$48,000,000 Series A Floating Rate
Notes due 2005][U.S.$11,000,000 Series B Floating Rate Notes due 2005][U.S.$21,000,000
Series C Floating Rate Notes due 2005] (the  Notes ) issued under an
Indenture, dated as of October 31, 1997 (herein called the  Indenture ),
among the Company, the Guarantors named therein, The Chase Manhattan Bank, New York, as
trustee (herein called the  Trustee , which term includes any successor
trustee under the Indenture), The Chase Manhattan Bank, New York as Registrar and Paying
Agent, The Chase Manhattan Bank, London Branch as Transfer Agent, Calculation Agent and
Paying Agent, Chase Manhattan Bank Luxembourg, S.A. as Paying Agent, and Chase Trust Bank
as Principal Paying Agent. The Series A Notes, Series B Notes and Series C Notes are
limited in aggregate principal amount to U.S.$48,000,000, U.S.$11,000,000 and
U.S.$21,000,000, respectively. Reference is hereby made to the
Indenture and all indentures supplemental thereto for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company, the
Guarantors, the Trustee and the Noteholders and of the terms upon which the Notes are, and
are to be, authenticated and delivered.

As provided in the Indenture and
subject to certain limitations therein set forth, the obligations of the Company under the
Indenture and this Note are guaranteed pursuant to the Guarantee set forth in the
Indenture. Each Noteholder, by holding this Note, agrees to all of the terms and
provisions of said Guarantee. The Indenture provides that the Guarantors will be released
from the Guarantee upon compliance with certain conditions. Reference is hereby made to
the Indenture for a statement of the respective rights, limitations of rights, duties and
obligations thereunder of the Guarantors, the Trustee and the Noteholders.

As further set forth in the
Indenture, this Note shall be redeemable at the option of the Company or the holder hereof
at such times, at such prices and in accordance with such procedures as are set forth in
the Indenture.

[Include if Note is a Restricted
Global Note  If the holder of a beneficial interest in this Restricted Global Note
wishes at any time to transfer such interest to a Person who wishes to take delivery
thereof in the form of a beneficial interest in the Regulation S Global Note, such
transfer may be effected, subject to the rules and procedures of the Depositary, Euroclear
and CEDEL, in each case to the extent applicable and as in effect from time to time, only
in accordance with the terms of this paragraph. Upon receipt by the Trustee, as Note
Registrar of:

| | (A) written instructions given by or on behalf of the Depositary in accordance with
the rules and procedures of the Depositary, Euroclear and CEDEL, in each case to
the extent applicable and as in effect from time to time directing the Trustee
to credit or cause to be credited to a specified Agent Members account a
beneficial interest in the Regulation S Global Note in a specified principal
amount and to cause to be debited from another specified Agent Members
account a beneficial interest in the Restricted Global Note in an equal
principal amount; and
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (B) a certificate in substantially the form set forth in Exhibit A of the Indenture
          signed by or on behalf of the holder of such beneficial interest in this
          Restricted Global Note, the Trustee, as Note Registrar, shall reduce the
          principal amount of this Restricted Global Note, and increase the principal
          amount of the Regulation S Global Note by such specified principal amount.]                                                                                                                                           

The Notes do not have the benefit of
any sinking fund obligations.

In the event of redemption or
purchase of this Note in part only, a new Note or Notes of like tenor for the unredeemed
or unpurchased portion hereof will be issued in the name of the Noteholder hereof upon the
cancellation hereof.

The Indenture permits, with certain
exceptions as therein provided, the amendment thereof and the modification of the rights
and obligations of the Company and the Guarantors and the rights of the Noteholders under
the Indenture at any time by the Company, the Guarantors and the Trustee with the consent
of the Noteholders of a majority in aggregate principal amount of the Notes at the time
Outstanding. The Indenture also contains provisions permitting the Noteholders of
specified percentages in aggregate principal amount of the Notes at the time Outstanding,
on behalf of the Noteholders of all the Notes, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Noteholder of this Note shall be
conclusive and binding upon such Noteholder and upon all future Noteholders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange herefor or
in lieu hereof, whether or not notation of such consent or waiver is made upon this Note.

No reference herein to the Indenture
and no provision of this Note or of the Indenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of and premium, if
any, and interest on this Note at the times, place and rate, and in the coin or currency,
herein prescribed.

As provided in the Indenture and
subject to certain limitations therein set forth, the transfer of this Note is registrable
in the Note Register, upon surrender of this Note for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New York, New
York, or of any Transfer Agent duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Note Registrar duly executed by, the
Noteholder hereof or his attorney duly authorized in writing, and thereupon one or more
new Notes, of authorized denominations and like tenor and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.

Prior to due presentment of this Note
for registration of transfer, the Company, the Trustee, the Transfer Agent and any agent
of the Company or the Trustee may treat the Person in whose name this Note is registered
as the owner hereof for all purposes, whether or not this Note is overdue, and none of the
Company, the Trustee or any such agent shall be affected by notice to the contrary. All
terms used in this Note which are defined in the Indenture shall have the meanings
assigned to them in the Indenture.

THE INDENTURE, THIS NOTE AND THE
GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.

The Company and each of the
Guarantors agree that any suit, action or proceeding against any of them brought by any
Holder or the Trustee arising out of or based upon this Indenture, the Notes or the
Guarantee may be instituted in any state or federal court in The City of New York, New
York, and waive any objection which any of them may now or hereafter have to the laying of
venue of any such proceeding, and irrevocably submits to the non-exclusive jurisdiction of
such courts in any suit, action or proceeding.

U.S.dollars are the sole currency of account and payment for all sums payable by the
          Company and the Guarantors under or in connection with the Notes, the Guarantee
          or the Indenture, including damages.

The Company and the Guarantors have
agreed that the provisions of Section 1.14 of the Indenture shall apply to conversion of
currency in the case of the Notes, the Guarantee and the Indenture. The Company and the
Guarantors have appointed CT Corporation System, currently located at 1633 Broadway, New
York, New York 10019, as its authorized agent upon which process may be served in any
suit, or proceeding with respect to, arising out of, or relating to, this Note, the
Indenture or the Guarantees, that may be instituted in any Federal or state court in the
State of New York, The City of New York, the Borough of Manhattan, or brought under
Federal or state securities laws and have agreed that there shall, at all times, be at
least one agent for service of process for the Company and the Guarantors appointed and
acting in accordance with the provisions of Section 1.13 of the Indenture relating to
agent for service of process. To the extent that the Company or any of the Guarantors has
or hereafter may acquire any immunity from jurisdiction of any court or from any legal
process (whether through service of notice, attachment prior to judgment, attachment in
aid of execution, execution or otherwise) with respect to itself or its property, the
Company and the Guarantors have irrevocably waived such immunity in respect of its
obligations under the Indenture, this Note and the Guarantee, to the extent permitted by
law.

SECTION 2.4 Form of
Trustees Certificate of Authentication

This is one of the Notes with the
Guarantee referred to in the within-mentioned Indenture.

THE CHASE MANHATTAN
BANK, NEW YORK, as Trustee

By:
_______________________________

Authorized Signatory

The Guarantors jointly, severally,
unconditionally and irrevocably guarantee the due and punctual payment of all sums from
time to time payable in respect of the Notes as set forth in the Indenture.

TV A CABO DE CAPÃO DA CANOA LTDA. 
HORIZONTE SUL COMUNICAÇÕES LTDA.
DR - EMPRESA DE DISTRIBUIÇÃO E RECEPÇÃO DE TV LTDA. 
DR MULTI CABO SANTA MARIA LTDA. 
TV CABO DO SUL LTDA.
ANTENAS COMUNITÁRIAS SUL BRASIL LTDA. TV CABO CRICIÚMA LTDA. CHAPECÓ EMPRESA DE TV POR ASSINATURA
LTDA. MULTICANAL FLORIANÓPOLIS S.A. HTV COMUNICAÇÕES LTDA. 
TVC DO PARANÁ DISTRIBUIDORA DE SINAIS DE TELEVISÃO LTDA. ANTENAS COMUNITÁRIAS BRASILEIRAS LTDA. TV CABO DO
NORTE DO PARANÁ COMERCIAL LTDA. VTV TELEVISÃO A CABO LTDA. A CABO SERRANA LTDA.

By:.....................................     Name:     Title:

By: .....................................     Name:     Title:

Witness:

1.___________________________ 2.___________________________

ARTICLE 3

THE NOTES

SECTION 3.1 Title and
Terms

The aggregate principal amount of
Series A Notes, Series B Notes and Series C Notes which may be authenticated and delivered
under this Indenture is limited to U.S.$48,000,000, U.S.$11,000,000 and U.S.$21,000,000,
respectively except for Notes authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Notes pursuant to Section 3.4, 3.5 or 9.5.

The Notes shall be known and
designated as the U.S.$48,000,000 Series A Floating Rate Notes due 2005", the
U.S.$11,000,000 Series B Floating Rate Notes due 2005 and the
U.S.$21,000,000 Series C Floating Rate Notes due 2005 of the Company. The
Stated Maturity of the Notes shall be October 31, 2005. The Notes shall bear interest at a
per annum rate equal to LIBOR plus the Applicable Margin for the relevant series, from
October 31, 1997, or from the most recent Interest Payment Date thereafter to which
interest has been paid or duly provided for, as the case may be, payable quarterly in
arrears on each January 31, April 30, July 31 and October 30 commencing January 31, 1998,
until the principal thereof is paid or made available for payment. The Notes will be
jointly and severally and unconditionally guaranteed by each of the Guarantors named
herein and party hereto. The Notes will be direct, general and unconditional obligations
of the Issuer and will rank pari passu among themselves and with all other existing and
future unsecured and unsubordinated obligations of the Issuer.

The principal of and premium, if any,
and interest on the Notes shall be payable at the Corporate Trust Office of the Trustee in
The City of New York, New York, maintained for such purpose, the office of the Paying
Agents and at any other office or agency maintained by the Company for such purpose.

The Notes shall be redeemable as
provided in Article 13.

The Notes shall not have the benefit
of any sinking fund obligations.

Unless the context otherwise
requires, the Notes shall constitute one series for all purposes under this Indenture,
including, without limitation, amendments, waivers or redemptions.

SECTION 3.2 Denominations

The Notes are issuable only in fully
registered form, without coupons, in denominations of U.S.$500,000 (or such lesser amount
as may be required by the Luxembourg Stock Exchange for listing of the Notes thereon) and
any integral multiple of $1,000 in excess thereof.

SECTION 3.3 Execution,
Authentication, Delivery and Dating

The Notes shall be executed on behalf
of the Company by an authorized signatory or authorized signatories of the Company. The
signature of any of these shareholders on the Notes may be manual or facsimile.

Notes bearing the manual or facsimile
signatures of individuals who were at any time the proper officers of the Company shall
bind the Company, notwithstanding that such individuals or any of them have ceased to hold
such offices prior to the authentication and delivery of such Notes.

At any time and from time to time
after the execution and delivery of this Indenture, the Company may deliver Notes executed
by the Company and having the benefit of the Guarantee executed as provided in Section
14.2 by the Guarantors, to the Trustee for authentication, together with a Company Order
for the authentication and delivery of such Notes; and the Trustee in accordance with such
Company Order shall authenticate and deliver such Notes as in this Indenture provided and
not otherwise.

Each Note shall be dated the date of
its authentication.

No Note or Guarantee shall be
entitled to any benefit under this Indenture or be valid or obligatory for any purpose
unless there appears on such Note a certificate of authentication substantially in the
form provided for herein executed by the Trustee by manual signature, and such certificate
upon any Note shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder and that each Guarantee referred to therein has
been duly executed and delivered hereunder.

SECTION 3.4 Global
Notes; Registration, Registration of Transfer and Exchange

(a)    
            Global Notes    . The provisions of Clauses (1) through (7)
          below shall apply to the Global Notes:

(1)    
          Each Global Note authenticated under this Indenture shall be registered in the
          name of the Depositary or a nominee thereof and delivered to the Depositary or a
          nominee thereof or custodian therefor, and each such Global Note shall
          constitute a single Note for all purposes of this Indenture.

(2)    
          Notwithstanding any other provision in this Indenture, no Global Note may be
          exchanged in whole or in part for Notes registered, and no transfer of a Global
          Note in whole or in part may be registered, in the name of any Person other than
          the Depositary or a nominee thereof unless (A) the Depositary (i) has notified
          the Company that it is unwilling or unable to continue as Depositary for such
          Global Note and the Company thereupon fails to appoint a successor Depositary or
          (ii) has ceased to be a clearing agency registered under the Exchange Act, and a
          successor depositary is not appointed by the Company within 90 days or (B) there
          shall have occurred and be continuing a Default or an Event of Default with
          respect to the Notes evidenced by such Global Note.

(3)    
          If any Global Note is to be exchanged for other Notes or cancelled in whole, it
          shall be surrendered by or on behalf of the Depositary or its nominee to the
          Trustee, as Note Registrar, for exchange or cancellation as provided in this
          Article 3. If any Global Note is to be exchanged for other Notes or cancelled in
          part, or if another Note is to be exchanged in whole or in part for a beneficial
          interest in any Global Note, such Global Note shall be so surrendered for
          exchange or cancellation as provided in this Article 3 or, if the Trustee is
          acting as custodian for the Depositary or its nominee (or is party to a similar
          arrangement) with respect to such Global Note, the principal amount thereof
          shall be reduced or increased by an amount equal to the portion thereof to be so
          exchanged or cancelled, or the principal amount of such other Note to be so
          exchanged for a beneficial interest therein, as the case may be, in each case by
          means of an appropriate adjustment made on the records of the Trustee, whereupon
          the Trustee, in accordance with the Applicable Procedures, shall instruct the
          Depositary or its authorized representatives to make a corresponding adjustment
          to its records (including by crediting or debiting any Agent Members
          account as necessary to reflect any transfer or exchange of a beneficial
          interest pursuant to Section 3.4(c)). Upon any such surrender or adjustment of a
          Global Note, the Trustee shall, subject to Section 3.4(a)(2) and as otherwise
          provided in this Article 3, authenticate and deliver any Notes issuable in
          exchange for such Global Note (or any portion thereof) to or upon the order of,
          and registered in such names as may be directed by, the Depositary or its
          authorized representative. Upon the request of the Trustee in connection with
          the occurrence of any of the events specified in the preceding paragraph (2),
          the Company shall promptly make available to the Trustee a reasonable supply of
          Notes that are not in the form of Global Notes. The Trustee shall be entitled to
          conclusively rely upon any order, direction or request of the Depositary or its
          authorized representative which is given or made pursuant to this Article 3 if
          such order, direction or request is given or made in accordance with the
          Applicable Procedures.

(4)    
          Every Note authenticated and delivered upon registration of transfer of, or in
          exchange for or in lieu of, a Global Note or any portion thereof, whether
          pursuant to this Article 3 or Section 9.5 or otherwise, shall be authenticated
          and delivered in the form of, and shall be, a Global Note, unless such Note is
          registered in the name of a Person other than the Depositary or a nominee
          thereof.

(5)    
          None of the Company, the Trustee, any agent of the Trustee, any Paying Agent or
          the Note Registrar will have any responsibility or liability for any aspect of
          the Depositarys records (or the records of the participant of such
          Depositary) relating to or payments made on account of beneficial ownership
          interests of a Global Note or for maintaining, supervising or reviewing any
          records of the Depositary relating to such beneficial ownership interests.

(6)    
          Subject to the provisions in the legends required by Section 2.2 above, the
          registered Noteholder may grant proxies and otherwise authorize any Person,
          including Agent Members and Persons who may hold interests in Agent Members, to
          take any action that such Noteholder is entitled to take under this Indenture.

(7)    
          Neither Agent Members nor any other Person on whose behalf Agent Members may act
          shall have any rights under this Indenture with respect to any Global Note held
          on their behalf by the Depositary or under the Global Note, and the Depositary
          may be treated by the Company, the Trustee and any agent of the Company or the
          Trustee as the absolute owner of such Global Note for all purposes whatsoever.
          Notwithstanding the foregoing, nothing herein shall prevent the Company, the
          Trustee or any agent of the Company or the Trustee from giving effect to any
          written certification, proxy or other authorization furnished by the Depositary
          or impair, as between the Depositary and its Agent Members, the operation of
          customary practices governing the exercise of the rights of a Noteholder of any
          Note. With respect to any Global Note deposited with the Trustee as custodian
          for the Depositary for credit to their respective accounts (or to such other
          accounts as they may direct) at Euroclear or CEDEL, the provisions of the
          Operating Procedures of the Euroclear System and the Terms and
          Conditions Governing Use of Euroclear, and the Management
          Regulations and Instructions to Participants of CEDEL,
          respectively, shall be applicable to such Global Note.

(b)    
            Registration, Registration of Transfer and Exchange and
          Legends    . The Company shall cause to be kept at the Corporate
          Trust Office of the Trustee a register (the register maintained in such office
          and in any other office or agency designated pursuant to Section 10.2 being
          herein sometimes collectively referred to as the  Note
          Register ) in which, subject to such reasonable regulations as they may
          prescribe, the Company shall provide for the registration of Notes and of
          transfers and exchanges of Notes. The Trustee is hereby appointed Note
          Registrar for the purpose of registering Notes and transfers and exchanges
          of Notes as herein provided.

Upon surrender for registration of
transfer of any Note at an office or agency of the Company designated pursuant to Section
10.2 for such purpose in accordance with the terms hereof, the Company shall, subject to
the other provisions of this Section 3.4, execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more new Notes of
any authorized denominations and of a like tenor and aggregate principal amount and
bearing the applicable legends set forth in Section 2.2.

Subject to Section 3.4(c), at the
option of the Noteholder, Notes may be exchanged for other Notes of any authorized
denominations and of a like tenor and aggregate principal amount and bearing the
applicable legends set forth in Section 2.2, each such new Note having the benefit of the
Guarantee executed by the Guarantors, upon surrender of the Notes to be exchanged at such
office or agency. Whenever any Notes are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Notes which the Noteholder
making the exchange is entitled to receive.

All Notes issued upon any
registration of transfer or exchange of Notes shall be the valid obligations of the
Company and the Guarantors, evidencing the same debt, and entitled to the same benefits
under this Indenture (including, without limitation, the Guarantee), as the Notes
surrendered upon such registration of transfer or exchange.

Every Note presented or surrendered
for registration of transfer or for exchange shall (if so required by the Company or the
Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Note Registrar, duly executed by the Noteholder
thereof or his attorney duly authorized in writing.

No service charge shall be made to
the Noteholder for any registration of transfer or exchange of Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental charge that may
be imposed in connection with any registration of transfer or exchange of Notes, other
than exchanges pursuant to Section 3.4, 3.5 or 9.5.

The Company and the Note Registrar
shall not be required (i) to issue, register the transfer of or exchange any Note during a
period beginning at the opening of business 15 days before the day of the mailing of a
notice of redemption of Notes selected for redemption under Section 13.7 and ending at the
close of business on the day of such mailing, or (ii) to register the transfer of or
exchange any Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part.

All Notes issued hereunder shall at
all times, bear the relevant legends specified in Section 2.2 to be applied to such a
Note.

(c)    
            Certain Transfers and Exchanges    . Upon presentation for
          transfer or exchange of any Note at the office of the Trustee, as Note
          Registrar, located in The City of New York, accompanied by a written instrument
          of transfer or exchange in the form approved by the Company and the Trustee (it
          being understood that, until notice to the contrary is given to holders of
          Notes, the Company shall be deemed to have approved the form of instrument of
          transfer or exchange, if any, printed on any Note), executed by the registered
          Noteholder, in person or by such Noteholders attorney thereunto duly
          authorized in writing, and upon compliance with this Section 3.4, such Note
          shall be transferred upon the Note Register, and a new Note shall be
          authenticated and issued in the name of the transferee. Notwithstanding any
          provision to the contrary herein or in the Notes, transfers of a Global Note, in
          whole or in part, and transfers of interests therein of the kind described in
          this Section 3.4(c), shall only be made in accordance with this Section 3.4(c).
          Transfers and exchanges subject to this Section 3.4(c) shall also be subject to
          the other provisions of this Indenture that are not inconsistent with this
          Section 3.4(c).

(1)     
          General . A Global Note may not be transferred, in whole or in part, to any
          Person other than the Depositary or a nominee thereof, and no such transfer to
          any such other Person may be registered;  provided, however,  that this
          Clause (1) shall not prohibit any transfer of a Note that is issued in exchange
          for a Global Note but is not itself a Global Note. No transfer of a Note to any
          Person shall be effective under this Indenture or the Notes unless and until
          such Note has been registered in the name of such Person. Nothing in this Clause
          (1) shall prohibit or render ineffective any transfer of a beneficial interest
          in a Global Note effected in accordance with the other provisions of this
          Section 3.4(c).

(2)    
           Restricted Global Note to Regulation S Global Note . If the holder of a
          beneficial interest in the Restricted Global Note wishes at any time to transfer
          such interest to a Person who wishes to take delivery thereof in the form of a
          beneficial interest in the Regulation S Global Note, such transfer may be
          effected, subject to the rules and procedures of the Depositary, Euroclear and
          CEDEL, in each case to the extent applicable and as in effect from time to time
          (the  Applicable Procedures ), only in accordance with this
          Clause (2). Upon receipt by the Trustee, as Note Registrar, of (A) written
          instructions given by or on behalf of the Depositary in accordance with the
          Applicable Procedures directing the Trustee to credit or cause to be credited to
          a specified Agent Members account a beneficial interest in the Regulation
          S Global Note in a specified principal amount and to cause to be debited from
          another specified Agent Members account a beneficial interest in the
          Restricted Global Note in an equal principal amount and (B) a certificate in
          substantially the form set forth in Exhibit A signed by or on behalf of the
          holder of such beneficial interest in the Restricted Global Note, the Trustee,
          as Note Registrar, shall reduce the principal amount of the Restricted Global
          Note, and increase the principal amount of the Regulation S Global Note by such
          specified principal amount as provided in Section 3.4(a)(3).

SECTION 3.5 Mutilated,
Destroyed, Lost and Stolen Notes

If any mutilated Note is surrendered
to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver
in exchange therefor a new Note of like tenor and principal amount, having the benefit of
the Guarantee executed by the Guarantors and bearing a number not contemporaneously
outstanding.

If there shall be delivered to the
Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or
theft of any Note and (ii) such security or indemnity as may be required by them to save
each of them, the Guarantor and any agent of either of them harmless, then, in the absence
of notice to the Company or the Trustee that such Note has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in
lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal
amount, having the benefit of the Guarantee executed by the Guarantors and bearing a
number not contemporaneously outstanding.

In case any such mutilated,
destroyed, lost or stolen Note has become or is about to become due and payable, the
Company may in its discretion, instead of issuing a new Note, pay such Note.

Upon the issuance of any new Note
under this Section, the Company may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.

Every new Note issued pursuant to
this Section in lieu of any destroyed, lost or stolen Note, including any Guarantee in
connection therewith, shall constitute an original additional contractual obligation of
the Company and the Guarantors, respectively, whether or not the destroyed, lost or stolen
Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all other Notes and any
Guarantee, respectively, duly issued hereunder.

The provisions of this Section are
exclusive and shall preclude (to the extent lawful) all other rights and remedies with
respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.

SECTION 3.6 Computation
and Payment of Interest

Interest shall be payable on each
Note of each series at the Applicable Interest Rate for such series from October 31, 1997,
or from the most recent Interest Payment Date to which interest has been paid or duly
provided for, quarterly in arrears on each January 31, April 30, July 31 and October 30
commencing January 31, 1998 (each an  Interest Payment Date ), until the
principal thereof is paid or made available for payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will be paid to the
Person in whose name such Note (or one or more Predecessor Notes) is registered at the
close of business on the Regular Record Date for such interest, which shall be 15 calendar
days prior to payment (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Interest on each Note shall be computed on the basis of the
actual number of days elapsed in a year of 360 days;  provided, however,  that
Default Interest shall be computed on the basis of a 365 or 366-day year, as the case may
be, and the number of days actually elapsed. Any such interest not so punctually paid or
duly provided for will forthwith cease to be payable to the Noteholder on such Regular
Record Date and may either be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on a Special Record Date for the
payment of such Default Interest to be fixed by the Trustee, notice whereof shall be given
to Noteholders of Notes not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange. In addition, the Company will pay to the Noteholder of each
Note such Additional Amounts as may become payable under Section 12.2 hereof and such
Breakage Costs, if any, as may become payable hereunder.

Immediately upon and during the
continuation of an Event of Default set forth in any of Section 5.1(a) (b) or (c),
interest will accrue on the unpaid principal amount outstanding on each Note of each
series at the Default Rate, shall be payable on demand, and, if not so paid on demand,
such interest shall itself bear interest at the Default Rate (to the extent that the
payment of such interest shall be legally enforceable), and shall accrue from the date of
such demand for payment to the date payment of such interest has been made or duly
provided for, and such interest on unpaid interest shall also be payable on demand;
provided, however, in no event shall the Companys interest payment obligations
exceed the limitations set forth in the following paragraph.

NOTWITHSTANDING ANY OTHER PROVISION HEREOF, IN NO EVENT SHALL THE
AMOUNT OR RATE OF INTEREST (INCLUDING TO THE EXTENT APPLICABLE ANY DEFAULT RATE INTEREST, ADDITIONAL
AMOUNTS OR BREAKAGE COSTS) PAYABLE, CONTRACTED FOR, CHARGED OR RECEIVED UNDER OR IN
CONNECTION WITH THE NOTES, FROM TIME TO TIME OR FOR WHATEVER REASON, EXCEED THE MAXIMUM
RATE OR AMOUNT, IF ANY, SPECIFIED BY APPLICABLE LAW. If from any circumstance whatsoever,
fulfillment of any provision hereof shall involve transcending the limit of such validity,
and if from any such circumstance the holder of a Note shall ever receive an amount deemed
interest by applicable law which shall exceed the highest lawful rate, such amount which
would be excessive interest shall be applied to the reduction of the principal amount
owing under such Note and not to the payment of interest, or, if such excessive interest
exceeds the unpaid principal amount hereunder, the excess shall be refunded to the
Company. The terms and provisions of this paragraph shall control and supersede every
other provision hereof.

Payment of the principal of and
premium, if any, and interest on this Note will be made at the Corporate Trust Office of
the Trustee, at the offices of a Paying Agent, at the office or agency of the Company
maintained for that purpose in the City of New York, New York, and at any other office or
agency maintained by the Company for such purpose, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of public and
private debts.

Interest on any Note which is
payable, and is punctually paid or duly provided for, on any Interest Payment Date shall
be paid to the Person in whose name that Note (or one or more Predecessor Notes) is
registered at the close of business on the Regular Record Date for such interest.

Principal, premium, if any, and
interest on any Note which are payable, but are not punctually paid or duly provided for
when due in accordance with the terms hereof, shall (a) bear interest from and after the
due date therefor until so paid or provided for at the Default Rate ( Default
Interest ) (to the extent that the payment of such interest shall be legally
enforceable), and (b) forthwith cease to be payable to the Noteholder on the relevant
Regular Record Date by virtue of having been such Noteholder, and such Default Interest
may be paid by the Company, at its election in each case, as provided in Clause (1) or (2)
below:

(1)    
          The Company may elect to make payment of any Default Interest to the Persons in
          whose names the Notes (or their respective Predecessor Notes) are registered at
          the close of business on a Special Record Date for the payment of such Default
          Interest, which shall be fixed in the following manner. The Company shall notify
          the Trustee in writing of the amount of Default Interest proposed to be paid on
          each Note and the date of the proposed payment, and at the same time the Company
          shall deposit with the Trustee an amount of money equal to the aggregate amount
          proposed to be paid in respect of such Default Interest or shall make
          arrangements satisfactory to the Trustee for such deposit prior to the date of
          the proposed payment, such money when deposited to be held in trust for the
          benefit of the Persons entitled to such Default Interest as in this Clause
          provided. Thereupon the Trustee shall fix a Special Record Date for the payment
          of such Default Interest which shall be not more than 15 days and not less than
          10 days prior to the date of the proposed payment and not less than 10 days
          after the receipt by the Trustee of the notice of the proposed payment. The
          Trustee shall promptly notify the Company of such Special Record Date and, in
          the name and at the expense of the Company, shall cause notice of the proposed
          payment of such Default Interest and the Special Record Date therefor to be
          mailed, first-class postage prepaid, to each Noteholder at his address as it
          appears in the Note Register, not less than 10 days prior to such Special Record
          Date. Notice of the proposed payment of such Defaulted Interest and the Special
          Record Date therefor having been so mailed, such Default Interest shall be paid
          to the Persons in whose names the Notes (or their respective Predecessor Notes)
          are registered at the close of business on such Special Record Date and shall no
          longer be payable pursuant to the following Clause (2).

(2)    
          The Company may make payment of any Default Interest in any other la wful manner
          not inconsistent with the requirements of any securities exchange on which the
          Notes may be listed, and upon such notice as may be required by such exchange,
          if, after notice given by the Company to the Trustee of the proposed payment
          pursuant to this Clause, such manner of payment shall be deemed practicable by
          the Trustee.

Subject to the foregoing provisions
of this Section, each Note delivered under this Indenture upon registration of transfer of
or in exchange for or in lieu of any other Note shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Note.

SECTION 3.7 Persons
Deemed Owners

Prior to due presentment of a Note
for registration of transfer and the effective registration of such transfer by the Note
Registrar, the Company, the Guarantors, the Trustee and any agent of the Company, the
Guarantors or the Trustee may treat the Person in whose name such Note is registered as
the owner of such Note for the purpose of receiving payment of principal of and premium,
if any, and (subject to Section 3.6) interest on such Note and for all other purposes
whatsoever, whether or not such Note is overdue and regardless of any notice of ownership,
trust or any other interest therein, any writing on a Restricted Global Note relating
thereto (other than the endorsed form of transfer) or any notice of any previous loss or
theft of such Restricted Global Note, and none of the Company, the Guarantor, the Trustee
or any agent of the Company, the Guarantor or the Trustee shall be liable for so treating
such holder.

SECTION 3.8 Cancellation

Except as provided for in Sections
13.2 and 13.3, Notes surrendered for payment, redemption, registration of transfer or
exchange shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the
Trustee for cancellation any Notes previously authenticated and delivered hereunder which
the Company may have acquired in any manner whatsoever, and all Notes so delivered shall
be promptly cancelled by the Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes cancelled as provided in this Section, except as expressly
permitted by this Indenture. All cancelled Notes held by the Trustee shall be disposed of
in accordance with its standard procedures or as directed by a Company Order;  provided,
however,  that the Trustee shall not be required to destroy such Notes.  SECTION 3.9
CUSIP and ISIN Numbers

The Company shall, in issuing the
Notes, use CUSIP and ISIN numbers, and the Trustee shall use the applicable CUSIP or ISIN
number, as the case may be, in notices of redemption or exchange as a convenience to the
Noteholders;  provided , that any such notice may state that no representation is
made as to the accuracy or correctness of the CUSIP or ISIN number or numbers printed in
the notice or on the certificates representing the Notes and that reliance may be placed
only on the other identification numbers printed on the certificates representing the
Notes.

SECTION 3.10 Paying
Agents; Discharge of Payment Obligations; Indemnity of Noteholders

(a)    
          The Company may from time to time appoint one or more Paying Agents under this
          Indenture and the Notes. By its execution and delivery of this Indenture, the
          Company hereby initially designates and appoints Chase Trust Bank as Principal
          Paying Agent and The Chase Manhattan Bank, New York; The Chase Manhattan Bank,
          London Branch; and Chase Manhattan Bank, Luxembourg, S.A., as Paying Agents.

(b)    
          The Company shall, by 10:00 a.m. Tokyo time, no later than one Business Day
          prior to each interest payment date or principal payment date on any Notes
          (whether on maturity, redemption or otherwise) (each, a  Payment
          Date ), deposit with the Principal Paying Agent in Tokyo in immediately
          available funds a sum sufficient to pay such principal, premium, if any, and
          interest when so becoming due (including any Additional Amounts). The Company
          shall request that the bank through which such payment is to be made agree to
          supply to the Principal Paying Agent in Tokyo by 10:00 a.m. (Tokyo time) two
          business Days prior to the due date for any such payment an irrevocable
          confirmation (by tested telex or authenticated SWIFT MT 100 Message) of its
          intention to make such payment. The Principal Paying Agent shall arrange with
          all other Paying Agents for the payment, from funds furnished by the Company or
          the Guarantors to the Trustee pursuant to this Indenture, of the principal of
          and premium, if any, and interest (including Additional Amounts, if any) on the
          Notes and of the compensation of such Paying Agents for their services as such.
          All Paying Agents will hold in trust, for the benefit of the Noteholders or the
          Trustee, all money held by such Paying Agent for the payment of principal of and
          premium if any, and interest on the Notes and shall notify the Trustee in
          writing of any default by the Company in making any such payment. The Company at
          any time may require a Paying Agent to pay all money held by it to the Trustee
          and to account for any funds disbursed by it. Upon complying with this Section
          3.10 and the applicable provisions of Section 10.3, the Paying Agents shall have
          no further liability for the money delivered to the Trustee.

(c)    
          Any payment to be made in respect of the Notes or the Guarantee by the Company
          or the Guarantors to or to the order of the Principal Paying Agent shall be in
          satisfaction  pro tanto  of the obligations of the Company under the Notes.
          The Company and the Guarantors shall indemnify the Noteholders against any
          failure on the part of any Paying Agent to pay any sum due in respect of the
          Notes and shall pay such sum to the Trustee on demand. This indemnity
          constitutes a separate and independent obligation from the other obligations of
          the Company under the Notes and the Guarantors under the Guarantee, shall give
          rise to a separate and independent cause of action, will apply irrespective of
          any waiver granted by the Trustee and/or any holder of Notes and shall continue
          in full force and effect despite any judgment, order, claim, or proof for a
          liquidated amount in respect of any sum due under this Indenture, the Notes or
          any judgment or order.

(d)    
          Notwithstanding the fact that the Paying Agent is not obligated to make any such
          payment, if the Paying Agent pays out any amount due under the terms of the
          Notes on or after the due date therefor on the assumption that the corresponding
          payment for such amount has been or will be made by the Company and such payment
          has in fact not been so made by the Company prior to the time that the Paying
          Agent makes such payment, then the Company shall on demand reimburse the Paying
          Agent for the relevant amount, and pay interest to the Paying Agent on such
          amount from the date on which it is paid out to the date of reimbursement at a
          rate per annum equal to the cost of the Paying Agent of funding the amount paid
          out, as certified by the Paying Agent and expressed as a rate per annum.

ARTICLE 4

SATISFACTION AND
DISCHARGE

SECTION 4.1 Satisfaction
and Discharge of Indenture

This Indenture shall cease to be of
further effect as to all Outstanding Notes (except as to (i) rights of registration of
transfer and exchange and the Companys right of optional redemption, (ii)
substitution of apparently mutilated, defaced, destroyed, lost or stolen Notes, (iii)
rights of holders of Notes to receive payment of principal of and premium, if any, and
interest (including Additional Amounts) on the Notes, (iv) rights, obligations and
immunities of the Trustee under this Indenture and (v) rights of the holders of the Notes
as beneficiaries of this Indenture with respect to any property deposited with the Trustee
payable to all or any of them), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and discharge of this
Indenture, when

(1) either

(A)    
          the Company will have paid or caused to be paid the principal of and premium, if
          any, and interest on the Notes as and when the same will have become due and
          payable; or

(B)    
          all Outstanding Notes (except lost, stolen or destroyed Notes which have been
          replaced or paid) have been delivered to the Trustee for cancellation; and the
          Company, in the case of (A) above, has deposited or caused to be deposited with
          the Trustee as trust funds in trust for the purpose an amount sufficient to pay
          and discharge the entire indebtedness on such Notes not theretofore delivered to
          the Trustee for cancellation, for principal of and premium, if any, and interest
          to the date of such deposit (in the case of Notes which have become due and
          payable) or to the Stated Maturity or Redemption Date, as the case may be, on
          such Notes;

(2)    
          the Company has paid or caused to be paid all other sums payable hereunder by
          the Company and the Guarantors;

(3)    
          the Company has delivered to the Trustee an Officers Certificate and an
          Opinion of Counsel, each stating that all conditions precedent herein provided
          for relating to the satisfaction and discharge of this Indenture have been
          complied with; and

(4)    
          the Trustee shall have received such other documents and assurances as the
          Trustee shall have reasonably requested.

Notwithstanding the satisfaction and
discharge of this Indenture, (i) the obligations of the Company to the Trustee under
Section 6.7, (ii) substitution of apparently mutilated, defaced, destroyed, lost or stolen
Notes, (iii) rights of holders of Notes to receive payment of principal of and premium, if
any, and interest on the Notes, (iv) rights, obligations and immunities of the Trustee
under this Indenture (including, without limitation, Sections 6.7(3), 12.2(b), the third
to last sentence of Section 12.2(f) and, if money shall have been deposited with the
Trustee pursuant to subclause (B) of Clause (1) of this Section, the obligations of the
Trustee under Section 4.2 and the last paragraph of Section 10.3), and (v) rights of
Noteholders as beneficiaries of this Indenture with respect to any property deposited with
the Trustee payable to all or any of them, shall survive.

SECTION 4.2 Application
of Trust Money

Subject to the provisions of the last
paragraph of Section 10.3, all money deposited with the Trustee pursuant to Section 4.1
shall be held in trust and applied by it, in accordance with the provisions of the Notes
and this Indenture, to the payment, either directly or through any Paying Agent (including
the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal, premium, if any, and interest for whose payment such
money has been deposited with the Trustee.

SECTION 4.3 Set-Off;
Sharing of Payments

(a)    
          In addition to any rights now or hereafter granted under applicable law and not
          by way of limitation of any such rights, during the continuance of any Event of
          Default, each Noteholder is hereby authorized by the Company and each Guarantor,
          at any time or from time to time, with reasonably prompt subsequent notice to
          the Company and any relevant Guarantor (any prior or contemporaneous notice
          being hereby expressly waived) to set off and to appropriate and to apply any
          and all (A) balances held by such Noteholder at any of its offices for the
          account of the Company or any Guarantor or any of their respective Subsidiaries
          (regardless of whether such balances are then due to such Noteholder or its
          Subsidiaries), and (B) other property at any time held or owing by such
          Noteholder to or for the credit or for the account of the Company or any
          guarantor or any of their respective Subsidiaries, against and on account of any
          obligations under the Notes.

(b)    
          If any Noteholder shall obtain from the Company or any Guarantor payment of any
          principal of or interest on its Note or payment of any other amount under its
          Note through the exercise of any right of set-off, bankers lien or
          counterclaim or similar right or otherwise (other than from the Trustee in
          accordance with the terms and conditions of the Notes), and, as a result of such
          payment, such Note holder shall have received a percentage of the principal of
          or interest on its Note or such other amounts then due hereunder by the Company
          to such Noteholder in excess of its  pro rata  share thereof, it shall
          promptly purchase from such other Noteholders participations in the Notes or
          such other amounts, respectively, owing to such other Noteholders in such
          amounts, and make such other adjustments from time to time as shall be
          equitable, to the end that all the Noteholders shall share the benefit of such
          excess payment (net of any expenses that may be incurred by such Noteholder in
          obtaining or preserving such excess payment)  pro rata  in accordance with
          the unpaid principal of and/or interest on the Notes or such other amounts,
          respectively, owing to each of the Noteholders. To such end all the Noteholders
          shall make appropriate adjustments among themselves (by the resale of
          participations sold) if such payment is rescinded or must otherwise be restored.

(c)    
          Nothing contained herein shall require any Noteholder to exercise any such right
          or shall affect the right of any Noteholder to exercise, and retain the benefits
          of exercising, any such right with respect to any other indebtedness or
          obligation of the Company or any Guarantor.

ARTICLE 5

DEFAULTS AND REMEDIES

SECTION 5.1 Events of
Default

Event of Default ,
wherever used herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):

(a)    
          failure to pay any amount of principal of, or premium, if any, with respect to,
          any Note when due;

(b)    
          failure to pay any interest on any Note when due and such failure shall continue
          for a period of five (5) days;

(c)    
          default in the payment of principal and interest on Notes required to be
          redeemed pursuant to the obligation described in Section 13.2 (and, following
          notice of redemption by the Company thereunder, 13.1 and 13.3) when due;

(d)    
          failure of the Company, any Guarantor or an Affiliate of the Company or any
          Guarantor to perform or comply with any of the provisions of Sections 8.1 (other
          than the failure to deliver the supplemental indenture referred to therein
          within the time so specified), 10.4, 10.5, 10.9, 10.12, 10.14, 10.15, 10.16,
          10.17, 10.18, 10.19, 10.20, 10.21, 10.22, 10.23, or 10.24 applicable to such
          Person;

(e)    
          failure of the Company, any Guarantor or an Affiliate of the Company or any
          Guarantor to perform any covenant or agreement under any Transaction Document to
          which it is a party, other than any referred to in Section 5.1(d), and such
          failure is incapable of remedy, or, capable of remedy, but remains unremedied
          for 30 days after the Trustee has given written notice thereof to the Company
          and the Guarantors;

(f)    
          any representation or warranty by the Company, any Guarantor or an Affiliate of
          the Company or any Guarantor in any Transaction Document to which it is a party
          or in any certificate, document or financial or other statement of such Person
          or any officer thereof furnished at any time under any such Transaction Document
          is incorrect in any material respect on or as of the date when made.

(g)    
          failure to pay when due or, as the case may be, within any originally applicable
          grace period, any amount of principal, premium, if any, or interest (including
          Additional Amounts, if any), due under the terms of any instrument evidencing
          Indebtedness of the Company or any Guarantor or any such Indebtedness of the
          Company or any Guarantor becomes (or becomes capable of being declared) due and
          payable prior to its stated maturity otherwise than at the option of the issuer
          thereof by reason of the occurrence of an event of default howsoever described;
           provided that  the aggregate amount of any such Indebtedness equals
          U.S.$5,000,000 or more (or its equivalent in other currency or currencies);

(h)    
          failure of the Company or any Guarantor to pay when due any guarantee of
          Indebtedness;  provided that  the aggregate amount of any such Indebtedness
          equals U.S.$5,000,000 or more (or its equivalent in other currency or
          currencies);

(i)    
          the rendering of a judgment or judgments (not subject to appeal) for the payment
          of money against the Company or any Guarantor which remains undischarged,
          unbonded or unstayed for a period of 60 days after the date on which the right
          to appeal all such judgments has expired or, if later, the date therein
          specified for payment;  provided that  the aggregate amount of any such
          final judgment equals or exceeds U.S.$5,000,000 (or its equivalent in other
          currency or currencies);

(j)    
          all or a substantial part of the property of the Company or any Guarantor, if
          the whole or part of such property shall be material to the Company and the
          Guarantors, considered as a whole, shall be condemned, seized or otherwise
          appropriated, or custody of such property shall be assumed by any governmental
          authority or court or other person purporting to act under the authority of the
          federal government of any jurisdiction, or the Company or any Guarantor shall be
          prevented from exercising normal control over all or a substantial part of its
          property, if the whole or part of such property shall be material to the Company
          and the Guarantors, considered as a whole, and such default is not remedied
          within 60 days after it occurs;

(k)    
          a secured party takes possession, or a receiver or similar officer is appointed,
          of a material part of the assets or revenues of the Company or any Guarantor;

(l)    
          the Company or any Guarantor (i) is adjudicated by a court of competent
          jurisdiction (as a result of proceedings initiated against or by the Company or
          such Guarantor) as insolvent or bankrupt or unable to pay its debts, (ii) is
          unable to pay its debts as they fall due, (iii) makes a general assignment or an
          arrangement or compositions with or for the benefit of relevant creditors in
          respect of such Indebtedness, (iv) has any petition filed or proceeding started
          against it for its winding up, liquidation or dissolution and such petition or
          proceeding is not dismissed within sixty (60) days of its filing or
          commencement, (v) passes an effective resolution for its winding up, liquidation
          or dissolution, or (vi) commences negotiations with any one or more of its
          creditors with a view to the general readjustment or rescheduling of its
          Indebtedness;

(m)    
          the occurrence of any event which under the laws of Brazil has an analogous
          effect to any of the events referred to in paragraphs (i) through (l) above;

(n)    
          the performance or compliance of the Company, any Guarantor or any Affiliate of
          the Company or any Guarantor with any material obligation under or in respect of
          any Transaction Document to which it is a party is or will become unlawful or
          any material provision of any such Transaction Document ceases to be enforceable
          and in full force and effect in any respect (or is claimed by any of such
          Persons to be unenforceable or not in full force and effect in any respect);
           provided, however,  for purposes of this provision, provisions with
          respect to payment obligations are, in all cases material; and  provided,
          further,  that the foregoing stipulation shall not be deemed to limit in any
          respect the determination as to the materiality of any other provision of any
          Transaction Document;

(o)    
          failure of the Company or any Guarantor to take any action or do anything at any
          time required to be taken, fulfilled or done in order (i) to enable the Company
          and each of the Guarantors lawfully to enter into, exercise their respective
          rights and perform and comply with their respective obligations under and in
          respect of each of the Transaction Documents to which it is a party, (ii) to
          ensure that those obligations are legal, valid, binding and enforceable, and
          (iii) to make each of the Transaction Documents admissible in evidence in the
          courts of Brazil;

(p)    
          (i) the condemnation, seizure, expropriation, nationalization or similar adverse
          governmental action with respect to all or any substantial part of the assets
          and revenues of the Company or any Guarantor by any Person acting under the
          authority of any national, regional or local government or (ii) the prevention
          by any such Person of the Companys or any Guarantors ability to
          exercise normal control over all or any substantial part of the assets and
          revenues of the Company, the Guarantors and their respective Subsidiaries,
          considered as a whole;

(q)    
          the revocation, termination, suspension or expiration without renewal or loss
          for any other reason of any license or concession of the Company or any
          Guarantor material to the Company, the Guarantors and their respective
          Subsidiaries, considered as a whole; and

(r)    
          the Company or any Guarantor or an Affiliate of either thereof repudiates any
          Transaction Document or does or causes to be done any act or thing evidencing an
          intent to repudiate any Transaction Document,

provided that failure to comply with
the provisions of Section 10.4 in respect of any period of four fiscal quarters ending
prior to December 31, 1998 shall not constitute an Event of Default under Section 5.1(d).
The holders of a majority in aggregate principal amount of the outstanding Notes will have
the right to direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the Trustee. The
Trustee may refuse, however, to follow any direction that the Trustee, in its sole
discretion, determines may be unjustly prejudicial to the rights of the Noteholders or
that may subject the Trustee to any liability, loss or expense if the Trustee determines,
in its sole discretion, that it lacks reasonable indemnification against such liability,
loss or expense. If an Event of Default (other than an Event of Default described in
Clause (l) above with respect to the Company or any Guarantor) shall occur and be
continuing, either the Trustee or the Noteholders of at least 25% in aggregate principal
amount of the Outstanding Notes, by written notice to the Company (and to the Trustee if
such notice is given by the Noteholders), may, and the Trustee at the request of such
Noteholders shall, declare the principal amount of and premium, if any, and accrued
interest on the Notes to be immediately due and payable. Upon a declaration of
acceleration, such principal amount, premium, if any, and accrued interest shall be
immediately due and payable. If an Event of Default specified in Clause (l) above occurs
with respect to the Company or any Guarantor, the outstanding Notes will  ipso facto
 become immediately due and payable without any declaration or other act on the part of
the Trustee or any Noteholder.

At any time after such a declaration
of acceleration, but before a judgment or decree for the payment of the money due has been
obtained by the Trustee, the Noteholders of at least a majority in principal amount of the
outstanding Notes by written notice to the Company and to the Trustee may waive all past
Defaults and rescind and annul such declaration of acceleration and its consequences if
(a) all existing Events of Default, other than the non-payment of the principal amount of
and premium, if any, and accrued interest on the Notes that have become due solely by such
declaration of acceleration, have been cured or waived and (b) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction.

No Noteholder will have any right to
institute any proceeding with respect to this Indenture or for any remedy hereunder,
unless such Noteholder shall have previously given to the Trustee written notice of a
continuing Event of Default (as defined) and unless the Noteholders of at least 25% in
aggregate principal amount of the Outstanding Notes shall have made a written request to
the Trustee to institute such proceeding as trustee, and the Trustee shall not have
received from the Noteholders of a majority in aggregate principal amount of the
Outstanding Notes a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. Such limitations, however, do not apply to a
suit instituted by a Noteholder of a Note for enforcement of payment of the principal of
and premium, if any, or interest on such Note on or after the respective due dates
expressed in such Note.

The Company and each Guarantor shall
furnish to the Trustee (i) within ten days of demand by the Trustee therefor and (ii)
(without the necessity of any such demand) together with the delivery of each of the
audited consolidated annual financial statements and unaudited consolidated quarterly
financial statements of the Company and its Subsidiaries, an Officers Certificate or
Officers Certificates stating whether or not to the best knowledge of the signers
thereof the Company or such Guarantor, as the case may be, is in default in the
performance and observance of any of the terms, provisions and conditions of this
Indenture and if the Company or such Guarantor, as the case may be, is in default,
specifying all such defaults and the nature and status thereof of which it may have
knowledge.

SECTION 5.2 Collection
of Indebtedness and Suits for Enforcement by Trustee

The Company and each of the
Guarantors covenants that if

(1)    
          default is made in the payment of any interest on any Note when such interest
          becomes due and payable and such default continues for a period of thirty (30)
          days, or

(2)    
          default is made in the payment of the principal of and premium, if any, with
          respect to any Note at the Maturity thereof or, with respect to any Note to be
          redeemed, at the Redemption Date thereof,

then, without prejudice to the
provisions of Section 5.1, the Company and the Guarantors shall, jointly and severally,
upon demand of the Trustee, pay to it, for the benefit of the Noteholders of such Notes,
the whole amount then due and payable on such Notes for principal and interest, and, to
the extent that payment of such interest shall be legally enforceable, interest on any
overdue principal and on any overdue interest, at the rate provided by the Notes, and, in
addition thereto, such further amount as shall be sufficient to cover the costs and
expenses incurred by the Trustee under this Indenture, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

If the Company and the Guarantors
fail to pay such amounts forthwith upon such demand, the Trustee, in its own name and as
trustee of an express trust, may institute a judicial proceeding for the collection of the
sums so due and unpaid, may prosecute such proceeding to judgment or final decree, and may
enforce the same against the Company, each of the Guarantors or any other obligor upon the
Notes and collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company, any Guarantor or any other obligor upon the Notes,
wherever situated.

If an Event of Default occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce its rights
and the rights under this Indenture and the Guarantee of the Noteholders by such
appropriate judicial proceedings as the Trustee shall deem most effective to protect and
enforce any such rights, whether for the specific enforcement of any covenant or agreement
in this Indenture or in aid of the exercise of any power granted herein including, without
limitation, seeking recourse against the Guarantors or proceeding to enforce any other
proper remedy.

SECTION 5.3 Trustee May
File Proofs of Claim

The Trustee is authorized to file
such proofs of claim and other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Noteholders allowed in any judicial proceedings relative to the Company (or any
other obligor under the Notes), the Guarantors, their respective creditors or their
property and shall be entitled and empowered to collect, receive and distribute any money
or other property payable or deliverable on any such claims, and, unless prohibited by law
or applicable regulations, may vote on behalf of the Noteholders at their direction in any
election of a trustee in bankruptcy or other Person performing similar functions, and any
custodian in any such judicial proceeding is hereby authorized by each Noteholder to make
payments to the Trustee and, in the event that the Trustee shall consent to the making of
such payments directly to the Noteholders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 6.7 hereof. To the
extent that the payment of any such compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee under Section
6.7 hereof out of the estate in any such proceeding, shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the Noteholders may
be entitled to receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition affecting
the Notes or the rights of any Noteholder, or to authorize the Trustee to vote in respect
of the claim of any Noteholder in any such proceeding, other than at the direction of such
Noteholder.

SECTION 5.4 Trustee May
Enforce Claims Without Possession of Notes

All rights of action and claims under
this Indenture, the Notes or the Guarantee may be prosecuted and enforced by the Trustee
without the possession of any of the Notes or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of the
Noteholders in respect of which such judgment has been recovered.

SECTION 5.5 Application
of Money Collected

Any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on account of
principal, premium, if any, or interest, upon presentation of the Notes and the notation
thereon of the payment if only partially paid and upon surrender thereof if fully paid:

FIRST: To the payment of all amounts
due the Trustee under Section 6.7; and

SECOND: To the payment of the amounts
then due and unpaid for principal of, and premium, if any, and interest on the Notes in
respect of which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due and payable on
such Notes for principal, premium, if any, and interest, respectively.

The Trustee, upon prior written
notice to the Company, may fix a record date and payment date for any payment to the
Noteholders pursuant to this Section 5.5.

SECTION 5.6 Limitation
on Suits

No Noteholder of any Note shall have
any right to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless

(1)    
          such Noteholder has previously given written notice to the Trustee of a
          continuing Event of Default;

(2)    
          the Noteholders of at least 25% in aggregate principal amount of the Outstanding
          Notes shall have made written request to the Trustee to institute proceedings in
          respect of such Event of Default in its own name as Trustee hereunder;

(3)    
          such Noteholder or Noteholders have offered and, if requested, provided to the
          Trustee reasonable indemnity against the costs, expenses and liabilities to be
          incurred in compliance with such request;

(4)    
          the Trustee for 60 days after its receipt of such notice, request and offer and,
          if requested, provision of indemnity has failed to institute any such
          proceeding; and

(5)    
          no direction inconsistent with such written request has been given to the
          Trustee during such 60-day period by the Noteholders of a majority in principal
          amount of the Outstanding Notes;

it being understood and intended that
no one or more Noteholders shall have any right in any manner whatever by virtue of, or by
availing of, any provision of this Indenture, any Note or the Guarantee to affect, disturb
or prejudice the rights of any other Noteholders, or to obtain or to seek to obtain
priority or preference over any other Noteholders or to enforce any right under this
Indenture, any Note or the Guarantee, except in the manner herein provided and for the
equal and ratable benefit of all the Noteholders.

SECTION 5.7
Unconditional Right of Noteholders to Receive Principal and Interest

Notwithstanding any other provision
in this Indenture, the Notes or the Guarantee, the Noteholder of any Note shall have the
right, which is absolute and unconditional, to receive payment of the principal of,
premium, if any, and (subject to Section 3.6) interest on such Note on the respective
Stated Maturities expressed in such Note (or earlier Redemption Date) and to institute
suit for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Noteholder.

SECTION 5.8 Restoration
of Rights and Remedies

If the Trustee or any Noteholder has
instituted any proceeding to enforce any right or remedy under this Indenture, any Note or
the Guarantee, and such proceeding has been discontinued or abandoned for any reason, or
has been determined adversely to the Trustee or to such Noteholder, then and in every such
case, subject to any determination in such proceeding, the Company, the Guarantors, the
Trustee and the Noteholders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and the
Noteholders shall continue as though no such proceeding had been instituted.

SECTION 5.9 Rights and
Remedies Cumulative

Except as otherwise provided with
respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in the
last paragraph of Section 3.6, no right or remedy herein conferred upon or reserved to the
Trustee or to the Noteholders is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter existing at
law or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.

SECTION 5.10 Delay or
Omission Not Waiver

No delay or omission of the Trustee
or of any Noteholder of any Note to exercise any right or remedy accruing upon any Event
of Default shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this Article or by
law to the Trustee or to the Noteholders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Noteholders, as the case may be.

SECTION 5.11 Control by
Noteholders

The Noteholders of a majority in
aggregate principal amount of the Outstanding Notes shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee;  provided  that

(1)    
          such direction shall not be in conflict with any rule of law or with this
          Indenture or expose the Trustee to personal liability (as determined in the sole
          discretion of the Trustee), and

(2)    
          the Trustee may take any other action deemed proper by the Trustee which is not
          inconsistent with such direction.

The Trustee may refuse, however, to
follow any direction that the Trustee, in its sole discretion, determines may be unduly
prejudicial to the rights of another Noteholder or that may subject the Trustee to any
liability, loss or expense if the Trustee determines, in its sole discretion, that it
lacks indemnification satisfactory to it against such liability, loss or expense.

SECTION 5.12 Waiver of
Past Defaults

The Noteholders of not less than a
majority in aggregate principal amount of the Outstanding Notes may by written notice to
the Company and the Trustee waive any past default hereunder and rescind and annul any
declaration of acceleration and its consequences, except a default

(1)    
          in the payment of the principal of and premium, if any, or interest on any Note,
          or

(2)    
          in respect of a covenant or provision hereof which under Article 9 cannot be
          modified or amended without the consent of the Noteholder of each Outstanding
          Note affected.

Upon any such waiver, such default
shall cease to exist, and any Event of Default arising therefrom shall be deemed to have
been cured, for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.

SECTION 5.13 Undertaking
for Costs

In any suit for the enforcement of
any right or remedy under this Indenture, or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court may require any party litigant in such
suit to file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant;  provided  that this Section 5.13 shall not be deemed to
authorize any court to require such an undertaking or to make such an assessment in any
suit instituted by the Company or any Guarantor.

SECTION 5.14 Waiver of
Stay, Extension or Usury Laws

The Company and each Guarantor
covenants (to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any
stay or extension law or any usury law or other law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this Indenture or
prohibit or forgive the Company or such Guarantor, as the case may be, from paying all or
any portion of the principal of, premium, if any, and/or interest on the Notes as
contemplated herein; and the Company each Guarantor (to the extent that it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to the Trustee,
but will suffer and permit the execution of every such power as though no such law had
been enacted.

ARTICLE 6

THE TRUSTEE

SECTION 6.1 Certain
Duties and Responsibilities

(a)    
          Except during the continuance of an Event of Default,

(1)    
          the Trustee undertakes to perform such duties and only such duties as are
          specifically set forth in this Indenture, and no implied covenants or
          obligations shall be read into this Indenture against the Trustee; and

(2)    
          in the absence of bad faith on its part, the Trustee may conclusively rely, as
          to the truth of the statements and the correctness of the opinions expressed
          therein, upon certificates or opinions furnished to the Trustee and conforming
          to the requirements of this Indenture; but in the case of any such certificates
          or opinions which by any provision hereof are specifically required to be
          furnished to the Trustee, the Trustee shall be under a duty to examine the same
          to determine whether or not they conform to the requirements of this Indenture.

(b)    
          In case an Event of Default has occurred and is continuing, the Trustee shall
          exercise such of the rights and powers vested in it by this Indenture, and use
          the same degree of care and skill in their exercise, as a prudent man would
          exercise or use under the circumstances in the conduct of his own affairs.

(c)    
          No provision of this Indenture shall be construed to relieve the Trustee from
          liability for its own negligent action, its own negligent failure to act, or its
          own wilful misconduct,  except  that

(1)    
          this Subsection shall not be construed to limit the effect of Subsection (a) of
          this Section;

(2)    
          the Trustee shall not be liable for any error of judgment made in good faith by
          a Responsible Officer, unless it shall be proved that the Trustee was negligent
          in ascertaining the pertinent facts;

(3)    
          the Trustee shall not be liable with respect to any action taken or omitted to
          be taken by it in good faith in accordance with the direction of the Noteholders
          of a majority in principal amount of the Outstanding Notes, determined as
          provided in Section 5.11, relating to the time, method and place of conducting
          any proceeding for any remedy available to the Trustee, or exercising any trust
          or power conferred upon the Trustee under this Indenture with respect to the
          Notes or the Guarantee; and

(4)    
          no provision of this Indenture shall require the Trustee to expend or risk its
          own funds or otherwise incur any financial liability in the performance of any
          of its duties hereunder, or in the exercise of any of its rights or powers, if
          it shall have reasonable grounds for believing that repayment of such funds or
          adequate indemnity against such risk or liability is not reasonably assured to
          it.

(d)    
          Whether or not herein expressly so provided, every provision of this Indenture
          relating to the conduct or affecting the liability of or affording protection to
          the Trustee shall be subject to the provisions of this Section.

SECTION 6.2 Notice of
Defaults

The Trustee shall give the
Noteholders notice of any Default that has occurred and is continuing and of which a
Responsible Officer of the Trustee has actual knowledge, within 90 days after the
occurrence of such Default;  provided, however,  that in the case of any Default of
the character specified in Section 5.1(f), no such notice to Noteholders shall be given
until at least 30 days after the occurrence thereof.

SECTION 6.3 Certain
Rights of Trustee

Subject to the provisions of Section
6.1:

(a)    
          the Trustee may conclusively rely and shall be fully protected in acting or
          refraining from acting upon any resolution, certificate, statement, instrument,
          opinion, report, notice, request, direction, consent, order, bond, debenture,
          note, other evidence of indebtedness or other paper or document believed by it
          to be genuine and to have been signed or presented by the proper party or
          parties;

(b)    
          any request or direction of the Company mentioned herein shall be sufficiently
          evidenced by a Company Request or a Company Order and any resolution of the
          Board of Directors of the Company shall be sufficiently evidenced by a Board
          Resolution;

(c)    
          whenever in the administration of this Indenture the Trustee shall deem it
          desirable that a matter be proved or established prior to taking, suffering or
          omitting any action hereunder, the Trustee (unless other evidence is herein
          specifically prescribed) may, in the absence of bad faith on its part,
          conclusively rely upon an Officers Certificate or an Opinion of Counsel;

(d)    
          the Trustee may consult with counsel and the written advice of such counsel or
          any Opinion of Counsel shall be full and complete authorization and protection
          in respect of any action taken, suffered or omitted by it hereunder in good
          faith and in reliance thereon;

(e)    
          the Trustee shall be under no obligation to exercise any of the rights or powers
          vested in it by this Indenture at the request or direction of any of the
          Noteholders pursuant to this Indenture, unless such Noteholders shall have
          offered to the Trustee reasonable security or indemnity against the costs,
          expenses and liabilities which might be incurred by it in compliance with such
          request or direction reasonably satisfactory to the Trustee;

(f)    
          the Trustee shall not be bound to make any investigation into the facts or
          matters stated in any resolution, certificate, statement, instrument, report,
          opinion, notice, request, direction, consent, order, bond, debenture, note,
          guarantee, other evidence of indebtedness or other paper or document, but the
          Trustee, in its discretion, may make such further inquiry or investigation into
          such facts or matters as it may see fit, and, if the Trustee shall determine to
          make such further inquiry or investigation, it shall be entitled to examine the
          books, records and premises of the Company and each Guarantor, personally or by
          agent or attorney;

(g)    
          the Trustee may execute any of the trusts or powers hereunder or perform any
          duties hereunder either directly or by or through agents, attorneys, custodians
          or nominees appointed with due care by it hereunder; and

(h)    
          the Trustee shall not be liable for any action taken, suffered or omitted by it
          in good faith which the Trustee reasonably believed to have been authorized or
          within its rights or powers.

(i)    
          In the event that the Trustee is also acting as Paying Agent, Transfer Agent, or
          Note Registrar hereunder, the rights and protections afforded to the Trustee
          pursuant to this Article Six shall also be afforded to such Paying Agent,
          Transfer Agent or Note Registrar.

SECTION 6.4 Not
Responsible for Recitals or Issuance of Notes

The recitals contained herein and in
the Notes and the Guarantee with respect thereto, except the Trustees certificates
of authentication, shall be taken as the statements of the Company or the Guarantors, as
the case may be, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this Indenture or
the Notes. The Trustee shall not be accountable for the use or application by the Company
of Notes or the proceeds thereof.

SECTION 6.5 May Hold
Notes

The Trustee, any Paying Agent or
Transfer Agent, any Note Registrar (if other than the Trustee) or any other agent of the
Company or the Guarantor, in its individual or any other capacity, may become the owner or
pledgee of Notes and, subject to Sections 6.8 and 6.13, may otherwise deal with the
Company and the Guarantors with the same rights it would have if it were not Trustee,
Paying Agent, Transfer Agent, Note Registrar or such other agent.

SECTION 6.6 Money Held
in Trust

Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required by law.
The Trustee shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed with the Company or the Guarantors, as the case may be.

SECTION 6.7
Reimbursement and Indemnification

The Company and the Guarantors agree,
jointly and severally:

(1)    
          to pay to the Trustee from time to time upon demand reasonable compensation for
          all services rendered by it hereunder (which compensation shall not be limited
          by any provision of law in regard to the compensation of a trustee of an express
          trust);

(2)    
          except as otherwise expressly provided herein, to reimburse the Trustee upon its
          request for all reasonable expenses, disbursements and advances incurred or made
          by the Trustee in accordance with any provision of this Indenture (including the
          reasonable compensation and the expenses and disbursements of its agents and
          counsel), except any such expense, disbursement or advance as may be
          attributable to its negligence or wilful misconduct; and

(3)    
          to indemnify the Trustee and its directors, officers, employees and agents for,
          and to hold it and them harmless against, any loss, liability or expense
          (including the reasonable compensation, expenses and disbursements of its or
          their agents, accountants, experts and counsel) incurred without negligence or
          wilful misconduct on its or their part, arising out of or in connection with the
          acceptance or administration of this trust, including the costs and expenses of
          enforcing this Indenture against the Company or the Guarantors, as the case may
          be (including, without limitation, this Section 6.7) and of defending itself or
          themselves against any claim (whether asserted by any Noteholder or the Company
          or the Guarantors, as the case may be) or liability in connection with the
          exercise or performance of any of its or their powers or duties hereunder. The
          provisions of this Section 6.7 shall survive any termination of this Indenture
          and the resignation or removal of the Trustee.

As security for the performance of
the obligations of the Company or the Guarantor, as the case may be, under this Section
6.7, the Trustee shall have a Lien prior to the Notes upon all property and funds held or
collected by the Trustee, except funds held in trust for the payment of principal of and
premium, if any, or interest on particular Notes. The Trustees right to receive
payment of any amounts due under this Section 6.7 shall not be subordinate to any other
liability or indebtedness of the Company or the Guarantors, as the case may be (even
though the Notes may be so ubordinated).

When the Trustee incurs expenses or
renders services after an Event of Default specified in Section 5.1(j), (k) or (l) occurs,
the expenses and the compensation for such services are intended to constitute expenses of
administration under Title II, U.S. Code, or any similar Federal, State or analogous
foreign law for the relief of debtors.

SECTION 6.8
Disqualification; Conflicting Interests

If the Trustee has or shall acquire a
conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall
either eliminate such interest or resign, to the extent and in the manner provided by, and
subject to the provisions of, the Trust Indenture Act and this Indenture.

SECTION 6.9 Corporate
Trustee Required; Eligibility

There shall at all times be a Trustee
hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to
act as such and has a combined capital and surplus of at least $50,000,000 and its
Corporate Trust Office in The City of New York, New York. If such Person publishes reports
of condition at least annually, pursuant to law or to the requirements of a Federal,
State, Territorial or District of Columbia supervising or examining authority, then for
the purposes of this Section 6.9, the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set f orth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.9, it shall resign immediately in the
manner and with the effect hereinafter specified in this Article 6.

SECTION 6.10 Resignation
and Removal; Appointment of Successor

(a)    
          No resignation or removal of the Trustee and no appointment of a successor
          Trustee pursuant to this Article shall become effective until the acceptance of
          appointment by the successor Trustee under Section 6.11 and any and all amounts
          then due and owing to the retiring Trustee hereunder have been paid in full, at
          which time the retiring Trustee shall be fully discharged from its obligations
          hereunder.

(b)    
          The Trustee may resign at any time by giving written notice thereof to the
          Company. If an instrument of acceptance by a successor Trustee shall not have
          been delivered to the Trustee within 30 days after the giving of such notice of
          resignation, the resigning Trustee may petition any court of competent
          jurisdiction for the appointment of a successor Trustee.

(c)    
          The Trustee may be removed at any time by Act of the Noteholders of a majority
          in principal amount of the Outstanding Notes, delivered to the Trustee and to
          the Company.

(d)    
          If at any time:

(1)    
          the Trustee shall fail to comply with Section 6.8 after written request therefor
          by the Company or by any Noteholder who has been a bona fide Noteholder of a
          Note for at least six months, or

(2)    
          the Trustee shall cease to be eligible under Section 6.9 and shall fail to
          resign after written request therefor by the Company or by any such Noteholder,
          or

(3)    
          the Trustee shall become incapable of acting or shall be adjudged a bankrupt or
          insolvent or a receiver of the Trustee or of its property shall be appointed or
          any public officer shall take charge or control of the Trustee or of its
          property or affairs for the purpose of rehabilitation, conservation or
          liquidation, then, in any such case, (i) the Company by a Board Resolution may
          remove the Trustee, or (ii) any Noteholder who has been a bona fide Noteholder
          of a Note for at least six months may, on behalf of himself and all others
          similarly situated, petition any court of competent jurisdiction for the removal
          of the Trustee and the appointment of a successor Trustee.

(e)    
          If the Trustee shall resign, be removed or become incapable of acting, or if a
          vacancy shall occur in the office of Trustee for any reason, the Company, by a
          Board Resolution, shall promptly appoint a successor Trustee. If, within one
          year after such resignation, removal or incapability, or the occurrence of such
          vacancy, a successor Trustee shall be appointed by Act of the Noteholders of a
          majority in principal amount of the Outstanding Notes delivered to the Company
          and the retiring Trustee, the successor Trustee so appointed shall, forthwith
          upon its acceptance of such ppointment, become the successor Trustee and
          supersede the successor Trustee appointed by the Company. If no successor
          Trustee shall have been so appointed by the Company or the Noteholders and
          accepted appointment in the manner hereinafter provided, any Noteholder who has
          been a bona fide Noteholder of a Note for at least six months may, on behalf of
          himself and all others similarly situated, petition any court of competent
          jurisdiction for the appointment of a successor Trustee.

(f)    
          The Company shall give notice of each resignation and each removal of the
          Trustee and each appointment of a successor Trustee to all Noteholders in the
          manner provided in Section 1.6. Each notice shall include the name of the
          successor Trustee and the address of its Corporate Trust Office.

SECTION 6.11 Acceptance
of Appointment by Successor

Every successor Trustee appointed
hereunder shall execute, acknowledge and deliver to the Company, the Guarantors and to the
retiring Trustee an instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring Trustee hereunder, subject
nevertheless to its Lien, if any, provided for in Section 6.7. Upon request of any such
successor Trustee, the Company and the Guarantors shall execute any and all instruments
for more fully and certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts.

No successor Trustee shall accept its
appointment unless at the time of such acceptance such successor Trustee shall be
qualified and eligible under this Article.

SECTION 6.12 Merger,
Conversion, Consolidation or Succession to Business

Any corporation or other entity into
which the Trustee may be merged or converted or with which it may be consolidated, or any
corporation or other entity resulting from any merger, conversion or consolidation to
which the Trustee shall be a party, or any corporation or other entity succeeding to all
or substantially all the corporate trust business of the Trustee, shall be the successor
of the Trustee hereunder,  provided  that such corporation or other entity shall be
otherwise qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto. In case any Notes
shall have been authenticated, but not delivered, by the Trustee then in office, any
successor Trustee by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Notes so authenticated with the same effect
as if such successor Trustee had itself authenticated such Notes.

SECTION 6.13
Preferential Collection of Claims Against the Company

(a)    
          Subject to Subsection (c) of this Section 6.13, if the Trustee shall be or shall
          become a creditor, directly or indirectly, secured or unsecured, of the Company
          within four months prior to a default, as defined in Subsection (e) of this
          Section 6.13, or subsequent to such a default, then, unless and until such
          default shall be cured, the Trustee shall set apart and hold in a special
          account for the benefit of the Trustee individually, the Noteholders and the
          holders of other indenture securities, as defined in Subsection (e) of this
          Section:

(1)    
          an amount equal to any and all reductions in the amount due and owing upon any
          claim as such creditor in respect of principal, premium, if any, or interest,
          effected after the beginning of such four-month period and valid as against the
          Company and its other creditors, except any such reduction resulting from the
          receipt or disposition of any property described in paragraph (2) of this
          Subsection (a), or from the exercise of any right of set-off which the Trustee
          could have exercised if a petition in bankruptcy had been filed by or against
          the Company upon the date of such default;

(2)    
          all property received by the Trustee in respect of any claims as such creditor,
          either as security therefor, or in satisfaction or composition thereof, or
          otherwise, after the beginning of such four-month period, or an amount equal to
          the proceeds of any such property, if disposed of,  subject, however , to
          the rights, if any, of the Company and its other creditors in such property or
          such proceeds.

(b)    
          Nothing contained in Subsection (a) of this Section 6.13, however, shall affect
          the right of the Trustee:

(1)    
          to retain for its own account (i) payments made on account of any such claim by
          any Person (other than the Company) who is liable thereon, and (ii) the proceeds
          of the bona fide sale of any such claim by the Trustee to an independent third
          party, and (iii) distributions made in cash, securities or other property in
          respect of claims filed against the Company in bankruptcy or receivership or in
          proceedings for reorganization pursuant to the Federal Bankruptcy Act or
          applicable State law;

(2)    
          to realize, for its own account, upon any property held by it as security for
          any such claim, if such property was so held prior to the beginning of such
          four-month period;

(3)    
          to realize, for its own account, but only to the extent of the claim hereinafter
          mentioned, upon any property held by it as security for any such claim, if such
          claim was created after the beginning of such four-month period and such
          property was received as security therefor simultaneously with the creation
          thereof, and if the Trustee shall sustain the burden of proving that at the time
          such property was so received the Trustee had no reasonable cause to believe
          that a default, as defined in Subsection (d) of this Section, would occur within
          four months; or

(4)    
          to receive payment on any claim referred to in paragraph (B) or (C), against
          release of any property held as security for such claim as provided in paragraph
          (2) or (3), as the case may be, to the extent of the fair value of such
          property.

(c)    
          For the purposes of paragraphs (b)(2), (b)(3) and (b)(4), property substituted
          after the beginning of such four-month period for property held as security at
          the time of such substitution shall, to the extent of the fair value of the
          property released, have the same status as the property released, and, to the
          extent that any claim referred to in any of such paragraphs is created in
          renewal of or in substitution for or for the purpose of repaying or refunding
          any pre-existing claim of the Trustee as such creditor, such claim shall have
          the same status as such pre-existing claim.

If the Trustee shall be required to
account, the funds and property held in such special account and the proceeds thereof
shall be apportioned among the Trustee, the Noteholders and the holders of other indenture
securities in such manner that the Trustee, the Noteholders and the holders of other
indenture securities realize, as a result of payments from such special account and
payments of dividends on claims filed against the Company in bankruptcy or receivership or
in proceedings for reorganization pursuant to the Federal Bankruptcy Act or applicable
State law, the same percentage of their respective claims, figured before crediting to the
claim of the Trustee anything on account of the receipt by it from the Company of the
funds and property in such special account and before crediting to the respective claims
of the Trustee and the Noteholders and the holders of other indenture securities dividends
on claims filed against the Company in bankruptcy or receivership or in proceedings for
reorganization pursuant to the Federal Bankruptcy Act or applicable State law, but after
crediting thereon receipts on account of the indebtedness represented by their respective
claims from all sources other than from such dividends and from the funds and property so
held in such special account. As used in this paragraph, with respect to any claim, the
term dividends shall include any distribution with respect to any claim, in
bankruptcy or receivership or proceedings for reorganization pursuant to the Federal
Bankruptcy Act or applicable State law, whether such distribution is made in cash,
securities or other property, but shall not include any such distribution with respect to
the secured portion, if any, of such claim. The court in which such bankruptcy,
receivership or proceedings for reorganization is pending shall have jurisdiction (i) to
apportion among the Trustee, the Noteholders and the holders of other indenture
securities, in accordance with the provisions of this paragraph, the funds and property
held in such special account and proceeds thereof, or (ii) in lieu of such apportionment,
in whole or in part, to give to the provisions of this paragraph due consideration in
determining the fairness of the distributions to be made to the Trustee and the
Noteholders and the holders of other indenture securities with respect to their respective
claims, in which event it shall not be necessary to liquidate or to appraise the value of
any securities or other property held in such special account or as security for any such
claim, or to make a specific allocation of such distributions as between the secured and
unsecured portions of such claims, or otherwise to apply the provisions of this paragraph
as a mathematical formula.

Any Trustee which has resigned or
been removed after the beginning of such four-month period shall be subject to the
provisions of this Subsection (c) as though such resignation or removal had not occurred.
If any Trustee has resigned or been removed prior to the beginning of such four-month
period, it shall be subject to the provisions of this Subsection (c) if and only if the
following conditions exist:

(1)    
          the receipt of property or reduction of claim, which would have given rise to
          the obligation to account, if such Trustee had continued as Trustee, occurred
          after the beginning of such four-month period; and

(2)    
          such receipt of property or reduction of claim occurred within four months after
          such resignation or removal.

(d)    
          There shall be excluded from the operation of Subsection (a) of this Section
          6.13 a creditor relationship arising from:

(1)    
          the ownership or acquisition of securities issued under any indenture, or any
          security or securities having a maturity of one year or more at the time of
          acquisition by the Trustee;

(2)    
          advances authorized by a receivership or bankruptcy court of competent
          jurisdiction or by this Indenture, for the purpose of preserving any property
          which shall at any time be subject to the lien of this Indenture or of
          discharging tax liens or other prior liens or encumbrances thereon, if notice of
          such advances and of the circumstances surrounding the making thereof is given
          to the Noteholders at the time and in the manner provided in this Indenture;

(3)    
          disbursements made in the ordinary course of business in the capacity of trustee
          under an indenture, transfer agent, registrar, custodian, paying agent, fiscal
          agent or depositary, or other similar capacity;

(4)    
          an indebtedness created as a result of services rendered or premises rented; or
          an indebtedness created as a result of goods or securities sold in a cash
          transaction, as defined in Subsection (e) of this Section;

(5)    
          the ownership of stock or of other securities of a corporation organized under
          the provisions of Section 25(a) of the Federal Reserve Act, as amended, which is
          directly or indirectly a creditor of the Company; and

(6)    
          the acquisition, ownership, acceptance or negotiation of any drafts, bills of
          exchange, acceptances or obligations which fall within the classification of
          selfliquidating paper, as defined in Subsection (e) of this Section 6.13.

(e)    
          For the purposes of this Section 6.13 only:

(1)    
          the term default means any failure to make payment in full of the
          principal of and premium, if any, or interest on any Note or upon the other
          indenture securities when and as such principal, premium, if any, or interest
          becomes due and payable;

(2)    
          the term other indenture securities means securities upon which the
          Company is an obligor outstanding under any other indenture (i) under which the
          Trustee is also trustee, (ii) which contains provisions substantially similar to
          the provisions of this Section, and (iii) under which a default exists at the
          time of the apportionment of the funds and property held in such special
          account;

(3)    
          the term cash transaction means any transaction in which full
          payment for goods or securities sold is made within seven days after the
          delivery of the goods or securities in currency or in checks or other orders
          drawn upon banks or bankers and payable upon demand;

(4)    
          the term self-liquidating paper means any draft, bill of exchange,
          acceptance or obligation which is made, drawn, negotiated or incurred by the
          Company for the purpose of financing the purchase, processing, manufacturing,
          shipment, storage or sale of goods, wares or merchandise and which is secured by
          documents evidencing title to, possession of, or a lien upon, the goods, wares
          or merchandise or the receivables or proceeds arising from the sale of the
          goods, wares or merchandise previously constituting the security, provided the
          security is received by the Trustee simultaneously with the creation of the
          creditor relationship with the Company arising from the making, drawing,
          negotiating or incurring of the draft, bill of exchange, acceptance or
          obligation;

(5)    
          the term Company means any obligor upon the Notes; and

(6)    
          the term Federal Bankruptcy Act means the Bankruptcy Act or Title 11
          of the United States Code.

SECTION 6.14 Appointment
of Authenticating Agent

The Trustee may appoint an
Authenticating Agent or Agents with respect to the Notes which shall be authorized to act
on behalf of the Trustee to authenticate Notes issued upon original issue and upon
exchange, registration of transfer or partial redemption thereof or pursuant to Section
3.6, and Notes so authenticated shall be entitled to the benefits of this Indenture and
shall be valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Wherever reference is made in this Indenture to the authentication and delivery
of Notes by the Trustee or the Trustees certificate of authentication, such
reference shall be deemed to include authentication and delivery on behalf of the Trustee
by an Authenticating Agent and a certificate of authentication executed on behalf of the
Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business under the
laws of the United States of America, any State thereof or the District of Columbia,
authorized under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination by Federal
or State authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time an Authenticating
Agent shall cease to be eligible in accordance with the provisions of this Section 6.14,
such Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section 6.14.

Any corporation or other entity into
which an Authenticating Agent may be merged or converted or with which it may be
consolidated, or any corporation or other entity resulting from any merger, conversion or
consolidation to which such Authenticating Agent shall be a party, or any corporation or
other entity succeeding to the corporate agency or corporate trust business of an
Authenticating Agent, shall continue to be an Authenticating Agent, provided such
corporation or other entity shall be otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the Trustee or the
Authenticating Agent.

An Authenticating Agent may resign at
any time by giving written notice thereof to the Trustee and to the Company. The Trustee
may at any time terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such Authenticating Agent
shall cease to be eligible in accordance with the provisions of this Section 6.14, the
Trustee may appoint a successor Authenticating Agent which shall be acceptable to the
Company and shall give notice of such appointment in the manner provided in Section 1.6 to
all Noteholders of Notes. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the provisions
of this Section 6.14.

The Trustee agrees to pay to each
Authenticating Agent from time to time reasonable compensation for its services under this
Section 6.14, and the Trustee shall be entitled to be reimbursed for such payments,
subject to the provisions of Section 6.7.

If an appointment is made pursuant to
this Section 6.14, the Notes may have endorsed thereon, in lieu of the Trustees
certificate of authentication, an alternative certificate of authentication in the
following form:

This is one of the Notes referred to
in the within-mentioned Indenture.

THE CHASE MANHATTAN
BANK, NEW

YORK,

As Trustee  
By: ..................................................

As Authenticating Agent

ARTICLE 7

NOTEHOLDERS, LISTS AND REPORTS BY TRUSTEE AND THE COMPANY

SECTION 7.1 Company to
Furnish Trustee Names and Addresses of Noteholders

The Company will furnish or cause to
be furnished to the Trustee:

(a)    
          semi-annually, not more than 15 days after each Regular Record Date, a list, in
          such form as the Trustee may reasonably require, of the names and addresses of
          the Noteholders as of such Regular Record Date, and

(b)    
          at such other times as the Trustee may request in writing, within 30 days after
          the receipt by the Company of any such request, a list of similar form and
          content as of a date not more than 15 days prior to the time such list is
          furnished;

excluding from any such list names
and addresses received by the Trustee in its capacity as Note Registrar.

SECTION 7.2 Preservation
of Information; Communications to Noteholders

(a)    
          The Trustee shall preserve, in as current a form as is reasonably practicable,
          the names and addresses of Noteholders contained in the most recent list
          furnished to the Trustee as provided in Section 7.1 and the names and addresses
          of Noteholders received by the Trustee in its capacity as Note Registrar. The
          Trustee may destroy any list furnished to it as provided in Section 7.1 upon
          receipt of a new list so furnished.

(b)    
          If three or more Noteholders (herein referred to as
           applicants ) apply in writing to the Trustee, and furnish to
          the Trustee reasonable proof that each such applicant has owned a Note for a
          period of at least six months preceding the date of such application, and such
          application states that the applicants desire to communicate with other
          Noteholders with respect to their rights under this Indenture or under the Notes
          or the Guarantee and is accompanied by a copy of the form of proxy or other
          communication which such applicants propose to transmit, then the Trustee shall,
          within five Business Days after the receipt of such application, at its
          election, either

(i)    
          afford such applicants access to the information preserved at the time by the
          Trustee in accordance with Section 7.2(a), or

(ii)    
          inform such applications as to the approximate number of Noteholders whose names
          and addresses appear in the information preserved at the time by the Trustee in
          accordance with Section 7.2(a), as to the approximate cost of mailing to such
          Noteholders the form of proxy or other communication, if any, specified in such
          application.

(c)    
          Every Noteholder of Notes, by receiving and holding the same, agrees with the
          Company and the Trustee that neither the Company nor the Trustee nor any agent
          of either of them shall be held accountable by reason of the disclosure of any
          such information as to the names and addresses of the Noteholders in accordance
          with Section 7.2(b), regardless of the source from which such information was
          derived, and that the Trustee shall not be held accountable by reason of mailing
          any material pursuant to a request made under Section 7.2(b).

SECTION 7.3 Reports by
Trustee

(a)    
          Within 60 days after December 31 of each year commencing with the year 1997, the
          Trustee shall transmit by mail to all Noteholders, as their names and addresses
          appear in the Note Register, a brief report dated as of such date with respect
          to:

(1)    
          its eligibility under Section 6.9 and its compliance with Section 6.8, or in
          lieu thereof, if to the best of its knowledge it has continued to be eligible
          and qualified under said Sections, a written statement to such effect;

(2)    
          the character and amount of any advances (and if the Trustee elects so to state,
          the circumstances surrounding the making thereof) made by the Trustee (as such)
          which remain unpaid on the date of such report, and for the reimbursement of
          which it claims or may claim a Lien or charge, prior to that of the Notes, on
          any property or funds held or collected by it as Trustee, except that the
          Trustee shall not be required (but may elect) to report such advances if such
          advances so remaining unpaid aggregate not more than 1⁄2 of 1% of the
          principal amount of the Outstanding Notes on the date of such report;

(3)    
          the amount, interest rate and maturity date of all other indebtedness owing by
          the Company (or by any other obligor on the Notes) to the Trustee in its
          individual capacity, on the date of such report, with a brief description of any
          property held as collateral security therefor, except any indebtedness based
          upon a creditor relationship arising in any manner described in Section
          6.13(d)(2), (3), (4) or (6);

(4)    
          the property and funds, if any, physically in the possession of the Trustee as
          such on the date of such report;

(5)    
          any additional issue of Notes which the Trustee has not previously reported; and

(6)    
          any action taken by the Trustee in the performance of its duties hereunder which
          it has not previously reported and which in its opinion materially affects the
          Notes, except action in respect of a default, notice of which has been or is to
          be withheld by the Trustee in accordance with Section 6.2.

(b)    
          The Trustee shall transmit by mail to all Noteholders, as their names and
          addresses appear in the Note Register, a brief report with respect to the
          character and amount of any advances (and if the Trustee elects so to state, the
          circumstances surrounding the making thereof) made by the Trustee (as such)
          since the date of the last report transmitted pursuant to Subsection (a) of this
          Section (or if no report has yet been so transmitted, since the date of
          execution of this instrument) for the reimbursement of which it claims or may
          claim a lien or charge, prior to that of the Notes, on property or funds held or
          collected by it as Trustee and which it has not previously reported pursuant to
          this Subsection (b), except that the Trustee shall not be required (but may
          elect) to report such advances if such advances remaining unpaid at any time
          aggregate 10% or less of the principal amount of the Outstanding Notes at such
          time, such report to be transmitted within 90 days after such time.

(c)    
          A copy of each such report shall, at the time of such transmission to
          Noteholders, be filed by the Trustee with each stock exchange upon which any
          Notes are listed and with the Company. The Company will notify the Trustee when
          any Notes are listed on any stock exchange.

ARTICLE 8

MERGER, CONSOLIDATION,
ETC.

SECTION 8.1 Mergers,
Consolidations and Certain Sales of Assets

The Company and each Guarantor may
not, in a single transaction or a series of related transactions, (i) consolidate with or
merge into any other Person or permit any other Person to consolidate with or merge into
it (other than the consolidation or merger of a Wholly Owned Subsidiary organized under
the laws of Brazil into it), or (ii) directly or indirectly, transfer, sell, lease or
otherwise dispose of all or substantially all of its assets (determined, in the case of
the Company, on a consolidated basis for the Company and its Subsidiaries taken as a
whole), unless:

(1)    
          in a transaction in which the surviving entity or entities, as the case may be
          (A) shall expressly assume, by a supplemental indenture executed and delivered
          to the Trustee in form satisfactory to the Trustee, all of the Companys
          and/or, as the case may be, such Guarantors obligations under this
          Indenture and (B) shall be organized under the laws of (x) Brazil or any State
          or political subdivision thereof; or (y) the United States of America or any
          State thereof or the District of Columbia or (z) any other country if such
          successor entity undertakes, in such supplemental indenture, to pay any such
          additional amounts in respect of principal (and premium, if any) and interest as
          may be necessary in order that the net amounts paid pursuant to the Notes after
          deduction or withholding of any Covered Taxes;

(2)    
          immediately after giving pro forma effect to such transaction as if such
          transaction had occurred at the beginning of the last full fiscal quarter
          immediately prior to the consummation of such transaction with the appropriate
          adjustments with respect to the transaction being included in such pro forma
          calculation and treating any Indebtedness which becomes an obligation of the
          Company or a Subsidiary as a result of such transaction as having been Incurred
          by the Company or such Subsidiary at the time of the transaction, no Default or
          Event of Default shall have occurred and be continuing;

(3)    
          if, as a result of any such transaction, property or assets of the Company, any
          Guarantor or any of their respective Subsidiaries would become subject to a Lien
          prohibited by the provisions of Section 10.17, the Company or the successor
          entity to the Company shall have secured the Notes as required by said covenant;

(4)    
          immediately after giving effect to the merger on a pro forma basis, the
          successor company could Incur U.S.$1.00 of additional debt pursuant to Section
          10.14; and

(5)    
          the Company has delivered to the Trustee an Officers Certificate and an
          Opinion of Counsel, each in form and substance satisfactory to the Trustee
          stating that such consolidation, merger, conveyance, transfer, lease or
          acquisition and, if a supplemental indenture is required in connection with such
          transaction, such supplemental indenture, complies with this covenant and that
          all conditions precedent herein provided for relating to such transaction have
          been complied with.

SECTION 8.2 Successor
Substituted

In the event of any transaction
(other than a lease) described in and complying with the immediately preceding paragraph
in which the Company or one or more Guarantors is not the surviving person and the
surviving person assumes all the obligations of the Company or such Guarantor(s) under the
Notes and this Indenture pursuant to a supplemental indenture, such surviving person shall
succeed to, and be substituted for, and may exercise every right and power of, the Company
or such Guarantor(s), as the case may be, and thereafter, except in the case of a lease,
the Company or such Guarantor(s), as the case may be, will be discharged from its
obligations under this Indenture and the Notes;  provided  that solely for the
purpose of calculating amounts described in clause (3) of Section 10.15, any such
surviving person shall only be deemed to have succeeded to and be substituted for the
Company with respect to the period subsequent to the effective time of such transaction,
and the Company (before giving effect to such transaction) shall be deemed to be the
Company for such purposes for all prior periods.

ARTICLE 9

SUPPLEMENTAL INDENTURES

SECTION 9.1 Supplemental
Indentures Without Consent of Noteholders

Without the consent of any
Noteholders, the Company, when authorized by a Board Resolution of the Company, the
Guarantors, when authorized by respective Board Resolutions of each Guarantor, and the
Trustee, at any time and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any of the following
purposes:

(i)    
          to evidence the succession of another Person to the Company and the assumption
          by any such successor of the covenants of the Company herein and in the Notes;
          or

(ii)    
          to add to the covenants of the Company for the benefit of the Noteholders, or to
          surrender any right or power herein conferred upon the Company or the
          Guarantors; or

(iii)    
          to secure the Notes pursuant to the requirements of Section 10.17 or otherwise;
          or

(iv)    
          to cure any ambiguity, to correct or supplement any provision herein which may
          be inconsistent with any other provision herein, or to make any other provisions
          with respect to matters or questions arising under this Indenture which shall
          not be inconsistent with the provisions of this Indenture,  provided  that
          such action pursuant to this Clause (iv) shall not adversely affect the legal
          rights of the Noteholders.

SECTION 9.2 Supplemental
Indentures with Consent of Noteholders

With the consent of the Noteholders
of not less than a majority in aggregate principal amount of the Outstanding Notes, by Act
of said Noteholders delivered to the Company and the Trustee, and consistent with Section
5.11, the Company, when authorized by a Board Resolution of the Company, the Guarantors,
when authorized by the respective Board Resolutions of each Guarantor, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of this
Indenture or of modifying in any manner the rights of the Noteholders under this
Indenture;  provided, however , that no such supplemental indenture shall, without
the consent of the Noteholder of each outstanding Note affected thereby:

(i)    
          reduce the percentage in principal amount of outstanding Notes whose Noteholders
          must consent to an amendment, supplement, waiver, the taking of any action under
          this Indenture, the Notes or the Guarantee;

(ii)    
          change the Stated Maturity of the principal of, or any installment of interest
          on, any Note, or reduce the principal amount thereof or the rate of interest
          thereon or any premium payable thereon, or change the place of payment where, or
          the coin or currency in which, any Note or any premium or interest thereon is
          payable, or impair the right to institute suit for the enforcement of any such
          payment on or after the Stated Maturity thereof (or, in the case of redemption,
          on or after the Redemption Date);

(iii)    
          alter the provisions in any manner adverse to the Noteholders relating to the
          payment of Additional Amounts on the Notes, alter the redemption provisions of
          the Notes;

(iv)    
          modify any of the provisions of this Section 9.2, Section 5.11, any Section
          contained in Article 10 or Section 13.1, except to increase any such percentage
          described in Clause (i) above or to provide that certain other provisions of
          this Indenture cannot be modified or waived without the consent of the
          Noteholder of each Outstanding Note affected thereby;

(v)    
          impair the right set forth in this Indenture to institute suit for the
          enforcement of any payment on or with respect to the Notes (other than any such
          payment that has become due solely as a result of the acceleration of the
          maturity of the Notes).

After an amendment, supplement or
waiver under this Section 9.2 becomes effective, the Company shall mail to the Noteholders
a notice briefly describing the amendment, supplement or waiver.

It shall not be necessary for any Act
of Noteholders under this Section 9.2 to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act shall approve the substance
thereof.

SECTION 9.3 Execution of
Supplemental Indentures

In executing, or accepting the
additional trusts created by, any supplemental indenture permitted by this Article 9 or
the modifications thereby of the trusts created by this Indenture, the Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Officers
Certificate and an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the Trustees
own rights, duties or immunities under this Indenture or otherwise.

SECTION 9.4 Effect of
Supplemental Indentures

Upon the execution of any
supplemental indenture under this Article 9, this Indenture shall be modified in
accordance therewith, and such supplemental indenture shall form a part of this Indenture
for all purposes; and every Noteholder of Notes theretofore or thereafter authenticated
and delivered hereunder shall be bound thereby.

SECTION 9.5 Reference in
Notes to Supplemental Indentures

Notes authenticated and delivered
after the execution of any supplemental indenture pursuant to this Article 9 may, and
shall if required by the Trustee, bear a notation in form approved by the Trustee as to
any matter provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the Company, to any
such supplemental indenture may be prepared and executed by the Company and authenticated
and delivered by the Trustee in exchange for Outstanding Notes.

ARTICLE 10

COVENANTS

SECTION 10.1 Payment of
Principal and Interest

The Company will duly and punctually
pay the principal of and premium, if any, and interest on the Notes in accordance with the
terms of the Notes and this Indenture.

SECTION 10.2 Maintenance
of Office or Agency

The Company will maintain in the
Borough of Manhattan, The City of New York, New York, an office or agency where Notes may
be presented or surrendered for payment, where Notes may be surrendered for registration
of transfer or exchange and where notices and demands to or upon the Company or the
Guarantors in respect of the Notes, the Guarantee and this Indenture may be served. In
addition, for as long as the Notes are listed on the Luxembourg Stock Exchange, the
Company will maintain in Luxembourg an office or agency where securities may be presented
or surrendered for payment and where securities may be surrendered for registration of
transfer or exchange. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such offices or agencies. If at any time the
Company shall fail to maintain any such required offices or agencies or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.

The Company may also from time to
time designate one or more other offices or agencies (in or outside the Borough of
Manhattan, The City of New York, New York) where the Notes may be presented or surrendered
for any or all such purposes (each, a  Transfer Agent ) and may from time
to time rescind such designations;  provided, however,  that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain an office
or agency in the Borough of Manhattan, The City of New York, New York or, for so long as
the Notes are listed on the Luxembourg Stock Exchange, in Luxembourg for such purposes.
The Company has initially designated the offices of The Chase Manhattan Bank, London
Branch to act as Transfer Agent. The Company will give prompt written notice to the
Trustee of any such designation or rescission and of any change in the location of any
such other office or agency.

SECTION 10.3 Money for
Note Payments to Be Held in Trust

Whenever the Company shall have one
or more Paying Agents, it will, prior to each due date of the principal of and premium, if
any, or interest on any Notes, deposit with the Principal Paying Agent a sum sufficient to
pay the principal, premium, if any, and interest so becoming due, such sum to be held in
trust for the benefit of the Persons entitled to such principal, premium, if any, or
interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify
the Trustee in writing of its action or failure so to act. Upon any bankruptcy or
reorganization proceeding relative to the Company the Trustee shall serve as the Paying
Agent for the Notes.

The Company will cause each Paying
Agent other than the Trustee or its Affiliate to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee, subject to the
provisions of this Section, that such Paying Agent will:

(i)    
          hold all sums held by it for the payment of the principal of and premium, if
          any, and interest on the Notes in trust for the benefit of the Persons entitled
          thereto until such sums shall be paid to such Persons or otherwise applied as
          herein provided:

(ii)    
          give the Trustee notice of any default by the Company (or any other obligor upon
          the Notes) in the making of any payment of principal, premium, if any, or
          interest;

(iii)    
          at any time during the continuance of any such default, upon the written request
          of the Trustee, forthwith pay to the Trustee all sums so held in trust by such
          Paying Agent; and

(iv)    
          acknowledge, accept and agree to comply in all respects with the provisions of
          this Indenture relating to the duties, rights and obligations of such Paying
          Agent.

The Company may at any time in
accordance with the provisions of this Indenture, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company
or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those
upon which such sums were held by the Company or such Paying Agent; and, upon such payment
by any Paying Agent to the Trustee, such Paying Agent shall be released from all further
liability with respect to such money.

Any money deposited with the Trustee
or any Paying Agent, or then held by the Company, in trust for the payment of the
principal of and premium, if any, or interest on any Note and remaining unclaimed for two
years after such principal, premium, if any, or interest has become due and payable shall
be paid to the Company, or, if then held by the Company, shall be discharged from such
trust; and the Noteholder of such Note shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease;  provided, however,  that the Trustee or such Paying
Agent, before being required to make any such repayment, may, at the expense of the
Company, cause to be published once, in a newspaper published in the English language,
customarily published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from the date
of such publication, any unclaimed balance of such money then remaining will be repaid to
the Company.

SECTION 10.4 Maintenance
of Financial Condition

The Company shall ensure that the
financial condition of the Company and its Subsidiaries on a consolidated basis is such
that:

(i)    
           Interest Coverage : The ratio of (i) Consolidated Adjusted EBITDA to (ii)
          Consolidated Adjusted Gross Interest Expense for each period of four full fiscal
          quarters is at least equal to 2.0 to 1 for each such four-quarter period.

(ii)    
           Leverage Restriction : The ratio of (i) Consolidated Total Senior
          Indebtedness outstanding as of the most recent available quarterly or annual
          balance sheet to (ii) Consolidated Adjusted EBITDA for the period of four full
          fiscal quarters ending on such date is not more than (1) 5.0 to 1, in respect of
          any such four-quarter period ending on or before June 30, 1998 and (2) 4.5 to 1,
          in respect of any such four-quarter period ending thereafter.

SECTION 10.5 Existence

Subject to Article 8, the Company and
each Guarantor will, and will cause each of its Subsidiaries to, do or cause to be done
all things necessary to preserve and keep in full force and effect its existence and
rights (charter and statutory);  provided, however,  that no Subsidiary of the
Company which is not a Guarantor and no Subsidiary of a Guarantor which is not itself a
Guarantor, shall be required to preserve any such right if the preservation thereof is no
longer desirable in the conduct of its business and the loss thereof would not have a
Material Adverse Effect on the Company and the Guarantors, taken as a whole.

SECTION 10.6 Maintenance
of Licenses

The Company and each Guarantor will,
and will require each of its Subsidiaries to preserve and maintain in full force and
effect all material governmental rights, privileges, qualifications, permits, licenses and
franchises, including, without limitation all Multi-Point, Multi-Channel Distribution
Service, cable and all other licenses, necessary or desirable in the normal conduct of its
business, except where the failure to so preserve and maintain any of such would not have
a Material Adverse Effect on the Company and the Guarantors, taken as a whole.

SECTION 10.7 Maintenance
of Properties and Insurance

The Company and each Guarantor will
and will require each of its Subsidiaries to cause all material properties used or useful
in the conduct of its respective business to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company, such Guarantor or any such Subsidiary, as the case
may be, may be necessary;  provided, however,  that nothing in this Section shall
prevent the Company, such Guarantor or any such Subsidiary, as the case may be, from
discontinuing the operation or maintenance of any of such properties where such
discontinuance would not have a Material Adverse Effect on the Company and the Guarantors,
taken as a whole.

The Company and each Guarantor will,
and will require each of its Subsidiaries, to maintain commercially reasonable insurance
with respect to its properties and business against loss or damage of the kinds that are
customarily insured against by Persons engaged in the same or similar business in the
jurisdiction of its organization and in each jurisdiction in which it does business, of
such types and in such amounts as customarily are carried under similar circumstances by
such other Persons in each such jurisdiction.

SECTION 10.8 Provision
of Financial Information

(a)    
          The Company shall deliver, after the date hereof, to the Trustee and each
          Noteholder, as soon as available, but not later than one-hundred twenty (120)
          days after the end of each fiscal year of the Company, a copy of the audited
          consolidated balance sheet of the Company and its Subsidiaries as at the end of
          such year and the related consolidated statements of income, operations and
          shareholders equity and statement of changes in financial position for
          such year, setting forth in each case in comparative form the figures for the
          previous fiscal year, and accompanied by the opinion of an internationally
          recognized Big-Six independent public accounting firm (the
           Independent Auditor ), which report: (i) shall state that such
          consolidated financial statements present fairly the financial position for the
          dates and periods indicated in conformity with Brazilian GAAP applied on a basis
          consistent with prior years and (ii) shall not be qualified or limited because
          of a restricted or limited examination by the Independent Auditor of any
          material portion of the Companys or any of its Subsidiaries records.

(b)    
          The Company shall deliver, after the date hereof, to the Trustee and each
          Noteholder, as soon as available, but not later than sixty (60) days after the
          end of each of its first three fiscal quarters and one-hundred twenty (120) days
          after the end of its fourth fiscal quarter, a copy of the unaudited consolidated
          balance sheet of the Company and its Subsidiaries as at the end of such quarter
          and the related consolidated statements of income, shareholders equity and
          statement of changes in financial position for the period: commencing on the
          first day and ending on the last day of such quarter, in accordance with
          Brazilian GAAP (subject to ordinary, good faith year-end audit adjustments), the
          financial position and the results of operations of the Company and its
          Subsidiaries; provided, that the Company shall deliver such information in
          relation to the third fiscal quarter of 1997 not later than November 30, 1997.

(c)    
          The Company shall, in addition, furnish from time to time to the Trustee and
          each of the Noteholders, at the Companys own cost, such other information
          as the Trustee or any Noteholder may reasonably request.

SECTION 10.9 Compliance
Certificates and Notices

(a)    
          The Company and each Guarantor shall deliver, after the date hereof, to the
          Trustee, within 60 days after the end of each of such Persons first three
          fiscal quarters and within 120 days after the end of such Persons fourth
          fiscal quarter and fiscal year, an Officers Certificate, stating that a
          review of the activities of the Company or such Guarantor, as the case may be,
          and each of its Subsidiaries during such fiscal quarter and/or fiscal year, as
          the case may be, has been made under the supervision of the signing Officers
          with a view to determining whether the Company or such Guarantor, as the case
          may be, has kept, observed, performed and fulfilled its obligations under this
          Indenture, and further stating, as to each such Officer signing such certificate
          whether or not to the best knowledge of the signers thereof the Company or such
          Guarantor, as the case may be, is in default in the performance and observance
          of any of the terms, provisions and conditions of this Indenture and if the
          Company or such Guarantor, as the case may be, is in default, specifying all
          such defaults and the nature and status thereof of which they may have knowledge
          and that to the best of his or her knowledge no event has occurred and remains
          in existence by reason of which payments on account of the principal of or
          interest, if any, on the Notes are prohibited or if such event has occurred, a
          description of the event and what action the Company or such Guarantor is taking
          or proposes to take with respect thereto.

(b)    
          The Company and each Guarantor shall deliver to the Trustee, as soon as possible
          and in any event within 10 days after the Company or such Guarantor, as the case
          may be, becomes aware of the occurrence of a Default or an Event of Default or
          any event which would make the representation in Section 11.1(o) then untrue or
          unable to be given by the Company if then asked to be given, an Officers
          Certificate setting forth the details of such Default or Event of Default or
          such event, as the case may be, and the action which the Company or such
          Guarantor, as the case may be, proposes to take with respect thereto.

SECTION 10.10 Payment of
Taxes and Other Liabilities

The Company and each Guarantor will,
and will cause each of its Subsidiaries to, pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company, such Guarantor or such
Subsidiary, as the case may be, or upon the income, profits or property of the Company,
such Guarantor or such Subsidiary, as the case may be, (2) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the property of
the Company, such Guarantor or such Subsidiary, as the case may be, and (3) all other
obligations and liabilities;  provided, however,  that the Company, such Guarantor or
such Subsidiary, as the case may be, shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate proceedings.

SECTION 10.11 Waiver of
Certain Covenants

The Company or any Guarantor or any
Subsidiary of any of the foregoing, as the case may be, may omit in any particular
instance to comply with any covenant or condition set forth herein (other than any
covenant or condition with respect to a payment of principal, premium, if any, interest or
other amount), if before or after the time for such compliance the Noteholders of at least
a majority in aggregate principal amount of the Outstanding Notes shall, by Act of such
Noteholders, either waive such compliance in such instance or generally waive compliance
with such covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such waiver
shall become effective, the obligations of the Company, such Guarantor or such Subsidiary,
as the case may be, and the duties of the Trustee in respect of any such covenant or
condition shall remain in full force and effect.

SECTION 10.12 Compliance
with Laws

The Company and each Guarantor will,
and will cause each of its Subsidiaries to, comply in all material respects with all
applicable requirements of law, except where the failure to comply would not have a
Material Adverse Effect on the Company and the Guarantors, taken as a whole, it and,
without limiting the foregoing, shall conduct its operations, and cause all of its
properties (owned or leased) to be, in compliance in all material respects with all
applicable Environmental Laws, except such as where the failure to comply would not have a
Material Adverse Effect on the Company and the Guarantors, taken as a whole.

SECTION 10.13
Maintenance of Books and Records

The Company and each Guarantor will,
and will require each of its Subsidiaries to, maintain proper books of record and account
in which full, true and correct entries in conformity with Brazilian GAAP consistently
applied shall be made of all financial transactions and matters involving its assets and
business and shall permit reasonable access to representatives and independent contractors
of the Trustee or any representative thereof to visit and inspect any of its properties,
to examine its corporate, financial and operating records, and make at the expense of the
relevant Person being visited, copies thereof or abstracts therefrom, and to discuss its
respective affairs, finances and accounts with its respective officers and independent
public accountants and at any time during normal business hours with reasonable notice.

SECTION 10.14 Limitation on Indebtedness

Neither the Company nor any Guarantor
will Incur or allow any of its Subsidiaries to incur any Indebtedness (including any
Acquired Indebtedness), unless (x) the ratio of (i) Consolidated Total Senior Indebtedness
outstanding as of the most recent available quarterly or annual balance sheet after giving
pro forma effect to the Incurrence of such Indebtedness and any other Indebtedness
Incurred since such balance sheet date and the receipt and application of the proceeds
thereof, to (ii) Consolidated Adjusted EBITDA for the four full fiscal quarters next
preceding the Incurrence of such Indebtedness for which consolidated financial statements
are available, determined on a pro forma basis as if any such Indebtedness had been
Incurred and the proceeds thereof had been applied at the beginning of such four fiscal
quarters, would be less than (1) 5.0 to 1 for any such period of four fiscal quarters
ending on or before June 30, 1998 and (2) 4.5 to 1 for any such period of four fiscal
quarters ending thereafter; and (y) the ratio of (i) Consolidated Adjusted EBITDA to (ii)
Consolidated Adjusted Gross Interest Expense for the most recent four full fiscal quarters
next preceding the Incurrence of such Indebtedness for which consolidated financial
statements are available, determined on a pro forma basis as if any such Indebtedness had
been Incurred and the proceeds thereof had been applied at the beginning of such four
fiscal quarters, would be at least equal to 2.0 to 1 for each such period of four fiscal
quarters provided that in making such computation the interest expense on any Indebtedness
to be Incurred and computed on a pro forma basis and bearing a floating interest rate
shall be computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period. Notwithstanding the foregoing provisions of this
Section 10.14, the Company, the Guarantors and any Subsidiaries of the Company or the
Guarantors may Incur or issue (A) Indebtedness evidenced by the Notes and the Guarantees,
(B) Indebtedness owed by the Company, any Guarantor or any Subsidiary to the Company, any
Guarantor or any Subsidiary, (C) Subordinated Indebtedness and (D) Indebtedness incurred
to renew, extend, refinance or refund the Notes or any other Consolidated Total Senior
Indebtedness in circumstances where (i) the principal amount of Indebtedness is not
thereby increased, (ii) the terms on which such Indebtedness is Incurred does not provide
for payments of principal or liquidation value at the stated maturity of such Indebtedness
or by way of a sinking fund applicable to such Indebtedness or by way of mandatory
redemption, defeasance, retirement or repurchase of such Indebtedness (other than
following an acceleration of such Indebtedness) or redemption at the option of the holders
thereof in each case prior to the time the same are required or, as the case may be,
permitted at the option of the holder of such Indebtedness by the terms of the
Indebtedness being refinanced, and (iii) in the case of any such refinancing being
constituted by an exchange or redemption of Preferred Stock, such Preferred Stock may only
be exchanged for or redeemed with Preferred Stock.

SECTION 10.15 Limitation
on Restricted and Other Payments

Neither the Company nor any Guarantor
will, directly or indirectly (i) declare or pay any dividend, or make any distribution, in
respect of its Capital Stock or to the holders thereof (in their capacity as such)(other
than dividends of a Guarantor which are paid to the Company or another Guarantor),
excluding any dividends or distributions payable solely in shares of its Capital Stock
(other than Disqualified Stock) or in options, warrants or other rights to acquire its
Capital Stock (other than Disqualified Stock); (ii) purchase, redeem, or otherwise retire
or acquire for value (a) any of the Capital Stock of the Company or any Guarantor (other
than of a Guarantor which is or as a result thereof becomes a Wholly Owned Subsidiary of
the Company) (b) any rights to purchase or acquire shares of Capital Stock of the Company
or any Guarantor; (iii) redeem, defease, repurchase, retire or otherwise acquire or retire
for value, prior to any scheduled maturity, repayment or sinking fund payment, any
Subordinated Indebtedness (other than Specified Subordinated Indebtedness) or make any
interest or other payment in relation thereto (each of clauses (i) through (iii) being a
 Restricted Payment ) if: (1) a Default or an Event of Default shall have
occurred and is continuing; or (2) upon giving pro forma effect to such Restricted Payment
as if such Restricted Payment had been made at the beginning of the applicable
four-quarter period, the Company could not Incur at least U.S.$1.00 of additional
Indebtedness pursuant to the terms of Section 10.14; or (3) upon giving effect to such
Restricted Payment, the aggregate of all Restricted Payments from the date of this
Indenture would exceed an amount equal to 75% of cumulative Consolidated Adjusted
Available Cash Flow from the first day of the first full fiscal quarter following the
Issue Date through the last full fiscal quarter of the Company immediately preceding the
date such Restricted Payment is proposed to be made for which financial information is
available and has been provided by the Company as required by Section 10.8 hereof;
 provided, however,  the immediately preceding clause (3) shall not apply to any
Subordinated Indebtedness. The foregoing provision of this Section 10.15 shall not be
violated by reason of (i) the declaration of dividends payable to shareholders  provided
 that such shareholders waive the right to receive payment therefor and the Person
declaring such dividend records such waiver as a capital contribution from such
shareholders or (ii) the payment of any dividend within 60 days after the declaration
thereof if at the declaration date such payment would have complied with the foregoing
provision of this Section 10.15;  provided  that at the time of such payment, no
Default or Event of Default has occurred and is continuing.

SECTION 10.16
Restriction on Payments on Specified Subordinated Indebtedness

If a Default or Event of Default with
respect to any payment referred to in Section 5.1(a), (b) or (c) shall have occurred and
is continuing then neither the Company, the Guarantors nor any Subsidiary shall make any
payment of principal on or interest or any other payment in relation to any Specified
Subordinated Indebtedness.

SECTION 10.17 Limitation
on Liens

Neither the Company nor any Guarantor
may, nor may they permit any of their respective Subsidiaries to Incur or suffer to exist
any Lien other than a Permitted Lien on or with respect to any property or assets now
owned or hereafter acquired to secure any Indebtedness without making, or causing such
Subsidiary to make, effective provision for securing the Notes (x) equally and ratably
with (or prior to) such Indebtedness as to such property for so long as such Indebtedness
will be so secured or (y) in the event such Indebtedness is Indebtedness of the Company
which is subordinate in right of payment to the Notes, prior to such Indebtedness as to
such property for so long as such Indebtedness will be so secured.

SECTION 10.18 Limitation
on Sale and Leaseback Transactions

The Company and each Guarantor may
not, and may not permit any of their respective Subsidiaries to, enter into any Sale and
Leaseback Transaction unless (i) the Company, such Guarantor or such Subsidiary of the
Company or such Guarantor, as the case may be, would be entitled to Incur a Lien to secure
Indebtedness by reason of the provisions of Section 10.17, equal in amount to the
Attributable Value of the Sale and Leaseback Transaction without equally and ratably
securing the Notes; or (ii) the Sale and Leaseback Transaction is treated as an Asset
Disposition and all of the conditions of Section 10.19 (including the provisions
concerning the application of Net Available Proceeds) are satisfied with respect to such
Sale and Leaseback Transaction, treating all of the consideration received in such Sale
and Leaseback Transaction in the same manner as consideration received in respect of an
Asset Disposition for purposes of such covenant.

SECTION 10.19 Limitation
on Asset Dispositions

The Company and each Guarantor may
not, and may not permit any of their respective Subsidiaries to, make any Asset
Disposition in one or more related transactions occurring within any 12-month period
unless: (i) the Company, such Guarantor or such Subsidiary of the Company or such
Guarantor, as the case may be, receives consideration for such disposition at least equal
to the fair market value for the assets sold or disposed of as determined by the Board of
Directors in good faith and evidenced by a certificate of the Board of Directors filed
with the Trustee, which determination shall be conclusive; (ii) at least 75% of the
consideration for such disposition consists of cash or Cash Equivalents or the assumption
of Indebtedness of the Company (other than Subordinated Indebtedness), such Guarantor or
such Subsidiary of the Company or such Guarantor, as the case may be, and release from all
liability on the Indebtedness assumed; and (iii) all Net Available Proceeds, less any
amounts invested within 180 days of such disposition in new Subscriber TV Assets, are
applied within 180 days of such disposition, (1) first, to make an Offer to Purchase
outstanding Notes at 100% of their principal amount plus accrued and unpaid interest, if
any, to the date of purchase and, to the extent required by the terms thereof, any other
Indebtedness of the Company that is  pari passu  with the Notes at a price no greater
than 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase and (2) second, to the extent of any remaining Net Available Proceeds
following the completion of the Offer to Purchase, to the repayment of other Indebtedness
of the Company or Indebtedness of a Guarantor or a Subsidiary of a Guarantor, as the case
may be, to the extent permitted under the terms thereof. To the extent any Net Available
Proceeds remain after such uses, the Company, the Guarantors and their respective
Subsidiaries may use such amounts for any purposes not prohibited by this Indenture.
Notwithstanding the foregoing, clauses (i), (ii) and (iii) of this Section 10.19 shall not
apply to (A) any Asset Disposition in one or more related transactions occurring within
any 12-month period where the proceeds of such Asset Disposition is not greater than
$20,000,000, and (B) the consideration payable in respect of such Asset Disposition is
payable by way of an exchange of assets and such Asset Disposition does not constitute a
breach of Section 10.22; and clauses (i), (ii) and (iii) of this Section 10.19 shall not
apply to any Asset Disposition which constitutes a transfer, conveyance, sale, lease or
other disposition of all or substantially all of the Companys properties or assets
pursuant to Section 8.1.

SECTION 10.20 Limitation
on Issuances and Sales of Capital Stock of Subsidiaries

The Company and each Guarantor may
not, and may not permit any of their respective Subsidiaries to, issue, transfer, convey,
sell or otherwise dispose of any shares of Capital Stock of any Subsidiary or securities
convertible or exchangeable into, or options, warrants, rights or any other interest with
respect to, Capital Stock of any Subsidiary to any Person other than the Company or a
Wholly Owned Subsidiary of the Company except in a transaction consisting of a sale of
Capital Stock of such Subsidiary that complies with the provisions of Section 10.19.

SECTION 10.21 Limitation
on Transactions with Affiliates

The Company and each of the
Guarantors may not, and may not permit any of their respective Subsidiaries to, enter into
any transaction (or series of related transactions) with an Affiliate of the Company
(other than the Company, a Guarantor or a Wholly Owned Subsidiary of the Company or a
Guarantor) (including any Investment, but excluding (A) transactions pursuant to employee
compensation arrangements approved by the Board of Directors of the Company, such
Guarantor or such Subsidiary of any of the foregoing, as the case may be, and (B) series
of related transactions with RBS Treasury where such transactions are for the account of
the Company, and/or one or more Guarantors and/or one or more Wholly Owned Subsidiaries of
the Company or one or more Guarantors, and which, when taken together, have no net effect
on the consolidated assets and liabilities (and the maturity thereof) and fixed charges
payable in respect thereof of the Company on a consolidated basis, either directly or
indirectly, unless such transaction is on terms no less favorable to the Company, such
Guarantor or such Subsidiary of any of the foregoing, as the case may be, than an
arms-length transaction with an unrelated third party would be. For any transaction (or
series of related transactions) with an Affiliate that involves in excess of U.S.$20
million but less than or equal to U.S.$30 million, the Chief Executive Officer of the
Company, such Guarantor or such Subsidiary of any of the foregoing, as the case may be,
shall determine that the transaction satisfies the above criteria and shall evidence such
a determination by a certificate filed with the Trustee. For any transaction (or series of
related transactions) with an Affiliate that involves in excess of U.S.$30 million, the
Company shall cause a certificate of the Disinterested Board of Directors Members of the
Company, such Guarantor or such Subsidiary of any of the foregoing, as the case may be, to
be delivered to the Trustee. For any recurring transaction with an Affiliate the Company
shall cause the Chief Executive Officer or the Board of Directors of the Company, such
Guarantor or such Subsidiary of any of the foregoing, as the case may be, to file an
annual certificate with the Trustee confirming that during the previous year the Company,
such Guarantor or such Subsidiary of any of the foregoing, as the case may be, has not,
and has not permitted any Subsidiary to have, entered into any transaction (or series of
transactions) involving in excess of U.S.$20 million or U.S.$30 million, respectively,
except where the transaction was in the best interests of the Company, such Guarantor or
such Subsidiary of any of the foregoing, as the case may be, and was on terms no less
favorable to the Company, such Guarantor or such Subsidiary of any of the foregoing, as
the case may be, as those that could have been obtained in a comparable arms length
transaction with an entity that was not an Affiliate. This covenant shall not apply to
Investments by an Affiliate of the Company in the Capital Stock (other than Disqualified
Stock) of the Company, any Guarantor or any Subsidiary of the Company or any Guarantor or
to recurring transactions under arrangements existing at the date of this Indenture which
are conducted in the ordinary course of business between the Company, a Guarantor or a
Wholly Owned Subsidiary and an Affiliate of any thereof.

SECTION 10.22 Limitation
on Lines of Business

The Company and each Guarantor shall,
and shall cause each of its respective Subsidiaries to, directly or indirectly engage
primarily in the Subscriber Television Business.

SECTION 10.23 Limitation
on Change of Control

(i)    
          Upon the occurrence of a Change of Control (the date of such occurrence being
          the  Change of Control Date ), the Company or, at the
          Companys request, the Trustee in the Companys name and at the
          Companys expense, will notify the Noteholders with, if mailed by the
          Company, a copy to the Trustee, in writing of such occurrence and will make an
          Offer to Purchase (the  Change of Control Offer ), on a
          Business Day (the  Change of Control Payment Date ) not later
          than 60 Business Days following the Change of Control Date, all Notes then
          outstanding at a purchase price equal to 100% of the aggregate principal amount
          thereof, plus accrued and unpaid interest, if any, thereon to the Change of
          Control Payment Date (such purchase price being hereinafter referred to as the
           Change of Control Purchase Price ) in accordance with the
          procedures set forth in this Section 10.23 and the definition of Offer to
          Purchase herein. All Notes properly tendered pursuant to such Change of
          Control Offer and not withdrawn pursuant thereto will be purchased on the Change
          of Control Payment Date. The Change of Control Offer shall remain open for at
          least 20 Business Days and until the close of business on the Change of Control
          Payment Date.

(ii)    
          Within 30 days of the occurrence of a Change of Control, the Company also shall
          cause a notice of the Change of Control Offer to be sent at least once to the
          Dow Jones News Service or similar business news service in the United States.
          Notice of a Change of Control Offer will be mailed by the Company to the Trustee
          and the Noteholders not less than 30 calendar days nor more than 60 calendar
          days before the Change of Control Payment Date. Such notice shall be sent by
          first-class mail, postage prepaid, to the Trustee and to each Noteholder, at the
          address appearing in the register maintained by the Registrar of the Notes, and
          shall state:

(A)    
          that the Change of Control Offer is being made pursuant to this Section 10.23,
          the length of time the Change of Control Offer will remain open and that all
          Notes tendered will be accepted for payment, and otherwise subject to the terms
          and conditions set forth herein;

(B)    
          the Change of Control Purchase Price and the Change of Control Payment Date;

(C)    
          that any Note not tendered or improperly tendered will continue to accrue
          interest;

(D)    
          that, unless the Company defaults in the payment of the Change of Control
          Purchase Price, any Notes accepted for payment pursuant to the Change of Control
          Offer shall cease to accrue interest after the Change of Control Payment Date;

(E)    
          that Noteholders electing to have their Notes purchased pursuant to a Change of
          Control Offer will be required to surrender the Notes, with the form entitled
           Option of Noteholder to Elect Purchase  on the reverse of the
          Notes completed, to the Paying Agent at the address specified in the notice
          prior to the close of business on the third Business Day preceding the Change of
          Control Payment Date in order to collect the purchase price;

(F)    
          that Noteholders will be entitled to withdraw their election if the Paying Agent
          receives, not later than the close of business on the Change of Control Payment
          Date, a facsimile transmission or letter setting forth the name of the
          Noteholder, the principal amount of the Notes delivered for purchase (including,
          if any, the CUSIP or ISIN number, as applicable, and the certificate number of
          such Notes), and a statement that such Noteholder is withdrawing his election to
          have such Notes purchased;

(G)    
          that Noteholders whose Notes are being purchased only in part will be issued new
          Notes equal in principal amount to the unpurchased portion of the Notes
          surrendered,  provided  that each Note purchased and each such new Note
          issued shall be in an original principal amount in denominations of $1,000 and
          integral multiples thereof;

(H)    
          any other procedures that a Noteholder must follow to accept a Change of Control
          Offer or effect withdrawal of such acceptance; and

(I)    
          the name and address of the Paying Agent.

On the Change of Control Payment
Date, the Company shall, to the extent lawful, (i) accept for payment Notes or portions
thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent U.S. legal tender sufficient to pay the Change of Control Purchase Price of all
Notes or portions thereof so tendered and (iii) deliver or cause to be delivered to the
Paying Agent an Officers Certificate stating that such Notes or portions thereof
were accepted for purchase by the Company in accordance with the terms of this Indenture.
The Paying Agent shall promptly (but in any case not later than 5 days after the Change of
Control Payment Date) mail or deliver to each Noteholder of Notes so accepted payment in
an amount equal to the Change of Control Purchase Price for such Notes, and the Company
shall promptly execute and issue, and the Trustee shall promptly authenticate and make
available for delivery to such Noteholder, new Notes equal in principal amount to any
unpurchased portion of the Notes surrendered;  provided  that each such new Note
shall be issued in an original principal amount in denominations of $1,000 and integral
multiples thereof. Any Note not so accepted shall be promptly mailed or delivered by the
Company to the Noteholder thereof.

The Company will comply with any
tender offer rules under the Exchange Act which may then be applicable, including, but not
limited to, Rule 14e-1 thereunder, and any other applicable laws, rules and regulations,
in connection with any Change of Control Offer. To the extent that the provisions of any
United States federal or state securities laws and regulations conflict with this Section
10.23, the Company will comply with such applicable securities laws and regulations and
will not be deemed to have breached its obligations under this Section 10.23 by virtue
thereof.

SECTION 10.24 Payments
for Consent Prohibited

Neither the Company nor any Guarantor
nor any Subsidiary of the Company or any Guarantor shall, directly or indirectly, pay or
cause to be paid any consideration, whether by way of interest, fee or otherwise, to any
Noteholder of any Notes for or as an inducement to any consent, waiver or amendment of any
of the terms or provisions of this Indenture or the Notes unless such consideration is
offered to be paid or agreed to be paid to all Noteholders which so consent, waive or
agree to amend in the time frame set forth in solicitation documents relating to such
consent, waiver or agreement.

SECTION 10.25 Use of
Proceeds

The proceeds from the sale of the
Notes will be used by the Company for certain Capital Expenditures and for on-lending to
the Guarantors for use by the Guarantors in connection with the continued expansion plans
of their respective cable and Multi-Point, Multi-Channel Distribution Service television
networks. The Company may also use the proceeds of the sale of the Notes to discharge (i)
Indebtedness owed by it to RBS Participações S.A. and Affiliates thereof,
and (ii) to refinance its or, by on-lending such proceeds to a Guarantor, any
Guarantors Indebtedness with a remaining maturity at the time of such refinancing of
less than 365 days. Pending such uses, the Company may invest the proceeds from the sale
of the Notes in domestic or foreign currency denominated money market instruments or other
short-term investments.

SECTION 10.26 Additional
Subsidiaries as Guarantors

The Company shall cause each
Significant Subsidiary of the Company, immediately upon, and in any event within thirty
(30) days after, such Subsidiary first becoming a Significant Subsidiary of the Company,
to execute a supplemental indenture hereto pursuant to which such Subsidiary shall enter
into a guarantee of the Notes, jointly and severally with all then existing Guarantors, on
terms identical to those set forth in Article 14 hereof. In addition to the foregoing, the
Company shall cause any or all Subsidiaries of the Company, as nominated by the Company,
to execute a supplemental indenture hereto pursuant to which each such Subsidiary shall
enter into a guarantee of the Notes, jointly and severally with all then existing
Guarantors, on terms identical to those set forth in Article 14 hereof so as to ensure
that, at no time shall greater than 15% of either the total assets of the Company and all
of its Subsidiaries, taken as a whole, be owned by, or more than 15% of the Consolidated
Net Income be generated by, Subsidiaries of the Company which are not Guarantors.

SECTION 10.27
Consularization and Registration

(i)    
          As soon as possible after the date of this Indenture and in any event within
          twenty (20) days of the date hereof, the Company will procure the notarization
          by a Notary Public and the consularization of this Indenture and each other
          Transaction Document then executed by a Brazilian Consulate; (ii) within fifteen
          (15) days of the date of the Purchase Agreement, the Company will apply for the
          registration of the Notes purchased thereunder with the Central Bank under Law
          No. 4131/62, as amended, of Brazil on terms permitting compliance by the parties
          thereto with their respective obligations thereunder and provide each Purchaser
          with a certified copy of the Certificate of Registration (the
           Certificate of Registration ) issued by the Central Bank
          promptly after the receipt thereof and in any event within six (6) months of the
          date of the Purchase Agreement; and (iii) the Company will obtain and maintain
          in effect from time to time all such consents as may be required under any
          Requirement of Law to permit or enable it to perform and comply with its
          obligations under this Indenture and each other Transaction Document, to ensure
          that those obligations are valid, legally binding and enforceable and to make
          such documents admissible in evidence against it and each Guarantor in the
          courts of Brazil and New York and it will provide each Purchaser with copies of
          any such consents.

SECTION 10.28 Notice of
Dissolution, etc. of any Member of the Net Sul Group

The Company shall give prompt notice
to the Trustee of any dissolution, winding-up, liquidation, reorganization, arrangement,
adjustment, composition or readjustment of any member of the Net Sul Group, or its
respective securities or debt.

ARTICLE 11

REPRESENTATIONS AND
WARRANTIES

SECTION 11.1
Representations and Warranties of the Company and the Guarantors

The Company represents and warrants
with respect to the Company and each of the Guarantors, and each Guarantor represents and
warrants with respect to itself that:

(a)    
          (i) Neither the Preliminary Offering Circular as of the date thereof nor the
          Offering Circular nor any amendment or supplement thereto as of the date thereof
          and at all times subsequent thereto up to the Issue Date included or includes an
          untrue statement of a material fact or omitted or omits to state a material fact
          necessary in order to make the statements therein, in light of the circumstances
          under which they were made, not misleading, (ii) there are no other facts in
          relation to the Company, the Guarantors, the Purchase Agreement or this
          Indenture, the omission of which would, in the context of the issue of the
          Notes, make any statement in the Offering Circular materially misleading, untrue
          or inaccurate, (iii) all reasonable inquiries have been made to ascertain such
          facts and to verify the accuracy of all such information and statements and (iv)
          any opinions and intentions expressed in the Offering Circular with respect to
          the Company are honestly held and are based on reasonable assumptions;
           provided  that this representation and warranty shall not apply to
          statements or omissions made in reliance upon and in conformity with written
          information furnished to the Company by the Purchasers relating to the
          Purchasers expressly for use in the Preliminary Offering Circular or the
          Offering Circular or any amendment or supplement thereto.

(b)    
          The Company and each Guarantor has been duly incorporated and is validly
          existing as a corporation under the laws of Brazil with corporate authority and
          power to own, lease and operate its properties and to conduct its business as
          described or contemplated in the Offering Circular and is duly qualified as a
          foreign corporation to transact business in good standing in each jurisdiction
          in which such qualification is required, whether by reason of the ownership or
          leasing of property and assets or the conduct of business or otherwise, except
          where the failure to so qualify would not have, with respect to the Company and
          the Guarantors taken as a whole, a Material Adverse Effect.

(c)    
          All of the issued and outstanding shares of capital stock of the Company and
          each Guarantor have been duly authorized and validly issued and are fully paid
          and nonassessable; and the issuance of the Notes and the consummation of the
          transactions contemplated by the Purchase Agreement and this Indenture do not
          give any person the right to require registration of any securities of the
          Company.

(d)    
          Neither the Company nor any Guarantor is (A) in violation of its Organization
          Documents, (B) in breach of or default (or, with notice or lapse of time or
          both, would be in default) in the performance or observance of any obligation,
          agreement, covenant or condition contained in any Contract, or (C) in violation
          of any Requirement of Law other than, in the case of clauses (B) and (C), such
          defaults or violations which, individually or in the aggregate, would not have a
          Material Adverse Effect on the Company and the Guarantors taken as a whole.

(e)    
          The issuance, sale and delivery of the Notes, the execution, delivery and
          performance of the Purchase Agreement and this Indenture, the consummation by
          the Company and the Guarantors of the transactions contemplated hereby and
          thereby and the compliance by the Company and the Guarantors with the terms of
          the foregoing do not and will not conflict with or constitute or result in a
          breach or violation by the Company or any Guarantor of (A) any of the terms or
          provisions of, or constitute a default (or an event which, with notice or lapse
          of time or both, would constitute a default) by the Company or any Guarantor or
          give rise to any right to accelerate the maturity or require the prepayment of
          any indebtedness under, or result in the creation or imposition of any lien,
          charge, security interest or other encumbrance upon any property or assets of
          the Company or any Guarantor under, any Contract, (B) the applicable
          Organization Documents of the Company or any Guarantor, as the case may be, or
          (C) any Requirement of Law other than in the case of clauses (A) and (C), such
          breaches or violations which, individually or in the aggregate, would not have
          or result in a Material Adverse Effect on the Company and the Guarantors taken
          as a whole.

(f)    
          No event with respect to the Company or any Guarantor has occurred and is
          continuing which, upon issuance of the Notes, would (whether or not with the
          giving of notice and/or the passage of time and/or the fulfilment of any other
          requirement) constitute a Default or an Event of Default.

(g)    
          The Company and each Guarantor has all requisite corporate power and authority
          to execute, deliver and perform its obligations under the Purchase Agreement and
          to consummate the transactions contemplated hereby. The Purchase Agreement has
          been duly and validly authorized, executed and delivered by the Company and each
          Guarantor (assuming the due execution and delivery thereof by the Purchasers)
          and constitutes the legal, valid and binding obligation of the Company and each
          Guarantor, enforceable against the Company and each Guarantor in accordance with
          its terms, except as enforcement thereof may be limited by bankruptcy,
          insolvency, reorganization, moratorium or similar laws affecting enforcement of
          creditors rights generally and except as enforcement thereof is subject to
          general principles of equity (regardless of whether enforcement is considered in
          a proceeding in equity or at law) (the  Enforceability
          Exceptions ) and as to rights of indemnification or contribution
          thereunder may be limited by principles of public policy or federal or state
          securities laws relating thereto.

(h)    
          The Company and each Guarantor has all requisite corporate power and authority
          to execute, deliver and perform its obligations under this Indenture. This
          Indenture has been duly and validly authorized by the Company and each Guarantor
          and, when duly executed and delivered by the Company and each Guarantor
          (assuming the due execution and delivery thereof by the Trustee), will
          constitute the legal, valid and binding obligation of the Company and each
          Guarantor, enforceable against the Company and each Guarantor in accordance with
          its terms, except for the Enforceability Exceptions; and this Indenture conforms
          in all material respects to the description thereof included in the Offering

Circular.

(i)    
          The Company has all requisite corporate power and authority to execute, deliver
          and perform each of its obligations under the Notes. The Notes, when issued,
          will be in the form contemplated by this Indenture. The Notes have been duly and
          validly authorized by the Company and, when duly executed by the Company and
          authenticated by the Trustee in accordance with the provisions of this Indenture
          and when delivered and paid for in the manner provided for herein, will
          constitute legal, valid and binding obligations of the Company, enforceable
          against the Company in accordance with their terms, except for the
          Enforceability Exceptions. The Notes conform in all material respects to the
          description thereof included in the Offering Circular.

(j)    
          No consent, approval, authorization, exemption, order or decree of any court or
          governmental or regulatory agency or body of the United States of America or
          Brazil (other than, if applicable, the securities or blue sky laws of the
          various states of the United States of America) is required to be obtained by
          the Company or any Guarantor for the execution, delivery and performance by the
          Company or such Guarantor, as the case may be, of the Purchase Agreement or this
          Indenture, the valid authorization, issuance, sale and delivery of the Notes or
          the distribution of the Offering ircular in accordance with the provisions of
          the Purchase Agreement, or is required to permit the Company to effect payments
          of principal of and premium and interest on the Notes in United States Dollars,
          except for (a) such consents, approvals, authorizations, orders or decrees as
          have heretofore been obtained or made and which continue to be in full force and
          effect, including, without limitation, the prior approval from the Central Bank
          of the financial terms of the Notes to close the foreign exchange transaction
          for the remittance of the proceeds of the Notes into Brazil and to make certain
          payments of fees related to the issuance of the Notes and the execution and
          delivery of the Purchase Agreement and this Indenture, and (b) a Certificate of
          Registration from the Central Bank for the Notes, which will enable the Company
          or the Guarantors, as the case may be, to make remittances from Brazil of the
          principal of, and interest on, the Notes, and the fees, expenses and commissions
          referred to in this Indenture, the Purchase Agreement or the Notes that will not
          be paid on the date of the entrance of the proceeds thereof into Brazil, which
          the Company will request within 30 days after the entrance of the proceeds of
          the Notes into Brazil, and (c) any further authorization from the Central Bank
          which will enable the Company or the Guarantors, as the case may be, to make
          remittances from Brazil to make payments contemplated in this Indenture, the
          Purchase Agreement or the Notes not specifically covered by the Certificate of
          Registration or to make payments specifically covered by the Certificate of
          Registration earlier than their respective due dates;  provided, however,
           that the Company may be obligated to file certain notifications with the tax
          authorities of Brazil.

(k)    
          Since the date of the most recent financial statements appearing in the Offering
          Circular, except as described therein, (i) neither the Company nor any Guarantor
          has incurred any liabilities or obligations, direct or contingent, or entered
          into or agreed to enter into any transactions or contracts (written or oral) not
          in the ordinary course of business, other than liabilities, obligations,
          transactions or contracts which would not, individually or in the aggregate,
          result in a Material Adverse Effect on the Company and the Guarantors taken as a
          whole, (ii) neither the Company nor any Guarantor has purchased any of its
          outstanding Capital Stock, or declared, paid or otherwise made any dividend or
          distribution of any kind on its Capital Stock and (iii) there shall not have
          been any change in the Capital Stock or material long-term indebtedness of the
          Company or any Guarantor.

(l)    
          The Company has the authorized, issued and outstanding capitalization as set
          forth in the Offering Circular under the heading Capitalization.

(m)    
          The Company and each Guarantor has good and valid title to all property (real
          and personal, movable or immovable) described in the Offering Circular as being
          owned by it, free and clear of all liens, claims, security interests or other
          encumbrances, except for such liens, claims, security interests or other
          encumbrances as are described in the Offering Circular or which, individually
          and in the aggregate would not have or result in a Material Adverse Effect on
          the Company and the Guarantors taken as a whole, and all of the property
          described in the Offering Circular as being held under lease by any of them is
          held under valid, subsisting and enforceable leases. All leases, contracts and
          agreements to which the Company or any Guarantor is a party or by which the
          Company or such Guarantor is bound are valid and enforceable against the
          Company, and are valid and enforceable against the other party or parties
          thereto and are in full force and effect with only such exceptions as would not,
          individually or in the aggregate, have a Material Adverse Effect on the Company
          and the Guarantors taken as a whole. The Company and each Guarantor owns or
          possesses adequate licenses or other rights to use all patents, trademarks,
          service marks, trade names, copyrights and know-how necessary to conduct its
          business now or proposed to be operated by it as described in the Offering
          Circular, and neither the Company nor any Guarantor has received any notice of
          infringement of or conflict with (or knows of any such infringement of or
          conflict with) asserted rights of others with respect to any patents,
          trademarks, service marks, trade names, copyrights or know-how which, if such
          assertion of infringement or conflict were sustained, would not have a Material
          Adverse Effect on the Company and the Guarantors taken as a whole.

(n)    
          Except as described in the Offering Circular, (A) the Company and each Guarantor
          owns, possesses or has obtained all Permits as are required to own its
          properties and to conduct its business in the manner described or contemplated
          in the Offering Circular; and, except as described in the Offering Circular, the
          Company and each Guarantor has fulfilled and performed in all material respects
          all of its obligations with respect to such Permits and no event has occurred,
          or as a result of the consummation of the transactions contemplated hereby or in
          the Offering Circular would occur, which allows, or after notice or lapse of
          time or both would allow, revocation or termination thereof or results or would
          result in any other material impairment of the rights of the holder of any such
          Permit; and (B) except as described in the Offering Circular, none of such
          Permits contains any material limitation on the ability of the Company or such
          Guarantor to own its properties or to conduct its business in the manner
          described in the Offering Circular and except as in the case of (A) and (B)
          would not, individually or in the aggregate, have aMaterial Adverse Effect on
          the Company and the Guarantors taken as a whole; and neither the Company nor any
          Guarantor, as the case may be, has any knowledge of a threatened revocation or
          modification relating to any such Permit.

(o)    
          There is no legal action, suit, proceeding inquiry or investigation (domestic or
          foreign) before or by any court or governmental or regulatory body or agency or
          arbitrator now pending or, to the best knowledge of the Company or any
          Guarantor, as the case may be, threatened against or affecting the Company or
          such Guarantor or any of its properties which, if determined adversely to the
          Company or such Guarantor, individually or in the aggregate, could reasonably be
          expected to have a Material Adverse Effect on the Company and the Guarantors
          taken as a whole.

(p)    
          Except as would not, individually or in the aggregate, have a Material Adverse
          Effect on the Company and the Guarantors taken as a whole (A) the Company and
          each Guarantor is in compliance with and not subject to liability under
          applicable Environmental Laws, (B) the Company has made all filings and provided
          all notices required under any applicable Environmental Law, and has and is in
          compliance with all Permits required under any applicable Environmental Laws and
          each of them is in full force and effect, (C) there is no civil, criminal or
          administrative action, suit, demand, claim, hearing, notice of violation,
          investigation, proceeding, notice or demand letter or request for information
          pending or, to the knowledge of the Company, threatened against the Company
          under any Environmental Law, and (D) no lien, charge, encumbrance or restriction
          has been recorded under any Environmental Law with respect to any assets,
          facility or property owned, operated, leased or controlled by the Company or any
          Guarantor.

(q)    
          The Company and each Guarantor has in full force and effect commercially
          reasonable insurance with respect to its properties and business against loss or
          damage of the kinds that are customarily insured against by Persons engaged in
          the same or similar business in the jurisdiction of its organization and in each
          jurisdiction in which it does business, of such types and in such amounts as
          customarily are carried under similar circumstances by such other Persons in
          each such jurisdiction.

(r)    
          The Company and each Guarantor has filed or caused to be filed all necessary tax
          returns (income, franchise, VAT or otherwise) under all applicable
          jurisdictions, except where the failure to so file such returns would not have a
          Material Adverse Effect on the Company and the Guarantors taken as a whole, and
          has discharged all taxes shown as due and payable thereon; and, other than tax
          deficiencies which are being contested in good faith and for which the Company
          or such Guarantor, as the case may be, reasonably believes that adequate
          reserves have been provided, there is no tax deficiency that has been asserted
          against the Company or such Guarantor, as the case may be, that could reasonably
          be expected to have a Material Adverse Effect on the Company and the Guarantors
          taken as a whole. There are no disputes pending or, to the best knowledge of the
          Company or any Guarantor, threatened, between the Company or such Guarantor on
          the one hand and any governmental taxing authority on the other hand other than
          any such disputes which individually or in the aggregate would not have a
          Material Adverse Effect on the Company and the Guarantors taken as a whole.

(s)    
          The special-purpose combined financial statements of Rede Net Sul and audited
          financial statements of HTV Comunicações Ltda. and HTV
          Comunicações Ltda. and Operating Subsidiaries included in the
          Offering Circular, together, and together with the related notes thereto,
          present fairly the financial position, results of operations and cash flows of
          the Company and the Guarantors on a pro forma basis, at the dates and for the
          periods to which they relate, and have been prepared, and the consolidated
          financial statements of the Company and the Guarantors to be prepared in the
          future will be prepared, in accordance with Brazilian GAAP applied on a
          consistent basis, and in accordance with  Correção
          Monetária , or the Integral Restatement Method of
          accounting for the effects of Brazilian inflation, and in the case of unaudited
          financial statements subject to year end adjustment. The summary and selected
          financial and statistical data in the Offering Circular present fairly in all
          material respects the information shown therein and have been prepared and
          compiled on a basis consistent with the audited financial statements included
          therein, except as otherwise stated therein. Price Waterhouse Auditores
          Independentes, which has examined certain of such financial statements as set
          forth in its reports included in the Offering Circular, is an independent public
          accounting firm with respect to the Company and the Guarantors within the
          meaning of the Securities Act and the rules and regulations thereunder.

(t)    
          The Company and each of the Guarantors maintains a system of internal accounting
          controls sufficient to provide reasonable assurances that (A) transactions are
          executed in accordance with managements general or specific authorization;
          (B) transactions are recorded as necessary to permit preparation of financial
          statements in conformity with Brazilian GAAP and to maintain accountability for
          assets; (C) access to assets is permitted only in accordance with
          managements general or specific authorization; and (D) the recorded
          accountability for assets is compared with the existing assets at reasonable
          intervals and appropriate action is taken with respect to any differences.

(u)    
          The Company does not intend to, and will not, use all or any portion of the
          proceeds of the Notes to purchase or carry any securities, including, without
          limitation, Margin Stock. None of the proceeds of the Notes will be used,
          directly or indirectly, for the purpose of reducing or retiring any indebtedness
          which was originally incurred to purchase or carry any Margin Stock or other
          security or for any other purpose which might cause any of the notes to be
          considered a purpose credit within the meaning of Regulation G, T, U
          or X of the Board of Governors of the Federal Reserve System, as amended.
          Neither the Company nor any Guarantor has taken or will take any action that
          might cause the Purchase Agreement or the sale of the Notes to or by the
          Purchasers to violate Regulation G, T, U or X of the Board of Governors of the
          Federal Reserve System, as amended.

(v)    
          Neither the Company nor any Guarantor is now, or will be, after sale of the
          Notes to be sold by the Company hereunder and application of the net proceeds
          from such sale as described in the Offering Circular under the heading Use
          of Proceeds and consummation of each of the transactions contemplated by
          the Offering Circular an investment company within the meaning of
          the Investment Company Act of 1940, as amended.

(w)    
          Neither the Company nor any of its affiliates (as defined in Rule 501(b) under
          the Securities Act) has, directly or through any agent, sold, offered for sale,
          solicited offers to buy or otherwise negotiated in respect of, any security (as
          defined in the Securities Act) which is or will be integrated with the sale of
          the Notes in a manner that would require the registration of any of the Notes
          under the Securities Act.

(x)    
          When the Notes are issued and delivered pursuant to the Purchase Agreement and
          this Indenture, none of the Notes will be of the same class (within the meaning
          of Rule 144A) as securities of the Company which are listed on a national
          securities exchange registered under Section 6 of the Exchange Act, or quoted in
          a U.S. automated inter-dealer quotation system.

(y)    
          Neither the Company nor any person (other than the Purchasers, as to which the
          Company makes no representation) acting on its behalf has engaged, in connection
          with the offering of the Notes, (A) in any form of general solicitation or
          general advertising within the meaning of Rule 502(c) under the Securities Act,
          (B) in any directed selling efforts within the meaning of Rule 903 under the
          Securities Act and the Commissions written releases related thereto, (C)
          in a public offering of the Notes within the meaning of Section 4(2) under the
          Securities Act or (D) in any action which would require the registration of the
          offering or sale of the Notes pursuant to the Purchase Agreement.

(z)    
          The Company has not taken and will not take, directly or indirectly, any action
          designed to, or that might be reasonably expected to, cause or result in
          stabilization or manipulation of the price of the Notes.

(aa)    
          The statistical and market-related data included in the Offering Circular are
          based on or derived from sources which the Company and each Guarantor believes
          to be reliable and accurate or represents the Companys good faith
          estimates that are made on the basis of data derived from such sources.

(bb)    
          Neither the Company nor any Guarantor nor any of their respective employees has
          made any payment of funds prohibited by applicable law, and no funds of the
          Company have been set aside to be used for any payment prohibited by applicable
          law.

(cc)    
          Neither the Company nor any Guarantor nor any of their respective properties or
          assets has any immunity from jurisdiction of any court or from any legal process
          (whether through service of notice, attachment prior to judgment, attachment in
          aid of execution, execution or otherwise).

(dd)    
          The Notes, at the Issue Date rank, and at all time thereafter will rank, at
          least equally and ratably in all respects with all of the companys
          unsubordinated Indebtedness and liabilities except for Indebtedness secured by
          Permitted Liens.

(ee)    
          As of the Issue Date, the Company and the Guarantors, taken as a whole, are not
          subject to Liens (other than purchase money Liens) securing more than
          $10,000,000 principal amount outstanding of Indebtedness.

ARTICLE 12

TAXES AND INCREASED
COSTS

SECTION 12.1 Payment of Additional
Noteholder Costs

(a)    
          The Company shall reimburse each Noteholder, within 30 days after notification
          by the Trustee to the Company, in Dollars for all material costs incurred and
          reductions in amounts received or receivable (as determined by such Noteholder)
          that result from or are based on such Noteholders beneficial ownership of
          such Note or the performance of its obligations thereunder, if that cost or
          reduction occurs by reason of the adoption of, or any change in, on or after the
          date hereof any Requirement of Law or any change therein or in the
          interpretation thereof by any competent Governmental Authority or by reason of
          compliance by such Noteholder with any direction, requirement or request
          (whether or not having the force of law) of any Governmental Authority. The
          amount reimbursable to each Noteholder hereunder shall include, without
          limitation, any such cost or reduction that results from (A) the imposition of
          or increase in any reserve, special deposit or similar requirement against
          assets of, liabilities of, deposits with or for the account of, or loans by,
          such Noteholder, or (B) the imposition of or increase in any tax, duty or other
          charge on a Noteholder (or its Applicable Purchasing Office) which is neither
          (x) a Covered Tax or Other Applicable Tax (without prejudice to the rights of
          Noteholders under Section 12.2) nor (y) a tax measured by the net income of such
          Noteholder or of such Applicable Purchasing Office and imposed as a result of a
          connection between such Noteholder or its Applicable Purchasing Office and the
          jurisdiction of the government or taxing authority imposing such tax other than
          a connection arising solely from such Noteholder having entered into or enforced
          its rights under such Note.

(b)    
          Each Noteholder shall notify the Trustee and the Company of any event entitling
          such Noteholder to compensation under paragraph (a) of this Section 12.1 as
          promptly as practicable, provided that each Noteholder claiming compensation
          under this Section will designate a different Applicable Purchasing Office as
          permitted by the terms of such Notes if such designation will avoid the need
          for, or reduce the amount of, such costs and will not, in the reasonable
          judgment of such Noteholder, be disadvantageous to such Noteholder, except that
          a Noteholder shall have no obligation to designate an Applicable Purchasing
          Office located in the United States of America. If such Noteholder does not
          affect such a designation within 10 Business Days after providing notice of a
          demand for compensation, or if such designation would not eliminate the need for
          compensation under Section 12.1(a), then, provided that no Event of Default, or
          event which with notice or lapse of time or both would become an Event of
          Default, has occurred and is continuing or would result from such redemption,
          the Company may, upon at least 10 Business Days notice to the Trustee and
          such Noteholder, redeem such Notes at a redemption price of 100% of the
          principal amount thereof, plus accrued interest, and any other amounts due and
          payable on the date of such redemption. Each Noteholder will furnish to the
          Company a certificate setting forth the basis and amount of each request by such
          Noteholder for compensation under paragraph (i) of this Section 12.1, which
          certificate shall provide reasonable detail as to the manner in which such
          amounts were calculated. Determinations and allocations by any Noteholder set
          forth in such certificate of the effect of any change pursuant to paragraph (i)
          of this Section 12.1 on its costs of maintaining its Notes or on amounts
          receivable by it in respect of its Notes, and of the amounts required to
          compensate such Noteholder under Section 12.4, shall be conclusive and binding
          for all purposes, absent manifest error, provided that such determination and
          allocation are made on a reasonable basis.

(c)    
          If any Noteholder determines that compliance with any law or regulation or any
          guideline or request from any central bank or other Governmental Authority
          (whether or not having the force of law) imposed or amended after the date
          hereof increases the amount of capital required or expected to be maintained by
          such Noteholder or any corporation controlling such Noteholder based upon the
          holding of its Notes, then, upon demand by such Noteholder (with a copy of such
          demand to the Trustee), the Company shall immediately pay to the Trustee for the
          account of such Noteholder, from time to time as specified by such Noteholder,
          additional amounts sufficient to compensate such Noteholder or such corporation
          in the light of such circumstances, to the extent that such Noteholder
          reasonably determines such increase in capital to be allocable to the holding of
          its Notes,  provided  that each Noteholder claiming compensation under this
          Section will designate a different Applicable Purchasing Office as permitted by
          the terms of such Notes if such designation will avoid the need for, or reduce
          the amount of, such additional amounts and will not, in the reasonable judgment
          of such Noteholder, be disadvantageous to such Noteholder, except that a
          Noteholder shall have no obligation to designate an Applicable Purchasing Office
          located in the United States of America. If such Noteholder does not affect such
          a designation within 10 Business Days after providing notice of a demand for
          compensation, or if such designation would not eliminate the need for
          compensation under this Section 12.1(c), then, provided that no Event of
          Default, or event which with notice or lapse of time or both would become an
          Event of Default, has occurred and is continuing or would result from such
          redemption, the Company may, upon at least 10 Business Days notice to the
          Trustee and such Noteholder, redeem such Notes at a redemption price of 100% of
          the principal amount thereof, plus accrued interest, and any other amounts due
          and payable on the date of such redemption. A certificate as to such amounts
          submitted to the Company and the Trustee by such Noteholder shall be conclusive
          and binding for all purposes, absent manifest error of order, provided that such
          determination is made on a reasonable basis.

SECTION 12.2 Payment of
Covered Taxes

(a)    
          Any and all payments to a Noteholder of principal and interest in respect of the
          Notes will be made free and clear of, and without withholding or deduction for,
          any and all present and future income taxes, and taxes measured by income, and
          all other similar taxes and levies, imposts, deductions, charges, duties,
          assessments or withholdings whatsoever, and all interest, penalties or similar
          amounts with respect thereto, now or hereafter imposed, assessed, levied or
          collected by any authority of or in Brazil or in any jurisdiction through which
          payment on the Notes is being made, or any political subdivision or taxing
          authority thereof or therein, or any organization or federation of which Brazil
          or any such other jurisdiction may be a member, on or in respect of the Notes or
          the recording, registration, notarization or other formalization of any thereof
          (excluding, however, income, franchise or real property taxes imposed on the
          Trustee or a Noteholder by any jurisdiction or any political subdivision thereof
          as a result of the Trustee or such Noteholder being organized under the laws of
          such jurisdiction or by virtue of such Noteholders Applicable Purchasing
          Office being located in such jurisdiction) ( Covered Taxes ),
          unless such withholding or deduction is a Requirement of Law. In that event, the
          Company or the Guarantors, as the case may be, shall pay such additional amounts
          (the  Additional Amounts ) as will result in the receipt by the
          oteholders of such amounts as would have been received by them if no such
          withholding or deduction had been required, except that no such Additional
          Amounts shall be payable in respect of any Note where (in the case of a payment
          of principal, premium, if any, or interest on the Maturity Date or date of
          earlier redemption) the relevant Note is surrendered for payment more than 30
          days after the Relevant Date except to the extent that the relevant holder would
          have been entitled to such Additional Amounts if it had surrendered the relevant
          Note on the last day of such period of 30 days. Additional Amounts will not be
          paid with respect to any payment of principal or interest on a Note to any
          Noteholder that is a fiduciary (other than DTC, Euroclear, Cedel, any other
          common depository or clearing system or any nominee of any of the foregoing) or
          partnership or other than the sole beneficial owner of any such payment to the
          extent that a beneficiary or settlor with respect to such fiduciary, a partner
          of such partnership or the beneficial owner, respectively, would not have been
          entitled to such Additional Amounts had such beneficiary or settlor, partner or
          beneficial owner, respectively, been the Noteholder. Relevant Date
          means whichever is the later of (a) the date on which the payment in question
          first becomes due and (b) if the full amount payable has not been received in
          New York by the Registrar on or prior to such due date, the date on which (the
          full amount having been so received) notice to that effect has been given to the
          Noteholders.

(b)    
          The Company shall indemnify the Trustee and each Noteholder against, and
          reimburse the Trustee and each Noteholder on demand for, any Covered Taxes and
          any loss, liability, claim or expense, including interest, penalties and
          reasonable legal fees and expenses, that the Trustee or such Noteholder may
          incur at any time arising out of or in connection with any failure of the
          Company to make any payment of Covered Taxes when due. This Section 12.2(b)
          shall survive the term of this Indenture and the earlier removal or resignation
          of the Trustee.

(c)    
          The Company shall furnish to the Trustee, upon the request of any Noteholder
          (through the Trustee), together with sufficient certified copies for
          distribution to each Noteholder requesting the same (identifying the Noteholders
          that have so requested), original official tax receipts in respect of each
          payment of Covered Taxes required under this Section 12.2, within 30 days after
          the date such payment is made, and the Company shall promptly furnish to the
          Trustee at its request or at the request of any Noteholder (through the Trustee)
          any other information, documents and receipts that the Trustee or such
          Noteholder may reasonably require to establish to its satisfaction that full and
          timely payment has been made of all Covered Taxes required to be paid under this
          Section 12.2.

(d)    
          The Company will pay any present or future stamp, court or documentary taxes, or
          any other excise or property taxes, charges or similar levies which arise in any
          jurisdiction from the execution, delivery or registration of the Notes or any
          other document or instrument referred to therein, excluding any such taxes,
          charges or similar levies imposed by any jurisdiction outside of Brazil, except
          those resulting from, or required to be paid in connection with, the enforcement
          of the Notes or any other such document or instrument following the occurrence
          of any Event of Default with respect to the Notes (Other Applicable
          Taxes).

(e)    
          Upon the reasonable request of the Company, each Noteholder that may legally do
          so agrees to complete in good faith, execute and deliver to the Company such
          forms, certificates, documents, applications, declarations or returns as are
          necessary to establish the extent to which any payments to such Noteholder are
          exempt from, or are entitled to a reduction of, withholding or deduction of any
          Brazilian Tax. The Company shall not be obligated to pay amounts to a Noteholder
          pursuant to this Section 12.2(e) in respect of Covered Taxes or Other Applicable
          Taxes to the extent that such Covered Taxes or Other Applicable Taxes would not
          have arisen but for the failure by such Noteholder to use all reasonable efforts
          lawfully to complete, execute and deliver to the Company such forms in a
          reasonably timely fashion.

(f)    
          At least 10 Business Days prior to the first date of payment of principal of or
          interest on the Notes if at such time any payment of principal of or any
          interest on the Notes shall be subject to deduction or withholding for or on
          account of any Covered Taxes, and at least 10 such Business Days prior to each
          date, if any, of payment of principal or interest thereafter if there has been
          any change with respect to such matters, the Company will furnish the Trustee
          and each Paying Agent with a certificate of an Officer of the Company
          instructing the Trustee and each such Paying Agent whether such payment of
          principal of or any interest on such Notes shall be made after deduction or
          withholding for or on account of any Covered Taxes. If any such deduction or
          withholding shall be required, then such certificate shall specify the rate of
          withholding and the amount, if any, required to be withheld on such payment to
          holders of such Notes and shall certify that any such amount withheld will be
          paid by the Company to the appropriate governmental authority, with interest or
          penalty as may be required, and the Company shall pay or cause to be paid to
          such Paying Agent Additional Amounts, if any, required to be paid pursuant to
          this Section 12.2. In the absence of any such certificate the Trustee and each
          Paying Agent may assume that no such deduction or withholding shall be required.
          The Company agrees to indemnify the Trustee and each Paying Agent for, and to
          hold each harmless against, any loss, liability or expense incurred without
          negligence or bad faith on their part arising out of or in connection with
          actions taken or omitted by them in reliance on any certificate furnished
          pursuant to this Section 12.2(f) or not furnished. This sentence and the
          immediately preceding sentence shall survive the term of this Indenture, and the
          earlier removal or resignation of the Trustee. Any certificate required by this
          Section 12.2(f) to be provided to the Trustee and each Paying Agent shall be
          deemed to be duly provided if telecopied to, and received by, the Trustee.

(g)    
          If the Company, any Guarantor or any Subsidiary of any of the foregoing becomes
          subject at any time to any taxing jurisdiction other than Brazil references
          herein to Brazil shall be construed to include such other jurisdiction.

ARTICLE 13

REDEMPTION OF NOTES

SECTION 13.1 Redemption
For Tax Reasons

The Notes shall be redeemable at the
option of the Company, in whole but not in part, upon giving not less than 30 nor more
than 60 days notice to the Noteholders (which notice will be irrevocable), at 100%
of the principal amount thereof, plus accrued interest and any Additional Amounts payable
with respect thereto, if (i) the Company has or will become obligated to pay Additional
Amounts with respect to such Notes in excess of the Additional Amounts that the Company
would pay if payments in respect of the Notes were subject to deduction or withholding at
a rate of 15% (determined without regard to any interest, fees, penalties or other
additions to tax) as a result of any change in, or amendment to, the laws or regulations
of Brazil or any political subdivision or governmental authority thereof or therein having
power to tax, or any change in the application or official interpretation of such laws or
regulations, which change or amendment occurs after the date of this Indenture and (ii)
such obligation cannot be avoided by the Company taking reasonable measures available to
it. Following such redemption, the Notes will be cancelled. No such notice of redemption
will be given earlier than 60 days prior to the earliest date on which the Company would
be obligated to pay such Additional Amounts if a payment in respect of such Notes were
then due. Any such notice, once given, will be irrevocable and the delivery thereof will
bind the Company to the redemption therein specified.

Prior to the publication or mailing
of any notice of redemption pursuant to the preceding paragraph, the Company will deliver
to the Trustee an Officers Certificate to the effect that the Companys
obligation to pay Additional Amounts cannot be avoided by the Company taking reasonable
measures available to it. The Company will also deliver an Opinion of Counsel delivered by
counsel of recognized standing that the Company is or would be obligated to pay Additional
Amounts due to the changes in tax laws or regulations. The Trustee will accept such
certificate and opinion as sufficient evidence of the satisfaction of the conditions
precedent set forth in clauses (i) and (ii) of the foregoing paragraph, in which event it
will be conclusive and binding on the Noteholders.

SECTION 13.2 Early
Redemption at Noteholders Option

Each holder of Notes will be entitled
to require that the Company redeem, in whole or in part ( provided that , if in part,
any such Notes will be in an amount equal to U.S.$10,000 or any integral multiple
thereof), the Notes held by it, at a redemption price of 100% (expressed as a percentage
of the principal amount of the Notes to be redeemed) (the  Put Settlement
Price ), on any Put Settlement Date, together with all accrued and unpaid
interest, if any, to such Put Settlement Date, and following such redemption, the Notes so
redeemed will be cancelled.  Put Settlement Date  shall mean, the
Interest Payment Date occurring in October of any year beginning in the year 2000, 2001
and 2002, with respect to the Series A Notes, the Series B Notes and the Series C Notes,
respectively. In order to exercise such option, the holder must, not less than 60 nor more
than 90 days prior to the relevant Put Settlement Date, deposit the DTC Note Certificate
issued in relation thereto with any Paying Agent, together with a duly completed put
notice (the  Put Notice ) (in the form attached hereto as Exhibit B).
Each of the Agents will make available forms of the Put Notice to Noteholders during
normal business hours at its specified office. No DTC Note Certificate so deposited may be
withdrawn (except as provided herein) without the prior consent of the Company.

SECTION 13.3 Early
Redemption at Companys Option

The Company will have the right to
redeem outstanding Notes from Noteholders in whole but not in part, at a redemption price
of 100% (expressed as a percentage of the principal amount of the Notes to be redeemed)
(the  Call Settlement Price ), together with all accrued and unpaid
interest, if any, on any Interest Payment Date (a date so specified for redemption by the
Company, the  Call Settlement Date ) without penalty, and on any date
other than an Interest Payment Date subject to the payment of Breakage Costs, subject to
the giving of not less than 60 nor more than 90 days prior notice mailed by the
Company to the Noteholders (to each such Noteholders address appearing in the Note
Register), and the Registrar, or, if request is made to the Trustee no less than 90 days
prior to the Call Settlement Date, by the Trustee, in the name and at the expense of the
Company. Following such redemption, the Notes will be cancelled. Any such notice, once
given, will be irrevocable and the delivery thereof will bind the Company to the
redemption therein specified.

SECTION 13.4 Redemption
Resulting From Noteholder Illegality

Notwithstanding any other provision
hereof, in the event that on or after the date hereof the adoption of or any change in any
Requirement of Law or any change in the interpretation thereof by any competent
Governmental Authority shall make it unlawful for any Noteholder or its Applicable
Purchasing Office to hold any Note (and the designation of a different Applicable
Purchasing Office would either not avoid such unlawfulness or would be disadvantageous to
such Noteholder in its reasonable judgment), then such Noteholder shall promptly notify
the Company thereof (with a copy to the Trustee), following which, if such Requirement of
Law shall so mandate, such Note shall be redeemed, at 100% of the principal amount
thereof, plus accrued and unpaid interest and Breakage Costs, if any, by the Company on or
before such date as shall be mandated by such Requirement of Law,  provided, however,
 that if it is lawful for such Noteholder to hold such Note through the last day of the
current Interest Period, such payment shall be made on such date.

SECTION 13.5
Applicability of Article

Redemption of Notes at the election
of the Company, as permitted or required by any provision of this Indenture, shall be made
in accordance with such provision and this Article.

SECTION 13.6 Election to
Redeem

The election of the Company to redeem
any Notes by the Company or its Affiliates pursuant to Section 13.1 or Section 13.3 shall
be evidenced by a Board Resolution of the Company.

SECTION 13.7 Notice of
Redemption

Notice of redemption pursuant to
Section 13.1 or Section 13.3 shall be given by first-class mail, postage prepaid, mailed
not less than 60 nor more than 90 days prior to the Redemption Date, to each Noteholder of
Notes to be redeemed, at such Noteholders address appearing in the Note Register.
All notices of redemption shall state:

(1)    
          the Redemption Date,

(2)    
          the Redemption Price,

(3)    
          that on the Redemption Date the Redemption Price will become due and payable
          upon each such Note to be redeemed and that interest thereon will cease to
          accrue on and after said date,

(4)    
          the place or places where such Notes are to be surrendered for payment of the
          Redemption Price,

(5)    
          the aggregate principal amount of Notes being redeemed,

(6)    
          the CUSIP or ISIN number or numbers, as applicable, of the Notes being redeemed,
          and

(7)    
          that no representation is made as to the accuracy or correctness of the CUSIP or
          ISIN number or numbers, as applicable, printed in the notice or on the
          certificates representing the Notes and that reliance may be placed only on the
          other identification numbers printed on the certificates representing the Notes.

SECTION 13.8 Deposit of
Redemption Price

Prior to any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent an amount of money
sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an
Interest Payment Date) accrued and unpaid interest on, all the Notes which are to be
repurchased on that date.

SECTION 13.9 Notes
Payable on Redemption Date

Notice of redemption having been
given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due
and payable at the Redemption Price therein specified, and from and after such date
(unless the Company shall default in the payment of the Redemption Price and accrued and
unpaid interest) such Notes shall cease to bear interest. Upon surrender of any such Note
for redemption in accordance with said notice, such Note shall be paid by the Company at
the Redemption Price, together with accrued and unpaid interest to the Redemption Date;
 provided, however,  that installments of interest whose Stated Maturity is on or
prior to the Redemption Date shall be payable to the Noteholders of such Notes, or one or
more Predecessor Notes, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 3.6.

If any Note called for redemption
shall not be so paid upon surrender thereof for redemption, the principal shall, until
paid, bear interest from the Redemption Date at the rate provided by the Note.

ARTICLE 14

GUARANTEE

SECTION 14.1 Guarantee

The Guarantors hereby jointly and
severally, fully and unconditionally guarantee on a senior basis to each Noteholder of a
Note authenticated and delivered by the Trustee, and to the Trustee on behalf of such
Noteholder, the due and punctual payment of the principal of and premium, if any, and
interest (including any Additional Amounts) on such Note when and as the same shall become
due and payable, whether at the Stated Maturity or by acceleration, redemption, purchase
or otherwise, in accordance with the terms of such Note and of this Indenture and any and
all amounts payable under this Indenture. In case of the failure of the Company punctually
to make any such payment, the Guarantors hereby agree, jointly and severally, to cause
such payment to be made punctually when and as the same shall become due and payable,
whether at the Stated Maturity or by acceleration, call for redemption, purchase or
otherwise, and as if such payment were made by the Company.

Each Guarantor hereby agrees that its
obligations hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of any Note or this Indenture, the absence of any action to enforce the
same, any release or amendment or waiver of any term of any other guarantee of, or any
consent to departure from any requirement of any other guarantee, of all or any of the
Notes, any waiver or consent by the Noteholder of any Note or by the Trustee with respect
to any provisions thereof or of this Indenture, the obtaining of any judgment against the
Company or any action to enforce the same or any other circumstances which might otherwise
constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives notice of the acceptance of this Guarantee and of any of the obligations under this
Indenture or the Notes (the  Obligations ) or of the accrual thereof, and
further waives presentment, protest, notice or demand. This is a continuing guarantee and
is a guarantee of payment and not of collection, and the Guarantor waives any right to
require the Noteholders to initiate collection proceeds or otherwise enforce payment of
the Obligations or any security or other guarantee therefor before obtaining payment
hereunder.

This Guarantee shall continue to be
in effect or be reinstated, as the case may be, if at any time any payment in respect of
any of the Obligations is rescinded or must otherwise be returned by the Noteholders,
whether by reason of the insolvency, bankruptcy, receivership, reorganization or
liquidation of the Company or any Guarantor or any other obligor or otherwise, all as
though such payment had not been made.

Each Guarantor hereby waives the
benefits of diligence, presentment, demand of payment, any requirement that the Trustee or
any of the Noteholders protect, secure, perfect or insure any security interest in or
other Lien on any property subject thereto or exhaust any right or take any action against
the Company or any other Person or any collateral, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest or notice with respect to any Note or the indebtedness
evidenced thereby and all demands whatsoever, and covenants, that this Guarantee will be
discharged in respect of any Note except by complete performance of the obligations
contained in such Note and in this Guarantee. Each Guarantor hereby agrees that, in the
event of a default in payment of principal of or premium, if any, or interest (including
any Additional Amounts) on any Note, whether at its Stated Maturity or by acceleration,
redemption, purchase or otherwise, legal proceedings may be instituted by the Trustee on
behalf of, or by, the Noteholder of such Note, subject to the terms and conditions set
forth in this Indenture, directly against such Guarantor to enforce this Guarantee without
first proceeding against the Company or any other Guarantor. Each Guarantor agrees that
if, after the occurrence and during the continuance of an Event of Default, the Trustee or
any of the Noteholders are prevented by applicable law from exercising their respective
rights to accelerate the maturity of the Notes, to collect interest on the Notes or to
enforce or exercise any other right or remedy with respect to the Notes, or the Trustee or
the Noteholders are prevented from taking any action to realize on any collateral, such
Guarantor agrees to pay to the Trustee for the account of the Noteholders, upon demand
therefor, the amount that would otherwise have been due and payable had such rights and
remedies been permitted to be exercised by the Trustee or any of the Noteholders.

No provision of the Guarantee or Note
or of this Indenture shall alter or impair the Guarantee of the Guarantors, which is joint
and several, absolute and unconditional, of the due and punctual payment of the principal
and interest on the Note upon which the Guarantee is endorsed.

Each Guarantor shall be subrogated to
all rights of the Noteholders upon which the Guarantee is endorsed against the Company in
respect of any amounts paid by such Guarantor on account of such Note pursuant to the
provisions of this Guarantee or this Indenture;  provided, however , that no
Guarantor shall be entitled to enforce or to receive any payments arising out of, or based
upon, such right of subrogation until the principal of and premium, if any, and interest
(including any Additional Amounts) on all Notes issued hereunder shall have been paid in
full.

The Guarantee shall remain in full
force and effect and continue to be effective should any petition be filed by or against
the Company for liquidation or reorganization, should the Company become insolvent or make
an assignment for the benefit of creditors or should a receiver or trustee be appointed
for all or any significant part of the Companys assets, and shall, to the fullest
extent permitted by law, continue to be effective or be reinstated, as the case may be, if
at any time payment and performance of the Notes is, pursuant to applicable law, rescinded
or reduced in amount, or must otherwise be restored or returned by any obligee on the
Notes, whether as a voidable preference, fraudulent transfer or
otherwise, all as though such payment or performance had not been made. In the event that
any payment, or any part thereof, is rescinded, reduced, restored or returned, the Notes
shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.

Each Guarantor hereby irrevocably
waives all benefits set forth in the following provisions of the Brazilian law: articles
1491, 1494, 1498, 1499, 1500, 1503 and 1504 of the Civil Code, articles 261 and 262 of the
Commercial Code and article 595 of the Civil Procedure Code.

No stockholder, officer, director,
employer or incorporator, past, present or future, of any Guarantor, as such, shall have
any personal liability under this Guarantee by reason of his, her or its status as such
stockholder, officer, director, employer or incorporator.

SECTION 14.2 Delivery of
the Guarantee

The delivery of any Note by the
Trustee, after the authentication thereof hereunder, shall constitute due delivery of the
Guarantee set forth herein on behalf of the Guarantors.

SECTION 14.3 Guarantors
May Consolidate, Etc., on Certain Terms

Except as may be provided in Section
14.4 and in Articles 8 and 10, nothing contained in this Indenture or in any of the Notes
shall prevent any consolidation or merger of one or more Guarantors with or into the
Company or shall prevent any sale or conveyance of the property of any Guarantor as an
entirety or substantially as an entirety to the Company.

SECTION 14.4 Release of
Guarantors

Concurrently with any consolidation
or merger of a Guarantor or any sale or conveyance of the property of a Guarantor as an
entirety or substantially as an entirety, in each case as permitted by Section 14.3
hereof, and upon delivery by the Company to the Trustee of an Officers Certificate
and an Opinion of Counsel to the effect that such consolidation, merger, sale or
conveyance was made in accordance with Section 14.3 hereof, the Trustee shall execute any
documents reasonably required in order to evidence the release of any such Guarantor from
its obligations under the Guarantee endorsed on the Notes and under this Article 14.

IN WITNESS WHEREOF,  the
parties hereto have caused this Indenture to be duly executed and attested, and the
Trustee has caused its seal to be hereunto affixed and attested, all as of the day and
year first above written.

NET SUL TV A CABO E
PARTICIPAÇÕES LTDA. ,

By:    /s/ Luiz Alberto Barichello        Title: Chief Financial
Officer

Witness:
1. /s/ Raúl Marques 
2. /s/ Francisco Valim

By:    /s/ Afonso Antunes da Motta        Title: Chief Financial
Officer

Witness:
1. /s/ Raúl Marques 
2. /s/ Francisco Valim

TV A CABO DE
CAPÃO DA CANOA LTDA.HORIZONTE SUL COMUNICAÇÕES LTDA.DR  EMPRESA DE
DISTRIBUÇÃO E RECEPÇÃO DE TV LTDA.DR MULTI CABO SANTA
MARIA LTDA.TV CABO DO SUL LTDA. ANTENAS
COMUNITÁRIAS SUL BRASIL LTDA.TV CABO CRICIÚMA LTDA.CHAPECÓ EMPRESA
DE TV POR ASSINATURA LTDA.MULTICANAL FLORIANÓPOLIS S.A.HTV COMUNICAÇÕES
LTDA. TVC DO PARANÁ
DISTRIBUIDORA DE SINAIS DE TELEVISÃO LTDA.ANTENAS COMUNITÁRIAS
BRASILEIRAS LTDA.TV CABO DO NORTE DO PARANÁ COMERCIAL LTDA.VTV TELEVISÃO
A CABO LTDA.TV A CABO SERRANA LTDA.,

By:    /s/ Luiz Alberto Barichello        Title: Chief Financial
Officer

Witness:
1. /s/ Raúl Marques 
2. /s/ Francisco Valim

By:    /s/ Afonso Antunes da Motta        Title: Chief Financial
Officer

Witness:
1. /s/ Raúl Marques 
2. /s/ Francisco Valim

THE CHASE MANHATTAN
BANK, NEW YORK, as Trustee

By:    /s/ Lucia Jaklitsch       Title: Trust Officer
Officer

Witness:
1. /s/ Valerie Dunbar
2. /s/ Kevin Binnie

THE CHASE MANHATTAN BANK,
NEW YORK, as Registrar and Paying
Agent

By:    /s/ Lucia Jaklitsch       Title: Trust Officer
Officer

Witness:
1. /s/ Valerie Dunbar
2. /s/ Kevin Binnie

THE CHASE MANHATTAN
BANK, LONDON BRANCH, as Transfer Agent,
Calculation Agent and Paying Agent

By:    /s/ Lucia Jaklitsch       Title: Trust Officer
Officer

Witness:
1. /s/ Valerie Dunbar
2. /s/ Kevin Binnie

CHASE MANHATTAN BANK LUXEMBOURG,
S.A. , as Paying Agent

By:    /s/ Lucia Jaklitsch       Title: Trust Officer
Officer

Witness:
1. /s/ Valerie Dunbar
2. /s/ Kevin Binnie

CHASE TRUST BANK, as Principal Paying Agent

By:    /s/ Lucia Jaklitsch       Title: Trust Officer
Officer

Witness:
1. /s/ Valerie Dunbar
2. /s/ Kevin Binnie

EXHIBIT A

FORM OF CERTIFICATION
FOR TRANSFER OR EXCHANGE OF RESTRICTED GLOBAL NOTE
TO REGULATION S GLOBAL
NOTE (Exchanges or transfers
pursuant to Section 3.4(c)(2) of
the Indenture)

The Chase Manhattan Bank,
New York, as Trustee450 West 33rd Street, 15th FloorNew York, New York
10001-2697

Attention: Global Trust
Services

Re: NET SUL TV A CABO
E PARTICIPAÇÕES LTDA. [U.S.$48,000,000
SERIES A FLOATING RATE NOTES DUE 2005] [U.S.$11,000,000 SERIES
B FLOATING RATE NOTES DUE 2005] [U.S.$21,000,000
SERIES C FLOATING RATE NOTES DUE 2005]

(the Notes)

Reference is hereby made to the
Indenture, dated as of October 31, 1997 (the  Indenture ), among Net Sul
TV a Cabo e Participações Ltda., as Company, the Guarantors, and The Chase
Manhattan Bank, New York, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.

This letter relates to U.S.$[ ]
aggregate principal amount of Notes which are held in the form of the Restricted Global
Note (CUSIP No. [ ]) with the Depositary in the name of  [insert name of transferor]
 (the  Transferor ). The Transferor has requested a transfer of such
beneficial interest in the Notes to a Person who will take delivery thereof in the form of
an equal aggregate principal amount of Notes evidenced by the Regulation S Global Note
(ISIN No. [ ]).

In connection with such request, and
in respect of such Notes, the Transferor does hereby certify that such transfer has been
effected in accordance with the transfer restrictions set forth in the Notes and that:

(a)    
          the offer of the Notes was not made to a person in the United States; and

(B)    
          either:

(i)    
          at the time the buy order was originated, the transferee was outside the United
          States or the Transferor and any person acting on its behalf reasonably believed
          that the transferee was outside the United States; or

(ii)    
          the transaction was executed in, on or through the facilities of a designated
          offshore securities market and neither the Transferor nor any person acting on
          our behalf knows that the transaction was pre-arranged with a buyer in the
          United States;

(C)    
          no directed selling efforts have been made in contravention of the requirements
          of Rule 903(b) or 904(b) of Regulation S, as applicable;

(D)    
          the transaction is not part of a plan or scheme to evade the registration
          requirements of the Securities Act; and

(E)    
          upon completion of the transaction, the beneficial interest being transferred as
          described above was held with the Depositary through [Euroclear] [CEDEL]. We
          understand that this certificate is required in connection with certain
          securities laws of the United States. In connection therewith, if administrative
          or legal proceedings are commenced or threatened in connection with which this
          certificate is or would be relevant, we irrevocably authorize you to produce
          this certificate to any interested party in such proceeding. This certificate
          and the statements contained herein are made for your benefit and the benefit of
          the Company and the Managers.

[INSERT NAME OF TRANSFEROR]

By: ................................................
    Name:
    Title:
Dated: ..................................................

cc: Net Sul TV a Cabo e
Participações Ltda.

EXHIBIT B

FORM OF PUT NOTICE

TO:       [PAYING AGENT] COPY TO:  NET
SUL TV A CABO E PARTICIPACOES LTDA.

[Date]

NET SUL TV A CABO E
PARTICIPAÇÕES LTDA.

[U.S.$48,000,000
SERIES A FLOATING RATE NOTES DUE 2005] [U.S.$11,000,000 SERIES
B FLOATING RATE NOTES DUE 2005] [U.S.$21,000,000
SERIES C FLOATING RATE NOTES DUE 2005]

jointly and severally, and
unconditionally and irrevocably guaranteed
by

TV A CABO DE
CAPÃO DA CANOA LTDA. HORIZONTE SUL
COMUNICAÇÕES LTDA. DR  EMPRESA DE
DISTRIBUIÇÃO E RECEPÇÃO DE TV LTDA. DR MULTI CABO SANTA
MARIA LTDA. TV CABO DO SUL LTDA. ANTENAS
COMUNITÁRIAS SUL BRASIL LTDA. TV CABO CRICIÚMA
LTDA. CHAPECÓ EMPRESA
DE TV POR ASSINATURA LTDA. MULTICANAL
FLORIANÓPOLIS S.A. HTV
COMUNICAÇÕES LTDA. TVC DO PARANÁ
DISTRIBUIDORA DE SINAIS DE TELEVISÃO LTDA. ANTENAS
COMUNITÁRIAS BRASILEIRAS LTDA. TV CABO DO NORTE DO
PARANÁ COMERCIAL LTDA. VTV TELEVISÃO A
CABO LTDA. TV A CABO SERRANA
LTDA.,

By depositing this duly completed
Notice with the above Paying Agent for the above notes (the  Notes ), the
undersigned holder of the principal amount of Notes specified below and evidenced by the
Note presented and/or surrendered with the copy of this Notice deposited with such Paying
Agent and referred to below, exercises its option to have such principal amount of Notes
redeemed in accordance with Article 13 on [ ].

This Notice relates to Note(s) in the aggregate principal amount of
U.S.$........... evidenced by the Note bearing the following serial bearing the following
numbers:

_________________

_________________

_________________

If the Note referred to above is to
be returned to the undersigned in accordance with the terms of the Indenture, they should
be returned by post to:

_________________

_________________

_________________

Payment Instructions

Please make payment in respect of the
above-mentioned Note(s) as follows:

either

(a)    
          by United States dollar check drawn on a bank in New York City mailed to the
          above address; or

or

(b)    
          by transfer to the following United States dollar account maintained with a bank
          in New York City:

Bank: __________________________________________    Branch
address: __________________________________________

_________________

Branch code: ___________________________________________     Account
no.: ___________________________________________

Signature of holder:       ____________________________

THIS NOTICE SHALL NOT BE VALID
UNTIL ALL OF THE PARAGRAPHS REQUIRING COMPLETION HAVE BEEN DULY COMPLETED.

The Paying Agent with whom the
above-mentioned Note(s) are deposited will not in any circumstances be liable to the
depositing holder or any other person for any loss or damage arising from any act, default
or omission of such Paying Agent in relation to the said Note(s) or any of them unless
such loss or damage was caused by the fraud or gross negligence of such Paying Agent or
its directors, officers or employees.[To be completed by Paying Agent:]

Received by: ________________________________

[Signature and stamp of
Paying Agent:]

At its office at______________________________________

_________________

_________________

On____________________________________________________

EXHIBIT C

FORM OF SUBORDINATION
AGREEMENT FOR SPECIFIED SHORT-TERM INDEBTEDNESS



EXHIBIT 2.3

Exhibit A

FIRST SUPPLEMENTAL
INDENTURE

This First Supplemental Indenture
(this  Supplemental Indenture ) is supplemental to the Indenture, dated
as of October 31, 1997 (the  Indenture ), among  NET SUL
COMUNICAÇÕES S.A. , a sociedade por ações organized under
the laws of the Federative Republic of Brazil (formerly known as Net Sul TV a Cabo e
Participações Ltda.) (the  Company ), having its principal
office at Avenida Érico Veríssimo, 400, 90160-180 Porto Alegre-RS, Brazil,
 TV A CABO DE CAPÃO DA CANOA LTDA., HORIZONTE SUL COMUNICAÇÕES
LTDA., DR  EMPRESA DE DISTRIBUIÇÃO E RECEPÇÃO DE TV
LTDA., DR MULTI CABO SANTA MARIA LTDA., TV CABO DO SUL LTDA., ANTENAS COMUNITÁRIAS
SUL BRASIL LTDA., TV CABO CRICIÚMA LTDA., CHAPECÓ EMPRESA DE TV POR
ASSINATURA LTDA., MULTICANAL FLORIANÓPOLIS S.A., HTV COMUNICAÇÕES
LTDA., TVC DO PARANÁ DISTRIBUIDORA DE SINAIS DE TELEVISÃO LTDA., ANTENAS
COMUNITÁRIAS BRASILEIRAS LTDA., TV CABO DO NORTE DO PARANÁ COMERCIAL LTDA.,
VTV TELEVISÃO A CABO LTDA.  and  TV A CABO SERRANA LTDA. , each a
corporation incorporated under the laws of the Federative Republic of Brazil (each a
 Guarantor  and, collectively, the  Guarantors ),  THE
CHASE MANHATTAN BANK, NEW YORK , a New York banking corporation, as Trustee (in such
capacity, the  Trustee ), as Registrar and Paying Agent,  THE CHASE
MANHATTAN BANK, LONDON BRANCH  as Transfer Agent, Calculation Agent and Paying Agent,
 CHASE MANHATTAN BANK LUXEMBOURG, S.A.  as Paying Agent, and  CHASE TRUST BANK
 as Principal Paying Agent, and is entered into as of the [ ] day of December, 1998 by
the Company, the Guarantors and the Trustee. Capitalized terms used and not defined herein
shall have the respective meanings attributed to such terms in the Indenture.

WHEREAS,  prior to giving
effect to this Supplemental Indenture, the proviso immediately following Section 5.1(r) of
the Indenture provides that an Event of Default shall not result solely from failure of
the Company to comply with the provisions of Section 10.4 of the Indenture with respect to
any period of four fiscal quarters ending prior to December 31, 1998;

WHEREAS , the Company and the
Guarantors have requested that the proviso immediately following Section 5.1(r) of the
Indenture be amended and restated so as to extend its effectiveness until December 31,
1999;

WHEREAS , the entering into by
the Trustee of this Supplemental Indenture requires the consent of Noteholders holding a
majority in aggregate principal amount of the Outstanding Notes pursuant to Section 9.2 of
the Indenture ( Noteholder Consent );

WHEREAS , in partial
consideration for the Noteholder Consent, the Company has agreed, pursuant to this
Supplemental Indenture, to an increase in the Applicable Margin for each Series of Notes
by 1.00% for each of the four Interest Periods that begins on a date during calendar year
1999, which increase shall apply for all levels of the ratio of Consolidated Total Senior
Indebtedness to Consolidated Adjusted EBITDA as set forth in the definition of
Applicable Margin in the Indenture.

WHEREAS , the Noteholders have
conditioned the Noteholder Consent on receipt by the Trustee of a Capital Contribution
Agreement substantially in the form of Exhibit A hereto (the  Capital Contribution
Agreement ) duly authorized and executed by each of RBS
Participações S.A., Caboparbs-Participações
Ltda., Globo Cabo S.A. and the Company;

WHEREAS , each of RBS
Participações S.A., Caboparbs-Participações Ltda., Globo Cabo
S.A. and the Company has delivered to the Trustee an executed counterpart of the Capital
Contribution Agreement together with evidence, satisfactory to the Trustee, of due
authorization with respect to the execution and delivery thereof and performance
thereunder;

WHEREAS , in accordance with
Sections 9.2 and 1.4 of the Indenture, the Company has established a Record Date of
November 23, 1998 for determining Noteholders entitled to join in the granting of the
Noteholder Consent and a Cutoff Date of December 16, 1998 with respect thereto;

WHEREAS , consistent with
Section 9.2 of the Indenture, Noteholders holding, as of the Record Date, a majority in
aggregate principal amount of the Outstanding Notes, by Act of said Noteholders, have
consented to this Supplemental Indenture in accordance with the terms of the Indenture;

WHEREAS , the Company has
delivered to the Trustee a Board Resolution of the Company authorizing the entering into
by the Company of this Supplemental Indenture;

WHEREAS , each Guarantor has
delivered to the Trustee a Board Resolution of such Guarantor authorizing the entering
into by such Guarantor of this Supplemental Indenture;

NOW THEREFORE , for good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and
subject to the following conditions and limitations, the Company, the Guarantors and the
Trustee have agreed as follows:

1.    
          Representations and Warranties of the Company and the Guarantors

The Company and each of the
Guarantors represents and warrants as follows:

(a)    
          This Supplemental Indenture has been duly authorized, executed and delivered by
          such party and the Indenture, as amended hereby, constitutes the legal, valid
          and binding obligation of such party enforceable in accordance with its terms.

(b)    
          The representations and warranties contained in Sections 11.1(b), (c) and (d) of
          the Indenture are true and correct in all material respects as of the date
          hereof.

(c)    
          No event with respect to the Company or any Guarantor has occurred and is
          continuing which, on the date hereof, would (whether or not with the giving of
          notice and/or the passage of time and/or the fulfilment of any other
          requirement) constitute a Default or an Event of Default.

(d)    
          As of the date hereof and after giving affect to this Supplemental Indenture,
          neither the Company nor any Guarantor is in default in the performance or
          observance of any of the terms, provisions and conditions of the Indenture and
          no event has occurred and remained in existence by reason of which payments on
          account of the principal of or interest, if any, on the Notes are prohibited.

(e)    
          No consent, approval, authorization, exemption, order or decree of any court of
          governmental or regulatory agency or body of the United States of America or
          Brazil (other than, if applicable, the securities or blue sky laws of the
          various states of the United States of America) is required to be obtained by
          Net Sul or any Guarantor for the execution, delivery and performance by Net Sul
          or such Guarantor, as the case may be, of the Indenture, as amended and
          supplemented by this Supplemental Indenture, except for (a) such consents,
          approvals, authorizations, orders or decrees as have heretofore been obtained or
          made and which continue to be in full force and effect, including, without
          limitation, the prior approval from the Central Bank of the financial terms of
          the Notes as amended by this Supplemental Indenture and the execution and
          delivery of this Supplemental Indenture, and (b) a Certificate of Registration
          from the Central Bank for the Notes as amended by this Supplemental Indenture,
          which will enable Net Sul or the Guarantors, as the case may be, to make
          remittances from Brazil of the principal of, and interest on, the Notes, and the
          fees, expenses and commissions referred to in this Supplemental Indenture and
          (c) any further authorization from the Central Bank which will enable Net Sul or
          the Guarantors, as the case may be, to make remittances from Brazil to make
          payments contemplated in this Supplemental Indenture not specifically covered by
          the Certificate of Registration or to make payments specifically covered by the
          Certificate of Registration earlier than their respective due dates;
           provided, however,  that Net Sul may be obligated to file certain
          notifications with the tax authorities of Brazil.

2.    
          Amendment to Definition of Applicable Margin set forth in Section 1.1 of the
          Indenture

The definition of Applicable
Margin set forth in Section 1.1 of the Indenture shall be amended by adding at the
end thereof the following:

Notwithstanding the foregoing,
the Applicable Margin for each of the four Interest Periods beginning in the calendar year
1999 shall be the sum of (a) the applicable margin as determined pursuant to the foregoing
grid and (b) 1.00%.

3.    
          Amendment of Section 5.1(r) of the Indenture

The proviso immediately following
Section 5.1(r) of the Indenture shall be amended and restated to read as follows:

provided that failure to comply
with the provisions of Section 10.4 in respect of any period of four fiscal quarters
ending prior to December 31, 1999 shall not constitute an Event of Default under Section
5.1(d).

4. Supplemental Provisions

Save as expressly modified by this
Supplemental Indenture, the Indenture and the Notes shall continue in full force and
effect. The Indenture and this Supplemental Indenture shall henceforth be read and
construed in conjunction as one Indenture.

5. GOVERNING LAW

THIS SUPPLEMENTAL
INDENTURE SHALL BE GOVERNED BY, AND CONSTRUEDIN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK WITHOUTGIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.

6. Notification to
Noteholders

In accordance with Section 9.2 of the
Indenture, the Company shall mail to the Noteholders a notice briefly describing the
amendment effected hereby. Such notice shall specify the date on which this First
Supplemental Indenture first became effective in accordance with Section 7 hereof.

7. Effectiveness of this
Supplemental Indenture

The provisions of this Supplemental
Indenture shall take effect on the date as of which both (i) this Supplemental Indenture
shall have been executed by all of the parties hereto and (ii) all governmental approvals
required therefor (including, without limitation, an appropriate Certificate of
Registration of the Central Bank) shall have been obtained.

IN WITNESS WHEREOF,  the
parties hereto have caused this Indenture to be duly executed and attested, and the
Trustee has caused its seal to be hereunto affixed and attested, all as of the day and
year first above written.

NET SUL
COMUNICAÇÕES S.A.

By:
__________________________________ Witness:    Name:    Title:

By:
__________________________________ Witness:    Name:    Title:

TV A CABO DE
CAPÃO DA CANOA LTDA.

HORIZONTE SUL
COMUNICAÇÕES LTDA.

DR  EMPRESA DE
DISTRIBUÇÃO E RECEPÇÃO DE TV LTDA.

DR MULTI CABO SANTA
MARIA LTDA.

TV CABO DO SUL LTDA.

ANTENAS
COMUNITÁRIAS SUL BRASIL LTDA.

TV CABO CRICIÚMA
LTDA.

CHAPECÓ EMPRESA
DE TV POR ASSINATURA LTDA.

MULTICANAL
FLORIANÓPOLIS S.A.

HTV
COMUNICAÇÕES LTDA.

TVC DO PARANÁ
DISTRIBUIDORA DE SINAIS DE TELEVISÃO LTDA.

ANTENAS
COMUNITÁRIAS BRASILEIRAS LTDA.

TV CABO DO NORTE DO
PARANÁ COMERCIAL LTDA.

VTV TELEVISÃO A
CABO LTDA.

TV A CABO SERRANA LTDA.,

By:
__________________________________ Witness:    Name:    Title:

By:
__________________________________ Witness:    Name:    Title:

THE CHASE MANHATTAN BANK, as Trustee

By:
__________________________________ Witness:    Name:    Title:



EXHIBIT 2.4

SECOND SUPPLEMENTAL
INDENTURE

This Second Indenture (this
 Supplemental Indenture ) is supplemental to the Indeture, dated as of
October 31, 1997, as amended and restated on December 18, 1998 (the
 Indenture ), among  NET SUL COMUNICAÇÕES S.A ., a
 sociedade anônima  organized under the laws of the Federative Republic of
Brazil (formerly known as Net Sul TV a Cabo e Participações Ltda.) (the
 Company ), having its principal office as Avenida Érico
Veríssimo, 400, 90160-180 Porto Alegre-RS, Brazil,  HORIZONTE SUL
COMUNICAÇÕES LTDA., DR  EMPRESA DE DISTRIBUIÇÃO E
RECEPÇÃO DE TV LTDA ., (in its own capacity, and as successor in interest
to TV a Cabo de Capão da Canoa Ltda., DR Multi Cabo Santa Maria Ltda., and TV a
Cabo do Sul Ltda.),  ANTENAS COMUNITÁRIAS SUL BRASIL LTDA., TV CABO CRICIUMA
LTDA., CHAPECÓ EMPRESA DE TV POR ASSINATURA LTDA., MULTICANAL FLORIANÓPOLIS
S.A., NET PARANÁ LTDA . (formerly known as HTV Comunicações
Ltda.),  TVC DO PARANÁ DISTRIBUIDORA DE SINAIS DE TELEVISÃO LTDA., ANTENAS
COMUNITÁRIAS BRASILEIRAS LTDA., TV CABO DO NORTE DO PARANÁ COMERCIAL LTDA.,
VTV TELEVISÃO A CABO LTDA . And  TV A CABO SERRANA LTDA ., each a company
organized under the laws of the Federative Republic of Brazil (each a
Guarantor and, collectively, the Guarantors), THE  CHASE
MANHATTAN BANK, NEW YORK , a New York banking corporation, as Trustee (in such
capacity, the Trustee), as Registrar and Paying Agent.  THE CHASE MANHATTAN
BANK, LONDON BRANCH  as transfer Agent, Calculation Agent and Paying Agent,  CHASE
MANHATAN BANK LUXEMBOURG, S.A.  as Paying Agent, and  CHASE TRUST BANK  as
Principal Paying Agent, and iis entered into as of he ___ day of August, 2000 by the
Company, the Guarantors and the Trustee. Capitalized terms used and not defined herein
shall have the respective meanings attributed to such terms in the Indenture.

WHEREAS , prior to giving
effect to this Supplemental Indenture, Section 13.2 of the Indenture provides that in
order for a Noteholder to exercise its to require that the Company redeem, in whole or
part, the Notes held by such Noteholder on a Put Settlement Date (the  Put
Option ) , such holder must, not less than 60 nor more than 90 days prior to the
relevant Put Settlement Date, deposit the DTC Note Certificate issued in relation thereto
with any Paying Agent, together with a Put Notice;

WHEREAS , the Company and the
Guarantors wish to extend the period oftime in which the holders of the Series A Notes
issued pursuant to the Indenture are entitled to exercise their Put Option in relation to
the Put Settlement Date occuring on October 30, 2000;

WHEREAS , Section 9.1 (ii) of
the Indenture provides that the Company and Guarantors, when authorized by a Board
Resolution of their respective Board of Directors, may enter into a supplemental
indenture, in form satisfactory to the Trustee, without the consent of any Noteholders,
for the purpose of adding to the covenants of the Company for the benefit of the benefit
of the Noteholders;

WHEREAS , the Company has
delivered to the Trustee a Board Resolution of the Company authorizing the entering into
by the Company of this Supplemental Indenture; WHEREAS, each Guarantor has delivered to
the Trustee a Board Resolution of such Guarantor authorizing the entering into by the
Company of this Supplemental Indenture;

NOW THEREFORE , for good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and
subject to the following and limitations, the Company, the Guarantors and the Trustee have
agreed as follows:

1. Covenants of the
Company

Notwithstanding the provisions of
Section 13.2 of the Indenture, the Company covenants and agrees to redeem, in whole or in
part  (provided that , if in part, any Series A Notes will be in an amount equal to
U.S.$ 10,000 or any integral multiple thereof), the Series A Notes held by any Noteholder,
at a redemption price of 100% (expressed as a percentage o the principal amount of the
Series A Notes to be redeemed), on October 30, 2000, together with all accrued and unpaid
interest, if any, to October 30, 2000, and following such redemption, the Series A Notes
so redeemed will be cancelled,  provided however , that in order to exercise such
option on October 30, 2000, the holder must, not less than 30 nor more than 90 days prior
to October 30, 2000, deposit a Put Notice In relation thereto with any Paying Agent.

2. Supplemental Provisions

Save as expressly modified by this
Supplemental Indenture, the Indenture ands the Notes shall continue in full force and
effect. The Indenture and this Supplemental Indenture shall henceforth be read and
construed in conjuction as one Indenture.

3. GOVERNING LAW

T HIS SUPPLEMENTAL INDENTURE SHALL
BE GOVERNED BY, AND CONSTRUED IN ACOORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. FOR THE PURPOSES OF ARTICLES 9 OF
DECREE-LAW NO. 4657 DATED SEPTEMBER 4, 1942, THE TRANSACTIONS CONTEMPLATED HEREBY HAVE
BEEN PROPOSED TO THE COMPANY AND THE GUARANTORS BY THE TRUSTEE.

4. Effectiveness of this
Supplemental Indenture

The provisions of this Suplemental
Indenture shall take effect on the date as of which this Supplemental Indenture shall have
been executed by all of the parties hereto.

IN WITNESS WHEREOF , the
partues hereto have caused this Indenture to be duly executed and attested, and te Trustee
has caused its seal to be hereunto affixed and attested, all as of the day and year first
above written.

NET SUL
COMUNICAÇÕES S.A.

By:
__________________________________ Witness:    Name:    Title:

By:
__________________________________ Witness:    Name:    Title:

HORIZONTE SUL
COMUNICAÇÕES LTDA.

DR  EMPRESA DE
DISTRIBUÇÃO E RECEPÇÃO DE TV LTDA.

ANTENAS
COMUNITÁRIAS SUL BRASIL LTDA.

TV CABO CRICIÚMA
LTDA.

MULTICANAL
FLORIANÓPOLIS S.A.

NET PARANÁ LTDA.

TVC DO PARANÁ
DISTRIBUIDORA DE SINAIS DE TELEVISÃO LTDA.

ANTENAS
COMUNITÁRIAS BRASILEIRAS LTDA.

TV CABO DO NORTE DO
PARANÁ COMERCIAL LTDA.

VTV TELEVISÃO A
CABO LTDA.

TV A CABO SERRANA LTDA.

By:
__________________________________ Witness:    Name:    Title:

By:
__________________________________ Witness:    Name:    Title:

By:
__________________________________ Witness:    Name:    Title:

Witness:

IN WITNESS WHEREOF , the
parties hereto have caused this Indunture to be duly executed and attested, and the
Trustee has caused its seal to be hereunto affixed and attested, all as of the day and
year first above written.

NET SUL
COMUNICAÇÕES S.A.

By:
__________________________________ Witness:    Name:    Title:

By:
__________________________________ Witness:    Name:    Title:

GLOBO CABO S.A.

By:
__________________________________ Witness:    Name:    Title:

HORIZONTE SUL
COMUNICAÇÕES LTDA.

DR  EMPRESA DE
DISTRIBUÇÃO E RECEPÇÃO DE TV LTDA.

ANTENAS
COMUNITÁRIAS SUL BRASIL LTDA.

TV CABO CRICIÚMA
LTDA.

CHAPECÓ EMPRESA
DE TV POR ASSINATURA LTDA.

MULTICANAL
FLORIANÓPOLIS S.A.

NET PARANÁ LTDA.

TVC DO PARANÁ
DISTRIBUIDORA DE SINAIS DE TELEVISÃO LTDA.

ANTENAS
COMUNITÁRIAS BRASILEIRAS LTDA.

TV CABO DO NORTE DO
PARANÁ COMERCIAL LTDA.

VTV TELEVISÃO A
CABO LTDA.

TV A CABO SERRANA LTDA.

By:
__________________________________ Witness:    Name:    Title:

By:
__________________________________ Witness:    Name:    Title:



EXHIBIT 2.5

THIRD SUPPLEMENTAL INDENTURE

This Third Supplemental Indenture
(this  Supplemental Indenture ), dated as of October __, 2000, is
supplemental to the Indenture, dated as of October 31, 1997, as amended and restated on
December 18, 1998 and further supplemented as of August 30, 2000 (the
 Indenture ), among  NET SUL COMUNICAÇÕES S.A. , a
 sociedade anônima  organized under the laws of the Federative Republic of
Brazil (formerly known as Net Sul TV a Cabo e Participações Ltda.) (the
 Company ), having its principal office at Avenida Érico
Veríssimo, 400, 90160-180 Porto Alegre  RS, Brazil,  HORIZONTE SUL
COMUNICAÇÕES LTDA., DR  EMPRESA DE DISTRIBUIÇÃO E
RECEPÇÃO DE TV LTDA.  (in its own capacity, and as successor in interest
to TV a Cabo de Capão da Canoa Ltda. DR Multi Cabo Santa Maria Ltda. and TV a Cabo
do Sul Ltda.),  ANTENAS COMUNITÁRIAS SUL BRASIL LTDA., TV CABO CRICIÚMA
LTDA., CHAPECÓ EMPRESA DE TV POR ASSINATURA LTDA., MULTICANAL FLORIANÓPOLIS
S.A., NET PARANÁ LTDA.  (formerly known as HTV Comunicações
Ltda.) , TVC DO PARANÁ DISTRIBUIDORA DE SINAIS DE TELEVISÃO LTDA., ANTENAS
COMUNITÁRIAS BRASILEIRAS LTDA., TV CABO DO NORTE DO PARANÁ COMERCIAL LTDA.,
VTV TELEVISÃO A CABO LTDA.  and  TV A CABO SERRANA LTDA. , each a company
organized under the laws of the Federative Republic of Brazil (each a
 Guarantor  and, collectively, the  Guarantors ),  THE
CHASE MANHATTAN BANK, NEW YORK , a New York banking corporation, as Trustee (in such
capacity, the  Trustee ), as Registrar and Paying Agent,  THE CHASE
MANHATTAN BANK, LONDON BRANCH  as Transfer Agent, Calculation Agent and Paying Agent,
 CHASE MANHATTAN BANK LUXEMBOURG, S.A.  as Paying Agent, and  CHASE TRUST BANK
 as Principal Paying Agent, and is entered into by the Company, the Guarantors and the
Trustee. Capitalized terms used and not defined herein shall have the respective meanings
attributed to such terms in the Indenture (as amended hereby).

WHEREAS,  certain Noteholders
desire to transfer Notes in amounts less than $500,000, the minimum denomination of the
Notes under the Indenture, and the Company wishes to facilitate such transfer;

NOW THEREFORE , for good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and
subject to the following conditions and limitations, the Company, the Guarantors and the
Trustee, acting with the consent of each Noteholder, hereby agree as follows:

Section 1. Amendment to the Minimum
Denomination of Notes. Section 3.2 is hereby deleted in its entirety and replaced with the
following language:

The Notes are issuable only in fully
registered form, without coupons, in denominations of U.S.$50,000 (or such lesser amount
as may be required by the Luxembourg Stock Exchange for listing of the Notes thereon) and
any integral multiple of $1,000 in excess thereof.

Section 2. Supplemental Provisions.
Save as expressly modified by this Supplemental Indenture, the Indenture and the Notes
shall continue in full force and effect. The Indenture and this Supplemental Indenture
shall henceforth be read and construed in conjunction as one Indenture.

Section 3. Effect of Headings. The
Section headings herein are for convenience only and shall not affect the construction
hereof.

Section 4. Counterparts. This
Supplemental Indenture may be executed in any number of counterparts, each of which will
be deemed an original, but all of which together will constitute one and the same
instrument.

Section 5. GOVERNING LAW. THIS
SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. FOR THE
PURPOSES OF ARTICLE 9 OF DECREE-LAW NO. 4657 DATED SEPTEMBER 4, 1942, THE TRANSACTIONS
CONTEMPLATED HEREBY HAVE BEEN PROPOSED TO THE COMPANY AND THE GUARANTORS BY THE TRUSTEE.

Section 6. Effectiveness of this
Supplemental Indenture. The provisions of this Supplemental Indenture shall take effect on
the date as of which this Supplemental Indenture shall have been executed by all of the
parties hereto.

IN WITNESS WHEREOF,  the
parties hereto have caused this Indenture to be duly executed and attested, and the
Trustee has caused its seal to be hereunto affixed and attested, all as of the day and
year first above written.

NET SUL
COMUNICAÇÕES S.A.

By:
__________________________________ Witness:    Name:    Title:

By:
__________________________________ Witness:    Name:    Title:

HORIZONTE SUL
COMUNICAÇÕES LTDA.

DR  EMPRESA DE
DISTRIBUÇÃO E RECEPÇÃO DE TV LTDA.

ANTENAS
COMUNITÁRIAS SUL BRASIL LTDA.

TV CABO CRICIÚMA
LTDA.

MULTICANAL
FLORIANÓPOLIS S.A.

NET PARANÁ LTDA.

TVC DO PARANÁ
DISTRIBUIDORA DE SINAIS DE TELEVISÃO LTDA.

ANTENAS
COMUNITÁRIAS BRASILEIRAS LTDA.

TV CABO DO NORTE DO
PARANÁ COMERCIAL LTDA.

VTV TELEVISÃO A
CABO LTDA.

TV A CABO SERRANA LTDA.

By:
__________________________________ Witness:    Name:    Title:

By:
__________________________________ Witness:    Name:    Title:

THE CHASE MANHATTAN BANK, as Trustee

By:
__________________________________ Witness:    Name:    Title:



EXHIBIT 2.6

FOURTH SUPPLEMENTAL
INDENTURE

This Fourth Supplemental Indenture
(this  Supplemental Indenture ), dated as of October 31, 2000, is
supplemental to the Indenture, dated as of October 31, 1997, as amended and restated on
December 18, 1998 and further supplemented as of August 30, 2000 and October 31, 2000 (the
 Indenture ), among  NET SUL COMUNICAÇÕES S.A. , a
 sociedade anônima  organized under the laws of the Federative Republic of
Brazil (formerly known as Net Sul TV a Cabo e Participações Ltda.) (the
 Company ), having its principal office at Avenida Érico
Veríssimo, 400, 90160-180 Porto Alegre  RS, Brazil,  GLOBO CABO S.A. , a
 sociedade anônima  organized under the laws of the Federative Republic of
Brazil ( Globo Cabo ),  HORIZONTE SUL COMUNICAÇÕES LTDA.,
DR  EMPRESA DE DISTRIBUIÇÃO E RECEPÇÃO DE TV LTDA.
 (in its own capacity, and as successor in interest to TV a Cabo de Capão da
Canoa Ltda. DR Multi Cabo Santa Maria Ltda. and TV a Cabo do Sul Ltda.),  ANTENAS
COMUNITÁRIAS SUL BRASIL LTDA., TV CABO CRICIÚMA LTDA., CHAPECÓ
EMPRESA DE TV POR ASSINATURA LTDA., MULTICANAL FLORIANÓPOLIS S.A., NET
PARANÁ LTDA.  (formerly known as HTV Comunicações Ltda.) , TVC
DO PARANÁ DISTRIBUIDORA DE SINAIS DE TELEVISÃO LTDA., ANTENAS
COMUNITÁRIAS BRASILEIRAS LTDA., TV CABO DO NORTE DO PARANÁ COMERCIAL LTDA.,
VTV TELEVISÃO A CABO LTDA.  and  TV A CABO SERRANA LTDA. , each a company
organized under the laws of the Federative Republic of Brazil (each a
 Guarantor  and, collectively, the  Guarantors ),  THE
CHASE MANHATTAN BANK, NEW YORK , a New York banking corporation, as Trustee (in such
capacity, the  Trustee ), as Registrar and Paying Agent,  THE CHASE
MANHATTAN BANK, LONDON BRANCH  as Transfer Agent, Calculation Agent and Paying Agent,
 CHASE MANHATTAN BANK LUXEMBOURG, S.A.  as Paying Agent, and  CHASE TRUST BANK
 as Principal Paying Agent, and is entered into by the Company, the Guarantors and the
Trustee. Capitalized terms used and not defined herein shall have the respective meanings
attributed to such terms in the Indenture (as amended hereby).

WHEREAS,  Globo Cabo has agreed
to purchase all of the outstanding equity securities of the Company and, in connection
with such purchase, is prepared to offer to the Noteholder its guarantee of the Notes;

WHEREAS,  as a condition to its
providing such a guarantee of the Notes, Globo Cabo is requesting certain changes to the
covenants and certain other provisions of the Indenture to reflect, in certain respects,
the terms of its existing outstanding external indebtedness;

WHEREAS , Globo Cabo is
requesting certain other related changes to the Indenture and the terms of the Notes, as
described herein;

NOW THEREFORE , for good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and
subject to the following conditions and limitations, the Company, the Guarantors and the
Trustee, acting with the consent of each Noteholder, hereby agree as follows:

Section 1. Representations and
Warranties. Globo Cabo hereby represents and warrants as follows:

(a)    
          Power and Authority. Each of the Company, Globo Cabo and each Guarantor (i) is a
          corporation duly organized, validly existing and in good standing under the laws
          of Brazil and (ii) has all requisite corporate power, and has all material
          governmental licenses, authorizations, consents and approvals, necessary to own
          its assets and carry on its business as now being or as proposed to be
          conducted;

(b)    
          Each of the Company, Globo Cabo and each Guarantor (i) is qualified to do
          business and is in good standing in all jurisdictions in which the nature of the
          business conducted by it makes such qualification necessary and where failure so
          to qualify could (either individually or in the aggregate) have a Material
          Adverse Effect; (ii) has good title to all its assets, free and clear of any
          Liens except Permitted Liens; and (iii) is in compliance in all material
          respects with all applicable laws and regulations and with all material
          contractual obligations applicable to it.

(c)    
          Due Authorization, Etc. The making and performance by each of the Company, Globo
          Cabo and each Guarantor of the Notes and the Indenture as amended by this
          Supplemental Indenture and all other documents and instruments to be executed
          and delivered hereunder by it have been duly authorized by all necessary
          corporate action, and do not contravene (i) its charter or by-laws, (ii) any
          applicable law, decree, regulation, judgment, award, injunction or similar legal
          restriction, as now in effect, or (iii) any agreement, instrument or other
          contractual restriction binding on or affecting it or any of its Properties or
          revenues, or result in the creation of any Lien on any of its property.

(d)    
          No Additional Authorization Required. All licenses, authorizations and approvals
          and other actions by, or notices to or filings or registrations with, any
          Governmental Authority, and all third-party approvals, required for the due
          execution, delivery and performance of this Supplemental Indenture or for the
          legality, validity or enforceability of the Supplemental Indentures have been
          obtained and are in full force and effect.

(e)    
          Legal Effect. This Supplemental Indenture has been duly executed and delivered
          by the Company, Globo Cabo and each Guarantor for value, will constitute a
          legal, valid and binding obligation of the Company, Globo Cabo and each
          Guarantor enforceable against each such Person in accordance with its respective
          terms.

(f)    
          Financial Statements. The consolidated balance sheet of Globo Cabo and its
          Subsidiaries as of June 30, 2000, and the related consolidated statements of
          income and cash flows for the fiscal year ending on that date, and the
          consolidated balance sheet as of June 30, 2000 and related consolidated
          statements of income and cash flow thereof for the period of six months ending
          on that date, each of which has heretofore been furnished to the undersigned
          Noteholders, are complete and correct and fairly present the financial condition
          of Globo Cabo and its Subsidiaries on a consolidated basis as at said respective
          dates and the consolidated results of their operations for the fiscal periods
          ending on said dates, all in accordance with GAAP; Globo Cabo and its
          Subsidiaries have no material contingent liabilities or unusual forward or
          long-term commitments not disclosed therein; and since June 30, 2000, no event
          or circumstance has occurred that has had a Material Adverse Effect.

(g)    
          Ranking; Priority. The payment obligations of the Company, Globo Cabo and each
          Guarantor hereunder and under the Notes are and will at all times be
          unconditional general obligations of each such Person, and rank and will at all
          times rank at least  pari passu  with all other present and future
          Indebtedness of each such Person.

(h)    
          No Actions or Proceedings. There is no litigation, investigation or proceeding
          pending or, to the best knowledge of Globo Cabo, threatened against it or any
          Subsidiary thereof or before any Governmental Authority that (either
          individually or in the aggregate) (a) could reasonably be expected to have a
          Material Adverse Effect or (b) purports to affect the legality, validity,
          binding effect or enforceability of any of the Supplemental Indentures to which
          it is party. The operations and property of Globo Cabo and each Subsidiary
          thereof comply with all applicable Environmental Laws, except to the extent the
          failure to so comply (either individually or in the aggregate) could not
          reasonably be expected to have a Material Adverse Effect.

(i)    
          Legal Form. The Indenture as modified by the Supplemental Indenture is in proper
          legal form under the laws of Brazil for the enforcement thereof against the
          Company, Globo Cabo and each Guarantor under such law, and if each were stated
          to be governed by such law, it would constitute a legal, valid and binding
          obligation thereof under such law, enforceable in accordance with its terms,
          provided that, for enforcement of such Supplemental Indenture before Brazilian
          courts, (A)(x) the signatures of the parties signing such Supplemental Indenture
          outside Brazil must be notarized by a notary public qualified as such under the
          laws of the place of signing and the signature of such notary public must be
          authenticated by a Brazilian consular officer at the nearest Brazilian consulate
          or (y) such Supplemental Indenture must be registered with the competent
          Registry of Deeds and Documents, and (B) such Supplemental Indenture must be
          translated into Portuguese by a sworn translator. Subject to the preceding
          sentence, all formalities required in Brazil for the validity and enforceability
          (including, without limitation, any necessary registration, recording or filing
          with any court or other Governmental Authority in Brazil) of each Supplemental
          Indenture have been accomplished, and no Covered Taxes are required to be paid,
          and no notarization is required for the validity and enforceability thereof.

(j)    
          Full Disclosure. The information, reports, financial statements, exhibits and
          schedules furnished in writing by or on behalf of Globo Cabo to the Noteholders
          in connection with this Supplemental Indenture or included herein or therein, or
          delivered pursuant hereto or thereto, taken as a whole, do not contain any
          untrue statement of material fact or omit to state any material fact necessary
          to make the statements therein, in light of the circumstances under which they
          were made, not misleading on the date as of which such information is stated or
          certified; and if any of such information, reports, financial statements,
          exhibits and schedules shall become materially untrue or misleading, the Company
          shall promptly inform the Noteholders thereof. All written information furnished
          after the date hereof by the Company to the Noteholders in connection with the
          Supplemental Indentures, and the transactions contemplated hereby will be true,
          complete and accurate in every material respect, or (in the case of projections)
          based on reasonable estimates, on the date as of which such information is
          stated or certified. There is no fact known to the Company that could reasonably
          be expected to have a Material Adverse Effect that has not been disclosed herein
          or in a report, financial statement, exhibit, schedule, disclosure letter or
          other writing furnished to Noteholders for use in connection with the
          transactions contemplated hereby.

(k)    
          Liens; Indebtedness. Each Lien securing Indebtedness of any Person outstanding
          on the date hereof and covering any property of the Company or any Subsidiary
          thereof (other than any Permitted Lien the enforcement of which could not
          reasonably be expected to have a Material Adverse Effect), and the aggregate
          amount of Indebtedness secured (or that may be secured) by each such Lien and
          the property covered by each such Lien, is publicly disclosed in the financial
          statements of the Company or its Subsidiaries that are filed with and publicly
          available through the  Comissão de Valores Mobiliários  of
          Brazil and is correctly described in such financial statements. The property of
          the Company and each Subsidiary thereof is subject to no Lien except as set
          forth in such public filings .

(l)    
          No Default. No event with respect to Globo Cabo, the Company or any Guarantor
          has occurred and is continuing which, upon effectiveness of this Supplemental
          Indenture, would constitute a Default or Event of Default.

(m)    
          Permits. Each of the Company, Globo Cabo and each Guarantor (i) owns, possesses
          or has obtained all permits as are required to own its properties and to conduct
          its business at the time of this Supplemental Indenture, (ii) has fulfilled and
          performed in all material respects all of its obligations with respect to such
          permits and no event has occurred, or as a result of the effectiveness of this
          Supplemental Indenture would occur, which allows, or after notice or lapse of
          time or both would allow, revocation or termination thereof or results or would
          result in any other material impairment of the rights of the holder of any such
          permit and (iii) does not have any knowledge of a threatened revocation or
          modification relating to any such permit, except for, in any such case, any
          permit the failure of which to be effective would not have a Material Adverse
          Effect.

Section 2. Amendments to Certain
Definitions. (a) The definitions of the following terms are hereby deleted from Section
1.1 of the Indenture: Acquired Indebtedness, Applicable Margin, Asset Disposition,
Attributable Value, Capital Expenditure, Capital Lease, Capital Lease Obligation, Capital
Stock, Combined Financial Statements, Consolidated Adjusted Available Cash Flow,
Consolidated Adjusted EBITDA, Consolidated Adjusted Gross Interest Expense, Consolidated
Debt Service, Consolidated Income Tax Expense, Consolidated Net Income, Consolidated Total
Indebtedness, Consolidated Total Senior Indebtedness, Disqualified Stock, Incur,
Indebtedness, Interest Rate or Currency Protection Agreement, Investment, Lien, Net
Available Proceeds, Net Obligation, Officers Certificate, Permitted Interest Rate or
Currency Protection Agreement, Permitted Liens, Preferred Stock, Qualified Preferred
Stock, RBS Treasury, Receivables Sale, Sale and Leaseback Transaction, Significant
Subsidiary, Specified Subordinated Indebtedness, Subordination Agreement, Subordinated
Indebtedness, Subscriber TV Assets, Subscriber Television Business, Subsidiary, Voting
Stock and Wholly Owned Subsidiary.

(b)    
          Section 1.1 of the Indenture is hereby further amended by adding, in appropriate
          alphabetical order, each of the definitions set forth in Schedule I to this
          Supplemental Indenture.

(c)    
          Notwithstanding the foregoing, the Applicable Margin from the date of the
          execution of this Fourth Supplemental Indenture to January 31, 2001 shall be
          calculated in accordance with the definition of Applicable Margin
          (as amended under Section 2(b) hereof) as if the ratio set forth in said
          definition for said period were 5.5 to 1.

Section 3. Amendments to Events of
Default. Section 5.1 of the Indenture is hereby deleted in its entirety and replaced by
the provisions set forth in Schedule II to this Supplemental Indenture.

Section 4. Amendment to Provisions on
Merger, Consolidation, Etc. Section 8.1 of the Indenture is hereby deleted in its entirety
and replaced by the provisions set forth in Schedule III to this Supplemental Indenture.

Section 5. Amendment to Provisions on
Supplemental Indentures. Clause (iv) of Section 9.2 is hereby deleted in its entirety and
replaced with the following language:

(iv)    
          modify any of the provisions of this Section 9.2 or Sections 5.11, 10.12 or
          13.1, except to increase any such percentage described in Clause (i) above or to
          provide that certain other provisions of this Indenture cannot be modified or
          waived without the consent of the Noteholder of each Outstanding Note affected
          thereby;

Section 6. Amendment to Covenants.
Article 10 of the Indenture is hereby deleted in its entirety and replaced by the
provisions set forth in Schedule IV to this Supplemental Indenture.

Section 7. Amendment to Provisions on
Early Redemption at Noteholders Option. Section 13.2 of the Indenture is hereby
modified to delete the definition of Put Settlement Date and to replace it with the
following sentence:

Put Settlement Date
 shall mean the Interest Payment Date occurring on October 31 of the year 2003, 2002
and 2002 with respect to the Series A Notes, the Series B Notes and the Series C Notes,
respectively.

Section 8. Provisions Relating to the
Guarantee of Globo Cabo. Globo Cabo hereby agrees to become a party to the Indenture as a
Guarantor thereunder and agrees to be bound as Guarantor by the provisions of Article 14,
Article 10 and the other provisions of the Indenture as amended hereby.

Section 9. Execution of Amended and
Restated Indenture. The parties hereto agree that the Company and the Trustee may, after
this Supplemental Indenture is duly executed and becomes effective, and without the
consent or signature of any Noteholder or other party hereto, enter into an Amended and
Restated Indenture that makes no changes or modifications to the Indenture other than as
expressly contemplated herein and/or under Section 9.1 of the Indenture, provided that the
Trustee shall have received an Officers Certificate of the Company and an Opinion of
Counsel to the effect that such Amended and Restated Indenture is authorized under the
Indenture as amended hereby, and provided, further, that a copy of such Amended and
Restated Indenture shall be provided to each Noteholder signatory hereto.

Section 10. Supplemental Provisions.
Save as expressly modified by this Supplemental Indenture, the Indenture and the Notes
shall continue in full force and effect. The Indenture and this Supplemental Indenture
shall henceforth be read and construed in conjunction as one Indenture.

Section 11. Effect of Headings. The
Section headings herein are for convenience only and shall not affect the construction
hereof.

Section 12. Counterparts. This
Supplemental Indenture may be executed in any number of counterparts, each of which will
be deemed an original, but all of which together will constitute one and the same
instrument.

Section 13. GOVERNING LAW. THIS
SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. FOR THE
PURPOSES OF ARTICLE 9 OF DECREE-LAW NO. 4657 DATED SEPTEMBER 4, 1942, THE TRANSACTIONS
CONTEMPLATED HEREBY HAVE BEEN PROPOSED TO THE COMPANY AND THE GUARANTORS BY THE TRUSTEE.

Section 14. Effectiveness of this
Supplemental Indenture. The provisions of this Supplemental Indenture shall take effect on
the date as of which this Supplemental Indenture shall have been executed by all of the
parties hereto.

Section 15. Payment of Certain Fees.
In consideration of the consent to the Supplemental Indenture by the Noteholders, Globo
Cabo hereby covenants to pay to each Noteholder of each Series the fees allocated to such
Series under the Letter Agreement Re Fees, dated as of October 31, 2000, executed by Globo
Cabo and acknowledged by the Trustee on behalf of Noteholders.

IN WITNESS WHEREOF,  the
parties hereto have caused this Indenture to be duly executed and attested, and the
Trustee has caused its seal to be hereunto affixed and attested, all as of the day and
year first above written.

NET SUL
COMUNICAÇÕES S.A.

By:
__________________________________ Witness:    Name:    Title:

By:
__________________________________ Witness:    Name:    Title:

GLOBO CABO S.A.

By:
__________________________________ Witness:    Name:    Title:

HORIZONTE SUL
COMUNICAÇÕES LTDA.

DR  EMPRESA DE
DISTRIBUÇÃO E RECEPÇÃO DE TV LTDA.

ANTENAS
COMUNITÁRIAS SUL BRASIL LTDA.

TV CABO CRICIÚMA
LTDA.

CHAPECÓ EMPRESA
DE TV POR ASSINATURA LTDA.

MULTICANAL
FLORIANÓPOLIS S.A.

NET PARANÁ LTDA.

TVC DO PARANÁ
DISTRIBUIDORA DE SINAIS DE TELEVISÃO LTDA.

ANTENAS
COMUNITÁRIAS BRASILEIRAS LTDA.

TV CABO DO NORTE DO
PARANÁ COMERCIAL LTDA.

VTV TELEVISÃO A
CABO LTDA.

TV A CABO SERRANA LTDA.

By:
__________________________________ Witness:    Name:    Title:

By:
__________________________________ Witness:    Name:    Title:

THE CHASE MANHATTAN BANK,

as Trustee

By:
__________________________________ Witness:    Name:    Title:

Witness:

SCHEDULE I

 Acquired
Indebtedness  means Indebtedness of a Person existing at the time such Person
becomes a Restricted Subsidiary or assumed in connection with an Asset Acquisition by such
Person, or Indebtedness secured by a Lien encumbering any asset acquired by any such
Person, and, in each case, not incurred in connection with, or in anticipation of, such
Person becoming a Restricted Subsidiary or such Asset Acquisition.

 Additional Amounts 
means the amounts that the Company, Globo Cabo or any Guarantor is required to withhold or
deduct any amount for or on account of Taxes imposed by a Taxing Authority of the
Federative Republic of Brazil or of Japan from any payment made under or with respect to
the Notes or any Guarantee of the Company, Globo Cabo or such Guarantor, as the case may
be, must pay.

Adjusted EBITDA 
means, for any period, EBITDA for such period plus sign-on and hookup revenues that were
deferred and amortized for future recognition during such period in accordance with U.S.
 GAAP.

Affiliate  of any
specified Person means any other Person which, directly or indirectly, controls, is
controlled by or is under direct or indirect common control with, such specified Person.
For the purposes of this definition, control when used with respect to any
Person means the power to, direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or otherwise,
and the terms controlling and controlled have meanings correlative
to the foregoing.

 Affiliate
Transaction  means any transaction or series of transactions between the Company,
Globo Cabo or any Restricted Subsidiary with an Affiliate of Globo Cabo (other than such a
transaction with the Company, Globo Cabo, any Restricted Subsidiary or a wholly owned
subsidiary of the Company, Globo Cabo or a Restricted Subsidiary).

 Amendment Date 
means the date of the execution of the supplemental indenture that gives effect to the
terms of the Notes as described herein.

 Annualized Pro Forma
Consolidated Operating Cash Flow  means Consolidated Operating Cash Flow for the
latest two Semiannual Periods for which consolidated financial statements of Globo Cabo
are available. For purposes of calculating Consolidated Operating Cash Flow
for any Semiannual Period for purposes of this definition (i) any Subsidiary of Globo Cabo
that is a Restricted Subsidiary on the date of the transaction giving rise to the need to
calculate Annualized Pro Forma Consolidated Operating Cash Flow (the
Transaction Date) (or would become a Restricted Subsidiary in connection with
the transaction that requires determination of such amount) shall be deemed to have been a
Restricted Subsidiary at all times during such Semiannual Period and (ii) any Subsidiary
of the Company or Globo Cabo that is not a Restricted Subsidiary on the Transaction Date
(or would cease to be a Restricted Subsidiary in connection with the transaction that
requires the determination of such amount) shall be deemed not to have been a Restricted
Subsidiary at any time during such Semiannual Period. In addition to and without
limitation of the foregoing, for purposes of this definition, Consolidated Operating
Cash Flow shall be calculated after giving effect on a  pro forma  basis for
the applicable Semiannual Period to, without duplication, any Asset Sales or Asset
Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need
to make such calculation as a result of Globo Cabos or one of the Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result
of the Asset Acquisition) incurring Acquired Indebtedness) occurring during the period
commencing on the first day of such Semiannual Period to and including the Transaction
Date (the Reference Period), as if such Asset Sale or Asset Acquisition
occurred on the first day of the Reference Period.

Applicable Margin
 means the margin to be calculated for each Series with reference to the then-current
ratio of (x) total Consolidated Indebtedness and Subsidiary Preferred Stock to (y)
Annualized Pro Forma Consolidated Operating Cash Flow, as calculated under Section 10.1
hereof, as follows:

|              | Series A Notes | Series B and Series C Notes
|------------- | -------------- | ---------------------------
|              |                |                            
|5.5 and above | 4.000          | 3.375%                     
|5.0 to 5.5    | 3.750          | 3.125%                     
|4.5 to 5.0    | 3.625          | 3.000%                     
|4.0 to 4.5    | 3.500          | 2.875%                     
|3.5 to 4.0    | 3.375          | 2.750%                     
|3.0 to 3.5    | 3.250          | 2.625%                     
|Less than 3.0 | 3.125          | 2.500%                     

 Arrangers  means
Citibank, N.A. and Salomon Smith Barney Inc.

 Asset Acquisition 
means (i) any capital contribution (by means of transfers of cash or other property to
others or payments for property or services for the account or use of others, or
otherwise) by the Company, Globo Cabo or any Restricted Subsidiary, or any acquisition or
purchase of Capital Stock of any other Person by the Company, Globo Cabo or any Restricted
Subsidiary, in either case pursuant to which such Person shall become a Restricted
Subsidiary or shall be merged with or into the Company, Globo Cabo or any Restricted
Subsidiary or (ii) any acquisition by the Company, Globo Cabo or any Restricted Subsidiary
of the assets of any Person which constitutes substantially all of an operating unit or
line of business of such Person or which constitutes a licensed area for the provision of
cable television services or a related business or which is otherwise outside of the
ordinary course of business.

 Asset Sale  means
any direct or indirect sale, conveyance, transfer, lease (that has the effect of a
disposition and is not for security purposes) or other disposition (that is not for
security purposes) to any Person other than the Company, Globo Cabo or a Restricted
Subsidiary, in one transaction or a series of related transactions, of (i) any Capital
Stock of any Restricted Subsidiary, (ii) any license for the provision of cable television
services or a related business held by the Company, Globo Cabo or any Restricted
Subsidiary (whether by sale of Capital Stock or otherwise), (iii) any assets of the
Company, Globo Cabo or any Restricted Subsidiary which constitute substantially all of an
operating unit or line of business of the Company, Globo Cabo or any Restricted Subsidiary
or constitutes a licensed area for the provision of cable television services or (iv) any
other property or asset of the Company, Globo Cabo or any Restricted Subsidiary outside of
the ordinary course of business. For the purposes of this definition, the term Asset
Sale shall not include (i) any disposition of properties or assets of the Company,
Globo Cabo or one or more of the Restricted Subsidiaries that is governed under Section
8.1 ( Consolidation, Merger, Sale of Assets, Etc. ) or (ii) sales of
property or equipment that have become worn out, obsolete or damaged or otherwise
unsuitable for use in connection with the business of the Company, Globo Cabo or any
Restricted Subsidiary, as the case may be.

For purposes of Section 10.9
( Disposition of Proceeds of Asset Sales ), the term Asset
Sale shall not include any sale, conveyance, transfer, lease or other disposition of
any property or asset, whether in one transaction or a series of related transactions,
either (x) involving assets with a Fair Market Value not in excess of the equivalent of
US$1,000,000 (or, to the extent non- U.S. dollar denominated, the U.S. Dollar Equivalent
of such amount) or (y) in connection with a Capitalized Lease Obligation.

 Average Life to Stated
Maturity  means, with respect to any Indebtedness or Preferred tock, as at any
date of determination, the quotient obtained by dividing (i) the sum of the products of
(a) the number of years from such date to the date or dates of each successive scheduled
principal or other return of capital (including, without limitation, any sinking fund
requirements) of such Indebtedness or Preferred Stock multiplied by (b) the amount of each
such principal or other payment by (ii) the sum of all such principal or other payments.

 Bankruptcy Law 
means Decree No. 7661 of June 21, 1945, or any other Brazilian law relating to, of Title
11, United States Code or any similar United States federal or state law relating to,
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization,
concordata or relief of debtors or the law of any other jurisdiction relating
to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization,
concordata or relief of debtors or any amendment to, succession to or change
in any such law.

 Bankruptcy Order 
means any court order made in a proceeding pursuant to or within the meaning of any
Bankruptcy law, containing an adjudication of bankruptcy or insolvency, or providing for
liquidation, receivership, winding-up, dissolution, concordata or
reorganization, or appointing a Custodian of a debtor or of all or any substantial part of
a debtors property, or providing for the staying, arrangement, adjustment or
composition of indebtedness of other relief of a debtor.

 Board  means the
Board of Directors of the Company, Globo Cabo or any Guarantor, or any other competent
corporate body of a Guarantor, as the case may be.

 Board Resolution 
means a copy of a resolution certified by the Secretary or an Assistant Secretary or
General Counsel of the Company, Globo Cabo or any Guarantor, as the case may be, to have
been duly adopted by its respective Board and to be in full force and effect on the date
of such certification, and delivered to the Trustee.

 Brazilian Taxes 
means any tax, duty, levy, impost, assessment or other governmental charge of whatever
nature (including penalties, interest and any other liabilities related thereto).

 Business Day  means
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in the city of New York, state of New York, Tokyo, Japan or São Paulo,
Brazil are authorized or obligated by law, regulation or executive order to close.

 Capital Stock 
means, with respect to any Person, any and all capital stock or shares, interests,
participations, rights in, or other equivalents (however designated and whether voting or
non-voting) (including share appreciation rights) of, such Persons capital stock or
shares, whether outstanding on the Amendment Date or issued after the issue Date, and any
and all rights, warrants or options exchangeable for or convertible into such capital
stock or shares.

 Capital Lease 
means a lease of real or personal property of such Person which is required to be
classified and accounted for as a capital lease or a liability set forth on a balance
sheet of such Person in accordance with U.S. GAAP.

 Capitalized Lease
Obligation  means any obligation to pay rent or other amounts under a Capital
Lease and, for the purpose of the Indenture, the amount of such obligation at any date
shall be the capitalized amount thereof at such date, determined in accordance with U.S.

GAAP.

 Cash Equivalents 
means (i) any evidence of Indebtedness with a maturity of 365 days or less issued or
directly and fully guaranteed or insured by the Federative Republic of Brazil or the
United States of America or any agency or instrumentality thereof (provided that the full
faith and credit of the Federative Republic of Brazil or the United States of America, as
the case may be, is pledged in support thereof or such Indebtedness constitutes a general
obligation of it), (ii) deposits, certificates of deposit or acceptances with a maturity
of 365 days or less of any institution which is a Brazilian regulated bank or a member of
the Federal Reserve System having combined capital and surplus and undivided profits (or
any similar capital concept) of not less than US$50,000,000 (or, to the extent non-U.S.
dollar denominated, the U.S. Dollar Equivalent of such amount) at the time of deposit,
(iii) commercial paper with a maturity of 365 days or less issued by a corporation (other
than an Affiliate of Globo Cabo) incorporated or organized under the laws of the
Federative Republic of Brazil or any jurisdiction thereof or the United States or any
state thereof or the District of Columbia and rated at least A-l by S&P or
P-I by Moodys or their respective Brazilian affiliates, (iv) investments
with a maturity of 365 days or less of any Person that is fully and unconditionally
guaranteed by a bank referred to in clause (ii) and (v) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or unconditionally
guaranteed by the United States government or issued by any agency thereof and backed by
the full faith and credit of the Federative Republic of Brazil or any jurisdiction thereof
or the United States government, respectively, in each case maturing within one year from
the date of acquisition.

 Central Bank  means
the Banco Central do Brasil or any successor entity.

 Change of Control 
is defined to mean the occurrence of any of the following events:

(a)    
          any Person or group (as such terms are used in Sections
          13(d) and 14(d) of the Exchange Act), other than the Permitted Holders, is or
          becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5
          under the Exchange Act, except that a Person shall be deemed to have
          beneficial ownership of all securities that such Person has the
          right to acquire, whether such right is exercisable immediately or only after
          the passage of time), directly or indirectly, of more than 50% of the total
          Voting Stock of Globo Cabo; or (b) Globo Cabo consolidates with, or merges with
          or into, another Person or sells assigns, conveys, transfers, leases or
          otherwise disposes of all or substantially all of its assets (determined on a
          consolidated basis) to any Person, or any Person consolidates with, or merges
          with or into Globo Cabo, other than any Permitted Holders, in any such event
          pursuant to a transaction in which the outstanding Voting Stock of Globo Cabo is
          converted into or exchanged for cash, securities or other property, other than
          (A) any such transaction where (i) the outstanding Voting Stock of Globo Cabo is
          converted into or exchanged for (1) Voting Stock (other than Disqualified stock)
          of the surviving or transferee corporation and/or (2) cash, securities and other
          property in an amount which could be paid by Globo Cabo as a Restricted Payment
          under the Indenture and (ii) the beneficial owners of the Voting
          Stock of Globo Cabo immediately prior to such transaction own, directly or
          indirectly, not less than a majority of the Voting Stock of the surviving or
          transferee corporation immediately after such transaction or (B) any such
          transaction as a result of which Permitted Holders own a majority of the total
          Voting Stock of the surviving or transferee corporation immediately after such
          transaction; or (c) during any consecutive two-year period, individuals who at
          the beginning of such period constituted the Board of Globo Cabo (together with
          any new directors whose election by the Board of Globo Cabo or whose nomination
          for election by the stockholders of Globo Cabo was approved by a vote of a
          majority of the directors then still in office who were either directors at the
          beginning of such period or whose election or nomination for election was
          previously so approved) cease for any reason (other than by action of the
          Permitted Holders pursuant to the bylaws of Globo Cabo, in each case, as in
          effect on the Amendment Date, or otherwise) to constitute a majority of the
          Board of Globo Cabo then in office;  provided  that, to the extent that one
          or more regulatory approvals are required for one or more of the events or
          circumstances described above to become effective under applicable law, such
          events or circumstances shall be deemed to have occurred at the time such
          approvals have been obtained and become effective under applicable law.

 Commission  means
the Securities and Exchange Commission.

 Common Stock  means
any Capital Stock other than Preferred Stock.

 Consolidated Income Tax
Expense  means, with respect to any period, the provision for Brazilian
corporation, local, foreign and other income taxes of the Company, Globo Cabo and the
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with U.S. GAAP.

 Consolidated Interest
Expense  means, with respect to any period, without duplication, the sum of (i)
the interest expense (including, without limitation, any payments similar to those
required under the additional amounts provisions of the Indenture) of the
Company, Globo Cabo and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with U.S. GAAP and shall, in any event, include, without
limitation (a) any amortization of debt discount, (b) the net cost under any Currency
Agreements and Interest Rate Protection Obligations (including any amortization of
discounts), (c) the interest portion of any deferred payment obligation, (d) all
commissions, discounts and other fees and charges owed with respect to letters of credit,
bills of exchange, promissory notes and bankers acceptance financing and (e) all
accrued interest and (ii) all but the principal component of Capitalized Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by such Person during such period as
determined on a consolidated basis in accordance with U.S. GAAP.

 Consolidated Net Income
  means, with respect to any period, the consolidated net income of the Company,
Globo Cabo and the Restricted Subsidiaries for such period, adjusted, to the extent
included in calculating such net income, by excluding, without duplication (i) all
extraordinary gains or losses (on an after-tax basis) of such Person (net of fees and
expenses relating to the transaction giving rise thereto) for such period, (ii) except to
the extent actually received by the Company, Globo Cabo or any Restricted Subsidiary,
income of the Company, Globo Cabo and the Restricted Subsidiaries derived from or in
respect of all Investments in Persons other than any Restricted Subsidiary, (iii) the
portion of net income (or loss) of any Restricted Subsidiary of the Company or Globo Cabo
that is not a Guarantor allocable to minority interests for such period, (iv) net income
(or loss) of any other Person combined with such Person in a pooling of
interests basis attributable to any period prior to the date of combination, (v) any
gain or loss, net of taxes realized by such Person, upon the termination of any employee
pension benefit plan during such period, (vi) gains or losses in respect of any Asset
Sales (on an after-tax basis and net of fees and expenses relating to the transaction
giving rise thereto) during such period and (vii) the net income of any Restricted
Subsidiary for such period to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary to the Company, Globo Cabo or any Restricted
Subsidiary of that income is not at the time permitted, directly or indirectly, by
operation of the terms of its charter or constituent documents or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulations applicable
to that Restricted Subsidiary.

 Consolidated Net Interest
Expense  means, with respect to any period, (i) the interest expense (including,
without limitation, any payments similar to those required under the additional
amounts provisions of the Indenture) of the Company, Globo Cabo and the Restricted
Subsidiaries for such period as determined on a consolidated basis in accordance with U.S.
GAAP, which shall, in any event, include, without limitation, (a) any amortization of debt
discount, (b) the net cost under any Currency Agreements and Interest Rate Protection
Obligations (including any amortization of discounts), (c) the interest portion of any
deferred payment obligation, (d) all commissions, discounts and other fees and charges
owed with respect to letters of credit, bills of exchange, promissory notes and
bankers acceptance financing and (e) all accrued interest,  minus  (ii) the
interest earnings of the Company, Globo Cabo and the Restricted Subsidiaries for such
period as determined on a consolidated basis in accordance with U.S. GAAP.

 Consolidated Operating Cash
Flow  means, with respect to any period, the Consolidated Net Income of the
Company, Globo Cabo and the Restricted Subsidiaries for such period (a) increased by (to
the extent included in computing Consolidated Net Income) the sum of (i) the Consolidated
Income Tax Expense of the Company, Globo Cabo and the Restricted Subsidiaries for such
period (other than Taxes attributable to extraordinary, unusual or nonrecurring gains or
losses), (ii) Consolidated Interest Expense for such period, (iii) depreciation of the
Company, Globo Cabo and the Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with U.S. GAAP, (iv) amortization of the Company, Globo
Cabo and the Restricted Subsidiaries for such period, including, without limitation and
without duplication, amortization of capitalized debt issuance costs for such period, all
determined on a consolidated basis in accordance with U.S. GAAP and (v) any other non-cash
charges that were deducted in computing Consolidated Net Income (excluding any non-cash
charge which requires an accrual or reserve for cash charges for any future period) of the
Company, Globo Cabo and the Restricted Subsidiaries for such period in accordance with
U.S. GAAP and (b) decreased by any non-cash gains that were included in computing
Consolidated Net Income.

 consolidation 
means, with respect to Globo Cabo, the consolidation of the accounts of the Restricted
Subsidiaries with those of the Company and Globo Cabo, all in accordance with U.S. GAAP;
 provided  that consolidation will not include consolidation of the
accounts of any Unrestricted Subsidiary with the accounts of the Company and Globo Cabo.
The term consolidated has a correlative meaning to the foregoing.

 Cumulative Adjusted
Available Cash Flow  means, as at any date of determination, the positive
cumulative Consolidated Operating Cash Flow realized during the period commencing on the
Amendment Date and ending on the last day of the most recent Semiannual Period immediately
preceding the date of determination for which consolidated financial information of Globo
Cabo is available  or  required to be available under the Indenture or, if such
cumulative Consolidated Operating Cash Flow for such period is negative, the negative
amount by which cumulative Consolidated Operating Cash Flow is less than zero.

 Currency Agreement 
means any foreign exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect the Company, Globo Cabo or any of their Restricted
Subsidiaries against fluctuations in currency values.

 Debt Securities 
means any debt securities (including any guarantee of such securities) issued by the
Company, Globo Cabo and/or any Guarantor, whether in a public offering or a private
placement; it being understood that the term Debt Securities shall not include
commercial bank borrowings or similar borrowings, intercompany loans, recourse transfers
of financial assets, capital leases or other types of borrowings issued in a manner not
customarily viewed as a securities offering.

 Default  means any
event that is, or after notice or passage of time or both would be, an Event of Default.

 Disinterested
Director  means, with respect to any transaction or series of transactions, a
member of the Board of Globo Cabo other than a director who has any material direct or
indirect financial interest in or with respect to such transaction or series of
transactions or is an Affiliate, beneficial holder of 10% or more of any class of Capital
Stock or officer, director or employee of any Person who has any direct or indirect
financial interest in or with respect to such transaction or series of transactions.

 Disqualified Stock 
means, with respect to any Person, any Capital Stock which, by its terms (or by the terms
of any security into which it is convertible or for which it is exchangeable, except to
the exchangeable at the option of such Person subject to the terms of any debt instrument
to which such Person is a party), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is
exchangeable for Indebtedness (other than at the option of such Person), or is redeemable
at the option of the holder thereof, in whole or in part, in any such case on or prior to
the final maturity date of the Notes.

 EBITDA  means the
sum of (i) net income (loss), (ii) financial income (expense), net, (iii) income tax
benefit, (iv) depreciation and amortization, (v) gain (loss) on translation, net, (vi)
other, net, (vii) minority interests in results of consolidated subsidiaries and (viii)
equity in results of investees (i.e., companies in which Globo Cabo has between a 20% and
50% equity interest), each as determined in accordance with U.S. GAAP.

 Fair Market Value  
means, with respect to any asset or property, the price that could be negotiated in an
arms-length free market transaction, for cash, between a willing seller and a willing
buyer, neither of whom is under pressure or compulsion to complete the transaction.

Unless otherwise specified in the
Indenture, Fair Market Value shall be determined by the Board of Globo Cabo acting in good
faith and shall be evidenced by a Board Resolution of Globo Cabo delivered to the Trustee;
 provided  that, for purposes of the third paragraph of Section 10.9
( Disposition of Proceeds of Asset Sales ) and Section 10.7
( Limitation on Transactions with Affiliates ) in the case of any
transaction or series of related transactions which involve aggregate consideration of
US$20,000,000 (or, to the extent non-U.S. dollar denominated, the U.S. Dollar Equivalent
of such amount) or more, Fair Market Value shall also be determined by an Independent
Financial Advisor.

 Globopar  means
Globo Comunicações e Participações S.A.

 Guarantee  means,
as applied to any obligation (i) a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or indirect, in any
manner, of any pan or all of such obligation and (ii) an agreement, direct or indirect,
contingent or otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of non-performance) of all or any part
of such obligation, including, without limiting the foregoing, the payment of amounts
drawn down by letters of credit.

 Guarantor  means
each Person who guarantees the Indenture Obligations as set forth in the Indenture and
shall include any successor replacing it in accordance with the terms of the Indenture and
thereafter means such successor.

 Indebtedness 
means, with respect to any Person, without duplication (i) any liability, contingent or
otherwise, of such Person (A) for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion thereof), whether
as a cash advance, bill, overdraft, money market facility loan or otherwise, or (B)
evidenced by a note, debenture or similar instrument or letters of credit (including a
purchase money obligation) or by any book-entry mechanism or (C) for the payment of money
relating to a Capitalized Lease Obligation or other obligation relating to the deferred
purchase price of property or (D) in respect of an Interest Rate Protection Obligation or
any foreign exchange contract, currency swap agreement or other similar agreement, (ii)
any liability of others of the kind described in the preceding clause (i) which the Person
has guaranteed or which is otherwise its legal liability, (iii) any obligation secured by
a Lien (other than a Lien on Indebtedness or Capital Stock of an Unrestricted Subsidiary
which represents the sole recourse of the secured party to the property or assets of such
Person for any default in respect of the secured obligation) to which the roperty or
assets of such Person are subject, whether or not the obligations secured thereby shall
have been assumed by or shall otherwise bc such Persons legal liability and (iv) the
maximum repurchase or redemption price of any Disqualified Stock of such Person not held
by the Company, Globo Cabo or a Guarantor. In no event shall Indebtedness
include trade payables incurred in the ordinary course of business (or letters of credit
issued in respect thereof). For purposes of Section 10.1  (Debt to Operating Cash
Flow Ratio),  Section 10.2 ( Interes Coverage Ratio)  and
Section 10.3 ( Limitation on Restricted Payments ) and the definition of
Events of Default, in determining the principal amount of any indebtedness (1)
to be incurred by the Company, Globo Cabo or a Restricted Subsidiary or which is
outstanding at any date, (x) the principal amount of any Indebtedness which provides that
an amount less than the principal amount thereof shall due be upon any declaration of
acceleration thereof shall be the accreted value thereof at the date of determination and
(y) effect shall be given to the impact of any Currency Agreements with respect to such
Indebtedness and (2) outstanding at any time under any Currency Agreement of the Company,
Globo Cabo or any Restricted Subsidiary shall be the net payment obligation under such
Currency Agreement of such Person at such time.

 Indenture   means
the indenture relating to the Notes as originally executed by the Company and the original
Guarantors (including all exhibits and schedules thereto) and as it may from time to time
be supplemented or amended by one or more indentures supplemental thereto entered into
pursuant to the applicable provisions thereof, including the supplemental indenture that
give effect to the terms of the Notes as described herein.

 Independent Financial
Advisor  means a Brazilian or United States investment or merchant banking firm
or public accounting firm of national standing in Brazil or the United States (i) which
does not, and whose directors and executive officers and Affiliates do not, have an
investment in Globo Cabo or any of its Affiliates and (ii) which, in the judgment of the
Board of Globo Cabo is otherwise independent with respect to Globo Cabo and its Affiliates
and qualified to perform the task for which it is to be engaged. A trustee or nominee for
the true parties in interest shall not be excluded from the definition of
Independent Financial Advisor solely as a result of such trustee or nominee
status.

 Interest Rate Protection
Obligations   means the obligations of any Person pursuant to any arrangement
with any other Person whereby, directly or indirectly, such Person is entitled to receive
from time to time periodic payments calculated by applying either a floating or a fixed
rate of interest on a stated notional amount in exchange for periodic payments made by
such Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include without limitation, interest rate swaps, caps, floors,
collars, forward interest rate agreements and similar agreements.

 Investment  means,
with respect to any Person, any advance, loan, account receivable (other than an account
receivable or prepaid expense, including but not limited to trade credit, arising in the
ordinary course of business), or other extension of credit (including, without limitation,
by means of any guarantee) or any capital contribution to (by means of transfers of
property to others, payments for properly or services for the account or use of others, or
otherwise), or any purchase of any shares, stocks, bonds, notes, debentures or other
securities of, any other Person. In addition, any foreign exchange contract, currency swap
agreement or other similar agreement made or entered into by any Person shall constitute
an Investment by such Person. Notwithstanding the foregoing, in no event shall any
issuance of Capital Stock (other than Disqualified Stock) of Globo Cabo in exchange for
Capital Stock, property or assets of another Person constitute an Investment by Globo Cabo
in such other Person.

 Lien  means any
mortgage, charge, pledge, lien (statutory or other), security interest, hypothecation,
assignment for security, claim, or preference or priority or other encumbrance upon or
with respect to any property of any kind, provided that no Asset Sale that is permitted
hereunder shall be considered a Lien. A Person shall be deemed to own subject to a Lien
any property which such Person has acquired or holds subject to the interest of a vendor
or lessor under any conditional sale agreement, capital lease or other title retention
agreement.

 Material Adverse
Effect  means a material adverse effect on (a) the business, condition (financial
or otherwise), operations, performance or properties of the Company, Globo Cabo and the
Guarantors taken as a whole, (b) the ability of the Company, Globo Cabo or the Guarantors
to perform obligations under the Indenture or (c) the rights and remedies of the Holders
under the Indenture.

 Material Licenses 
means each cable television license where the number of subscribers to whom service is
provided pursuant to such license constitutes more than [2%] of all subscribers of Globo
Cabo and its consolidated subsidiaries, taken as a whole.

 Material Restricted
Subsidiary   means any Restricted Subsidiary of Globo Cabo which, at any date of
determination, is a Significant Subsidiary (as that term is defined in
Regulation S-X, as in effect on the Amendment Date, issued under the Securities Act).

Moodys
means Moodys Investors Service, Inc.

 Net Cash Proceeds  
means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash
Equivalents including payments in respect of deferred payment obligations when received in
the form of cash or Cash Equivalents net of (i) brokerage commissions and other fees and
expenses (including fees and expenses of legal counsel and investment bankers) related to
such Asset Sale, (ii) provisions for all Taxes payable as a result of such Asset Sale,
(iii) amounts required to be paid to any Person (other than the Company, Globo Cabo or any
Restricted Subsidiary) owning a beneficial interest in or having a Lien on the assets
subject to Asset Sale, (iv) other amounts required to be treated as Net Cash Proceeds
pursuant to Section 10.9 ( Disposition of Proceeds of Asset Sales ) and
(v) appropriate amounts to be provided by the Company, Globo Cabo or any Restricted
Subsidiary, as the case may be, as a reserve required in accordance with U.S. GAAP against
any liabilities associated with such Asset Sale and retained by the Company, Globo Cabo or
any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities under any
indemnification obligations associated with such Asset Sale, all as reflected in an
Officers Certificate of Globo Cabo delivered to the Trustee.

 Notes  means the
Floating Rate Notes due 2005.

 Noteholder  means
any registered holder of a Note.

 Officers Certificate  
means a certificate signed by the Chairman of the Board, Vice Chairman, the Chief
Executive Officer, the Chief Financial Officer, the President or a Vice President, and by
the Secretary or an Assistant Secretary, of the Company, Globo Cabo or any Guarantor, as
the case may be, and delivered to the Trustee.

 Opinion of Counsel 
means a written opinion of counsel who shall be reasonably acceptable to the Trustee.

 Pari Passu Debt
Securities  means any Debt Securities which rank pari passu in right of payment
with the Notes and the Guarantees, as applicable.

 Permitted Business 
means (i) the delivery or distribution of television, radio, internet or other
telecommunications services in Brazil and (ii) any business or activity reasonably related
thereto, including, without limitation, any business conducted by the Company, Globo Cabo
or any Restricted Subsidiary on the Amendment Date, the acquisition, holding or
exploitation of any license relating to the delivery of the services described in clause
(i) of this definition, the development or acquisition of rights to programming for
delivery or distribution in accordance with clause (i) of this definition, the acquisition
or development of any hardware, software or other infrastructure to be used for the
services set forth in clause (i) of this definition and any other business involving
voice, data, internet or video telecommunications services.

 Permitted Holders  
means Globopar and its Affiliates.

 Permitted
Investments  means (a) Cash Equivalents, (b) Investments in prepaid expenses,
negotiable instruments held for collection and lease, utility and workers
compensation, performance and other similar deposits, (c) Interest Rate Protection
Obligations and Currency Agreements, (d) bonds, notes, debentures or other securities
received as a result of Asset Sales permitted under Section 10.9 ( Disposition of
Proceeds of Asset Sales),  (e) any Investment in another Person in exchange for
Capital Stock (other than Disqualified Stock) of Globo Cabo, (f) loans and advances to
employees of the Company, Globo Cabo or any of the Restricted Subsidiaries in the ordinary
course of business in an aggregate amount not to exceed US$1,000,000 (or, to the extent
non-U.S. dollar denominated, the U.S. Dollar Equivalent of such amount) at any time
outstanding and (g) any Investment in Capital Stock obligations of any Person made in
settlement of claims by the Company, Globo Cabo or any Restricted Subsidiary against such
Person.

 Permitted Liens  
means (a) Liens securing the Notes; (b) Liens existing on the Amendment Date; (c) Liens
securing Indebtedness otherwise permitted under this Indenture in respect of the purchase
of equipment, real property or other assets or for improvements or replacements or
substitutions therefor or additions thereto,  provided that  the principal amount of
Indebtedness secured by such Lien does not exceed 100% of the purchase price thereof and
such Lien does not extend to or cover any other equipment, property or other asset; (d)
Liens securing Acquired Indebtedness,  provided, however,  that (i) such Lien
attached to the acquired asset prior to the time of the acquisition of such Acquired
Indebtedness and (ii) such Lien does not extend to or cover any other asset; (e) any Lien
on receivables or shares constituting proceeds of an Asset Sale pursuant to clause (y) of
the first paragraph of Section 10.9; and (f) Liens to secure Debt Securities that are
incurred to extend, renew or refinance (or successive extensions, renewals or
refinancings), in whole or in part, Debt Securities secured by any Lien referred to in the
foregoing clauses (b), (c), (d) and (e), so long as such Lien does not extend to any other
property and the principal amount of Debt Securities so secured (i) is not increased and,
(ii) in the case of clause (b) and (e), does not exceed 100% of the purchase price of such
asset.

 Person  means any
individual, corporation, company, voluntary association, partnership, limited liability
company, joint venture, trust, unincorporated organization or governmental authority or
other entity of whatever nature.

 Preferred Stock 
means, with respect to any Person, any and all shares, interests, participations or other
equivalents (however designated) of such Persons preferred or reference stock or
shares whether now outstanding, or issued after the Amendment Date to the extent it
carries any preference in respect of the distribution of assets in the event of a
liquidation or insolvency of such Person as compared with any other Capital Stock of such
Person.

 Pro Rata Share 
means a fraction (i) the numerator of which is the aggregate principal amount of Notes
outstanding on the applicable purchase date and (ii) the denominator of which is the sum
of (x) the aggregate principal amount of Notes outstanding on such date and (y) if there
are Pari Passu Debt Securities or other unsubordinated Indebtedness of the Company, Globo
Cabo or any Guarantor that requires that Net Cash Proceeds be used to offer to purchase or
repay such Pari Passu Debt Securities, the outstanding principal amount of such Pari Passu
Debt Securities or other unsubordinated Indebtedness of the Company, Globo Cabo or any
Guarantor on such date.

 Restricted Payment 
means any of the following: (i) the declaration or payment of any dividend or any other
distribution on Capital Stock of Globo Cabo or any payment made to the direct or indirect
holders (in their capacities as such) of Capital Stock of Globo Cabo (other than dividends
or distributions payable solely in Capital Stock (other than Disqualified Stock) of Globo
Cabo or in options, warrants or other rights to purchase Capital Stock (other than
Disqualified Stock) of Globo Cabo), (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of Globo Cabo (other than any such Capital Stock
owned by the Company, Globo Cabo or a Restricted Subsidiary) or (iii) the making of any
principal payment on, or the purchase, redemption, defeasance or other acquisition or
retirement for value, prior to any scheduled maturity, scheduled repayment or scheduled
sinking fund payment of, any Subordinated Indebtedness (other than any Subordinated
Indebtedness held by the Company, Globo Cabo or a Restricted Subsidiary).

 Restricted Subsidiary
  means any Subsidiary of the Company or Globo Cabo that is not an Unrestricted
Subsidiary.

S&P means
Standard & Poors Corporation.

 Semiannual Period 
means the six-month period ending on each June 30 and December 31.

 Specified
Indebtedness  means any Indebtedness of any Restricted Subsidiary (other than a
Guarantor) which is not subordinated to any other Indebtedness of such Restricted
Subsidiary.

 Subordinated Debt
Securities  means any Debt Securities (and any Guarantee of any Debt Security)
which would constitute Subordinated Indebtedness.

 Subordinated
Indebtedness  means any Indebtedness of the Company, Globo Cabo or any Guarantor
which is expressly subordinated in right of payment to the Notes or the Guarantee of such
Guarantor, as the case may be.

 Subsidiary   means,
with respect to any Person (i) any corporation of which the outstanding Stock Voting
having at least a majority of the votes entitled to be cast in the election of directors
shall at the time be owned, directly or indirectly, by such Person or (ii) any other
Person of which at least a majority of Voting Stock is at the time, directly or
indirectly, owned by such Person.

 Taxes  means any
tax, duty, levy, impost, assessment or other governmental charge (including penalties,
interest and any other liabilities related thereto) imposed or levied by or on behalf of a
Taxing Authority.

 Taxing Authority 
means the government of the Federative Republic of Brazil or of Japan or any state of the
Federative Republic of Brazil or of Japan or any political subdivision or territory or
possession of the government of the Federative Republic of Brazil or of Japan or any
jurisdiction in which the Company, Globo Cabo or a Guarantor is engaged in business for
tax purposes or is resident for withholding tax purposes or, in all such instances, any
authority or agency therein or thereof having power to tax.

 Total Consolidated
Indebtedness and Subsidiary Preferred Stock  means, at any date of determination,
an amount equal (i) the aggregate principal amount of all Indebtedness of the Company,
Globo Cabo and the Restricted Subsidiaries outstanding as of the date of determination and
(ii) the aggregate liquidation preference of all Preferred Stock of Restricted
Subsidiaries issued and outstanding as of the date of determination (other than
Indebtedness owing to and Preferred Stock held by the Company, Globo Cabo or a Restricted
Subsidiary).

 Trustee  means the
Person named as the Trustee in the first paragraph of the Indenture, until a
successor Trustee shall have become suc h pursuant to the applicable provisions of the
Indenture, and thereafter Trustee shall mean such successor Trustee.

 Unrestricted Subsidiary
  means any Subsidiary of the Company or Globo Cabo (other than a Guarantor)
existing on the Amendment Date that accounts for less than 5% of the consolidated assets
and revenue of Globo Cabo designated as such pursuant to a resolution of the board of
directors delivered to the Trustee. Any such designation may be revoked by a Board
Resolution of the Company or Globo Cabo delivered to the Trustee.

 U.S.    
          Dollar Equivalent   means, with respect to any monetary amount in a
          currency other than the U.S. dollar, at any time for the determination thereof,
          the amount of U.S. dollars obtained by converting such foreign currency involved
          in such computation into U.S. dollars at the spot rate for the purchase of U.S.
          dollars with the applicable foreign currency as quoted by Reuters at
          approximately 11:00 a.m. (New York time) on the date not more than two business
          days prior to such determination. For purposes of determining whether any
          Indebtedness can be incurred, any Investment can be made and any Affiliate
          Transaction can be undertaken (a Tested Transaction), the U.S.
          Dollar Equivalent of such Indebtedness, Investment or Affiliate
          Transaction shall be determined on the date incurred, made or undertaken and no
          subsequent change in the U.S. Dollar Equivalent shall cause such Tested
          Transaction to have been incurred, made or undertaken in violation of the
          Indenture.

 U.S.    
          GAAP  means generally accepted accounting principles and practices in
          the United States consistently applied by a corporation or as between
          corporations and over time, as in effect from time to time;  provided
           that, for purposes of determining compliance with Section 10.1  (Debt to
          Operating Cash Flow Ratio),  Section 10.2 ( Interest Coverage Ratio)
           and Section 10.3 ( Limitation on Restricted Payments) , U.S.
          GAAP shall mean such generally accepted accounting principles and
          practices as adopted by Globo Cabo on the Amendment Date and as are consistent
          with those set forth in this Prospectus.

 Voting Stock 
means, with respect to any Person, the Capital Stock of any class or kind ordinarily
having the power to vote for the election of directors or other members of the governing
body of such Person.

 Wholly Owned Restricted
Subsidiary   means any Restricted Subsidiary of which 100% of the outstanding
Capital Stock is owned by the Company, Globo Cabo or another Wholly Owned Restricted
Subsidiary. For purposes of this definition, any directors qualifying shares or
nvestments by foreign nationals mandated by applicable law shall be disregarded in
determining the ownership of a Restricted Subsidiary.

Schedule II

SECTION 5.1 Events of
Default

Event of Default ,
wherever used herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):

(a)    
          default in the payment of the principal of, or premium, if any, on the Notes
          when due, at maturity, upon redemption or otherwise (including pursuant to a
          Change of Control Offer or an Asset Sale Offer);

(b)    
          default in the payment of interest on the Notes when it becomes due and payable
          and continuance of such default for a period of more than ten Business Days;

(c)(i)    
          failure to comply with Sections 8.1, 10.1, 10.2, 10.8, 10.12 (subject to the
          grace period set forth in Section 5.1(b)) and 10.14 or (ii) failure to comply
          with any other covenant or other term in the Indenture (other than those
          specified in clause (a), (b) or (c)(i)) and such default continues for a period
          of 30 days after notice to the Company by the Trustee or to the Company and the
          Trustee by holders of at least 25% of the aggregate principal amount of the
          Notes then outstanding;

(d)(i)    
          failure to pay, following any applicable grace period, any payment of principal,
          premium or interest due (whether at maturity or otherwise) under one or more
          classes or issues of indebtedness in an aggregate principal amount of
          US$10,000,000 (or, to the extent non-U.S. dollar denominated, the U.S. Dollar
          Equivalent of such amount) or more or (ii) failure by the Company, Globo Cabo or
          any Restricted Subsidiary to perform any other term, covenant, condition or
          provision of one or more classes or issues of indebtedness in an aggregate
          principal amount of the equivalent of US$10,000,000 or, to the extent non-U.S.
          dollar denominated, the U.S. Dollar Equivalent of such amount) or more and, in
          the case of this clause (ii), such failure results in an acceleration of the
          maturity thereof;  provided  that, in the case of a termination or
          expiration of an Interest Rate Protection Obligation or Currency Agreement
          requiring that the monetary liability thereunder be paid, no Event of Default
          shall occur if such payment is made within 30 days after such payment is due;

(e)    
          one or more judgments, orders or decrees for the payment of money shall be
          entered in an amount or amounts of US$10,000,000 (or, to the extent non-U.S.
          dollar denominated, the U.S. Dollar Equivalent of such amount) or more, either
          individually or in the aggregate, against the Company or Globo Cabo or any
          Restricted Subsidiary or any of their respective properties and shall not be
          discharged and there shall have been a period of 60 days during which a stay of
          enforcement of such judgment, order or decree, by reason of pending appeal or
          otherwise, shall not be in effect;

(f)    
          The Company, Globo Cabo or any of its Material Restricted Subsidiaries pursuant
          to or under or within the meaning of any Bankruptcy Law:

(i)    
          commences a voluntary case or proceeding;

(ii)    
          consent to the making of a Bankruptcy Order in an involuntary case or proceeding
          or the commencement of any case against it;

(iii)    
          consent to the appointment of, or taking possession by, a Custodian of it or for
          any substantial part of its property;

(iv)    
          makes a general assignment for the benefit of its creditors of files a proposal
          of other scheme or arrangement involving the rescheduling or composition of its
          indebtedness;

(v)    
          files a petition in bankruptcy or an answer or consent seeking reorganization or
          relief;

(vi)    
          shall admit in writing its inability to pay its debts generally as they become
          due; or

(vii)    
          consent to the filing or a petition in bankruptcy;

(g)    
          a court of competent jurisdiction in any involuntary case or proceeding enters a
          Bankruptcy Order against the Company, Globo Cabo or any Material Restricted
          Subsidiary, and such Bankruptcy Order remains unstayed and in effect for 30
          consecutive days;

(h)    
          a Custodian shall be appointed out of court (other than under any circumstance
          described in the preceding paragraphs (i) or (vii)) with respect to the Company,
          Globo Cabo or any Material Restricted Subsidiary or with respect to all or any
          substantial part of the assets or properties of Globo Cabo or any of its
          Material Restricted Subsidiaries, and such appointment shall remain unstayed and
          in effect for 30 consecutive days;

(i)    
          there shall have occurred any seizure, compulsory acquisition, expropriation or
          nationalization of all or a material part of the assets or revenues of the
          Company, Globo Cabo and the Material Restricted Subsidiaries, taken as a whole;
          or

(j)    
          fails to maintain its Material Licenses as required under Section 10.16
          (Maintenance of Material Licenses);

(k)    
          the representations and warranties of the Company and Globo Cabo contained in
          the supplemental indenture giving effect to these terms shall prove to have been
          materially incorrect at the time given; or

(l)    
          any Guarantee ceases to be in full force and effect or is declared null and void
          or any Guarantor denies that it has any further liability under any Guarantee or
          gives notice to that effect (other than by reason of the termination of the
          Indenture or the release of any Guarantee in accordance with the Indenture).

SCHEDULE III

SECTION 8.1.
Consolidation, Merger, Sale of Assets, Etc.

Neither the Company nor Globo Cabo
will, in a single transaction or through a series of transactions, consolidate, amalgamate
or combine with or merge with or into or, directly or indirectly, sell, assign, convey,
lease, transfer or otherwise dispose of all or substantially all of their properties and
assets to any Person or Persons, and neither the Company nor Globo Cabo will permit any of
the Restricted Subsidiaries to enter into any such transaction or series of transactions
if such transaction or series of transactions, in the aggregate, would result in the sale,
assignment, conveyance, lease, transfer or disposition of all or substantially all of the
properties and assets of the Company, Globo Cabo and the Restricted Subsidiaries, taken as
a whole, to any Person or Persons, unless (a) the Company or Globo Cabo shall be the
continuing Person, or the resulting, surviving or transferee Person (in either case, the
surviving entity) shall be a company organized and existing under the laws of
the Federative Republic of Brazil or any state or political subdivision thereof, (b) the
surviving entity shall expressly assume all of the obligations of the Company and Globo
Cabo under the Notes and the Indenture and shall execute a supplemental indenture to
effect such assumption which supplemental indenture shall be delivered to the Trustee and
shall be in form reasonably satisfactory to the Trustee, (c) immediately after giving
effect to such transaction or series of transactions on a pro forma basis (including,
without limitation, any Indebtedness incurred or anticipated to be incurred in connection
with or in respect of such transaction or series of transactions), no Default or Event of
Default shall have occurred and be continuing, (d) the Company, Globo Cabo and each
Guarantor shall have delivered a written instrument in form satisfactory to the Trustee
confirming its obligations under the Notes and (e) the surviving entity shall have
delivered to the Trustee an Officers Certificate and an Opinion of Counsel stating
that such transaction or series of transactions, and, if a supplemental indenture is
required in connection with such transaction or series of transactions to effectuate such
assumption, such supplemental indenture complies with this covenant and that all
conditions precedent in the Indenture relating to the transaction or series of
transactions have been satisfied. In addition to the foregoing, in the case of any merger,
consolidation or combination involving a Guarantor as a result of which such
Guarantors Guarantee is not released as provided in the Indenture, such Guarantor or
the resulting surviving or transferee Person (if other than such Guarantor) shall
expressly assume all of such Guarantors obligations under its Guarantee and the
indenture and shall execute a supplemental indenture to effectuate such assumption, which
supplemental indenture shall be delivered to the Trustee and shall be in form reasonably
satisfactory to the Trustee.

Upon any consolidation, combination
or merger or any transfer of all or substantially all of the assets of a Person subject
to, and in accordance with, the foregoing, the surviving entity shall succeed to, and be
substituted for, and may exercise every right and power of the Company, Globo Cabo or such
Guarantor, as the case may be, under the Indenture and the applicable Guarantee with the
same effect as if such surviving entity had been named as such;  provided  that,
solely for purposes of computing Cumulative Adjusted Available Cash Flow for purposes of
clause (ii) of the first paragraph of Section 10.3 ( Limitation on Restricted
Payments ) above, the Cumulative Adjusted Available Cash Flow of any Persons
other than Globo Cabo and the Restricted Subsidiaries shall only be included for periods
subsequent to the effective time of such merger, consolidation, combination or transfer of
assets.

For all purposes of the Indenture and
the Notes (including the provisions of this covenant and Section 10.3 ( Limitation
on Restricted Payments ) and Section 10.4 ( Limitation on Liens Securing
Certain Indebtedness )), Subsidiaries of any surviving entity will, upon such
transaction or series of transactions, become Restricted Subsidiaries or Unrestricted
Subsidiaries as provided hereunder, and all Indebtedness, and all Liens on property or
assets, of the Company, Globo Cabo and the Restricted Subsidiaries immediately prior to
such transaction or series of transactions will be deemed to have been incurred upon such
transaction or series of transactions.

SCHEDULE IV

SECTION 10.1 Debt to
Operating Cash Flow Ratio.

Globo Cabo will not permit the ratio
of (x) total Consolidated Indebtedness and Subsidiary Preferred Stock to (y) Annualized
Pro Forma Consolidated Operating Cash Flow for the latest two Semiannual Periods to exceed
the following respective ratios at any time during the following respective periods
(provided that, until the Semiannual Period ending December 31, 2001, such ratio shall be
calculated on a pro forma basis to give effect to the consolidation of the Company into
Globo Cabo):

|Period                                                      | Ratio      
|----------------------------------------------------------- | -----------
|From and including the Amendment Date through and including | 6.00 to 1.0
|December 31, 2000                                           |            
|                                                           
|From and including January 1, 2001 through and including    | 6.00 to 1.0
|December 31, 2001                                           |            
|                                                           
|From and including January 1, 2002 through and including    | 5.25 to 1.0
|December 31, 2002                                           |            
|                                                           
|From and including January 1, 2003 through and including    | 5.00 to 1.0
|December 31, 2003                                           |            

SECTION 10.2 Interest
Coverage Ratio.

Globo Cabo will not permit the ratio
of (x) Adjusted EBITDA to (y) Consolidated Net Interest Expense for the latest two
Semiannual Periods to be less than the following respective ratios at any time during the
following respective periods (provided that, until the Semiannual Period ending December
31, 2001, such ratio shall be calculated on a pro forma basis to give effect to the
consolidation of the Company into Globo Cabo):

|Period                                                      | Ratio     
|----------------------------------------------------------- | ----------
|From and including the Amendment Date through and including | 1.3 to 1.0
|December 31, 2000                                           |           
|                                                           
|From and including January 1, 2001 through and including    | 1.6 to 1.0
|December 31, 2001                                           |           
|                                                           
|From and including January 1, 2002 through and including    | 1.8 to 1.0
|December 31, 2002                                           |           
|                                                           
|From and including January 1, 2003 through and including    | 2.0 to 1.0
|December 31, 2003                                           |           

SECTION 10.3 Limitation
on Restricted Payments.

Neither the Company nor Globo Cabo
will, and will not permit any of the Restricted Subsidiaries to, make, directly or
indirectly, any Restricted Payment unless:

(i)    
          no Default shall have occurred and be continuing at the time of or after giving
          effect to such Restricted Payment; and

(ii)    
          immediately after giving effect to such Restricted Payment, the aggregate amount
          of all Restricted Payments declared or made on or after the Amendment Date does
          not exceed an amount equal to the sum of (a) the difference between (x) the
          Cumulative Adjusted Available Cash Flow determined at the time of such
          Restricted Payment and (y) 160% of the cumulative Consolidated Interest Expense
          of Globo Cabo determined for the period commencing on [July 1, 2000] and ending
          on the last day of the latest fiscal quarter for which consolidated financial
          statements of Globo Cabo are available preceding the date of such Restricted
          Payment plus (b) the aggregate net cash proceeds received by Globo Cabo (x) as
          capital contributions to Globo Cabo on or after the Amendment Date or (y) from
          the issue or sale (other than to a Restricted Subsidiary of Globo Cabo) of its
          Capital Stock (other than Disqualified Stock) on or after the Amendment Date
          (excluding, in the case of this subclause (b), any net cash proceeds that are
          invested in accordance with clause (vi) of the following paragraph) plus (c) the
          aggregate net proceeds received by Globo Cabo from the issuance (other than to a
          Restricted Subsidiary of Net Sul or Globo Cabo) on or after the Amendment Date
          of its Capital Stock (other than Disqualified Stock) upon the conversion of, or
          exchange for, Indebtedness of Globo Cabo or a Restricted Subsidiary plus (d) in
          the case of the disposition or repayment of any Investment constituting a
          Restricted Payment (other than an Investment made pursuant to clause (v) of the
          following paragraph) made after the Amendment Date an amount equal to the lesser
          of the return of capital with respect to such Investment and the cost of such
          Investment, in either case, less the cost of the disposition of such Investment.
          For purposes of the preceding clauses (b) (y) and (c) and without duplication,
          the value of the aggregate net cash proceeds received by Globo Cabo upon the
          issuance of Capital Stock either upon the conversion of convertible Indebtedness
          or in exchange for outstanding Indebtedness or upon the exercise of options,
          warrants or rights will be the net cash proceeds received upon the issuance of
          such Indebtedness, options, warrants or rights plus the incremental amount
          received by Globo Cabo upon the conversion, exchange or exercise thereof.

For purposes of determining the
amount expended for Restricted Payments, cash distributed shall be valued at the face
amount thereof, and property other than cash shall be valued at its Fair Market Value.

The provisions of this covenant shall
not prohibit, (i) so long as no Default shall have occurred and be continuing, the payment
of any dividend or other distribution within 60 days after the date of declaration
thereof, if at such date of declaration such payment would comply with the provisions of
the Indenture, (ii) so long as no Default shall have occurred and be continuing, the
purchase, redemption, retirement or other acquisition of any shares of Capital Stock of
Globo Cabo (A) in exchange for or conversion into or (B) out of the net cash proceeds of
the substantially concurrent issue and sale (other than to a Restricted Subsidiary of
Globo Cabo) of, shares of Capital Stock of Globo Cabo (other than Disqualified Stock):
 provided  that any such net cash proceeds pursuant to the immediately preceding
clause (B) are excluded from clause (iii)(b) of the preceding paragraph, (iii) so long as
no Default shall have occurred and be continuing, the purchase, redemption, retirement,
defeasance or other acquisition of (A) Preferred Stock of any Restricted Subsidiary made
by exchange for or conversion into, or out of the net cash proceeds of, a substantially
concurrent issue and sale (other than to a Restricted Subsidiary of Globo Cabo) of (x)
Capital Stock (other than Disqualified Stock) of Globo Cabo or (y) other Preferred Stock
of any Restricted Subsidiary having an Average Life to Stated Maturity equal to or greater
than the Average Life to Stated Maturity of the Preferred Stock being purchased, redeemed,
retired, defeased or otherwise acquired or (B) Subordinated Indebtedness made by exchange
for or conversion into, or out of the net cash proceeds of, a substantially concurrent
issue and sale (other than to a Restricted Subsidiary of Globo Cabo) of (x) Capital Stock
(other than Disqualified Stock) of Globo Cabo or (y) other Subordinated Indebtedness
having an Average Life to Stated Maturity equal to or greater than the Average Life to
Stated Maturity of the Subordinated Indebtedness being purchased, redeemed, retired,
defeased or otherwise acquired, (iv) so long as no Default shall have occurred and be
continuing, any Investment constituting a Restricted Payment by Globo Cabo or any
Restricted Subsidiary in any Person (including any Unrestricted Subsidiary) that operates
principally or has been formed to operate principally a Permitted Business in an amount
not to exceed US$25,000,000 (or, to the extent non-U.S. dollar denominated, the U.S.
Dollar Equivalent thereof) in the aggregate at any time outstanding, (v) so long as no
Default shall have occurred and be continuing, any Investment promptly made with the
proceeds of a substantially concurrent (1) capital contribution to Globo Cabo or (2) issue
or sale of Capital Stock (other than Disqualified Stock) of Globo Cabo. Restricted
Payments of the type set forth in the preceding clause (iv) shall be included in making
the determination of available amounts under clause (iii) of the preceding paragraph and
(vi) any Restricted Payment required to be made under applicable law or regulation or by
the rules of any exchange or quotation system on which securities of the Issuer are listed
or traded.

SECTION 10.4 Limitation
on Liens Securing Certain Indebtedness.

Neither the Company nor Globo Cabo
will, and will not permit any of the Restricted Subsidiaries to, create, incur, assume or
suffer to exist any Liens of any kind against or upon any of their property or assets, or
any proceeds therefrom, which secure either (i) Subordinated Debt Securities unless the
Notes and the Guarantees, as applicable, are secured by a Lien on such property, assets or
proceeds that is senior in priority to the Liens securing such Subordinated Debt
Securities or (ii) Pari Passu Debt Securities unless the Notes and the Guarantees, as
applicable, are equally and ratably secured with the Liens securing such Pari Passu Debt
Securities, except, in either such case, for Permitted Liens.

SECTION 10.5 Business of Globo
Cabo; Restriction on Transfers of Existing Business.

Neither the Company nor Globo Cabo
will, and will not permit any of the Restricted Subsidiaries to, be principally engaged in
any business or activity other than a Permitted Business. In addition, the Company, Globo
Cabo and the other Guarantors will not be permitted to, directly or indirectly, transfer
to any Restricted Subsidiary that is not a Guarantor or any Unrestricted Subsidiary (i)
any of the licenses, permits or authorizations used in the Permitted Business of the
Company, Globo Cabo and the Guarantors on the Amendment Date or (ii) any material portion
of the property and equipment (as such term is used in Globo Cabos
consolidated financial statements) of the Company, Globo Cabo or any Guarantor used in the
licensed service areas of the Company, Globo Cabo and the Guarantors as they exist on the
Amendment Date,  provided  that the Company, Globo Cabo and the Guarantors may make
Asset Sales in compliance with Section 10.9 ( Disposition of Proceeds of Asset
Sales ) and pledge property and assets to the extent permitted as described under
Section 10.4 ( Limitation on Liens Securing Certain Indebtedness ).

SECTION 10.6 Limitation
on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries.

Neither the Company nor Globo Cabo
will, and will not permit any of the Restricted ubsidiaries to, directly or indirectly,
create or otherwise enter into or cause to become effective any consensual encumbrance or
consensual restriction of any kind on the ability of any Restricted Subsidiary to (a) pay
dividends, in cash or otherwise, or make any other distributions on their Capital Stock or
any other interest or participation in, or measured by, its profits owned by the Company,
Globo Cabo or any Restricted Subsidiary, (b) pay any Indebtedness owed to the Company,
Globo Cabo or a Restricted Subsidiary, (c) make any Investment in the Company, Globo Cabo
or any Restricted Subsidiary or (d) transfer any of its property or assets to the Company,
Globo Cabo or to any Restricted Subsidiary, except for (i) any such customary encumbrance
or restriction contained in a security document creating a Lien permitted under the
Indenture to the extent relating to the property or asset subject to such Lien following a
default in respect of the applicable secured obligation, (ii) any such encumbrance or
restriction pursuant to any agreement existing on the Amendment Date, (iii) any such
encumbrance or restriction with respect to a Restricted Subsidiary that is not a
Restricted Subsidiary on the Amendment Date which encumbrance or restriction is in
existence at the time such Person becomes a Restricted Subsidiary but not created in
contemplation thereof, (iv) any such encumbrance or restriction existing under any
agreement that refinances, replaces or amends an agreement containing a restriction
permitted by clause (iii) above,  provided  that the terms and conditions of any such
restrictions are not materially less favorable to the holders of Notes than those under or
pursuant to the agreement being replaced or amended or the agreement evidencing the
indebtedness refinanced, (v) any such encumbrance or restriction imposed pursuant to an
agreement which has been entered into for the sale or disposition of all or substantially
all of the Capital Stock or assets of such Restricted Subsidiary and (vi) customary
non-assignment provisions in leases entered into in the ordinary course of business and
consistent with past practices.

SECTION 10.7 Limitation
on Transactions with Affiliates.

Neither the Company nor Globo Cabo
will, and will not permit any of the Restricted ubsidiaries to, enter into any Affiliate
Transaction, other than any such transaction with the Company, lobo Cabo or any Restricted
Subsidiary, except for any transactions that are conducted on an armslength basis.

In addition to the foregoing, for any
Affiliate Transaction that involves in excess of US$20,000,000 but less than or equal to
US$30,000,000, the Chief Executive Officer of the Company, Globo Cabo or such Restricted
Subsidiary, as the case may be, shall determine that the transaction satisfies the above
criteria and shall evidence such a determination by a certificate filed with the Trustee.
For any Affiliate Transaction with an Affiliate that involves in excess of US$30,000,000,
the Company shall cause a certificate of the Disinterested Board members of the Company,
Globo Cabo or such Restricted Subsidiary, as the case may be, to be delivered to the
Trustee. For any recurring Affiliate Transaction, the Company shall cause the Chief
Executive Officer or the Board of Directors of the Company, Globo Cabo or such Restricted
Subsidiary, as the case may be, to file an annual certificate with the Trustee confirming
that, during the previous year, the Company, Globo Cabo or such Restricted Subsidiary, as
the case may be, has not, and has not permitted any Subsidiary to have, entered into any
Affiliate Transaction involving in excess of US$20,000,000 or US$30,000,000, respectively,
except where the transaction was in the best interests of the Company, Globo Cabo or such
Restricted Subsidiary, as the case maybe, and was on terms no less favorable to the
Company, Globo Cabo or such Restricted Subsidiary, as the case may be, as those that could
have been obtained in a comparable arms-length transaction with an entity that was
not an Affiliate.

Notwithstanding the foregoing, the
restrictions set forth in this covenant shall not apply to (i) transactions with or among
the Company, Globo Cabo and/or any of the Restricted Subsidiaries, (ii) any dividend or
other payment explicitly permitted by Section 10.3 ( Limitation on Restricted
Payments ), (iii) directors fees, indemnification and similar arrangements,
officers indemnification, employee stock option or employee benefit plans, employee
salaries and bonuses or legal fees paid or created in the ordinary course of business,
(iv) any Investment (other than an Investment in Disqualified Stock) in the Company, Globo
Cabo or any Restricted Subsidiary that is otherwise permitted under the terms of this
Indenture, (v) any Restricted Payments required by applicable law or regulation or by the
rules of any exchange or quotation system on which securities of the Company, Globo Cabo
or such Restricted Subsidiary are listed or quoted, (vi) recurring transactions under
arrangements in existence on the Amendment Date and (vii) any ordinary-course treasury or
cash management transactions by the Company, Globo Cabo or any Restricted Subsidiary with
Globo Comunicações e Participações Ltda. or any successor
treasury or cash management companies charged with handling treasury functions for the
Globo organization and Affiliated Companies, to the extent that Net Sul, Globo Cabo or
such Restricted Subsidiary, as the case may be, shall retain rights thereto.

SECTION 10.8 Change of
Control.

Following the occurrence of a Change
of Control (the date of such occurrence being the Change of Control Date), the
Company shall notify the holders of the Notes, in the manner prescribed by the Indenture,
of such occurrence and shall make an offer to purchase (the Change of Control
Offer), on a business day (the Change of Control Payment Date) not later
than 60 days following the Change of Control Date, all Notes then outstanding at a
purchase price equal to 100% of the principal amount thereof plus accrued and unpaid
interest, if any, to any Change of Control Payment Date. Notice of a Change of Control
Offer shall be given to holders of Notes, not more than 60 days before the Change of
Control Payment Date. The Change of Control Offer is required to remain open for at least
20 business days and until the close of business the Change of Control Payment Date. The
Companys obligations may be satisfied if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Company and purchases all Notes
validly tendered and not withdrawn under such Change of Control Offer.

SECTION 10.9 Disposition
of Proceeds of Asset Sales.

Neither the Company nor Globo Cabo
will, and will not permit any of the Restricted Subsidiaries to, make any Asset Sale,
unless (a) the Company, Globo Cabo or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the shares or assets sold or otherwise disposed of and (b) at least 75% of such
consideration consists of cash or Cash Equivalents ( provided that  the following
shall be deemed cash for purposes of this provision and be treated as Net Cash Proceeds,
subject to application as hereinafter provided: the amount of (x) any liabilities (as
shown on the balance sheet or in the notes thereto of the Company, Globo Cabo or such
Restricted Subsidiary) of the Company, Globo Cabo or such Restricted Subsidiary that are
assumed (and from which the Company, Globo Cabo or such Restricted Subsidiary is
nconditionally released) in connection with such Asset Sale by the transferee or purchaser
of such assets or on behalf of such transferee or purchaser by a third party and (y) any
notes, lease obligations or other securities or obligations received by the Company, Globo
Cabo or such Restricted Subsidiary from such transferee or purchaser that are payable in,
or that are sold or transferred (on a non-recourse basis) within 30 days for, cash or Cash
Equivalents). To the extent the Net Cash Proceeds of any Asset Sale are not required to be
applied to repay, and permanently reduce the commitments under, any Specified Indebtedness
or are required but are not so applied, the Company, Globo Cabo or such Restricted
Subsidiary, as the case may be, may either (i) apply such Net Cash Proceeds to repay
Specified Indebtedness with written notice thereof to the Trustee and the Noteholders (the
Permitted Debt Reduction) or (ii) apply such Net Cash Proceeds within 365 days
of the date of sale to an investment in properties and assets that will be used in a
Permitted Business (or in Capital Stock of any Person that will become a Restricted
Subsidiary as a result of such investment or that will otherwise agree to be bound as a
Restricted Subsidiary if such Person principally owns properties and assets that will be
used in a Permitted Business) of the Company, Globo Cabo or any Restricted Subsidiary
(such property or assets, together with Capital Stock of any Person that principally owns
such properties and assets, the Replacement Assets). Pending the final
application of any such Net Cash Proceeds in accordance with the second sentence of this
paragraph or to an Asset Sale Offer, the Company, Globo Cabo or such Restricted Subsidiary
may invest such Net Cash Proceeds in any manner not prohibited by the Indenture and may
temporarily repay Specified Indebtedness. The Pro Rata Share of Net Cash Proceeds from any
Asset Sale that are neither used to repay, and permanently reduce the commitments under,
any Specified Indebtedness nor invested in Replacement Assets nor applied to a Permitted
Debt Reduction within such 365-day period shall constitute Excess Proceeds
subject to disposition as provided below.

Within 30 days after the aggregate
amount of Excess Proceeds equals or exceeds US$10,000,000 (or, to the extent non-U.S.
dollar denominated, the U.S. Dollar Equivalent of such amount), the Company shall make an
offer to purchase (an Asset Sale Offer) from all holders of the Notes, Notes
having an aggregate purchase price equal to such Excess Proceeds at a price in cash equal
to 100% of the outstanding principal amount thereof plus accrued and unpaid interest, if
any, to the purchase date. Each Asset Sale Offer shall remain open for a period of 20
business days or such longer period as may be required by law. To the extent that the
aggregate purchase price for Notes tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds available for such offer, the Company and the Restricted Subsidiaries
may use such deficiency for general corporate purposes. If the aggregate purchase price
for the Notes validly tendered and not withdrawn by holders thereof exceeds the Excess
Proceeds available for such offer, Notes to be purchased will be selected on a  pro rata
 basis or as nearly  pro rata  as practicable. Upon completion of such Asset Sale
Offer, the amount of Excess Proceeds shall be reset to zero.

Notwithstanding the two immediately
preceding paragraphs, the Company, Globo Cabo and the Restricted Subsidiaries will be
permitted to consummate an Asset Sale without complying with such paragraphs to the extent
(i) at least 75% of the consideration for such Asset Sale constitutes or a combination of
cash, Cash Equivalents and Replacement Assets and (ii) such Asset Sale is for Fair Market
Value (with Fair Market Value being determined by an Independent Financial Advisor to the
extent required by the definition of Fair Market Value),  provided  that any Net Cash
Proceeds received by Globo Cabo or any of the Restricted Subsidiaries in connection with
any Asset Sale permitted to be consummated under this clause (a) shall be subject to the
provisions of the two preceding paragraphs.

SECTION 10.10.
Limitation on Additional Guarantees by Restricted Subsidiaries.

No Restricted Subsidiary that is not
a Guarantor may at any time guarantee any Debt Securities of the Company, Globo Cabo or
any Guarantor or issue any Debt Securities, unless, at the time of such guarantee or issue
such Restricted Subsidiary becomes a Guarantor as contemplated by the following sentence.
The Company or Globo Cabo may, at any time, cause a Restricted Subsidiary to become a
Guarantor by executing and delivering a supplemental indenture providing for the guarantee
of payment of the Notes by such Restricted Subsidiary on the same basis as the Restricted
Subsidiaries that are Guarantors on the Amendment Date.

SECTION 10.11. Reports.

Whether or not Globo Cabo has a class
of securities registered under the Exchange Act, following any exchange offer or the
effectiveness of any shelf registration statement, Globo Cabo shall furnish without cost
to each holder of Notes and file with the Commission (whether or not Globo Cabo is a
public reporting company at the time), the Trustee and the Initial Purchasers (i) within
180 days after the end of each fiscal year of Globo Cabo, annual reports on Form 20-F (or
any successor form) containing the information required to be contained therein (or
required in such successor form), (ii) within 60 days after the end of each of the first
three fiscal quarters of each fiscal year, reports on Form 6-K (or any successor form) and
(iii) promptly from time to time after the occurrence of an event required to be therein
reported, such other reports on Form 6-K (or any successor form). Each of the reports will
be prepared in accordance with U.S. GAAP consistently applied, will include the amounts of
EBITDA and Adjusted EBITDA, based on U.S. GAAP financial data and will be prepared in
accordance with the applicable rules and regulations of the Commission. Globo Cabo will
agree to use its reasonable best efforts to schedule, disseminate in a customary manner
for public companies information concerning, and conduct a conference call for holders of
Notes to discuss with appropriate senior officers of Globo Cabo the results of operating
and financial conditions of Globo Cabo within 30 days of filing any reports described in
clause (i) and (ii) above with the Commission. Globo Cabo shall, in addition, furnish from
time to time to the Trustee and each of the Noteholders, at Globo Cabos own cost,
such other information as the Trustee or any Noteholder may reasonably request.

SECTION 10.12 Payment of
Principal, Premium and Interest.

The Company shall pay the principal
of, premium, if any, and interest on the Notes, and any Additional Amounts payable in
respect thereof, in accordance with the terms of the Notes and this Indenture.

SECTION 10.13.
Maintenance of Office or Agency.

Each of the Company and Globo Cabo
shall maintain in The City of New York an office or agency where Notes may be presented or
surrendered for payment, where Notes may be surrendered for registration of transfer or
exchange and where notices and demands to or upon Globo Cabo in respect of the Notes and
this Indenture may be served. The office of the Trustee at its Corporate Trust Office
shall be such office or agency of the Company, unless the Company or Globo Cabo shall
designate and maintain some other office or agency for one or more of such purposes. the
Company and Globo Cabo shall give prompt written notice to the Trustee of any change in
the location of any such office or agency.

The Company and Globo Cabo may also
from time to time designate one or more other offices or agencies (in or outside of The
City of New York) where the Notes may be presented or surrendered for any or all such
purposes, and may from time to time rescind such designation;  provided , however,
that no such designation or rescission shall in any manner relieve the Company or Globo
Cabo of their obligations to maintain an office or agency in The City of New York for such
purposes. the Company and Globo Cabo shall give prompt written notice to the Trustee of
any such designation or rescission and any change in the location of any such other office
or agency.

SECTION 10.14. Corporate
Existence.

Subject to the Indentures
article regarding amalgamation, consolidation, merger sale of assets etc., each of the
Company and Globo Cabo shall do or cause to be done all things necessary to preserve and
keep in full force and effect the corporate existence, rights (charter and statutory),
licenses and franchises of the Company, Globo Cabo and each of the Restricted
Subsidiaries;  provided , however, that the Company and Globo Cabo shall not be
required to preserve any such right, license or franchise if the Board of Globo Cabo shall
determine that the preservation thereof is no longer desirable in the conduct of the
business of the Company, Globo Cabo and the Restricted Subsidiaries as a whole and that
the loss thereof is not adverse in any material respect to the Noteholders;
 provided , further, that the foregoing shall not prohibit a sale, transfer or
conveyance of a Restricted Subsidiary of the Company or Globo Cabo or any of their assets
in compliance with the terms of this Indenture.

SECTION 10.15.
Compliance with Laws.

Globo Cabo and each Guarantor will,
and will cause each of its Subsidiaries to, comply in all material respects with all
applicable requirements of law, except where the failure to comply would not have a
Material Adverse Effect on Globo Cabo and the Guarantors, taken as whole, it and, without
limiting the foregoing, shall conduct its operation, and cause all of its properties
(owned or leased) to be, in compliance in all material respects with all applicable
Environmental Laws, except such as where the failure to comply would not have a Material
Adverse Effect on Globo Cabo and the Guarantors, taken as a whole.

SECTION 10.16.
Maintenance of Material Licenses.

The Company, Globo Cabo and the
Guarantors will, and will require each of its Subsidiaries to, preserve and maintain (or
cause to be maintained in full force and effect) in full force and effect all Material
Licenses, except where the failure to so preserve and maintain any of such would not have
a Material Adverse Effect on the Company, Globo Cabo and the Guarantors, taken as a whole.

SECTION 10.17. Payment
of Taxes and Other Claims.

The Company and Globo Cabo shall pay
or discharge or cause to be paid or discharged, before the same shall become delinquent,
(a) all taxes, assessments and governmental charges levied or imposed (i) upon each of the
Company and Globo Cabo or any of their respective Subsidiaries or (ii) upon the income,
profits or property of the Company, Globo Cabo or any of their Restricted Subsidiaries and
(b) all lawful claims for labor, material s  and supplies, which, if unpaid, could
reasonably be expected to become a Lien upon the property of the Company, Globo Cabo or
any of the Restricted Subsidiaries; provided , however, that the Company and Globo
Cabo shall not be required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim which (i) is being contested in good faith by appropriate
proceedings properly instituted and diligently conducted and (ii) if unpaid, would not
materially adversely affect the business, properties or financial condition of the
Company, Globo Cabo and Restricted Subsidiaries, taken as a whole.

SECTION 10.18.
Maintenance of Properties.

The Company and Globo Cabo shall
cause all properties owned by them or any of the Restricted Subsidiaries or used or held
for use in the conduct of their respective businesses to be aintained and kept in good
condition, repair and working order (reasonable wear and tear excepted) and supplied with
all necessary equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof except where the failure to do so would
not materially adversely affect the business, properties or financial condition of the
Company, Globo Cabo and the Restricted Subsidiaries, taken as a whole. the Company and
Globo Cabo can discontinue the maintenance of any of such properties if such
discontinuance is, in the judgment of the Company or Globo Cabo, desirable in the conduct
of its business or the business of any of the Restricted Subsidiaries and is not
disadvantageous in any material respect to the Noteholders.

SECTION 10.19.
Maintenance of Insurance.

The Company and Globo Cabo shall at
all times keep their material properties and the Restricted Subsidiaries material
properties which are of an insurable nature insured with insurers, believed by the Company
and Globo Cabo in good faith to be financially sound and responsible, against loss or
damage to the extent that property of similar character is usually and customarily so
insured by corporations similarly situated and owning like properties (which may include
selfinsurance, if reasonable and in comparable form to that maintained by companies
similarly situated).

SECTION 10.20. Statement
by Officers as to Default

(a)    
          The Company shall deliver to the Trustee, with the delivery of the Financial
          Statements and reports required for each Semiannual Period as described in
          Section 10.11, an Officers Certificate of the Company signed by the
          chairman or a chief executive officer of the Company, and by the principal
          financial officer or principal accounting officer of the Company, stating (i)
          that a review of the activities of the Company during the preceding fiscal year
          has been made under the supervision of the signing officers with a view to
          determining whether the Company has kept, observed, performed and fulfilled its
          obligations under this Indenture and (ii) that, to the knowledge of each officer
          signing such certificate, the Company has kept, observed, per formed and
          fulfilled each and every covenant and condition contained in this Indenture and
          is not in default in the performance or observance of any of the terms,
          provisions, conditions and covenants hereof (or, if a Default shall have
          occurred, describing all such Defaults of which such officers may have
          knowledge, their status and what action the Company is taking or proposes to
          take with respect thereto).

(b)    
          When any Default has occurred and is continuing, or if the Trustee or any
          Noteholder or the trustee for or the holder of any other evidence of
          Indebtedness of the Company and Globo Cabo or any Restricted Subsidiary gives
          any notice or takes any other action with respect to a claimed default (other
          than with respect to Indebtedness (other than Indebtedness evidenced by the
          Notes) in the principal amount of less than US$10,000,000 (or, if non-U.S.
          dollar denominated, the U.S. Dollar Equivalent thereof)), the Company shall
          promptly notify the Trustee of such Default, notice or action and shall deliver
          to the Trustee by registered or certified mail or by telegram, telex or
          facsimile transmission an Officers Certificate specifying such event,
          notice or other action within ten Business Days after the Company and Globo Cabo
          become aware of such occurrence and what action the Company and Globo Cabo are
          taking or propose to take with respect thereto.

SECTION 10.21 Books and
Records.

Globo Cabo shall and shall cause each
of its Restricted Subsidiaries to keep proper books of record and account in which full,
true and correct entries shall be made of all dealings and transactions in relation to
their respective businesses and activities and shall and shall cause each of its
Restricted Subsidiaries to permit representatives of any Noteholder at such
Noteholders expense to visit and inspect any of their respective properties, to
examine any of their respective books and records and to discuss their respective affairs,
finances and accounts with their respective officers, employees and independent public
accountants, all at reasonable times and upon reasonable notice to Globo Cabo; provided
that, so long as no Default or Event of Default has occurred and is continuing, such
requests and visitations shall not interfere with or disrupt the operations of Globo Cabo
or any of its Restricted Subsidiaries.



EXHIBIT 4.1

ACORDO DE ACIONISTAS DA NET SERVIÇOS DE COMUNICAÇÃO S.A. (nova
denominação social da GLOBO CABO S.A.)

O presente Acordo de Acionistas é celebrado entre as partes abaixo
qualificadas, a saber:

DISTEL HOLDING S.A. (nova  denominação  social da Globo Cabo Holding
S.A.),  com sede na Av. Afrânio de Melo Franco,  no 135, parte, na cidade do Rio de
Janeiro, Estado do Rio de Janeiro,  inscrita no CNPJ sob o  no 00.065.376/0001-84,  neste
ato representada na forma do seu estatuto social, doravante denominada DISTEL quando
referida isoladamente;

ROMA PARTICIPAÇÕES LTDA., com sede na Av. Afrânio de Melo Franco,  no 135,
5o andar, parte, na cidade do Rio de Janeiro,  Estado do Rio de  Janeiro,  inscrita  no
CNPJ  sob o no  62.143.623/0001-70,  neste  ato  representada  na forma do seu  contrato
 social,  doravante denominada ROMAPAR quando referida isoladamente;

GLOBO  COMUNICAÇÕES  E  PARTICIPAÇÕES  S.A.,  com sede na Av.  Afrânio
de Melo Franco,  no 135, 1o andar,  na cidade do Rio de Janeiro, Estado do Rio de
 Janeiro,  inscrita no CNPJ sob o no  27.865.757/0001-07,  neste ato  representada  na
forma do seu  estatuto  social, doravante  designada  GLOBOPAR  quando  referida
 isoladamente  e, em  conjunto  com  DISTEL  e  ROMAPAR,  as três  serão  referidas,
conjuntamente, como GLOBO;

BRADESPLAN  PARTICIPAÇÕES  S.A.,  com  sede na  Cidade  de Deus,
 Vila  Yara,  Osasco,  Estado  de São  Paulo,  inscrita  no CNPJ sob o no 61.782.769/0001-01,
 neste ato  representada  na forma do seu estatuto  social,  doravante  designada  BRADESPLAN  quando
referida isoladamente e, em conjunto com BRADESPAR S.A., as duas serão referidas,
conjuntamente, como BRADESPAR;

BNDES  PARTICIPAÇÕES  S.A. - BNDESPAR,  sociedade por ações,  subsidiária
 integral do BANCO  NACIONAL DE  DESENVOLVIMENTO  ECONÔMICO E SOCIAL - BNDES, com sede em
Brasília,  Distrito  Federal e escritório na cidade do Rio de Janeiro,  Av. República do
Chile, no 100, 19oe parte do 20o andares,  Estado do Rio de Janeiro,  inscrita no CNPJ
sob o  no 00.383.281/0001-09,  neste ato  representada na forma do seu estatuto social,
doravante designada BNDESPAR quando referida isoladamente;

MICROSOFT B.V.,  sociedade  constituída  segundo as leis da Holanda,
 com sede em 1119 PE Schiphol-Rijk,  Holanda,  doravante designada MICROSOFT B.V. quando
referida isoladamente e, em conjunto com a MICROSOFT CORPORATION,  ambas serão referidas,
 conjuntamente,  como MICROSOFT;

ZERO HORA EDITORA  JORNALÍSTICA S.A., com sede na Avenida Ipiranga,
 no 1.075, na cidade de Porto Alegre,  Estado do Rio Grande do Sul, inscrita no CNPJ sob
o  no 92.821.701/0001-00,  neste ato  representada na forma do seu estatuto  social,
 doravante  denominada  ZERO HORA quando referida isoladamente;

RBS PARTICIPAÇÕES S.A., com sede na Avenida Érico Veríssimo,  no 400,
na cidade de Porto Alegre,  Estado do Rio Grande do Sul, inscrita no CNPJ sob o  no 68.737.857/0001-22,
 neste ato representada na forma do seu estatuto social, doravante denominada RBS
PARTICIPAÇÕESquando referida isoladamente e, em conjunto com a ZERO HORA, as duas serão
referidas, conjuntamente, como RBS;

Os acima mencionados na qualidade de acionistas da NET SERVIÇOS DE
COMUNICAÇÃO S.A., abaixo  qualificada,  todos doravante referidos em conjunto como Acionistas
do Acordo;

e, ainda, como Intervenientes:

NET SERVIÇOS DE COMUNICAÇÃO S.A. (nova  denominação  social da Globo
Cabo S.A.),  sociedade com sede na Rua Verbo Divino,  no 1.356, 1oandar, na cidade de São
Paulo, Estado de São Paulo,  inscrita no CNPJ sob o no  00.108.786/0001-65,  neste ato
representada na forma do seu Estatuto Social, doravante denominada NET SERVIÇOS ou COMPANHIA quando
referida isoladamente;

BRADESPAR S.A., com sede na Av. Brigadeiro Faria Lima,  no 3.064,  6o andar,
na cidade de São Paulo,  Estado de São Paulo,  inscrita no CNPJ sob o no  03.847.461/0001-92,
 neste ato  representada na forma do seu estatuto  social,  doravante  denominada  BRADESPAR
 S.A.quando referida isoladamente e, em conjunto com a BRADESPLAN, as duas serão
referidas, conjuntamente, como BRADESPAR;

MICROSOFT CORPORATION,  sociedade norte-americana,  com sede em One
Microsoft Way, Redmond, Washington,  98052-6399,  U.S.A., doravante designada  MICROSOFT
 CORPORATION  quando  referida  isoladamente  e, em  conjunto  com a  MICROSOFT  B.V.,
 ambas  serão  referidas, conjuntamente, como MICROSOFT;

NET  BRASIL  S.A.,  sociedade  com sede na Avenida  Brasil,  no 1.612,
 Jardim  América,  na cidade de São Paulo,  Estado de São Paulo, inscrita no CNPJ sob o no  01.007.021/0001-00,
 neste ato  representada  na forma do seu Estatuto  Social,  doravante  denominada  NET
BRASIL quando referida isoladamente.

CONSIDERANDO  QUE GLOBO,  BRADESPAR,  BNDESPAR,  MICROSOFT  e RBS são
 titulares,  na presente  data,  de ações  ordinárias  e de ações preferenciais de emissão
da NET SERVIÇOS, conforme descrito na tabela a seguir:

|Acionista | Ações ON   | % Capital Votante | Ações PN   | % Capital Total(ON + PN)
|--------- | ---------- | ----------------- | ---------- | ------------------------
|GLOBO     | 68.722.497 | 56,71             | 31.822.493 | 35,77                   
|BRADESPAR | 16.917.760 | 13,96             | 0          | 6,02                    
|BNDESPAR  | 9.638.056  | 7,95              | 3.992.923  | 2,93                    
|MICROSOFT | 10.500.000 | 8,66              | 10.500.000 | 7,47                    
|RBS       | 11.159.034 | 9,21              | 23.227.312 | 12,24                   

CONSIDERANDO  QUE GLOBO,  BRADESPAR,  BNDESPAR,  MICROSOFT e RBS
 desejam  vincular ao  presente  Acordo de  Acionistas  todas as Ações Ordinárias  de que
são ou venham a ser titulares e a BNDESPAR,  a MICROSOFT e a RBS desejam  vincular,
 adicionalmente,  todas as Ações Preferenciais  de que são titulares  nesta data,
 conforme  descrito na tabela acima,  ao presente  Acordo de Acionistas,  respeitado o
direito  adquirido pela RBS de desvincular o montante de 11.613.656  (onze  milhões,
 seiscentos e treze mil,  seiscentos e cinqüenta e seis) Ações Preferenciais de que é titular,
as quais poderão ser negociadas nos termos previstos no presente Acordo de Acionistas;

CONSIDERANDO  QUE GLOBO,  BRADESPAR,  BNDESPAR,  MICROSOFT  e RBS
 desejam  conviver  harmonicamente  na NET  SERVIÇOS,  em prol do seu progresso e da
valorização, rentabilidade e liquidez dos investimentos de capital que nela já realizaram
ou vierem a realizar;

CONSIDERANDO  QUE foi celebrado,  em 16 de novembro de 1999,  acordo
de acionistas  entre Globo Cabo Holding S.A.,  antiga  denominação social de DISTEL,
Majoli Participações e Comércio Ltda. (MAJOLI),  sucedida pela BRADESPLAN,  BNDESPAR e
MICROSOFT, acionistas da NET SERVIÇOS naquela data, e que as partes almejam substitui-lo
pelo presente Acordo de Acionistas;

CONSIDERANDO QUE foi celebrado,  em 15 de setembro de 2000, contrato
(Aditivo no 1) entre DISTEL,  BRADESPLAN,  MICROSOFT e Caboparbs Participações  S.A.  (CABOPARBS),
 controlada  pela RBS, o qual  estabelece as condições para a alteração e consolidação do
acordo de acionistas  da NET  SERVIÇOS  firmado  em 16 de  novembro  de  1999,  inclusive
 no que se  refere à  inclusão  da  CABOPARBS  entre os Investidores Qualificados e
demais alterações necessárias em decorrência dessa inclusão;

CONSIDERANDO QUE foi celebrado,  em 10 de abril de 2002,  Protocolo
de Recapitalização da Globo Cabo S/A (antiga  denominação social da NET SERVIÇOS), entre
DISTEL, GLOBOPAR,  ROMAPAR,  BRADESPAR,  BRADESPLAN, RBS, BNDESPAR e GLOBO CABO S.A.
(antiga denominação social da NET SERVIÇOS),  com a interveniência  da NET BRASIL,  o
qual estabelece  condições para a capitalização da NET SERVIÇOS pelos referidos
acionistas  signatários  do  Protocolo,  bem como  consolida  as  alterações  previstas
 no Aditivo  no 1  mencionado  no  CONSIDERANDO imediatamente  anterior a este e aquelas
 estabelecidas  na  Cláusula 3 do  Protocolo  de  Recapitalização,  sendo que a  obrigação
 de capitalização  da NET SERVIÇOS  pelos  signatários  do  Protocolo de  Recapitalização
 sujeita-se  à celebração  do presente  Acordo de Acionistas;

CONSIDERANDO  QUE os Acionistas do Acordo  obrigam-se a exercer seus
direitos com o objetivo de obter a  classificação  da NET SERVIÇOS como  companhia
 admitida no Nível 2 da BOVESPA e, desde que  observadas  as  condições  previstas  nos
itens 2.1.1 e 2.1.2 do presente Acordo, aprovar a listagem das ações de emissão da NET
SERVIÇOS para negociação no Novo Mercado da BOVESPA, no menor prazo possível;

CONSIDERANDO  QUE é interesse  comum dos acionistas  deste Acordo de
Acionistas  que a NET SERVIÇOS,  por si própria ou através de suas controladas,  seja o
instrumento de participação  da GLOBOPAR e/ou dos Acionistas do Acordo,  direta ou
 indiretamente,  em negócios de distribuição terrestre de TV por assinatura e de distribuição
de serviços de banda larga nas áreas de cobertura no Brasil;

CONSIDERANDO  QUE é interesse  comum dos  Acionistas do Acordo dar
 efetividade  jurídica à sua  determinação  conjunta de  estabelecer procedimento  comum
nas questões  que  envolvam  seus  interesses  decorrentes  da  participação  acionária
 que os mesmos detêm na NET SERVIÇOS,  exercendo o direito de voto de forma harmônica,
 valendo-se desse instrumento para orientar e estabelecer condutas que visem o
desenvolvimento e o aprimoramento das atividades sociais, bem como incremento de seus
resultados;

resolvem celebrar o presente Acordo de Acionistas,  doravante
 denominado Acordo de Acionistas,  na forma do disposto no artigo 118 e seus parágrafos
da Lei no 6.404/76, nos seguintes termos e condições.

1. DAS DEFINIÇÕES

Para os fins deste Acordo, as seguintes expressões terão o
significado a elas atribuído abaixo:

Acionistas do Acordo significa a DISTEL, a ROMAPAR, a GLOBOPAR,  a
BRADESPLAN,  a BNDESPAR, a MICROSOFT B.V., a RBS PARTICIPAÇÕES e a ZERO HORA (como
 qualificados  acima),  bem como  quaisquer  de seus  respectivos  sucessores  ou  cessionários,
 nos termos e conforme permitido por este Acordo de Acionistas;

Ações  Ordinárias  significa as ações ordinárias de emissão da NET
SERVIÇOS  detidas pelos Acionistas do Acordo,  com direito a voto, representativas  do
capital social da NET SERVIÇOS,  identificadas nos Considerandos  acima, bem como
quaisquer ações ordinárias que os Acionistas  do Acordo  venham a adquirir  no futuro,
 por  ocasião  de,  mas não se  limitando  a,  subscrição  em aumento de  capital,
bonificação,  desdobramento,  grupamento,  conversão de  debêntures  em Ações  Ordinárias,
 conversão de Ações  Preferenciais  em Ações Ordinárias ou permuta;

Ações  Preferenciais  significa as ações  preferenciais de emissão
da NET SERVIÇOS detidas pela BNDESPAR,  pela MICROSOFT e pela RBS, identificadas nos
Considerandos  acima, bem como quaisquer ações  preferenciais que vierem a ser adquiridas
ou emitidas no futuro,  por ocasião de, mas não se limitando a,  subscrição  em aumento
de capital,  bonificação,  desdobramento  ou  grupamento,  excluindo-se  da presente
 definição as ações  preferenciais  oriundas da conversão de debêntures  da 2a emissão da
NET SERVIÇOS.  No caso da MICROSOFT, incluem-se no conceito de Ações Preferenciais
aquelas oriundas da Opção de Compra;

Acordo de Acionistas significa este Acordo de Acionistas;

Aditivo  no 1  significa o Term  Sheet  celebrado  em 15 de
setembro de 2000,  entre  DISTEL,  BRADESPLAN,  MICROSOFT e  CABOPARBS, controlada pela
RBS, o qual  estabelece as condições para a alteração e consolidação  do acordo de
acionistas da NET SERVIÇOS,  firmado em 16 de novembro de 1999,  inclusive no que se
refere à inclusão da CABOPARBS entre os Investidores  Qualificados e demais  alterações
necessárias em decorrência dessa inclusão;

BOVESPA significa a Bolsa de Valores de São Paulo;

Câmara de Arbitragem do Mercado significa a câmara arbitral instituída
pela BOVESPA, com base nos dispositivos da Lei no 9.307/96;

Competidor da NET SERVIÇOS  significa  qualquer  sociedade ou
Parte  Relacionada à mesma,  joint  venture,  consórcio,  associação, empreendimento
 estratégico  ou similar (i) cujo local  principal de negócios seja no Brasil;  (ii) cujo
 principal  negócio seja (a) o fornecimento  de serviços de  televisão a cabo no Brasil
ou (b) outros  serviços de  comunicação  de conteúdo  usando rede  destinada àtransmissão
 de  programas de televisão a cabo  (incluindo,  mas não se limitando a serviços de conexão
à internet via banda  larga), observando-se que,  exclusivamente  para a MICROSOFT,  não
se aplica o disposto na alínea b desse item ii para fins de definição de Competidor
da NET SERVIÇOS; e (iii) cujo(s) acionista(s)  controlador(es)  tenha(m) sua sede ou residência
no Brasil, excluída desde jáda presente definição a Multitel  Comunicações  Ltda.,
 sociedade detentora de licenças de televisão a cabo, enquanto a RBS for titular de
participação igual ou superior a 49% (quarenta e nove por cento) de seu capital social;

Competidor  da  MICROSOFT  significa  qualquer  sociedade ou Parte
 Relacionada  à mesma,  joint  venture,  consórcio,  associação, empreendimento  estratégico
ou similar que realize  atividades  competidoras às da MICROSOFT,  incluindo,  sem limitação,
 empresas que atuem (i) na elaboração e comercialização  de software para set top boxes
para cabo; (ii) na elaboração e  comercialização  de software para servidores de redes de
transmissão de dados a cabo;  (iii) nos serviços de WEBTV;  (iv) nos serviços de TV pak;
ou (v) na provisão de conteúdo e de serviços de internet (tais como, para fins
ilustrativos,  Yahoo, AOL,  Realnetworks,  IBM, Sun Microsystems,  Novell e AT&T),  sendo
certo que a MICROSOFT  terá o direito de indicar,  de tempos em tempos,  outras  empresas
ou atividades  comerciais  como Competidor da MICROSOFT, sujeitas ao razoável
consentimento da NET SERVIÇOS;

Contrato  de  Opção  de  Compra e de Opção de Venda de  Ações,
 firmado  entre a DISTEL e a  BNDESPAR,  tem o  significado  que lhe éatribuído no item
4.2;

Controle  significa,  nos termos do artigo  116 da Lei no  6.404/76,
 o poder de eleger a maioria  dos  administradores  e dirigir as atividades de
determinada  companhia,  sendo certo que, em relação à NET SERVIÇOS,  será considerado
acionista controlador o Investidor Qualificado que detiver,  individualmente,  mais de
50% (cinqüenta por cento) das Ações Ordinárias  vinculadas ao Acordo de Acionistas,
observando-se  as  disposições  especiais a respeito  (i) da  exigência de  aprovação  unânime
ou por quorum  qualificado,  incluindo a manifestação  favorável da BRADESPAR ou da
BNDESPAR,  ou de conselheiros por elas indicados,  com relação a matérias referidas em
itens específicos da Cláusula 8 e (ii) da eleição de conselheiros nos termos da Cláusula
9, respectivamente, do mesmo Acordo de Acionistas;

Direito à Venda Conjunta (Tag Along) tem o significado que lhe é atribuído
na Cláusula 6 deste Acordo de Acionistas;

Direito de Preferência  significa o direito  assegurado na Cláusula
5 deste Acordo de Acionistas aos demais  Acionistas do Acordo por qualquer  Acionista  do
Acordo que desejar  vender,  ceder,  transferir  ou de  qualquer  forma  dispor,  direta
ou  indiretamente,  da totalidade ou de parte de suas Ações  Ordinárias,  observadas,
 quando  aplicáveis,  certas regras especiais  inclusive quanto às Ações Preferenciais
tratadas neste instrumento em itens específicos;

Endividamento  Líquido  significa (i) qualquer  obrigação da
COMPANHIA e de suas  controladas:  (a)  contingente ou de qualquer forma exigível por empréstimos
 contraídos  (independentemente de direito real de garantia do credor contra todos os
ativos da COMPANHIA e de suas  controladas  ou somente parte dos mesmos),  seja na forma
de  antecipação  de recursos,  conta corrente a descoberto ou linhas de crédito;  (b)
evidenciada por notas  promissórias  (emitidas no Brasil ou no exterior),  debêntures ou
instrumento de natureza similar, cartas de crédito (incluindo a obrigação de compra de
moeda);  (c) para o pagamento de aluguel ou outros valores  relacionados à compra de bens
do ativo que devam ser classificados  como leasing  financeiro,  de acordo com os princípios
 contábeis  geralmente  aceitos no Brasil,  incluindo a compra  diferida de bens imóveis;
 ou (d) decorrente de contratos de proteção  contra variação das taxas de juros,
contratos de câmbio,  contratos de proteção contra variações cambiais ou quaisquer outros
contratos de natureza similar;  (ii) qualquer obrigação de terceiros de natureza  similar
às descritas  no item (i) acima,  no qual a COMPANHIA e suas  controladas  tenham
 prestado garantia ou que de outra forma venham a ser obrigação da COMPANHIA e de suas
 controladas;  e (iii) outra obrigação  garantida por ônus ou gravame sobre os bens ou
ativos da COMPANHIA e de suas  controladas,  independentemente  de ditas  obrigações
 garantidas terem sido assumidas pela COMPANHIA e/ou suas controladas,  deduzidas de (i),
(ii) e (iii) as disponibilidades financeiras,  entendidas como tal a conceituação do
artigo 179, I, da Lei no 6.404/76;

EBITDA  consolidado  anualizado  significa a soma de: (i) lucro
(prejuízo)  depois da provisão para o imposto de renda e contribuição social;  (ii)
 despesa  financeira  líquida;  (iii)  provisão  para  imposto  de  renda e  contribuição
 social;  (iv)  depreciações  e amortizações;  (v) outras despesas líquidas não
operacionais;  (vi) prejuízos decorrentes de participações  minoritárias nos resultados
de empresas com  demonstrações  consolidadas;  e (vii)  prejuízo nos  resultados de
coligadas (ou seja,  empresas nas quais a COMPANHIA tenha  participação  acionária  entre
20% e 50%,  sempre  determinados  de acordo com os  princípios  contábeis  geralmente
 aceitos no Brasil), do balanço patrimonial consolidado da COMPANHIA, do último trimestre
auditado, multiplicado por 4 (quatro);

Estatuto  Social  significa o estatuto social  consolidado da NET
SERVIÇOS,  aprovado pelos  acionistas  reunidos na Assembléia Geral Extraordinária
realizada em 13 de junho de 2002;

Investidor  Qualificado  significa  GLOBO,  BRADESPAR,  BNDESPAR,
 MICROSOFT  e RBS , enquanto  os mesmos  detiverem  a  participação acionária mínima
referida no item 14.2 do presente Acordo de Acionistas;

Matérias  Relevantes de Assembléia  Geral  significa as matérias
de  competência  da Assembléia  Geral de Acionistas da NET SERVIÇOS, como estabelecido na
Cláusula 8 deste Acordo de Acionistas,  as quais são consideradas,  pelos Acionistas do
Acordo, como relevantes e, portanto, sujeitas à deliberação de Reunião Prévia com quorum
qualificado, de acordo com o item 8.4 do presente Acordo de Acionistas;

Novo Mercado  significa o segmento  especial de listagem de ações
da Bolsa de Valores de São Paulo  BOVESPA,  destinado à negociação de  ações  emitidas
 por  empresas  que se  comprometem,  voluntariamente,  com a  adoção  de  práticas  de
 governança  corporativa  e transparência  na prestação de informações  periódicas e
eventuais  adicionais em relação ao que é exigido pela  legislação  aplicável, conforme
estabelecido no Regulamento de Listagem do Novo Mercado da BOVESPA;

Nível 2  significa o segmento  especial de listagem de ações da
Bolsa de Valores de São Paulo  BOVESPA,  destinado à  negociação  de ações emitidas por
empresas que adotam um conjunto amplo de práticas  diferenciadas de governança
 corporativa e de direitos adicionais para os acionistas minoritários, conforme
estabelecido no Regulamento dos Níveis Diferenciados de Governança Corporativa da BOVESPA;

Obrigação à Venda Conjunta (Drag Along) tem o significado que
lhe é atribuído na Cláusula 7 deste Acordo de Acionistas;

Opção de Compra, firmada entre DISTEL e MICROSOFT CORPORATION, tem
o significado que lhe é atribuído no item 4.2;

Partes  Relacionadas  ou Parte  Relacionada  significa,  com
 relação a qualquer um dos  Acionistas  do Acordo,  a qualquer  tempo, qualquer
 (quaisquer)  outra(s) pessoa(s) que o controle(m),  que seja(m) pelo mesmo
 controlada(s) ou que esteja(m) sob Controle comum do mesmo Acionista do Acordo;

Protocolo de  Recapitalização  significa o protocolo,  firmado em
10 de abril de 2002,  pela DISTEL,  GLOBOPAR,  ROMAPAR,  BRADESPAR, BRADESPLAN,  RBS
PARTICIPAÇÕES,  BNDESPAR e GLOBO CABO S.A. (antiga  denominação  social da NET SERVIÇOS),
 com a interveniência da NET BRASIL,  mediante o qual os acionistas signatários
 comprometem-se a realizar aportes de capital na NET SERVIÇOS nos termos e condições ali
previstos, bem como seus respectivos aditamentos;

Registration  Rights  Agreement  significa o contrato,  firmado em
16 de novembro de 1999, entre GLOBO CABO S.A. (antiga  denominação social da NET SERVIÇOS)
e MICROSOFT, em conformidade com as leis e regulamentos do direito norte-americano;

Reunião Prévia tem o significado que lhe é atribuído no item 8.2
deste Acordo de Acionistas;

Reunião do Conselho de Administração têm o significado que lhe é atribuído
no item 8.1 deste Acordo de Acionistas;

Transferência (e seus derivados verbais)  significa a venda,
 promessa de venda,  alienação,  cessão,  usufruto,  outorga de opção de compra  ou de
 venda,  permuta,  conferência  ao  capital  de  outra  sociedade,  transferência  ou
 qualquer  outra  forma de perda de titularidade,  alienação ou  oneração,  direta ou
 indireta,  de qualquer das Ações  Ordinárias  detidas,  direta ou  indiretamente,  a
qualquer tempo,  pelos Acionistas do Acordo,  bem como dos direitos  inerentes a essas Ações
 Ordinárias,  incluindo,  entre outros, os direitos de voto e de subscrição,  observadas,
 enquanto  aplicáveis,  certas regras especiais  inclusive quanto às Ações Preferenciais
tratadas neste instrumento em itens específicos.

2. DO NOVO MERCADO

2.1. Os  Acionistas  do Acordo  obrigam-se a aprovar,  no menor
prazo  possível e observadas  as condições  previstas nos itens 2.1.1 e 2.1.2 abaixo, a
listagem das ações de emissão da COMPANHIA para negociação no Novo Mercado da BOVESPA.

2.1.1.  Tendo em vista que a  listagem  das  ações da  COMPANHIA
 para  negociação  no Novo  Mercado  da  BOVESPA  implica a  conversão compulsória de
todas as ações preferenciais da COMPANHIA em ações ordinárias,  bem como o conseqüente
direito de recesso dos acionistas titulares de ações  preferenciais,  a obrigação
 assumida pelos  Acionistas do Acordo,  de acordo com o disposto no item 2.1 acima, não
prejudica o disposto no artigo 137,  parágrafo  3o, da Lei no  6.404/76,  no que se
refere à faculdade  de a COMPANHIA  reconsiderar  a decisão na hipótese de o pagamento do
valor de reembolso das ações aos acionistas  dissidentes  representar  riscos para a
estabilidade financeira da COMPANHIA,  o que deverá ser submetido à deliberação da Assembléia
 Geral e será  considerada  como Matéria  Relevante de Assembléia Geral, para os fins do
disposto no item 8.4 do presente Acordo.

2.1.2.  Adicionalmente,  a listagem das ações de emissão da
COMPANHIA para negociação no Novo Mercado está  condicionada à aprovação em assembléia
 especial de  preferencialistas  e à obtenção de todas as autorizações  necessárias,  a
fim de: (i) evitar o  descumprimento contratual pela COMPANHIA de quaisquer  compromissos
ou obrigações já contraídas;  (ii) evitar que sejam provocados eventos contratuais
danosos ao fluxo  financeiro  da  COMPANHIA,  como o  vencimento  antecipado  de dívidas;
 bem como (iii)  evitar o  descumprimento  de garantias ou obrigações assumidas pelos
Acionistas do Acordo em contratos que envolvam a COMPANHIA.

2.2. Em  decorrência  do previsto no item 2.1 acima,  os Acionistas
do Acordo  comprometem-se  a exercer seu direito de voto para fazer com que a NET SERVIÇOS,
 seus  administradores e os próprios  Acionistas do Acordo atendam a todos os requisitos
 exigidos pela BOVESPA para a listagem das ações da COMPANHIA para negociação no Novo
Mercado, incluindo mas não se limitando a:

|(a) | conversão  compulsória de todas as ações  preferenciais de emissão
da NET SERVIÇOS em ações  ordinárias,  como condição prévia para a listagem de suas ações
para  negociação no Novo Mercado.  Dessa forma,  a partir da data da efetiva  listagem
das ações da NET SERVIÇOS para negociação no Novo Mercado,  as ações  preferenciais
 vinculadas ao presente  Acordo de Acionistas  serão convertidas  em  ações  ordinárias
 e,  portanto,  toda e  qualquer  referência  feita  neste  Acordo  de  Acionistas  a Ações
Preferenciais  deixará de ser  aplicável  e tais  ações  passarão,  automaticamente,  a
serem  submetidas  à  disciplina  aqui estabelecida para as Ações Ordinárias;                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) | aditamento da escritura da 2a emissão  pública de debêntures da COMPANHIA,  do Contrato de Opção de Compra e de Opção de Venda
de Ações firmado entre DISTEL e BNDESPAR e da Opção de Compra  contratada entre MICROSOFT  CORPORATION e DISTEL,  definidos no
item 4.2.  do  presente  Acordo de  Acionistas,  a fim de refletir a conversão  compulsória  de ações  preferenciais  em ações
ordinárias de que trata a alínea a acima.  Como resultado das  alterações  previstas  nesta alínea b, as ações  ordinárias
adquiridas  pelo  exercício  das opções de compra pela GLOBO e/ou pela  MICROSOFT  estarão  vinculadas  ao presente  Acordo de
Acionistas e, conseqüentemente, sujeitas à disciplina aqui estabelecida para as Ações Ordinárias;
|   
|(c) | aprovação das mudanças  necessárias no atual programa de American Depositary  Receipts,  em decorrência da obrigação imposta à
NET SERVIÇOS para que tenha seu capital  social  dividido  exclusivamente  em ações  ordinárias,  mudanças estas que incluem a
criação de novo programa de American  Depositary  Receipts  exclusivo para as ações  ordinárias,  como condição  prévia para a
listagem de suas ações para negociação no Novo Mercado; e                                                                                                                                                                                                                                                                                                      
|   
|(d) | aprovação de alterações no Estatuto Social da NET SERVIÇOS, de forma a compatibilizar as disposições  estatutárias com aquelas
exigidas pela BOVESPA para listagem de ações para negociação no Novo Mercado.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

2.3. Os Acionistas do Acordo  comprometem-se  ainda a envidar seus
melhores esforços para adequar o Estatuto Social da NET SERVIÇOS,  o presente  Acordo de
Acionistas,  bem como os demais  documentos  aplicáveis no que se fizer  necessário para
refletir as disposições do Novo Mercado da BOVESPA.

3. DO NÍVEL 2 DA BOVESPA

3.1. Os Acionistas do Acordo reconhecem e se comprometem a seguir as
regras  estabelecidas  pela BOVESPA para as companhias do Nível 2, e certificar-se  de
que, na hipótese de alienação do Controle da NET SERVIÇOS,  seja por meio de uma única
 operação,  seja por meio de operações  sucessivas,  o contrato de alienação do Controle
que venha a ser  celebrado  por qualquer dos  Acionistas  do Acordo  deveráprever
expressamente,  sob condição suspensiva ou resolutiva, que o adquirente do Controle da
NET SERVIÇOS obriga-se a concretizar,  no prazo  máximo de 90 (noventa)  dias,  oferta  pública
de aquisição  das ações  ordinárias e  preferenciais  detidas por todos os demais
acionistas  da NET SERVIÇOS,  pelo mesmo preço por ação pago para adquirir o Controle da
NET SERVIÇOS,  de forma a assegurar aos demais acionistas da COMPANHIA tratamento igual àquele
dado ao acionista controlador alienante do Controle.

4. DAS AÇÕES VINCULADAS AO ACORDO

4.1.  Este Acordo de  Acionistas  vincula  todas as Ações  Ordinárias
 e, no caso da BNDESPAR,  da MICROSOFT e da RBS,  também as Ações Preferenciais,
 representativas  do capital social da NET SERVIÇOS,  que os Acionistas do Acordo
 detenham ou venham a deter,  pelo que ficam as mesmas sujeitas a todas as estipulações
 constantes  deste Acordo de Acionistas,  inclusive sobre a respectiva  Transferência,
preferência para sua aquisição, Direito e Obrigação de Venda Conjunta e exercício do
direito de voto.

4.1.1.  A RBS  adquiriu,  em 13 de setembro de 2001, o direito de
 desvincular  do presente  Acordo de Acionistas o total de 11.613.656 (onze milhões,
seiscentos e treze mil, seiscentos e cinqüenta e seis) Ações Preferenciais de que é titular,
as quais poderão ser alienadas mediante operações em Bolsas de Valores, bem como mediante oferta pública,  com registration  rights,  contando com total
colaboração  da NET SERVIÇOS e seus  colaboradores.  Portanto,  na data de assinatura  do presente  Acordo de  Acionistas,  a RBS têm o
direito de desvincular do presente Acordo de Acionistas o montante de 11.613.656  (onze milhões,  seiscentos e treze mil,  seiscentos e
cinqüenta e seis) Ações  Preferenciais de que é titular,  ficando as demais Ações  Preferenciais  de que é titular,  conforme consta na
tabela descrita no primeiro Considerando deste Acordo de Acionistas,  vinculadas ao presente Acordo de Acionistas e, portanto,  somente
poderão ser objeto de negociação observado o disposto nos itens 5.12 a 5.14 da Cláusula 5 deste Acordo de Acionistas.

4.2. Os Acionistas do Acordo, neste ato, declaram e garantem que são
proprietários e legítimos  possuidores das Ações Ordinárias,  e no caso da BNDESPAR,  da
MICROSOFT e da RBS, também das Ações  Preferenciais,  bem como que as mesmas se encontram
livres e desembaraçadas de todos e quaisquer  ônus,  gravames e/ou  direitos,  judiciais
ou  extrajudiciais,  inclusive  penhor,  caução,  seqüestro,  arresto, usufruto,
 promessas,  opções de compra ou de venda, ou qualquer outro ônus ou gravame,  de
qualquer  espécie ou natureza,  com exceção (i) do disposto no item 4.2.1 abaixo;  (ii)
da opção de compra e de venda sobre as ações  ordinárias e ações  preferenciais  de emissão
da NET SERVIÇOS  (Contrato  de Opção de Compra e de Opção de Venda de Ações),  firmada
 entre a DISTEL e a BNDESPAR em 14 de dezembro de 1999, tendo como  intervenientes a
MAJOLI, a MICROSOFT B.V., a MICROSOFT  CORPORATION e a GLOBO CABO S.A. (antiga denominação
social da NET  SERVIÇOS);  e (iii) da opção de compra e de venda sobre Ações
 Preferenciais  (Opção de Compra),  firmada  entre a DISTEL e a MICROSOFT CORPORATION
em 16 de novembro de 1999.

4.2.1. A ROMAPAR declara que estão  caucionadas em favor do Banco
Nacional de  Desenvolvimento  Econômico e Social  BNDES,  37.194.802 (trinta e sete milhões,
 cento e noventa e quatro mil, oitocentas e duas) Ações Ordinárias da NET SERVIÇOS
detidas pela ROMAPAR,  sendo (i) 16.906.728  (dezesseis milhões,  novecentos e seis mil,
 setecentas e vinte e oito) Ações Ordinárias,  por força do Aditivo no 1 ao Contrato de
 Financiamento  Mediante  Abertura de Crédito no 97.2.436.5.1,  de 01 de dezembro de
1997; (ii) 4.057.615  (quatro milhões, cinqüenta e sete mil, seiscentas e quinze) Ações
Ordinárias,  por força do Aditivo no 1 ao Contrato de Financiamento  Mediante Abertura de
Crédito no  98.2.039.5.1,  de 31 de março de 1998; (iii) 9.298.701 (nove milhões,
 duzentos e noventa e oito mil,  setecentas e uma) Ações Ordinárias,  por força do
Aditivo no 1 ao Contrato de Financiamento Mediante Abertura de Crédito no 98.2.040.5.1,
 de 31 de março de 1998; e (iv) 6.931.758 (seis milhões,  novecentos e trinta e um mil,
 setecentas e cinqüenta e oito) Ações Ordinárias,  por força do Aditivo no 1 ao Contrato
de Financiamento Mediante Abertura de Crédito no 97.2.101.5.1, de 05 de junho de 1997.

5. DO DIREITO DE PREFERÊNCIA E DA TRANSFERÊNCIA DAS AÇÕES

5.1. Os Acionistas do Acordo  reconhecem que a parceria  necessária à  consolidação
 dos objetivos  aqui  referidos  deverá  basear-se, principalmente,  no seu
 relacionamento  de  confiança.  As Ações  Ordinárias da COMPANHIA  não poderão ser
 Transferidas,  oneradas ou gravadas,  durante a vigência deste Acordo,  direta ou
indiretamente,  exceto para Partes  Relacionadas,  sem a observância do disposto nesta  Cláusula.
 A efetivação  de qualquer  negócio  jurídico  tendo por objeto as Ações  Preferenciais
 detidas pela  BNDESPAR,  pela MICROSOFT e pela RBS,  observado o disposto no item 4.1.1,
 deverá respeitar o disposto em todos os itens desta Cláusula 5, inclusive o disposto nos
itens 5.7 e 5.8, no caso da BNDESPAR, itens 5.10 e 5.11, no caso da MICROSOFT, e nos
itens 5.12 a 5.14, no caso da RBS.

5.2. Sem prejuízo  das regras  estabelecidas  nos itens 5.3 a 5.15
abaixo,  na hipótese de qualquer dos  Acionistas  do Acordo  desejar efetuar  a  Transferência
 de  parte  ou da  totalidade  das  Ações  Ordinárias,  e no caso  da  BNDESPAR  e da RBS
 também  das  Ações Preferenciais,  de sua  propriedade  a um terceiro,  deverá  observar
as seguintes  regras,  exceção  feita à MICROSOFT,  à qual não se aplicam as disposições
deste item 5.2 e seus subitens,  aplicando-se entretanto as disposições dos itens 5.3 e
seguintes desta Cláusula 5:

|(a) | os Acionistas  do Acordo  concordam  desde já e se obrigam a não vender e/ou ofertar à venda,  durante o prazo de 90 (noventa)
dias contado da data da publicação do primeiro  anúncio de início de  distribuição  pública das ações objeto da oferta pública
de ações  referida no  Protocolo  de  Recapitalização  (Lock-up),  quaisquer  das ações de emissão da  COMPANHIA de que eram
titulares na data da celebração do referido  Protocolo.  A vedação de que trata esta alínea não se aplica (i) a Transferências
realizadas  entre cada um dos  Acionistas  do Acordo e suas  respectivas  Partes  Relacionadas;  (ii) à RBS,  ZERO HORA e suas
Partes  Relacionadas,  que poderão dispor de qualquer forma,  incluindo mas não se limitando a operações em Bolsas de Valores,
com  registration  rights e colaboração da COMPANHIA e de seus acionistas  controladores,  operações de empréstimo de ações de
emissão da Companhia,  bem como caucionar ou de outra forma onerar,  inclusive em operações com derivativos,  durante e após o
prazo do Lock-up,  agindo de forma  coordenada  com a  COMPANHIA,  seus  Acionistas  e com os bancos  coordenadores  da oferta
pública de ações objeto do Protocolo de  Recapitalização,  sem que tal forma de atuação seja  interpretada  como  limitador de
direitos da RBS e da ZERO HORA, o total de até  11.613.656  (onze  milhões,  seiscentos e treze mil,  seiscentos e cinqüenta e
seis) Ações  Preferenciais,  ações essas sobre as quais a RBS  adquiriu,  em  setembro de 2001,  o direito de  desvincular  as
mesmas do presente Acordo de Acionistas;  e (iii) à GLOBO, que poderá dispor,  incluindo mas não se limitando à venda em bolsa
de valores,  caucionar ou de qualquer outra forma onerar suas ações preferenciais de emissão da COMPANHIA,  bem como caucionar
suas Ações Ordinárias de emissão da COMPANHIA,  observando-se,  entretanto,  que tais ações ordinárias  sujeitam-se ao Lock-up
de 90 (noventa)  dias aqui  definido,  com o objetivo de captar  recursos  para honrar o  compromisso  de  subscrição de ações
previsto no Protocolo de Recapitalização, com estrita observância das regras de preservação do
valor das ações no mercado e agindo de forma  coordenada  com a COMPANHIA e com os Acionistas  do Acordo.  A RBS, a ZERO HORA,
suas Partes  Relacionadas e/ou a GLOBO, ao exercerem a prerrogativa de que tratam os itens ii e iii acima,  devem observar
que tal exercício  não poderá  prejudicar o resultado  satisfatório  do processo de  recapitalização  previsto no Protocolo de
Recapitalização,  incluindo a emissão  pública de ações da COMPANHIA.  Não obstante o Lock-up aqui definido,  os Acionistas do
Acordo  concordam desde já e aceitam que a RBS poderá vender ações  preferenciais a serem por ela subscritas em decorrência de
sua  participação  na emissão  pública de ações,  parte do processo de  recapitalização  da  COMPANHIA  objeto do Protocolo de
Recapitalização,  até o montante equivalente a, aproximadamente,  R$25.000.000,00  (vinte e cinco milhões de reais) na data de
subscrição,  sem  sujeitar-se  às regras de Lock-up,  venda  coordenada  ou de Direito de  Preferência,  previstas no presente
Acordo de Acionistas;
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) | durante o prazo de 18 meses a contar do final do prazo de Lock-up de 90 dias,  os  Acionistas  do Acordo  obrigam-se a somente
efetuar a venda de suas ações  vinculadas ao presente  Acordo de Acionistas  caso a referida  venda seja realizada na forma de
venda coordenada com os demais Acionistas do Acordo;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(c) | após o prazo de 18 meses  estabelecido  na alínea b acima,  os  Acionistas do Acordo terão o direito de dispor de suas ações
vinculadas  ao Acordo de  Acionistas  por meio de  negociações  privadas,  respeitado  o Direito  de  Preferência  dos  demais
Acionistas do Acordo,  podendo ainda incluir a  transferência  de todos os direitos e deveres  previstos no presente Acordo de
Acionistas, exceto aqueles personalíssimos aplicáveis à BNDESPAR, como órgão institucional de fomento;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(d) | o direito de  preferência e os demais  procedimentos  previstos na alínea c acima não serão  aplicáveis  (i) à BNDESPAR,  na
venda  realizada em bolsa ou por meio de oferta  pública de suas ações  preferenciais  oriundas da conversão das debêntures da
2a emissão  pública da COMPANHIA e das ações a serem  adquiridas  como  resultado de sua  participação  na emissão  pública de
ações, parte do processo de recapitalização  da COMPANHIA objeto do Protocolo de  Recapitalização;  e (ii) à Transferência das
11.613.656 (onze milhões,  seiscentos e treze mil, seiscentos e cinqüenta e seis) Ações Preferenciais  detidas pela RBS, sobre
as quais a RBS adquiriu,  em setembro de 2001, o direito de  desvincular as mesmas do presente  Acordo de Acionistas  conforme
definido no item 4.1.1 do presente  Acordo de  Acionistas,  bem como das  11.613.656  (onze  milhões,  seiscentos e treze mil,
seiscentos e cinqüenta e seis) Ações  Preferenciais  que a RBS terá o direito de desvincular do presente  Acordo de Acionistas
após 08 de setembro de 2002,  cuja  Transferência  fica  sujeita ao  disposto  nos itens 5.12 a 5.14 desta  Cláusula 5, não se
aplicando,  ainda, à Transferência de ações  preferenciais de emissão da COMPANHIA,  no montante aproximado de R$25.000.000,00
(vinte e cinco milhões de reais),  a serem  adquiridas  pela RBS em  decorrência  de sua  participação  na emissão  pública de
ações, parte do processo de recapitalização da COMPANHIA objeto do Protocolo de Recapitalização;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(e) | adicionalmente ao Direito de Preferência  estabelecido na alínea c acima, toda e qualquer disposição,  transferência,  venda
ou oneração,  a que título for, das ações  vinculadas a este Acordo de  Acionistas,  que envolva a  transferência  de todos os
direitos  e deveres  aqui  previstos,  estará  sujeita  ao poder de veto da GLOBO no que se refere à adesão do  adquirente  ao
presente Acordo de Acionistas,  caso o referido adquirente seja concorrente da GLOBO ou de suas partes relacionadas,  conforme
avaliação  de boa fé a ser adotada  pela  GLOBO.  Caso a GLOBO  decida,  de boa fé,  vetar a venda de ações de qualquer  outro
Acionista do Acordo para  concorrente,  tal Acionista do Acordo ainda assim poderá  realizar a venda,  mas sem a transferência
dos direitos e obrigações  deste Acordo de Acionistas,  e o concorrente  não poderá  participar na gestão e  administração  da
COMPANHIA,  incluindo  participação no seu Conselho de Administração,  enquanto ficar  caracterizada a sua participação direta
ou  indireta  na gestão e  administração  de  negócio ou empresa  concorrente  da GLOBO,  de suas  partes  relacionadas  ou da
COMPANHIA.  Na hipótese de veto pela GLOBO,  poderá o Acionista do Acordo  realizar a venda ao concorrente sem a transferência
dos direitos e obrigações deste Acordo de Acionistas ou,  alternativamente,  realizar oferta pública de igual número de ações,
contando com registration rights e a colaboração da COMPANHIA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

5.3.  Sem  prejuízo  das regras  previstas  no item 5.2 acima,  na
hipótese de qualquer  dos  Acionistas  do Acordo  desejar  efetuar a Transferência  de
parte ou da  totalidade  das  Ações  Ordinárias,  e no caso da  BNDESPAR,  da  MICROSOFT
 e da RBS  também  das Ações Preferenciais,  observado o disposto no item 5.4 desta  Cláusula
5, de sua  propriedade a um terceiro (o  Proponente),  aquele deveránotificar,  por
escrito,  os demais  Acionistas do Acordo,  especificando  na notificação para o exercício
do Direito de Preferência (a Notificação):  (i) o nome e a  qualificação  do
 Proponente  e, no caso de o  Proponente  ser uma  sociedade,  a  Notificação  deveráidentificar
 também os  respectivos  acionistas  ou sócios que  detenham,  direta ou  indiretamente,
 o  controle  do  Proponente  e/ou participações  societárias que  representem 10% (dez
por cento) ou mais de seu capital votante e/ou de seu capital total;  (ii) preço e condições
de pagamento;  (iii) lote de ações a serem adquiridas (as Ações  Ofertadas);  (iv)
outras condições e termos  relevantes da proposta (a Proposta) e (v) manifestação do
acionista ofertante (o Acionista Ofertante) quanto à aceitação da proposta.

5.3.1.  Os outros  Acionistas do Acordo terão 30 (trinta)  dias, a
contar da data do  recebimento da  Notificação,  para  manifestar ao Acionista
 Ofertante,  por escrito, o seu interesse em exercer,  proporcionalmente  ao total de sua
participação nas Ações Ordinárias e Ações Preferenciais,  excluída a participação do
Acionista Ofertante, o Direito de Preferência para aquisição das Ações Ofertadas,  nos
mesmos termos e condições da Proposta, de acordo com as seguintes regras e procedimentos:

5.3.2.  Caso qualquer um dos Acionistas do Acordo não manifeste,  no
prazo a que se refere o item 5.3.1 acima, o interesse no exercício do  Direito  de  Preferência
 para a  aquisição  das Ações  Ofertadas  ou não o exerça  efetivamente,  as Ações  Ordinárias
 e as Ações Preferenciais que a ele(s) caberia(m) serão rateadas e ofertadas,  na proporção
aqui estabelecida,  aos demais Acionistas do Acordo, os quais  poderão  exercer o Direito
de  Preferência  e adquirir a  totalidade  das Ações  Ofertadas  ou,  alternativamente,
 desistir  da aquisição de tais Ações  Ofertadas,  não exercendo  assim o Direito de
Preferência  para aquisição  dessas ações,  as quais serão então adquiridas pelo
Proponente, conforme disposto no item 5.3.4 abaixo.

5.3.3.  No prazo de até 30 (trinta) dias a contar da data do
recebimento da  manifestação  positiva dos Acionistas do Acordo,  as Ações Ofertadas
 deverão ser  transferidas  aos Acionistas do Acordo que houverem  exercido o Direito de
Preferência,  mediante  pagamento do respectivo preço, nos termos e condições da Proposta.

5.3.4.  Após o prazo para  manifestação do exercício do Direito de
Preferência,  transcorrido  esse prazo sem  manifestação de qualquer dos demais
 Acionistas  do Acordo ou  ocorrendo a  desistência  nos termos do item 5.3.2  acima,  o
Acionista  Ofertante  poderá  então transferir as Ações Ofertadas ao Proponente, nos
mesmos termos e condições estabelecidos na Proposta.

5.3.5. Em qualquer hipótese,  se a Proposta for alterada em qualquer
dos seus termos, o Acionista  Ofertante deverá notificar novamente os demais Acionistas
do Acordo, repetindo o procedimento disposto neste item 5.3. e respectivos subitens.

5.3.6.  Caso o  Acionista  Ofertante  não  transfira  as Ações
 Ofertadas  ao  Proponente  no prazo de 90  (noventa)  dias  contados da Notificação,
restabelecer-se-á o Direito de Preferência, repetindo-se o procedimento disposto neste
item 5.3. e respectivos subitens.

5.3.7.  Aplicam-se  as  disposições  do Direito de  Preferência
 aqui  previsto à  Transferência  dos direitos de  subscrição  de Ações Ordinárias  e, no
caso da BNDESPAR,  da MICROSOFT e da RBS também de Ações  Preferenciais,  oriundos de
aumento de capital e emissão de bônus de subscrição em Ações  Ordinárias e Ações
 Preferenciais  da NET SERVIÇOS,  sendo  reduzidos para 15 (quinze) dias os prazos dos
itens 5.3.1 e 5.3.3.

5.4. O Direito de Preferência e os demais  procedimentos  previstos
no item 5.3 e respectivos subitens acima não serão aplicáveis (i) àBNDESPAR,  na venda
realizada em bolsa ou por meio de oferta pública de suas ações  preferenciais  oriundas
da conversão das debêntures da 2a emissão  pública da COMPANHIA e das ações a serem
 adquiridas  como resultado de sua  participação  na emissão  pública de ações, parte do
processo de recapitalização da COMPANHIA objeto do Protocolo de  Recapitalização,  e (ii)
à Transferência das 11.613.656 (onze milhões,  seiscentos e treze mil, seiscentos e cinqüenta
e seis) Ações  Preferenciais  detidas pela RBS, sobre as quais a RBS adquiriu, em
setembro de 2001, o direito de desvincular as mesmas do presente  Acordo de Acionistas
 conforme  definido no item 4.1.1 do presente Acordo  de  Acionistas,  bem como das
 11.613.656  (onze  milhões,  seiscentos  e treze  mil,  seiscentos  e  cinqüenta  e
seis)  Ações Preferenciais  que a RBS  terá o  direito  de  desvincular  do  presente
 Acordo  de  Acionistas  após 08 de  setembro  de  2002,  cuja Transferência  fica
sujeita ao disposto nos itens 5.12 a 5.14 desta  Cláusula 5, não se  aplicando,  ainda,  à  Transferência
 de ações preferenciais de emissão da COMPANHIA,  no montante aproximado de
R$25.000.000,00  (vinte e cinco milhões de reais), a serem adquiridas pela RBS em decorrência
de sua participação na emissão pública de ações, parte do processo de recapitalização da
COMPANHIA objeto do Protocolo de Recapitalização.

5.5. As restrições à Transferência  das Ações  Ordinárias aqui
previstas não se aplicam (i) à transferência  fiduciária de 1 (uma) ação pelos
 Acionistas  do Acordo a cada um dos membros do Conselho de  Administração  da NET  SERVIÇOS
e (ii) às  Transferências  ocorridas entre a DISTEL, ROMAPAR,  GLOBOPAR,  BRADESPLAN,
 BRADESPAR S.A., BNDESPAR,  MICROSOFT B.V., MICROSOFT CORPORATION,  RBS PARTICIPAÇÕES,
ZERO HORA e respectivas  Partes  Relacionadas,  inclusive no prazo de Lock-up de que
trata o item 5.2. As restrições às  Transferências previstas  nesta Cláusula 5 não
impedem a MICROSOFT de realizar,  em boa-fé,  operações de hedge  (incluindo  operações
de derivativos) com um ou mais bancos de investimento  de  reconhecimento  internacional,
 como forma de se proteger das oscilações do preço de mercado das Ações Preferenciais,
 desde que referidas operações não resultem em qualquer  Transferência das Ações
Preferenciais sem observância do  disposto  nesta  Cláusula 5. Com o objetivo de evitar
 qualquer  dúvida de  interpretação,  reafirma-se  que, em nenhuma  hipótese, referida
 operação de hedge dará direito à MICROSOFT de transferir a titularidade  das Ações
 Preferenciais  em qualquer tempo antes de transcorrido  o tempo em que a  MICROSOFT
 estará  autorizada  a  realizar a  Transferência  das Ações  Preferenciais,  de acordo
com o disposto nesta Cláusula 5.

5.6. Caso sejam  transferidas  Ações Ordinárias ou Ações
 Preferenciais  para Partes  Relacionadas nos termos do item 5.5. acima, (i) a Parte
 Relacionada  se  sub-rogará em todos os direitos e obrigações  do Acionista do Acordo
que lhe  transferiu as ações,  aderindo ao presente Acordo de Acionistas,  e (ii) em caso
de alteração no Controle da Parte  Relacionada,  os Acionistas do Acordo terão o direito
de exercer o Direito de Preferência  para adquirir as ações de emissão da NET SERVIÇOS de
 titularidade  da Parte  Relacionada,  a qual fica  obrigada a vender suas ações de emissão
da NET SERVIÇOS  para os  Acionistas  do Acordo,  em  conformidade  com os  procedimentos
definidos  no item 5.3 e seus  respectivos  subitens,  sendo o preço  fixado por  instituição
 financeira  de  primeira  linha,  a qual procederá à avaliação das participações acionárias
detidas pela Parte Relacionada na NET SERVIÇOS.

5.7.  Qualquer  Transferência  das Ações  Ordinárias  e das Ações
 Preferenciais,  de  direitos  de  subscrição,  bônus de  subscrição, debêntures  conversíveis
 ou  permutáveis em Ações  Ordinárias e Ações  Preferenciais,  ou quaisquer  outros
 valores  mobiliários  que atribuam, direta ou indiretamente,  participações no capital
da NET SERVIÇOS,  contrariando o disposto neste Acordo de Acionistas, seránula de pleno
direito,  ficando a NET SERVIÇOS  impedida de executar a Transferência  ou averbação nos
registros dos referidos  valores mobiliários,  ressalvada  a hipótese de alienação  das Ações
 Ordinárias e Ações  Preferenciais  da BNDESPAR,  no âmbito do Contrato de Opção de
Compra e de Opção de Venda de Ações definido no item 4.2. do presente  Acordo de
Acionistas,  ao qual não se aplicam as regras do Direito de Preferência previstas neste
item.

5.8. Fica acordado entre os Acionistas do Acordo que a BNDESPAR,  a
seu único e exclusivo critério,  poderá,  observadas as disposições do Contrato de Opção
de Compra e de Opção de Venda de Ações,  vender em bolsa,  sob condição  suspensiva ou
por meio de oferta pública, a totalidade ou parte das Ações  Ordinárias e Ações
 Preferenciais  de sua  propriedade,  sendo certo que, em qualquer caso, a BNDESPAR deverá (i)
 comunicar  aos demais  Acionistas  do Acordo,  com 15  (quinze)  dias de  antecedência,
 a intenção  de venda de suas Ações Ordinárias e Ações  Preferenciais;  e (ii)  respeitar
o Direito de  Preferência  previsto  nesta Cláusula 5, cujo prazo terá como termo inicial
a data da venda das Ações Ordinárias e Ações  Preferenciais  sob condição  suspensiva,
 fazendo constar essa condição do edital respectivo.  Exercido o Direito de  Preferência
 por qualquer um dos  Acionistas  do Acordo,  a venda sob condição  suspensiva a que se
refere este item será  considerada  definitivamente  prejudicada,  devendo  esta  estipulação
 constar do edital de venda,  não estando sujeita a tal  procedimento a venda das ações
 preferenciais  oriundas da conversão das  debêntures da 2a emissão  pública da COMPANHIA
pela BNDESPAR e das ações a serem  adquiridas pela BNDESPAR como resultado de sua
 participação  na emissão pública de ações,  parte do processo de recapitalização da
COMPANHIA objeto do Protocolo de Recapitalização.

5.9. BNDESPAR,  observadas as disposições do Contrato de Opção de
Compra e de Opção de Venda de Ações,  BRADESPAR,  MICROSOFT e RBS têm assegurado,  ao seu
 exclusivo  critério,  a partir de 16 de  novembro  de 2002,  o direito  de  proceder  a
oferta  pública  das Ações Preferenciais no mercado de valores mobiliários
norte-americano,  e, para este propósito,  BNDESPAR,  BRADESPAR,  MICROSOFT e RBS estão
tituladas  a, após o término do prazo acima  referido:  (i) incluir  suas Ações
 Preferenciais  em  qualquer  oferta  pública que a NET SERVIÇOS venha a realizar,  no
mercado  norte-americano;  ou (ii)  solicitar que a NET SERVIÇOS,  uma única vez a cada
12 (doze) meses, adote todas as medidas e providências  necessárias  para que as
referidas Ações  Preferenciais  sejam  registradas  para fins de oferta pública no
mercado  norte-americano.  Nas  circunstâncias  descritas neste item não se aplica o
Direito de Preferência  estabelecido no item 5.3  deste  Acordo  de  Acionistas.  O
 direito  descrito  em (i) e (ii)  acima  fica  condicionado  à  assinatura,  pelas
 partes interessadas,  de documentos específicos, de acordo com as leis e regulamentos do
direito norte-americano,  substancialmente nos termos do  Registration  Rights  Agreement
que MICROSOFT e GLOBO CABO S.A.  (antiga  denominação  social da NET SERVIÇOS)
 celebraram em 16 de novembro de 1999,  sendo que a BNDESPAR,  a BRADESPAR,  a RBS, e a
NET SERVIÇOS  poderão  firmar o referido  documento em qualquer data futura  requerida
 por qualquer  desses  Acionistas do Acordo.  NET SERVIÇOS e MICROSOFT  concordam  desde já em
aditar o  Registration Rights  Agreement,  para que qualquer  referência a ações
 preferenciais  da COMPANHIA  passe a ser  considerada uma referência a ações ordinárias,
 na mesma quantidade,  após a conversão de suas ações preferenciais em ações ordinárias e
a listagem das ações da COMPANHIA para negociação no Novo Mercado da BOVESPA.

5.9.1.  Caso as Ações  Ordinárias  da NET  SERVIÇOS  venham a ser
 registradas  no  mercado  de  valores  mobiliários  norte-americano, aplicar-se-ão  às Ações
 Ordinárias  detidas pela  BRADESPAR,  BNDESPAR,  MICROSOFT e RBS as mesmas  disposições
(i) e (ii) do item 5.9 acima.

5.9.2. Os mesmos direitos  estabelecidos  no item 5.9 acima, no que
for aplicável,  são assegurados à BRADESPAR,  à RBS e à BNDESPAR em relação ao mercado de
títulos e valores mobiliários brasileiro,  observadas,  inclusive,  também no que for
aplicável para o mercado de títulos e valores mobiliários brasileiro, as disposições do
item 2.2.3 do Registration Rights Agreement.

5.10.  As Ações  Ordinárias  e as Ações  Preferenciais  detidas
 pela  MICROSOFT  não  poderão ser objeto de  Transferência  aos demais Acionistas  do
Acordo ou a terceiros,  exceto se para Partes  Relacionadas  da  MICROSOFT,  até a data
de 16 de novembro de 2002.  Essa restrição não será aplicável  caso a NET SERVIÇOS,
 apesar da objeção  razoavelmente  fundamentada  da MICROSOFT,  nos casos (i) e (ii)
abaixo e apesar da objeção da MICROSOFT,  ainda que não  fundamentada,  no caso (iii),
 adote qualquer das medidas  referidas abaixo. A objeção da  MICROSOFT  dar-se-á  através
de voto  consignado  em Reunião  Prévia ou em ata de  Reunião do  Conselho  de  Administração,
conforme o caso:

(i) por duas vezes, adote qualquer ação listada nas alíneas
(d), (g) e (1) do item 8.5; ou

(ii) uma única vez, adote duas de qualquer das ações
listadas nas alíneas (d), (g), (h), e (1) do item 8.5; ou

(iii) por uma única vez, adote qualquer ação
listada nas alíneas (f) e (i) do item 8.5.

Verificada  qualquer  situação acima enquanto a MICROSOFT for um
Investidor  Qualificado,  a MICROSOFT poderá  transferir as suas Ações Ordinárias e Ações
 Preferenciais  a qualquer  tempo, a qualquer  pessoa,  observando-se,  todavia,  as
restrições  descritas nos itens 5.10.1 e 5.10.2  abaixo.  A NET SERVIÇOS,  nos termos do
art. 40 da Lei no 6.404/76,  informará,  no prazo de 5 (cinco) dias da data de assinatura
 deste  instrumento,  à instituição  financeira,  para que proceda às anotações da restrição
de que trata o presente item do Acordo de Acionistas.

5.10.1. A MICROSOFT não poderá alienar as suas Ações Ordinárias e Ações
Preferenciais para qualquer Competidor da NET SERVIÇOS.

5.10.2. A proibição de venda das Ações Ordinárias e das Ações
 Preferenciais a qualquer  Competidor da NET SERVIÇOS de que trata o item 5.10.1  acima não
se aplica se referida  venda for feita em bolsa de valores dos  Estados  Unidos ou na
NASDAQ,  após o registro de que trata o item 5.9 acima,  desde que feita em  quantidade
 compatível  com aquela  negociada  anteriormente  neste mercado e desde que os termos e
condições  da venda  (inclusive o preço,  a  quantidade  de ações e a identidade  do
 comprador)  não tenham sido  previamente negociados  entre a MICROSOFT (ou por seus
 representantes  a qualquer  título) e o comprador das respectivas  Ações Ordinárias e Ações
Preferenciais.  Qualquer  venda de ações em bloco  (block-trade)  deverá ser realizada
com tal dispersão que o volume a ser adquirido por um único investidor não seja incompatível
com o conceito de proibição de venda à Competidor da NET SERVIÇOS.

5.11. Caso a MICROSOFT  venha a exercer a opção de adquirir ações
 preferenciais  da NET SERVIÇOS  atualmente  detidas pela DISTEL,  de acordo com a Opção
de Compra  firmada entre  MICROSOFT  CORPORATION e DISTEL em 16 de novembro de 1999,
 aplicam-se às referidas  ações preferenciais as mesmas regras  estabelecidas no item 5.9
deste Acordo de Acionistas.  Para fins deste Acordo de Acionistas essas ações
preferenciais passarão a ser incluídas no conceito de Ações Preferenciais.

5.12.  Subordinado  às regras  previstas  na alínea b do item 5.2,
 após 08 de setembro  de 2002,  a RBS terá o direito de retirar do presente Acordo de
Acionistas as 11.613.656 (onze milhões,  seiscentos e treze mil,  seiscentos e cinqüenta
e seis) Ações Preferenciais remanescentes,  e poderá  realizar a venda das mesmas
 mediante  oferta  pública e/ou operações em Bolsa de Valores,  com  registration rights,
 contando com total colaboração da NET SERVIÇOS e de seus acionistas  controladores,  bem
como envidando esforços no sentido de observar os seguintes princípios, os quais não serão
interpretados como limitadores de direitos da RBS:

a) Preservação do valor das ações de emissão da NET SERVIÇOS no
mercado;

b) Atuação na forma de venda coordenada com a NET SERVIÇOS e com os
Acionistas do Acordo;

c) Adequação das informações sobre destinação dos recursos e de
planos sobre eventuais  alienações  futuras de blocos de ações          da NET SERVIÇOS,
de forma a assegurar o atendimento ao princípio descrito na alínea (a) acima.

5.13. A RBS compromete-se a escolher um banco e demais participantes
do mercado,  todos de primeira linha e com experiência  comprovada no mercado de capitais
local e nos mercados  internacionais,  para realizar as ofertas  públicas de Ações
 Preferenciais de que trata o item 5.12 acima,  sendo que tanto os custos de  contratação
 destes  participantes  como as demais  taxas  aplicáveis  ao registro  das ofertas públicas
ora mencionadas correrão por conta da RBS.

5.14.  Não  obstante o disposto  neste  Acordo de  Acionistas,  a
RBS  poderá,  a qualquer  tempo,  caucionar  ou de outra forma dar em garantia,  onerar
ou de qualquer  outra forma dispor,  inclusive em operações em Bolsa de Valores e/ou
 operações com  derivativos,  de 11.613.656 (onze milhões,  seiscentos e treze mil,
seiscentos e cinqüenta e seis) Ações Preferenciais de sua titularidade,  ações essas que já podem
ser  desvinculadas do presente Acordo de Acionistas,  sendo certo que tais Ações
 Preferenciais  poderão ser objeto de uma ou mais  ofertas  públicas,  respeitado  o
intervalo  mínimo de 12 (doze)  meses  entre cada  oferta,  e/ou vendas  diretas em bolsa
de valores, sem limitação temporal entre as vendas diretas em bolsa.

5.15.  Na hipótese de a GLOBO  realizar  oferta  pública de ações de
emissão da NET SERVIÇOS no prazo de 90 (noventa)  dias contados da data  mencionada no
item 5.12 acima (08 de setembro de 2002),  a RBS terá o direito de participar de tal
oferta pública em conjunto com a GLOBO,  ofertando  suas Ações  Preferenciais  em
 percentual  equivalente  a, no máximo,  35% (trinta e cinco por cento) do volume da
oferta realizada pela GLOBO.

5.16. A  Transferência  de ações de emissão da NET SERVIÇOS  tratada
nesta  Cláusula 5, por parte de qualquer dos Acionistas do Acordo, deverá ser
imediatamente  informada pelo respectivo  Acionista do Acordo à Comissão de Valores Mobiliários
e à BOVESPA, de acordo com o disposto no artigo 116-A da Lei no 6.404/76, alterada pela
Lei no 10.303/2001.

6. DO DIREITO À VENDA CONJUNTA (TAG ALONG)

6.1. A alienação do Controle da NET SERVIÇOS por qualquer  Acionista
do Acordo,  agindo  individualmente  ou não, tanto por meio de uma única operação,  como
por meio de operações sucessivas,  de forma direta ou indireta,  somente poderá será contratada
sob a condição de que o adquirente  se obrigue a realizar,  no prazo  máximo de 90
 (noventa)  dias,  oferta  pública de aquisição de ações  ordinárias e preferenciais
 detidas por todos os demais  acionistas da NET SERVIÇOS,  de forma a assegurar aos
mesmos a  oportunidade  de alienar as suas ações para o  adquirente  do Controle da NET
 SERVIÇOS ao preço  correspondente  a 100% (cem por cento) do valor pago por ação com
direito a voto integrante do bloco de Controle da NET SERVIÇOS, conforme o disposto no
Estatuto Social da COMPANHIA.

6.2. Na hipótese de um dos Investidores Qualificados possuir,
 individualmente,  mais de 50% (cinqüenta por cento) das Ações Ordinárias vinculadas ao
Acordo de Acionistas,  eventual  alienação da totalidade dessas Ações Ordinárias pelo
respectivo  Investidor  Qualificado ensejará, aos demais Investidores Qualificados,  o
direito de vender suas Ações Ordinárias e Ações Preferenciais,  no todo ou em parte, em
conjunto com as Ações Ordinárias alienadas pelo referido Investidor  Qualificado,  nas
mesmas condições de preço e pagamento,  desde que exerçam essa opção,  mediante  notificação
ao Investidor  Qualificado  alienante,  no mesmo prazo  estabelecido para o exercício do
Direito de Preferência, definido no item 5.3 deste Acordo de Acionistas.

6.2.1. Na hipótese de o Investidor  Qualificado titular de mais de
50% (cinqüenta por cento) das Ações Ordinárias  vinculadas ao Acordo de Acionistas
 alienar parte dessas Ações  Ordinárias e, como  resultado,  reduzir sua  participação
 para menos de 50%  (cinqüenta por cento) das Ações Ordinárias vinculadas ao Acordo de
Acionistas,  tal alienação ensejará aos demais Investidores  Qualificados o direito à venda
conjunta previsto no item 6.2 acima.

7. DA OBRIGAÇÃO À VENDA CONJUNTA (DRAG ALONG)

7.1. Caso a GLOBO  pretenda  vender as Ações  Ordinárias
 representativas  do Controle da NET SERVIÇOS a terceiro(s)  não sujeito(s) ao mesmo
controle final da BRADESPAR,  da BNDESPAR,  da MICROSOFT ou da RBS, e/ou realizar  operação
com conteúdo ou escopo  equivalentes, incluindo  a cessão e  transferência  de  direito
de  preferência  à  subscrição  de  capital  e/ou de  títulos ou valores  mobiliários
conversíveis em ações com direito a voto da NET SERVIÇOS de que resulte a  Transferência
 do Controle da NET SERVIÇOS,  a BRADESPAR,  a BNDESPAR,  a MICROSOFT e a RBS, se
requeridas  pela GLOBO,  se obrigam a participar  da operação,  nas mesmas  condições,
 inclusive de preço e pagamento, em bases pro-rata, proporcionalmente ao número de Ações
Ordinárias de cada um.

7.1.1.  O disposto no item 7.1 acima somente se aplica à BNDESPAR se
a venda for realizada por um preço igual ou superior  àquele que a BNDESPAR já tem
assegurado no âmbito do Contrato de Opção de Compra e de Opção de Venda.

7.1.2.  A operação de que trata o item 7.1 acima não exclui a obrigação
 de  observância  pela GLOBO do Direito de  Preferência  de que trata este Acordo de
Acionistas.

7.2. Se, a qualquer  tempo,  a relação  entre  Endividamento  Líquido
e EBITDA  calculada  para a NET SERVIÇOS for superior a 6 (seis), qualquer  um dos
 Acionistas  do  Acordo,  agindo  individual  ou  conjuntamente,  terá o direito de
alienar as ações de emissão da NET SERVIÇOS de sua titularidade para um terceiro,
 respeitado o Direito de Preferência de que trata a Cláusula 5 e poderá, também, obrigar
os demais  Acionistas  do Acordo a vender suas ações de emissão da NET SERVIÇOS nas
mesmas  condições,  inclusive de preço e pagamento, em bases pro-rata, proporcionalmente
ao número de Ações Ordinárias de cada acionista.

7.2.1.  A faculdade  assegurada à qualquer  Acionista do Acordo para
alienar suas Ações  Ordinárias e obrigar os demais  Acionistas  do Acordo a vender
 conjuntamente suas Ações Ordinárias somente será válida quando a relação entre
Endividamento  Líquido e EBITDA apurada para a COMPANHIA for superior a 6 (seis) em dois
trimestres  consecutivos.  Referida faculdade será válida pelo prazo de 6 (seis) meses a
contar do primeiro dia útil seguinte à divulgação  das  demonstrações  financeiras
 referentes ao segundo e consecutivo  trimestre no qual se  verificar  a relação  entre
 Endividamento  Líquido e EBITDA  superior a 6, e tal prazo será  automaticamente
 prorrogado  por períodos  consecutivos de 3 (três) meses, na hipótese de a relação entre
Endividamento  Líquido e EBITDA permanecer em patamar superior a 6 (seis), conforme
demonstrações a serem levantadas trimestralmente pela COMPANHIA.

7.2.2. A prorrogação  por períodos  consecutivos  de 3 (três) meses
referida no item acima será  automaticamente  interrompida  caso se verifique  que a  relação
 entre  Endividamento  Líquido  e EBITDA  retorne  a patamar  inferior  a 6  (seis),
 conforme  demonstrações financeiras  trimestrais a serem  levantadas  pela NET SERVIÇOS.
 Os  Acionistas  do Acordo desde já  estabelecem  que, para efeitos da apuração da relação
 entre  Endividamento  Líquido e EBITDA será  considerado  o período de 12 (doze)  meses
 imediatamente  anterior àdata-base do trimestre ao qual se referir as demonstrações
financeiras.

8. DO EXERCÍCIO DO VOTO NAS ASSEMBLÉIAS GERAIS E REUNIÕES DO
CONSELHO DE ADMINISTRAÇÃO

8.1. Os Acionistas do Acordo  obrigam-se a sempre  comparecer e
exercer o direito de voto de suas ações na(s)  Assembléia(s)  Geral(is) da COMPANHIA  (Assembléia
 Geral),  diretamente  ou por meio de seus  representantes  legalmente  indicados,
 votando  uniformemente, conforme  definido na Reunião Prévia a que se refere o item 8.2
abaixo,  bem como a orientar os conselheiros  pelos mesmos  indicados a votarem, em todas
as reuniões do Conselho de Administração  (Reunião do Conselho de  Administração),  de
acordo com o estabelecido na referida Reunião Prévia, observado o estabelecido nos itens
subseqüentes.

8.2. Para  implementar a regra  constante do item 8.1 acima,  os
 representantes  dos Acionistas do Acordo se reunirão com até 3 (três) dias úteis de
antecedência  (Reunião  Prévia) da Assembléia Geral ou da Reunião do Conselho de
 Administração,  conforme o caso, para apreciar,  discutir  e  deliberar  sobre  as  matérias
 objeto  da ordem  do dia da  Assembléia  Geral ou da  Reunião  do  Conselho  de
Administração, observado o disposto no item abaixo.

8.2.1. As Reuniões Prévias serão convocadas por qualquer um dos
Acionistas do Acordo,  através de  correspondência a cada um dos demais Acionistas do
Acordo, que poderão indicar por escrito seus representantes a participar das mesmas.

8.3. Para efeito de deliberação  acerca das matérias abaixo
 relacionadas  será necessária  aprovação  unânime,  em Reunião Prévia,  de todos os
Acionistas do Acordo:

(a) mudança do objeto da COMPANHIA;

(b) aquisição de controle  acionário,  participação em outras
 sociedades,  joint venture ou consórcios  estranhos ao objeto          social da
COMPANHIA;

(c) venda a terceiros de bens do ativo permanente cujo valor seja
superior a 20% (vinte por cento) do ativo total  consolidado          da COMPANHIA,
apurado no último trimestre imediatamente anterior ao mês da transação.

8.4. Nas Matérias  Relevantes de competência da Assembléia Geral,
 conforme o item 8.5. abaixo, a aprovação em Reunião Prévia dependerádo voto  favorável
de 51%  (cinqüenta e um por cento) das Ações  Ordinárias  vinculadas ao Acordo de
 Acionistas,  que deverá incluir o voto favorável da BRADESPAR ou da BNDESPAR.

8.4.1. Os Acionistas do Acordo exigirão dos membros do Conselho de
 Administração  da COMPANHIA  (Conselho de  Administração),  pelos mesmos indicados, o
cumprimento integral das decisões tomadas nas Reuniões Prévias.

8.4.2.  Os Acionistas do Acordo,  seja através de seus
 representantes  em  Assembléia  Geral,  seja através dos membros do Conselho de
Administração  por eles indicados,  se obrigam a não obstruir o exame e/ou votação,  na
forma deliberada na Reunião Prévia, de qualquer matéria  apresentada  à Assembléia  Geral
ou ao Conselho de  Administração  e, ainda,  a não deixar de  participar  de qualquer
 desses conclaves.

8.4.3.  Da Reunião Prévia será lavrada ata sumária das  deliberações
 às quais os votos dos  Acionistas do Acordo se  vincularão,  para todos os efeitos de
direito.

8.5.  Para efeito do  disposto  neste item,  competirá  às  Assembléias
 Gerais a decisão  sobre toda e qualquer  matéria que lhes seja atribuída por força da
lei, constituindo Matérias Relevantes de Assembléia Geral as seguintes:

(a) alteração do limite da autorização para aumento do capital
independentemente de reforma estatutária;

(b) emissão de ações,  debêntures  conversíveis,  bônus de  subscrição
 e qualquer  outro valor  mobiliário  conversível  e/ou          permutável em ações com
direito a voto, para subscrição pública ou particular;

(c) redução do capital social ou resgate de ações;

(d) modificação da política de dividendos e/ou de pagamento de juros
sobre capital;

(e) pedido de concordata ou confissão de falência;

(f) fusão da COMPANHIA ou sua incorporação em outra ou por outra que
seja Competidor da MICROSOFT;

(g) fusão da COMPANHIA ou sua incorporação em outra se na companhia
resultante a GLOBO não exercer o Controle;

(h) dissolução e liquidação da COMPANHIA;

(i) ingresso de qualquer Investidor Qualificado como acionista da
COMPANHIA que seja Competidor da MICROSOFT;

(j) demais matérias constantes do artigo 136 da Lei no 6.404/76;

(l)  alteração do estatuto  social da COMPANHIA que modifique
 adversamente  os direitos  assegurados  neste  instrumento  aos          Acionistas do
Acordo ou as atribuições do Conselho de Administração da COMPANHIA; e

(m)  cancelamento  do registro da Companhia  para  negociação de
suas ações no Nível 2 da BOVESPA ou no Novo Mercado,  caso as          ações da COMPANHIA
encontrem-se listadas para negociação no Novo Mercado, nos termos da Cláusula 2 do
presente Acordo.

8.6. As matérias de competência do Conselho de Administração  abaixo
 relacionadas serão aprovadas por maioria simples dos conselheiros presentes, a qual deverá incluir
necessariamente o voto favorável do conselheiro indicado pela BRADESPAR ou pela BNDESPAR:

(a) aumento de capital da COMPANHIA, mediante a emissão de ações com
direito a voto para subscrição pública ou particular;

(b) emissão de quaisquer valores mobiliários conversíveis ou permutáveis
em ações com direito a voto;

(c) alteração nos termos e condições, ou rescisão, de contratos de
concessão com operadoras;

(d) aprovação e alteração do Plano Financeiro, do Plano de Negócios,
do Plano de Investimentos e do Orçamento,  juntamente com          regras sobre
 investimentos,  nível de endividamento e outros compromissos  relativos a endividamento
e política financeira da          COMPANHIA,  como condições para contratar  novas dívidas,
 política de hedge e outros  assuntos  relativos a  endividamento  e          política
financeira;

(e) eleição e destituição de Diretores da COMPANHIA;

(f)  celebração,  pela Companhia,  de contratos de conteúdo e de
programação,  bem como a manutenção ou renovação das relações          comerciais
mantidas entre a COMPANHIA e a NET BRASIL.

8.7. As  contratações  entre a NET SERVIÇOS e Acionistas  do Acordo
ou Partes  Relacionadas  dos  Acionistas do Acordo que não envolvam contratos  de conteúdo
e de  programação,  não  envolvendo  portanto a NET BRASIL,  deverão ser  submetidas  à aprovação
do Conselho de Administração,  que  deliberará  por  maioria  simples de votos,
 observando-se  que  somente  poderão  votar os  Conselheiros  que não apresentem
conflito de interesse em relação à parte contratante.

8.7.1.  As transações  consideradas  nesse item 8.7 não serão
 caracterizadas  como matéria  relevante para fins de aplicação do quorum qualificado
previsto no item 8.6 acima.

8.8. Os Acionistas do Acordo  concordam,  ainda, que o Conselho de
Administração  poderá,  observado o quorum  qualificado  previsto no item 8.6 acima,
 estabelecer  que  contratos de baixo valor,  conforme  vier a ser definido  pelo
 Conselho de  Administração,  a serem celebrados pela COMPANHIA e Partes  Relacionadas,
 referentes a operações  corriqueiras e comuns aos negócios da NET SERVIÇOS,  ficarão
dispensados da obrigatoriedade de aprovação prévia pelo Conselho de Administração
prevista no item 8.7.

8.9. No que se refere às negociações  entre a COMPANHIA e a NET
BRASIL  relacionadas ao papel  desempenhado  por esta junto à COMPANHIA na definição e
contratação  de  programação  distribuída  pela  COMPANHIA,  deverão ser  observados,  além
do princípio de contratar em condições que reflitam  práticas  comerciais  usualmente
 adotadas pela  COMPANHIA com terceiros,  e respeitados os contratos  vigentes firmados
entre a NET BRASIL e terceiros  fornecedores de programação,  os seguintes princípios:
 (a) a NET BRASIL terá exclusividade no licenciamento de conteúdo para a COMPANHIA,  que
por sua vez terá exclusividade na veiculação por distribuição  terrestre (MMDS e Cabo) do
conteúdo da NET BRASIL,  nas áreas  geográficas das atuais operações das controladas da
COMPANHIA,  conforme  respectivas  licenças, assim como nas áreas de atuação de
operadoras  que vierem a ser  adquiridas,  respeitados,  no entanto,  os contratos da NET
BRASIL com terceiros,  em vigor  anteriormente  a tais  aquisições.  Nas áreas  geográficas
nas quais as controladas da COMPANHIA ainda não tenham licença para operar e que a NET
BRASIL não tenha  licenciado  conteúdo para outra  operadora,  as controladas da
COMPANHIA  deverão ter prioridade  para o  licenciamento,  caso  obtenham  referida  licença;
 (b) a NET BRASIL  deverá,  sempre que  solicitada,  franquear àCOMPANHIA a documentação
 referente à contratação junto a terceiros do conteúdo por ela licenciado;  e (c) a NET
BRASIL deverá submeter à aprovação da COMPANHIA  não só novos  conteúdos e contratos de
 programação,  mas também a  substituição  e renovação  dos  conteúdos distribuídos pela
operadoras,  devendo tal matéria ser objeto de aprovação pelo Conselho de Administração
da COMPANHIA,  que deliberarápor maioria simples dos conselheiros presentes,  observado
que referido quorum de maioria simples deverá incluir,  obrigatoriamente,  o voto favorável
do conselheiro indicado pela BNDESPAR ou do conselheiro indicado pela BRADESPAR.

8.9.1.  Ademais,  na hipótese de rompimento das relações  comerciais
 mantidas entre a NET BRASIL e a NET Sat Serviços Ltda.  (SKY), os Acionistas do Acordo
desde já concordam e se  comprometem a orientar os membros do Conselho de  Administração,
 no sentido de autorizar a  COMPANHIA  a  rescindir  qualquer  acordo  mantido com a NET
BRASIL  relativo à  programação,  devendo  tal decisão ser  submetida àaprovação do
Conselho de Administração,  que deliberará por maioria simples de votos,  observando-se
que esse quorum de maioria simples deverá incluir,  obrigatoriamente,  o voto favorável
do conselheiro indicado pela BNDESPAR e ou do conselheiro indicado pela BRADESPAR,
observando-se  ainda que a NET  BRASIL  deverá  fornecer  à  COMPANHIA  uma lista
 evidenciando  os termos e  condições  de cada um dos compromissos  então vigentes
assumidos pela NET BRASIL,  com terceiros,  em nome da COMPANHIA,  para que o Conselho de
Administração da COMPANHIA tenha  conhecimento de tais  compromissos ao deliberar acerca
da manutenção ou rescisão do contrato com a NET BRASIL.  Caso o Conselho de  Administração
 decida pela rescisão do contrato  celebrado  entre a COMPANHIA e a NET BRASIL,  bem como
em qualquer  outra hipótese de rescisão do referido  contrato ou no final de seu prazo de
vigência,  a COMPANHIA fica desde já autorizada pelos Acionistas do Acordo a, pelo prazo
 máximo de 30 (trinta)  meses  contado da rescisão do contrato com a NET BRASIL,
 continuar  utilizando a marca NET em todos os seus  produtos e serviços,  de acordo
com as  disposições  sobre  licenciamento  de marca  constantes  do Contrato de Comissão
 Mercantil,  Prestação de Serviços,  Licenciamento de Marca e Outras Avenças,  celebrado
entre a COMPANHIA e a NET BRASIL. Não obstante a rescisão do contrato com a NET BRASIL, a
COMPANHIA permanecerá  responsável por honrar todos os compromissos  assumidos pela NET
BRASIL com terceiros, em nome da COMPANHIA, que não seja possível à NET BRASIL cancelar.

8.9.2. Os Acionistas do Acordo se comprometem,  por fim, a tomar e
autorizar todas as medidas  necessárias  para alterar o contrato que estabelece o atual
 relacionamento  comercial entre a COMPANHIA e a NET BRASIL, para que do mesmo deixe de
constar a opção de compra de equipamentos, no caso de rescisão do contrato, que foi
outorgada à NET BRASIL.

8.9.3.  Sem prejuízo do acima  exposto,  os Acionistas do Acordo se
 comprometem  a tomar todas as  providências  para que as seguintes condições sejam
observadas na manutenção da relação comercial existente entre a COMPANHIA e a NET BRASIL:

|(a) | A  NET  BRASIL  deverá  prestar  serviços  de  identificação,
  desenvolvimento  e/ou  contratação  de  conteúdo  nacionais  e internacionais,
 conforme  definido  na carta  aditivo ao  Contrato  de  Comissão  Mercantil,  Prestação
 de Serviços,  Licenciamento de Marca e Outras Avenças,  celebrado entre a COMPANHIA e a
NET BRASIL, bem como de marcas para a COMPANHIA e suas operadoras;                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) | A NET BRASIL deverá administrar os contratos de programação
 existentes,  envidando todos os melhores esforços  comercialmente viáveis para
renegociar preços e condições desses contratos, em benefício da COMPANHIA;                                                                                                                                                                                                                             
|   
|(c) | A NET BRASIL deverá desenvolver e propor novos conteúdos e contratos
de programação para a COMPANHIA e as operadoras,  devendo tal matéria ser objeto de aprovação
pelo Conselho de Administração da COMPANHIA,  que deliberará por maioria simples de voto,
observando-se que esse quorum de maioria simples deverá incluir,  obrigatoriamente,  o
voto favorável do conselheiro indicado pela BNDESPAR ou do conselheiro indicado pela
BRADESPAR;
|   
|(d) | A NET BRASIL renuncia ao seu direito de comercialização  do banco de
dados de assinantes da COMPANHIA e das operadoras,  sendo mantido apenas seu direito de
acesso às informações para o adequado desempenho de suas funções;                                                                                                                                                                                                                     
|   
|(e) | A NET BRASIL deverá atuar de tal forma que, nos contratos com as
 operadoras  ligadas à COMPANHIA,  não se verifique  qualquer margem ou ganho por parte
da NET BRASIL;                                                                                                                                                                                                                                                                            
|   
|(f) | A NET BRASIL continuará a manter a COMPANHIA e as operadoras
 informadas das condições  vigentes nos contratos de programação, devendo,
 especialmente,  fornecer uma lista nos termos do item 8.9.1 do presente Acordo de
Acionistas,  bem como  permitir  a  realização  de  auditoria  para  verificar  tanto a
regular  execução  dos  contratos  de programação, como a sua própria atuação e, ainda, o
disposto na alínea e acima; e       
|   
|(g) | A NET BRASIL  concederá  para as operadoras  vinculadas à COMPANHIA
o direito de explorar até dois minutos de espaço  publicitário  por hora de  programação
 nos canais da  Globosat,  segundo  as normas e  procedimentos adotados pela Globosat e
aceitos pela COMPANHIA, sendo a venda realizada através da Globosat.                                                                                                                          

9. DO CONSELHO DE ADMINISTRAÇÃO

9.1. O Conselho de Administração  da COMPANHIA será formado por, no mínimo,
 9 (nove) e, no máximo,  12 (doze) membros efetivos e igual número de  suplentes,  todos
 acionistas  da NET  SERVIÇOS e  indicados  pelos  Investidores  Qualificados,  sendo que
cada  Investidor Qualificado terá o direito de indicar, individualmente, pelo menos um
membro do Conselho de Administração da COMPANHIA.

9.2. Na hipótese de algum outro  acionista da COMPANHIA,  que não
seja um  Investidor  Qualificado,  pleitear  validamente a eleição de membro(s) do
Conselho de  Administração  por meio da adoção do processo de voto múltiplo ou votação em
separado em Assembléia  Geral, o número total de  conselheiros  que deverão compor o
Conselho de  Administração  deverá ser  determinado a fim de contemplar o número de
conselheiro(s) indicado(s) por acionista(s) que não seja(m) Investidor(es)
 Qualificado(s),  assegurando-se a indicação de, pelo menos, 9 (nove) membros por
Investidores Qualificados, a qual será feita na forma prevista abaixo.

9.2.1.  Caso um dos  Investidores  Qualificados  possua,
 individualmente,  mais de 50% (cinqüenta por cento) das ações  ordinárias que compõem o
capital  social da  COMPANHIA,  este  Investidor  Qualificado  indicará  pelo menos
metade mais um dos membros do Conselho de Administração  da COMPANHIA e, se for necessário,
 o número de membros do Conselho de  Administração  será aumentado para  possibilitar tal
indicação, sem prejuízo do direito de cada Investidor Qualificado indicar, pelo menos, 1
(um) conselheiro.

9.2.2. Na hipótese de nenhum Investidor  Qualificado possuir,
 individualmente,  mais de 50% (cinqüenta por cento) das ações ordinárias que compõem o
capital social da COMPANHIA, mas um dos Investidores  Qualificados possuir,
 individualmente,  mais de 50% (cinqüenta por cento) das Ações Ordinárias  vinculadas ao
Acordo de Acionistas,  este Investidor  Qualificado  indicará,  pelo menos, a metade mais
um dos membros do Conselho de  Administração  da COMPANHIA  dentre aqueles  indicados
 pelos  Investidores  Qualificados,  sem prejuízo do direito de cada Investidor
Qualificado indicar, pelo menos, 1 (um) conselheiro.

9.2.3. Caso nenhum Investidor  Qualificado possua,  individualmente,
 mais de 50% (cinqüenta por cento) das Ações Ordinárias vinculadas ao Acordo de
 Acionistas,  a eleição dos membros do Conselho  de  Administração  da  COMPANHIA  pelos
 Investidores  Qualificados  serárealizada por meio da adoção, em Reunião Prévia,  de
processo similar àquele do voto múltiplo previsto na Lei no 6.404/76,  por meio do qual
os  Investidores  Qualificados  deverão  distribuir  seus  votos,  a seu livre  critério,
 tomando-se  por base o número  total de conselheiros  a serem eleitos pelos
 Investidores  Qualificados  e respeitado o direito de cada um deles eleger um
conselheiro na forma do item 9.1 acima,  sendo certo,  porém,  que apenas os votos de
cada  Investidor  Qualificado  que excederem o mínimo  necessário para indicar um
 conselheiro,  na forma do processo de escolha  previsto  neste item 9.2.3 (não
 considerando o percentual  necessário  para preencher o conceito de  Investidor
 Qualificado),  poderão ser reunidos com os votos de outros  Investidores  Qualificados.
 Não sendo preenchidas  todas as vagas desta forma,  o(s)  conselheiro(s)  faltante(s)
 serão  eleitos pela maioria  simples das Ações  Ordinárias vinculadas ao Acordo de
Acionistas, detidas pelos Investidores Qualificados.

9.3. Os Acionistas do Acordo  comprometem-se  a direcionar seus
votos na Assembléia  Geral para eleger os conselheiros  que cada um dos Acionistas do
Acordo indicar na forma deste Acordo.

9.3.1.  Sem  prejuízo do disposto no item  13.2.(a)  deste Acordo de
 Acionistas,  cada um dos  Acionistas  do Acordo terá o direito de requerer,  a qualquer
 tempo,  a  destituição  de qualquer  membro do Conselho de  Administração  da  COMPANHIA
 que tenha sido por ele indicado,  obrigando-se os outros Acionistas do Acordo a
prontamente adotar todas as providências  necessárias visando à destituição de tal
conselheiro.

9.3.2.  Em caso de  destituição,  renúncia,  substituição  ou
qualquer  outro  evento que resulte na vacância do cargo de qualquer  dos membros do
Conselho de  Administração  da  COMPANHIA,  o Acionista do Acordo que tiver  indicado tal
membro terá o direito de indicar o respectivo  substituto (ou um novo suplente,  caso
opte a parte por confirmar o suplente  originariamente  indicado para o cargo vago),
obrigando-se os demais Acionistas do Acordo a votar de acordo com a vontade do Acionista
do Acordo que tiver indicado tal membro.

10. NOVOS NEGÓCIOS NO ÂMBITO DO OBJETO SOCIAL

10.1. GLOBO, RBS e os acionistas  controladores,  direta ou
indiretamente,  da GLOBO e da RBS obrigam-se a utilizar a NET SERVIÇOS, por si própria ou
através de suas  controladas,  como o instrumento de  participação em negócios de
fornecimento de serviços de televisão a cabo no Brasil ou outros  serviços de  comunicação
 de conteúdo  usando rede  destinada à transmissão  de programas de televisão a cabo
(incluindo,  mas não se  limitando  a,  serviços  de conexão à internet  via  banda
 larga),  com  exceção de  eventual  participação minoritária  transitória  (Participação
 Transitória) e com exceção da participação que a RBS detém na Multitel  Comunicações
 Ltda., conforme definição de Competidor da NET SERVIÇOS constante do presente Acordo.
 Entende-se como Participação  Transitória aquela em que a GLOBO, a RBS ou seus
acionistas  controladores  seja(m)  acionista(s)  por um período máximo de 1 (um ano) e
detenha(m) no máximo 30% (trinta por cento) do capital  votante e 30% (trinta por cento)
do capital total da companhia  objeto do  investimento.  Se a GLOBO,  a RBS ou seus
acionistas  controladores  alienarem a participação para a NET SERVIÇOS,  o preço de
alienação deverá ser inferior ao preço de compra de referida Participação Transitória.

11. DA PARTICIPAÇÃO EM CONCORRENTES DA NET SERVIÇOS

11.1.  A BRADESPAR  compromete-se,  por si e por suas Partes
 Relacionadas,  a somente  realizar  investimentos  em  Competidor  da NET SERVIÇOS  como
 investidor  financeiro e sem gestão  administrativa,  sob pena de, na hipótese de
 descumprimento  do  compromisso  ora assumido,  a BRADESPAR  perder o direito de
participar de qualquer  Reunião Prévia realizada em conformidade com o disposto no
presente Acordo de Acionistas.

11.2. A MICROSOFT e qualquer Parte Relacionada à MICROSOFT
 obrigam-se,  direta ou indiretamente,  (i) a não participar na Diretoria ou no Conselho
de  Administração e (ii) a não efetuar  investimento  relevante,  entendido como tal
 participação  igual ou superior a 10% (dez por cento) do capital, em qualquer Competidor
da NET SERVIÇOS.

11.3. A BNDESPAR, à sua inteira discrição, poderá realizar
investimento em Competidor da NET SERVIÇOS.

12. DO CONFLITO COM A RBS

12.1. Caso (i) seja aprovada a realização de investimento  pela NET
SERVIÇOS,  seja por deliberação do Conselho de Administração ou dos acionistas  reunidos
 em  Assembléia  Geral,  em negócios  diferentes  daqueles  listados na Cláusula 10 acima
e referido  investimento acarrete  conflito de  interesses  para a RBS; ou (ii) seja
 aprovada  qualquer das matérias  definidas  nos itens 8.5. e 8.6.(c) e tal aprovação
 acarrete um conflito de interesses para com a RBS na região Sul do País e, em qualquer
dessas hipóteses,  a RBS tenha votado contrariamente a tal deliberação, a RBS poderá,
caso não consiga eliminar o conflito internamente, alternativamente:

(i)  notificar a existência de tal conflito de  interesses  aos
 Investidores  Qualificados  e à NET SERVIÇOS,  no prazo de 30          (trinta) dias
contados da data da deliberação que originou o conflito;

(ii) exigir que a GLOBO  permute a  totalidade,  e não menos que a
 totalidade,  das ações  ordinárias  então detidas pela RBS          representativas do
capital da NET SERVIÇOS,  por ações  preferenciais com registration  rights,  numa relação
de 75 (setenta e          cinco) ações preferenciais por cada lote de 100 (cem) ações
ordinárias; ou

(iii) após a efetiva  listagem das ações da COMPANHIA para negociação
no Novo Mercado da BOVESPA,  nos termos da Cláusula 2 do          presente  Acordo de
 Acionistas,  a RBS poderá  desvincular do presente  Acordo de Acionistas a totalidade,
 e não menos que a          totalidade,  das ações ordinárias  então por ela detidas,  a
fim de realizar sua venda no mercado,  com  registration  rights,          observado o
Direito de Preferência previsto no item 5.3 deste instrumento.

12.2.  Caso a RBS opte por permutar a totalidade de suas ações  ordinárias
 por ações  preferenciais  com a GLOBO,  deverá  notificar a GLOBO  (copiando os demais
 Investidores  Qualificados e a NET SERVIÇOS) para que esta realize tal permuta no prazo
de 30 (trinta) dias contados do recebimento de tal notificação.

12.3.  Caso a RBS opte por  notificar  os demais  Investidores
 Qualificados  e a NET SERVIÇOS nos termos do item  12.1.(i)  acima,  os administradores
 da NET SERVIÇOS  deverão,  no prazo de 30 (trinta)  dias  contados do  recebimento  de
tal  notificação,  realizar uma reunião com a RBS para  discutir e analisar as possíveis
 formas de solução ao conflito,  de forma a permitir que o  investimento  seja realizado
pela NET SERVIÇOS sem que haja prejuízo para a RBS ou para a NET SERVIÇOS.

12.4. A NET SERVIÇOS  deverá,  então,  no prazo  adicional de 30
(trinta) dias contados da data da reunião,  propor solução ao conflito com base nas
 discussões  havidas  entre as partes.  Tal solução  poderá  consistir  (i) na aceitação
da  concorrência  entre RBS e NET SERVIÇOS, na hipótese de ser este o conflito, caso em
que o mesmo será havido como eliminado; ou (ii) em proposta distinta à RBS.

12.5. Caso a NET SERVIÇOS  efetue proposta de solução do conflito,
 a RBS terá 30 (trinta) dias contados do recebimento de tal proposta para se manifestar
sobre a mesma.

12.6. Caso a RBS não concorde com a proposta de solução do conflito
 efetuada pela NET SERVIÇOS,  os  Diretores-Presidente  da RBS e da NET SERVIÇOS  deverão
se reunir num prazo  adicional de 60 (sessenta)  dias contados da notificação da RBS,
para buscar  alternativas àsolução do  conflito.  Caso a NET  SERVIÇOS e a RBS não
cheguem a um bom termo  sobre a solução do  conflito  em tal  reunião  entre os
Diretores-Presidente,  NET SERVIÇOS e RBS terão um prazo  adicional  de 30 (trinta)  dias
para  reexaminar a situação,  prazo dentro do qual os acionistas  controladores  finais
da NET SERVIÇOS  deverão estar direta e pessoalmente  envolvidos nas tratativas,
 realizando, pessoalmente, pelo menos uma reunião visando pôr fim ao conflito.

12.7.  Caso ao final dos 210 (duzentos e dez) dias referidos nos
itens acima, o conflito não tenha sido  resolvido  entre as partes,  a RBS poderá  notificar
a GLOBO para,  no prazo de 30  (trinta)  dias  contados da data do  recebimento  de tal
 notificação,  permutar a totalidade,  e não menos que a totalidade,  de suas ações ordinárias
da NET SERVIÇOS,  por ações preferenciais com registration rights, numa proporção de 90
(noventa) ações preferenciais para cada lote de 100 (cem) ações ordinárias.

12.8. A permuta de ações  prevista nos itens  12.1.(ii) e 12.7.
 acima será realizada  observando-se  o Direito de Preferência a que se refere a Cláusula
5 do presente  Acordo de  Acionistas.  Todas as  notificações  deverão ser realizadas na
forma prevista no item 16.1. deste Acordo de Acionistas.

13. DA EXECUÇÃO DO ACORDO

13.1. O  cumprimento  das  obrigações  assumidas  neste Acordo de
 Acionistas  poderá ser tornado  efetivo  pelos  Acionistas do Acordo mediante decisão
 arbitral  proferida pela Câmara de Arbitragem do Mercado,  se aplicável,  ou decisão
 judicial,  tendo ambos execução específica,  de acordo com o previsto no  parágrafo  3o do
artigo 118 da Lei no  6.404/76,  combinado  com os artigos  461,  632, 639 e seguintes do
Código de Processo  Civil.  O pagamento de indenização  por perdas e danos em virtude do
desrespeito às disposições  deste Acordo de Acionistas não constituirá,  por si só, reparação
suficiente,  não excluirá a execução específica aqui prevista e nem eximiráa parte responsável
pela quebra deste Acordo de Acionistas das demais conseqüências previstas em lei.

13.2.  Sem prejuízo do disposto no item 13.1 acima ou, em qualquer
 outro item deste Acordo de  Acionistas,  dos efeitos e da aplicação do disposto nos  parágrafos
8o e 9o do artigo 118 da Lei no 6.404/76,  fica  assegurado  aos  Acionistas do Acordo o
direito de exigir, judicialmente ou em fórum arbitral instituído pela BOVESPA, se for o
caso:

(a) a suspensão  ou anulação de decisão da  Assembléia  Geral e/ou
Reunião do Conselho de  Administração  e/ou  Diretoria  que          aceite a validade de
voto  proferido  por  qualquer dos  Acionistas  do Acordo ou membro do Conselho de
 Administração  contra          disposição  deste Acordo de Acionistas,  voto esse que não
deve ser computado,  conforme  dispõe o parágrafo 8o, artigo 118 da          Lei no 6.404/76,
alterada pela Lei no 10.303/2001;

(b) o cancelamento  imediato ou a suspensão de registro de  Transferência
 ou promessa de  Transferência de ações efetuada por          qualquer dos Acionistas do
Acordo em desrespeito às normas deste Acordo de Acionistas; e

(c) o suprimento  judicial,  ou mediante decisão  arbitral
 proferida pela Câmara de Arbitragem do Mercado,  se aplicável,  da          vontade de
 Acionista  do  Acordo,  em caso de recusa de exercer o direito de voto,  conforme
 previsto  no item 8.1,  e/ou de          cumprir outra obrigação deste Acordo de
Acionistas.

14. DO PRAZO DO ACORDO

14.1. O presente Acordo de Acionistas vigorará pelo prazo de 10 anos
a partir da data de sua assinatura.

14.2.  Sem  prejuízo do disposto  nos itens 14.1 e 14.6 e
 ressalvados  tanto o Direito à Venda  Conjunta de que trata o item 6.1 deste Acordo de
 Acionistas  como  qualquer  cláusula  específica  em  contrário,  os direitos e deveres
 decorrentes  do presente  Acordo de Acionistas  em relação a cada um dos  Acionistas  do
Acordo  estão  condicionados  à  manutenção,  pelo mesmo  Acionista  do Acordo (em
conjunto com suas  respectivas  Partes  Relacionadas  que tenham adquirido Ações Ordinárias
na forma do item 5.5 acima) de, pelo menos, 6% (seis por cento) do total de ações  ordinárias
 da  COMPANHIA,  sendo os mesmos  direitos  extintos  de pleno  direito em relação ao
Acionista do Acordo que tiver sua  participação  reduzida abaixo desse parâmetro  mínimo,
 ressalvado o disposto nos itens 14.3, 14.4 e 14.5 abaixo.

14.2.1 Os Acionistas do Acordo desde já concordam que deverão
 discutir a possibilidade  de redução da porcentagem  acima referida para 5%  (cinco  por
 cento)  do total do  capital  social  votante,  imediatamente  após a  integralização
 de todas as ações  emitidas  em decorrência do processo de recapitalização de que trata
o Protocolo de Recapitalização.

14.3. Para os efeitos do item 14.2 acima não serão consideradas
 diminuições na participação  acionária de qualquer Acionista do Acordo em decorrência de
incorporações ou fusões envolvendo a COMPANHIA.

14.4. Para os efeitos do item 14.2 acima não se considerará  qualquer
diminuição da participação  acionária da MICROSOFT em decorrência de qualquer aumento de
capital, a qualquer tempo, em decorrência da 2a emissão pública das debêntures  conversíveis
da NET SERVIÇOS.  O direito ao exercício  da Opção de Compra da  MICROSOFT  CORPORATION,
 mesmo que ainda não  exercido,  assegura à MICROSOFT o cômputo de referidas ações
preferenciais para fins de somatório do percentual de que trata o item 14.2 acima.

14.5. No caso da BNDESPAR,  estão assegurados os direitos
 estabelecidos  neste instrumento mesmo que a BNDESPAR transfira a totalidade das suas Ações
Ordinárias e Ações Preferenciais para um fundo de investimentos  administrado por uma
instituição financeira,  desde que referido  fundo  de  investimentos  tenha  como  único
e  exclusivo  quotista  a  BNDESPAR  e desde  que o  administrador  do  fundo de
investimentos, a qualquer tempo, tenha sido previamente aprovado pela NET SERVIÇOS.

14.6.  Caso ocorra  diluição da  participação  da BRADESPAR  e/ou da
BNDESPAR  e/ou da MICROSOFT no capital  social da NET SERVIÇOS que resulte em  participações
 menores do que aquelas dos itens 14.2 e 14.2.1  acima,  fica  mantida a obrigação  de
respeitar o Direito de Preferência de que tratam os itens 5.2 e 5.3 e seus  subitens,  no
caso da BRADESPAR  e/ou da BNDESPAR,  observando-se  que, no caso da MICROSOFT,  essa
 obrigação  fica  restrita  apenas ao item 5.3,  seus subitens e demais itens da Cláusula
5 deste Acordo de Acionistas aplicáveis  à  MICROSOFT.  A obrigação  de que trata este
item não se aplica à BRADESPAR  se a venda das ações de sua  propriedade  for realizada
em bolsa de valores.

14.7. Fica acordado entre os Acionistas do Acordo que a BNDESPAR,  a
seu único e exclusivo  critério,  poderá, a qualquer tempo, vender a totalidade ou parte
das ações  preferenciais  de sua  propriedade,  oriundas da conversão das debêntures da 2a emissão
pública da NET SERVIÇOS,  bem como as ações a serem  adquiridas como resultado de sua
 participação na emissão pública de ações,  parte do processo de recapitalização  da
COMPANHIA  objeto do Protocolo de  Recapitalização,  por meio de leilão ou mediante
oferta pública em bolsa,  sendo certo que neste caso não se aplica o Direito de Preferência
de que trata a Cláusula 5 e respectivos itens deste Acordo de Acionistas.

15. DA PUBLICIDADE DO ACORDO

15.1.  Este  Acordo de  Acionistas  deverá ser  arquivado  na sede
da NET  SERVIÇOS,  registrado  nos livros  societários  e  registros acionários e as
 disposições  nele  contidas  deverão ser  observadas  pela NET SERVIÇOS em  conformidade
 e para os fins dos objetivos estabelecidos pelo artigo 118 da Lei no 6.404/76,  bem como
na Comissão de Valores Mobiliários,  conforme dispõe o artigo 17, inciso IV da Instrução
CVM no 202 e na BOVESPA.

16. DAS DISPOSIÇÕES GERAIS

16.1.  Qualquer  aviso,  notificação,  solicitação  ou  comunicação
 relativa  ao  presente  Acordo de  Acionistas,  bem como  qualquer comunicação
 envolvendo a COMPANHIA e os Acionistas do Acordo,  inclusive para prestar ou receber
 informações,  deverá ser enviado por carta ou fax ou outro meio,  com prova de
 recebimento,  para os  respectivos  representantes,  localizados  nos endereços
 indicados a seguir:

(i) no caso da MICROSOFT:

Microsoft Corporation One Microsoft Way Redmond, Washington
98052-6399 U.S.A. Fax: 425-936-7329 Atenção: Chief Financial Officer; General Counsel,
Finance and Administration

Microsoft B.V. 1119 PE Schiphol-Rijk Holanda Aos Cuidados da
Microsoft Corporation

Com cópias para:

Microsoft Informática Ltda. Av. Nações Unidas, 12.901, Torre Norte,
27o andar 04578-000, São Paulo - SP Brasil Fax: (11) 5504-2228 Atenção: Luiz A. Sette

Pinheiro Neto Advogados Rua Boa Vista, 254, 9o andar 01014-907, São
Paulo - SP Brasil Fax: (11) 237-8600 Atenção: Raphael de Cunto

(ii) no caso da BRADESPAR:

A/c BRADESPAR S.A. Av. Brigadeiro Faria Lima no 3064, 6o andar
Jardim Paulistano  São Paulo, SP Brasil Fax:  (11) 3049-3935 Atenção: Mário da Silveira
Teixeira Júnior         Rômulo de Mello Dias

Com cópias para:

Demarest & Almeida Advogados  Av. Pedroso de Moraes, 1201 05419-001  São
Paulo  SP Brasil Fax: (11) 3888-1700 Atenção:      Rogério Cruz Themudo Lessa
         Nadine S.M. Baleeiro Teixeira

(iii) no caso da GLOBO: A/c GLOBOPAR Av. Afrânio de Melo Franco no 135,
1o andar 22430-060, Rio de Janeiro - RJ Brasil Fax: (21) 2512-6195 Atenção: Ronnie Vaz
Moreira Fax: (21) 2512-5889 Atenção: Ronaldo Tostes Mascarenhas

(iv) no caso da BNDESPAR:

BNDES Participações S.A. - BNDESPAR Av. República do Chile, no 100,
19o e parte do 20o andar 20001-970, Rio de Janeiro - RJ Brasil Fax:  (21) 2533-1572 Atenção:
José Mauro Mettrau Carneiro da Cunha

(v) no caso da NET SERVIÇOS

NET Serviços de Comunicação S.A. Rua Verbo Divino, no 1.356, 1o andar
04719-002, São Paulo - SP Brasil Fax: (11) 5186-2655 Atenção: Luiz Antônio Viana

Com cópias para:

Barbosa, Müssnich & Aragão Av. Almirante Barroso, no 52, 32o andar
20031-000, Rio de Janeiro - RJ Brasil Fax: (21) 2262-5536 Atenção: Paulo Cezar Aragão e
Pedro Lanna Ribeiro

Debevoise & Plimpton 875 Third Avenue New York, New York 10022
U.S.A. Fax: 1-212-909-6836 Atenção: Michael J. Gillespie

(vi) no caso da RBS:

A/c RBS Participações S.A. Avenida Érico Veríssimo, no 400, 6o andar
90160-180, Porto Alegre - RS Brasil Fax: (51) 3218-6244 Atenção:     Carlos Melzer
                     Luciana Ribeiro

(vii) no caso da NET BRASIL:

Avenida Brasil, no 1.612 01430-001, São Paulo - SP Brasil Fax: (21)
2273-2770 Atenção: Alberto Pecegueiro

16.2.  Qualquer  alteração no presente  Acordo de  Acionistas
 somente  poderá ser  efetuada  por escrito e após  assinada por todos os Acionistas do
Acordo.

16.3. O presente  Acordo de Acionistas  regula todas as relações
 entre os  Acionistas do Acordo no que concerne às matérias  objeto do mesmo,  ressalvado
 o  disposto  (i) no  Contrato  de Opção de  Compra  e de Opção de Venda de Ações e (ii)
na Opção de  Compra,  ambos definidos no item 4.2, e obriga os Acionistas do Acordo e
seus sucessores,  revogando e substituindo  integralmente  quaisquer  acordos anteriores,
 verbais ou por escrito,  entre os Acionistas do Acordo com relação à NET SERVIÇOS.  Para
maior clareza, fica expressamente rescindido o acordo de acionistas  firmado entre a
Globo Cabo Holding S.A.,  antiga  denominação  social da DISTEL, a MAJOLI,  sucedida pela
BRADESPLAN, a BNDESPAR e a MICROSOFT, em 16 de novembro de 1999, bem como seu Aditivo no 1.

16.4.  Ressalvadas  as hipóteses  expressamente  previstas,  as
obrigações e direitos do presente  Acordo de  Acionistas  não podem ser cedidos ou
transferidos no todo ou em parte.

16.5. O presente  Acordo de  Acionistas  será regido pelas leis da
República  Federativa do Brasil,  observando-se  as  disposições  do artigo 118 da Lei no 6.404/76.
 Quaisquer  controvérsias  decorrentes ou  relacionadas  com as disposições  deste Acordo
de Acionistas, isoladamente ou em conjunto com o Estatuto Social da COMPANHIA,  inclusive
relativas à respectiva  validade,  eficácia e interpretação, bem como com as normas
editadas pelo Conselho  Monetário  Nacional,  Banco Central do Brasil e Comissão de
Valores  Mobiliários,  serão dirimidas  por  arbitragem.  A arbitragem  será  conduzida
 por um ou mais árbitros  escolhidos  na forma do  Regulamento  da Câmara de Arbitragem
do Mercado da BOVESPA.

16.6.  Qualquer  tradução  do  presente  Acordo de  Acionistas  para
outro  idioma não terá  nenhuma  validade  para fins de direitos e obrigações entre os
Acionistas do Acordo.

16.7. Os Acionistas do Acordo adotarão todas as medidas  necessárias
 para fazer com que os membros do Conselho de  Administração  e/ou da Diretoria da NET
SERVIÇOS não aprovem a concessão de mútuo da NET SERVIÇOS para  sociedades  controladoras
 ou para  qualquer  outra sociedade que não seja diretamente ou indiretamente controlada
da NET SERVIÇOS.

16.8. É vedada a assinatura de qualquer  outro  instrumento  entre
os Acionistas do Acordo  regulando as disposições do direito de voto de que trata a Cláusula
8 e/ou as disposições do Direito de Preferência de que trata a Cláusula 5, ambas deste
Acordo de Acionistas.

16.9. Na hipótese de qualquer  disposição  constante no Protocolo de
 Recapitalização  ser  conflitante ou  inconsistente  com qualquer disposição constante
neste Acordo de Acionistas, as disposições deste Acordo de Acionistas prevalecerão.

16.10.  A GLOBO,  na condição de acionista  controlador  da NET
BRASIL,  permitirá e fará com que a NET BRASIL permita que os auditores externos
 independentes  da COMPANHIA  examinem os respectivos  livros  sociais para emitir,
 semestralmente,  relatório  específico no sentido de atestar que as operações
 realizadas pela NET BRASIL com a COMPANHIA foram  concretizadas com base em preços de
mercado,  os quais são, no máximo, iguais àqueles praticados com outras sociedades.

16.11.  Este  Acordo de  Acionistas  será  arquivado  na sede da
 COMPANHIA,  bem como será  averbado  junto à  instituição  financeira depositária das ações
de emissão da COMPAHIA,  se for o caso, que observará,  cumprirá e fará cumprir as suas
disposições.  A COMPANHIA ou a instituição  financeira  depositária,  se for o caso, deverá averbar,
à margem do registro de ações nominativas de propriedade dos Acionistas do Acordo, o
seguinte texto: As ações  representadas por este registro,  inclusive sua transferência
ou oneração a qualquer título ou o exercício do direito de voto,  estão  sujeitas ao ônus
e ao regime do Acordo de  Acionistas  datado de 11 de julho de 2002, sob pena de ineficácia
de transferência, de oneração ou do exercício do direito de voto.

Estando assim justos e contratados,  os Acionistas do Acordo, bem
como os intervenientes,  assinam o presente  instrumento em 12 (doze) vias de igual teor
e efeito, juntamente com 2 (duas) testemunhas.

São Paulo, 11 de julho de 2002.

_____________________________________________________DISTEL HOLDING S.A.

_____________________________________________________ROMA PARTICIPAÇÕES LTDA.

_____________________________________________________GLOBO COMUNICAÇÕES E PARTICIPAÇÕES S.A.

Esta folha de assinaturas  integra o Acordo de Acionistas da Net
Serviços de Comunicação  S.A. (nova  denominação  social da GLOBO CABO S.A.) celebrado em
11 de julho de 2002.

_____________________________________________________BRADESPLAN PARTICIPAÇÕES S.A.

_____________________________________________________BNDES PARTICIPAÇÕES S.A.  BNDESPAR

_____________________________________________________MICROSOFT B.V.

_____________________________________________________ZERO HORA EDITORA JORNALÍSTICA S.A.

_____________________________________________________RBS PARTICIPAÇÕES S.A.

Intervenientes:

_____________________________________________________NET SERVIÇOS DE COMUNICAÇÃO S.A.

_____________________________________________________BRADESPAR S.A.

Esta folha de assinaturas  integra o Acordo de Acionistas da Net
Serviços de Comunicação  S.A. (nova  denominação  social da GLOBO CABO S.A.) celebrado em
11 de julho de 2002.

_____________________________________________________MICROSOFT CORPORATION

_____________________________________________________NET BRASIL S.A.

Testemunhas:

|1. _____________________________CPF/MF: | 2. _____________________________CPF/MF:
|--------------------------------------- | ---------------------------------------

Shareholders Agreement Translated from the Portuguese

NET SERVIÇOS DE COMUNICAÇÃO S.A. (FORMERLY GLOBO CABO S.A.)
SHAREHOLDERS AGREEMENT

This Shareholders Agreement is entered into by and between the
parties described below, to wit:

DISTEL HOLDING S.A. (formerly Globo Cabo Holding S.A.), with
headquarters at Av. Afrânio de Melo Franco 135, part, in the city of Rio de Janeiro,
State of Rio de Janeiro, registered in the National Register of Legal Persons (CNPJ/MF)
under no. 00.065.376/0001-84 and represented herein in accordance with its bylaws,
hereafter referred to individually as DISTEL;

ROMA PARTICIPAÇÕES LTDA., with headquarters at Av. Afrânio de Melo
Franco 135, 5th floor, part, in the city of Rio de Janeiro, State of Rio de Janeiro,
registered in the National Register of Legal Persons (CNPJ/MF) under no.
62.143.623/0001-70 and represented herein in accordance with its bylaws, hereafter
referred to individually as ROMAPAR;

GLOBO COMUNICAÇÕES E PARTICIPAÇÕES S.A., with headquarters at Av Afrânio
de Melo Franco 135, 1st floor, in the city of Rio de Janeiro, State of Rio de Janeiro,
registered in the National Register of Legal Persons (CNPJ/MF) under no.
27.865.757/0001-07 and represented herein in accordance with its bylaws, hereafter
referred to individually as GLOBOPAR and collectively with DISTEL and ROMAPAR as GLOBO;

BRADESPLAN PARTICIPAÇÕES S.A., with headquarters at Cidade de Deus,
Vila Yara, Osasco, State of São Paulo, registered in the National Register of Legal
Persons (CNPJ/MF) under no. 61.782.769/0001-01 and represented herein in accordance with
its bylaws, hereafter referred to individually as BRADESPAR;

BNDES PARTICIPAÇÕES S.A.  BNDESPAR, a corporation wholly owned by
BANCO NACIONAL DE ESENVOLVIMENTO ECONÔMICO E SOCIAL BNDES, with headquarters in
Brasilia, Federal District and offices in the city of Rio de Janeiro at Av. República do
Chile 100, 19th floor and 20th floor, part, State of Rio de Janeiro, registered in the
National Register of Legal Persons (CNPJ/MF) under no. 00.383.281/0001-09 and represented
herein in accordance with its bylaws, hereafter referred to individually as BNDESPAR;

MICROSOFT B.V., a company organized under the laws of Holland, with
headquarters at 1119 PE Schiphol-Rijk, Holland, hereafter referred to individually as MICROSOFT
B.V. and collectively with MICROSOFT CORPORATION as MICROSOFT;

ZERO HORA EDITORA JORNALÍSTICA S.A., with headquarters at Avenida
Ipiranga 1075, in the city of Porto Alegre, State of Rio Grande do Sul, registered in the
National Register of Legal Persons (CNPJ/MF) under no. 92.821.701/0001-00 and represented
herein in accordance with its bylaws, hereafter referred to individually as ZERO HORA;

RBS PARTICIPAÇÕES S.A., with headquarters at Avenida Érico Veríssimo
400, in the city of Porto Alegre, State of Rio Grande do Sul, registered in the National
Register of Legal Persons (CNPJ/MF) under no. 68.737.857/0001-22 and represented herein
in accordance with its bylaws, hereafter referred to individually as RBS and
collectively with ZERO HORA as RBS;

All the above parties, as shareholders of NET SERVIÇOS DE COMUNICAÇÃO
S.A., defined below, are referred to hereafter as Agreement Shareholders;

and, as Intervening Parties:

NET SERVIÇOS DE COMUNICAÇÃO S.A. (formerly Globo Cabo S.A.), a
corporation with headquarters at Rua Verbo Divino 1356, 1st floor, in the city of São
Paulo, State of São Paulo, registered in the National Register of Legal Persons (CNPJ/MF)
under no. 00.108.786/0001-65 and represented herein in accordance with its bylaws,
hereafter referred to individually as NET SERVIÇOS or the COMPANY;

BRADESPAR S.A., with headquarters at Av. Brigadeiro Faria Lima 3064,
6th floor, in the city of São Paulo, State of São Paulo, registered in the National
Register of Legal Persons (CNPJ/MF) under no. 03.847.461/0001-92 and represented herein
in accordance with its corporate bylaws, hereafter referred to individually as BRADESPAR
S.A. and collectively with BRADESPLAN as BRADESPAR;

MICROSOFT CORPORATION, an American corporation, with headquarters at
One Microsoft Way, Redmond, Washington, 98052-6399 U.S.A., hereafter referred to
individually as MICROSOFT CORPORATION and collectively with MICROSOFT B.V. as MICROSOFT;

NET BRASIL S.A., a corporation with headquarters at Av. Brasil 1612,
in the city of São Paulo, State of São Paulo, registered in the National Register of
Legal Persons (CNPJ/MF) under no. 01.007.021/0001-00 and represented herein in accordance
with its bylaws, hereafter referred to individually as NET BRASIL.

WHEREAS GLOBO, BRADESPAR, BNDESPAR, MICROSOFT and RBS hold, on the
date hereof, common and preferred shares in NET SERVIÇOS, as shown in the table below:

|Shareholder | Common Shares | % Voting Capital | Preferred Shares | % Total Capital (Common + Preferred)
|----------- | ------------- | ---------------- | ---------------- | ------------------------------------
|GLOBO       | 68,722,497    | 56.71            | 31,822,493       | 35.77                               
|BRADESPAR   | 16,917,760    | 13.96            | 0                | 6.02                                
|BNDESPAR    | 9,638,056     | 7.95             | 3,992,923        | 2.93                                
|MICROSOFT   | 10,500,000    | 8.66             | 10,500,000       | 7.47                                
|RBS         | 11,159,034    | 9.21             | 23,227,312       | 12.24                               

WHEREAS GLOBO, BRADESPAR, BNDESPAR, MICROSOFT and RBS wish to make
all Common Shares that they now hold or may hold in future subject to this Shareholders Agreement
and BNDESPAR, MICROSOFT and RBS wish, in addition, to make all Preferred Shares that they
hold on the date hereof subject to this Shareholders Agreement, reserving RBS acquired
right to withdraw a quantity of 11,613,656 (eleven million, six hundred and thirteen
thousand, six hundred and fifty six) Preferred Shares held by it from this Shareholders Agreement,
which shares may be negotiated on the terms set out in this Shareholders Agreement;

WHEREAS GLOBO, BRADESPAR, BNDESPAR, MICROSOFT and RBS wish to
coexist harmoniously within NET SERVIÇOS, to further its progress and the valorization,
profitability and liquidity of the capital investments they have made and may make in
future in that Comp any;

WHEREAS on November 16, 1999, a shareholders agreement was entered
into by Globo Cabo Holding S.A., now DISTEL, Majoli Participações e Comércio Ltda. (MAJOLI),
which was succeeded by BRADESPLAN, BNDESPAR and MICROSOFT, all shareholders in NET SERVIÇOS
at that time, and the parties wish to replace that agreement with this Shareholders Agreement;

WHEREAS on September 15, 2000 a contract (Amendment no. 1) was
entered into by DISTEL, BRADESPLAN, MICROSOFT and Caboparbs Participações S.A. (CABOPARBS),
a company controlled by RBS, which established terms and conditions for the amendment and
consolidation of the NET SERVIÇOS shareholdersagreement of November 16, 1999, including
terms and conditions for inclusion of CABOPARBS among the Qualified Investors and other
changes arising out of that inclusion;

WHEREAS on April 10, 2002, a Protocol for Recapitalization of Globo
Cabo S.A. (now NET SERVIÇOS) was entered into by DISTEL, GLOBOPAR, ROMAPAR, BRADESPAR,
BRADESPLAN, RBS, BNDESPAR and GLOBO CABO S.A. (now NET SERVIÇOS), with NET BRASIL as
intervening party, which establishes terms and conditions for the capitalization of NET
SERVIÇOS by the shareholder signatories to the Protocol and consolidates the amendments
provided for under Amendment no. 1 referred to in the immediately preceding recital and
those provided for under Clause 3 of the Protocol for Recapitalization, the obligation of
the signatories to the Protocol to capitalize NET SERVIÇOS being subject to the execution
of this Shareholders Agreement;

WHEREAS the Agreement Shareholders have undertaken to exercise their
rights with a view to achieving classification of NET SERVIÇOS as a company admitted at
Level 2 on BOVESPA, and, subject to the conditions set out in items 2.1.1 and 2.1.2 of
this Agreement, to approve the listing of shares in NET SERVIÇOS on the BOVESPA New
Market in the shortest time possible;

WHEREAS it is in the common interest of the shareholders to this
ShareholdersAgreement that NET SERVIÇOS, directly or through its controlled companies,
be the instrument whereby GLOBOPAR and/or the Agreement Shareholders, directly or
indirectly, may participate in transactions involving land distribution of subscription
TV and distribution of broadband services in coverage areas in Brazil;

WHEREAS it is in the common interest of the Agreement Shareholders
to give legal effect to their joint decision to establish a common procedure for
questions that involve their interests as shareholders in NET SERVIÇOS, exercising their
voting rights in a harmonious manner and employing that instrument to orient and
establish conduct aimed at developing and improving the Companys business and improving
its results;

NOW THEREFORE they have entered into this Shareholders Agreement,
hereafter referred to as the Shareholders Agreement, within the terms of article 118
and paragraphs thereunder of Law no. 6404/76, on the following terms and conditions:

1. DEFINITIONS

In this Agreement, the following expressions shall have the meaning
given to them below:

Agreement Shareholders means DISTEL, ROMAPAR, GLOBOPAR,
BRADESPLAN, BNDESPAR, MICROSOFT B.V., RBS PARTICIPAÇÕES and ZERO HORA, as defined above,
together with their successors and assignees, as permitted and on the terms established
by this Shareholders Agreement;

Common Shares means common shares, identified in the Recitals to
this Agreement, issued by NET SERVIÇOS and held by Agreement Shareholders, with voting
rights, representing the corporate capital of NET SERVIÇOS, together with any and all
other common shares that the Agreement Shareholders may acquire in future, by reason of,
without limitation, subscription of capital increases, bonuses, share splits, reverse
share splits, conversion of debentures into Common Shares, conversion of Preferred Shares
in Common Shares or exchange;

Preferred Shares means preferred shares, identified in the
Recitals to this Agreement, issued by NET SERVIÇOS and held by BNDESPAR, MICROSOFT or
RBS, together with any and all other preferred shares that may be acquired or issued in
future, by reason of, without limitation, subscription of capital increases, bonuses,
share splits or reverse share splits, with the exception of preferred shares arising out
of conversion of NET SERVIÇOS 2nd issue debentures. With respect to MICROSOFT, Preferred
Shares shall include those arising out of the Purchase Option;

Shareholders Agreement means this Shareholders Agreement;

Amendment no. 1 means the Term Sheet executed on September 15,
2000 by DISTEL, BRADESPLAN, MICROSOFT and CABOPARBS, a company controlled by RBS, which
establishes terms and conditions for the amendment and consolidation of the NET SERVIÇOS
shareholders agreement of November 16, 1999, including terms and conditions for
inclusion of CABOPARBS among the Qualified Investors and other changes arising out of
that inclusion;

BOVESPA means the São Paulo Stock Exchange;

Market Arbitration Chamber means the arbitration chamber created
by BOVESPA under the provisions of Law no. 9307/96;

NET SERVIÇOS Competitor means any company or Related Party of such
company, joint venture, consortium, association, strategic enterprise or similar
undertaking that (i) has its principal place of business in Brazil; (ii) has as its
principal business (a) the supply of cable television services in Brazil or (b) other
services for communication of content, using the same network used to transmit cable
television programs (including, but not limited to, broadband internet connection
services), provided, however, that this item (ii)(b) shall not apply to MICROSOFT for the
purpose of defining NET SERVIÇOS Competitors; and (iii) has controlling shareholder(s)
with headquarters or residence in Brazil, provided, however, that Multitel Comunicações
Ltda., a company that holds cable television licenses, shall be excluded from this
definition of NET SERVIÇOS Competitors for so long as RBS holds an interest in that
company that is equal to or greater than 49% (forty-nine percent) of its capital;

MICROSOFT Competitor means any company or Related Party of such
company, joint venture, consortium, association, strategic enterprise or similar
undertaking that carries on business that competes with MICROSOFTs business, including,
without limitation, companies that do business in (i) the creation and sale of software
for set top boxes for cable; (ii) the creation and sale of software for cable data
transmission network servers; (iii) WEBTV services; (iv) TV pak services; or (v) in the
provision of internet content and services (such as, by way of example only, Yahoo, AOL,
Realnetworks, IBM, Sun Microsystems, Novell and AT&T), provided always that MICROSOFT
shall have the right to indicate, from time to time, other companies or businesses as
MICROSOFT Competitors, subject to the reasonable consent of NET SERVIÇOS;

Share Purchase and Sale Option Agreement, entered into by DISTEL
and BNDESPAR, has the meaning given to it in item 4.2;

Control means, within the terms of article 116 of Law no. 6404/76,
the power to elect a majority of the direct ors and officers, and to direct the
activities, of a given company and, in relation to NET SERVIÇOS, the Qualified Investor
that holds, individually, more than 50% (fifty percent) of the Common Shares subject to
the Shareholders Agreement shall be deemed to be the controlling shareholder, subject
always to the special provisions with respect to (i) the requirement for approval by
unanimity or by special majority, including the favorable vote of BRADESPAR or BNDESPAR,
or of directors nominated by them, with respect to the matters referred to in specific
items of Clause 8 and (ii) the election of directors under the terms of Clause 9,
respectively, of this Shareholders Agreement;

Tag-Along Right has the meaning given to it in Clause 6 of this
ShareholdersAgreement;

Right of First Refusal is the right conferred under Clause 5 of
this ShareholdersAgreement to the remaining Agreement Shareholders by any Agreement
Shareholder that wishes to sell, assign, transfer or in any other manner dispose,
directly or indirectly, of the whole or part of its Common Shares, subject, where
applicable, to certain special rules, which shall apply also to Preferred Shares, set out
in specific items of this instrument;

Net Indebtedness means (i) any obligation of the COMPANY or of its
controlled companies that: (a) is contingent or in any way enforceable for contracted
loans (regardless of any real security that the creditor may have in the assets of the
COMPANY or of its controlled companies or in any part of such assets); (b) is evidenced
by promissory notes (issued in Brazil or elsewhere), debentures or similar instrument,
letters of credit (including an obligation to buy currency); (c) is for payment of rent
or other amounts related to the purchase of assets that should be classified as a
financing lease in accordance with accounting principles generally accepted in Brazil,
including the deferred purchase of immovable property; or (d) arises out of contracts for
protection against variations in interest rates, currency exchange contracts, contracts
for protection against currency variations or any other similar contract; (ii) any
obligation of a third party similar in nature to those described in item (i) above, for
which the COMPANY or its controlled companies have provided security or that in any other
way may become an obligation of the COMPANY or its controlled companies; and (iii) any
other obligation that is secured by a lien or encumbrance on the property or assets of
the COMPANY or its controlled companies, regardless of whether the said secured
obligations have been assumed by the COMPANY and/or its controlled companies, deducting
from (i), (ii) and (iii) available funds [disponibilidades financeiras], within the
meaning of that term under article 179(I) of Law no. 6404/76;

Consolidated annualized EBITDA means the sum of: (i) profit (loss)
after provision for income tax and social contribution; (ii) net financial expenses;
(iii) provision for income tax and social contribution; (iv) depreciation and
amortization; (v) other net non-operational expenses; (vi) losses from minority interests
in companies with consolidated financial statements; and (vii) loss from results of
related companies (i.e. companies in which the COMPANY has an equity interest of between
20% and 50%, always determined in accordance with accounting principles generally
accepted in Brazil) on the consolidated balance sheet for the COMPANY for the last
audited quarter, multiplied by 4 (four);

Bylaws means the consolidated bylaws of NET SERVIÇOS, approved by
the shareholders at the Extraordinary General Shareholders Meeting held on June 13, 2002;

Qualified Investor means GLOBO, BRADESPAR, BNDESPAR, MICROSOFT and
RBS, for so long as they hold the minimum equity interest referred to in item 14.2 of
this Shareholders Agreement;

Relevant Matters for Shareholders Meetings means the matters
within the powers of the shareholders of NET SERVIÇOS in General Meeting, as established
in Clause 8 of this Shareholders Meeting, which are considered by the Agreement
Shareholders to be relevant and thus subject to decision, by a special majority, at a
Prior Meeting, in accordance with item 8.4 of this Shareholders Agreement;

New Market means the special segment for listing of shares on the São
Paulo Stock Exchange  BOVESPA, reserved for trading in shares issued by companies that
voluntarily undertake to adopt practices of corporate governance and transparency in
periodic provision of information and any other practices related to requirements under
applicable legislation, in accordance with the Regulation for Listing on the BOVESPA New
Market;

Level 2 means the special segment for listing of shares on the São
Paulo Stock Exchange  BOVESPA, reserved for trading in shares issued by companies that
adopt a broad set of differentiated corporate governance practices and additional rights
for minority shareholders, as established in the Regulation for Differentiated Levels of
Corporate Governance issued by BOVESPA;

Drag-Along Obligation has the meaning given to it in Clause 7 of
this ShareholdersAgreement;

Purchase Option, entered into between DISTEL and MICROSOFT
CORPORATION, has the meaning given to it in item 4.2;

Related Parties or Related Party means, in relation to any of
the Agreement Shareholders, at any time, any other person(s) that control, are controlled
by, or are under common Control with, the Agreement Shareholder;

Recapitalization Protocol means the protocol executed on April 10,
2002 by DISTEL, GLOBOPAR, ROMAPAR, BRADESPAR, BRADESPLAN, RBS PARTICIPAÇÕES, BNDESPAR and
GLOBO CABO S.A. (now NET SERVIÇOS), with NET BRASIL as intervening party, under which the
shareholder signatories undertook to make capital contributions to NET SERVIÇOS on the
terms and conditions provided for therein, together with all amendments thereto;

Registration Rights Agreement means the contract entered into on
November 16, 1999 between GLOBO CABO S.A. (now NET SERVIÇOS) and MICROSOFT, in accordance
with the laws and regulations of the United Stat es;

Prior Meeting has the meaning given to it in item 8.2 of this
ShareholdersAgreement;

Board of Directors Meeting has the meaning given to it in item 8.1
of this Shareholders Agreement;

Transfer (and related verb forms) means the sale, promise to sell,
alienation, assignment, usufruct, granting of option to purchase or to sell, exchange,
capital contribution to another company, transfer and any other manner of loss of
ownership, alienation or encumbrance, direct or indirect, of any of the Common Shares
held, directly or indirectly, at any time by the Agreement Shareholders, together with
all rights inherent in such Common Shares, including, among other rights, voting and
subscription rights, subject, for so long as they may be applicable, to the special
rules, which apply also to Preferred Shares, set out in specific items in this instrument.

2. THE NEW MARKET[Novo Mercado]

2.1. The Agreement Shareholders undertake to approve, within the
shortest possible period of time, and subject to the conditions set out in items 2.1.1
and 2.1.2 below, the listing of shares in the COMPANY for trading on the BOVESPA New
Market. 2.1.1. In view of the fact that the listing of shares in the COMPANY for trading
on the BOVESPA New Market will result in the mandatory conversion of all the preferred
shares in the COMPANY into common shares, and, consequently, the possible exercise of
appraisal rights by the holders of preferred shares, the obligation assumed by the
Agreement Shareholders under this item 2.1 above does not prejudice the provisions of
article 137§3 of Law no. 6404/76 to the effect that the COMPANY may reconsider its
decision in the event that the payment of the reimbursement value of shares held by
dissident shareholders represents a risk to the financial stability of the COMPANY.
Reconsideration of the said decision shall be submitted to the shareholders of the
COMPANY in General Meeting and shall be deemed to be a Relevant Matter for Shareholders Meetings
for the purposes of item 8.4 of this Agreement.

2.1.2. In addition, the listing of shares in the COMPANY for trading
on the New Market is conditional upon approval at a special meeting of preferred
shareholders and upon obtaining all authorizations required (i) to avoid breach by the
COMPANY of any existing undertakings and obligations, (ii) to avoid the occurrence of
contractual events that may injure the financial situation of the Company, such as
acceleration of debts, and (iii) to avoid the breach of guarantees or obligations assumed
by the Agreement Shareholders under contracts involving the Company.

2.2. In consequence of the provisions of item 2.1 above, the
Agreement Shareholders undertake to exercise their voting rights so as to cause NET SERVIÇOS,
its officers and directors and the Agreement Shareholders themselves to fulfill all
requirements imposed by BOVESPA for the listing of shares in the COMPANY for trading on
the New Market, including, without limitation:

(a) mandatory conversion of all preferred shares issued by NET SERVIÇOS
into common shares, as a condition precedent for listing of its shares for trading on the
New Market. Accordingly, from and after the date of effective listing of shares in NET
SERVIÇOS for trading on the New Market, the preferred shares subject to this Shareholders Agreement
shall be converted into common shares and, consequently, any and all references in this
ShareholdersAgreement to Preferred Shares shall cease to apply and such shares shall
automatically become subject to the provisions of this ShareholdersAgreement in respect
of Common Shares;

(b) amendment of the deed for the 2nd public issue of debentures by
the COMPANY, of the Share Purchase and Sale Option Agreement entered into by DISTEL and
BNDESPAR and of the Purchase Option entered into between MICROSOFT CORPORATION and
DISTEL, defined in item 4.2 of this Shareholders Agreement, so as to reflect the
mandatory conversion of preferred shares into common shares referred to in paragraph (a)
above. As a result of the amendments contemplated in this paragraph (b), the common
shares acquired through exercise of the purchase options by GLOBO and/or MICROSOFT shall
be subject to this Shareholders Agreement and all provisions contained herein in respect
of Common Shares;

(c) approval of the necessary changes to the current American
Depositary Receipt program, arising out of NET SERVIÇOS obligation to have its capital
divided exclusively into common shares, which changes shall include the creation of a new
American Depositary Receipt program exclusively for common shares, as a condition
precedent to the listing of shares in NET SERVIÇOS for trading on the New Market;

(d) approval of amendments to the Bylaws of NET SERVIÇOS so as to
make the provisions of the Bylaws compatible with those required by BOVESPA for listing
of shares for trading on the New Market.

2.3. The Agreement Shareholders also undertake to make their best
efforts to amend NET SERVIÇOS Bylaws, this Shareholders Agreement and any other
applicable documents to reflect the provisions of the BOVESPA New Market.

3. BOVESPA LEVEL 2

3.1. The Agreement Shareholders acknowledge and undertake to follow
the rules established by BOVESPA for Level 2 companies and to ensure that, in the event
of alienation of Control of NET SERVIÇOS, whether in a single transaction or through
successive transactions, any agreement for alienation of Control entered into by any of
the Agreement Shareholders shall expressly provide, as a condition precedent or condition
subsequent, that the acquiror of Control of NET SERVIÇOS undertake to realize, within a
period of no more than 90 (ninety) days, a public offer to acquire common and preferred
shares held by all other NET SERVIÇOS shareholders, at the same price per share paid to
acquire Control of NET SERVIÇOS, so as to ensure that the other shareholders of the
COMPANY are given equal treatment to that given to the controlling shareholder that has
alienated Control.

4. SHARES SUBJECT TO THE AGREEMENT

4.1. This Shareholders Agreement applies to all Common Shares and,
in the case of BNDESPAR, MICROSOFT and RBS, Preferred Shares as well, in the capital of
NET SERVIÇOS that the Agreement Shareholders now hold or may hold in future and all such
shares shall be subject to all the provisions of this Shareholders Agreement, including
provisions related to Transfer, right of first refusal, Tag-Along Right and Drag-Along
Obligation and exercise of voting rights.

4.1.1. On September 13, 2001, RBS acquired the right to withdraw a
total of 11,613,656 (eleven million, six hundred and thirteen thousand, six hundred and
fifty six) of its Preferred Shares, which may be sold in transactions performed in the
stock exchanges and/or by public offer, with registration rights, relying upon the total
cooperation of NET SERVIÇOS and its management and employees. Accordingly, on the date of
execution of this Shareholders Agreement, RBS has the right to withdraw from this
Shareholders Agreement, a quantity of 11,613,656 (eleven million, six hundred and
thirteen thousand, six hundred and fifty six) of its Preferred Shares and the remaining
shares held by RBS, as set out in the table in the first Recital to this Shareholders Agreement,
shall remain subject to this Shareholders Agreement and may be disposed of only in
accordance with the provisions of items 5.12 to 5.14 of this Shareholders Agreement.

4.2. The Agreement Shareholders hereby represent and warrant that
they are the owners and lawful possessors of the Common Shares and, in the case of
BNDESPAR, MICROSOFT and RBS, of the Preferred Shares as well, and that the said shares
are free and clear of any and all liens, encumbrances and/or rights, whether judicial or
extrajudicial, including pledges, deposits, attachments, seizures, usufructs, promises,
options to sell or to buy, and any other liens or encumbrances of any kind or nature,
with the exception of (i) the provisions of item 4.2.1 below; (ii) the option to purchase
and to sell common shares and preferred shares in NET SERVIÇOS (Share Purchase and Sale
Option Agreement), entered into by DISTEL and BNDESPAR on December 14, 1999, with
MAJOLI, MICROSOFT B.V., MICROSOFT CORPORATION and GLOBO CABO S.A. (now NET SERVIÇOS) as
intervening parties; and (ii) the option to purchase and to sell Preferred Shares (Purchase
Option) entered into between DISTEL and MICROSOFT CORPORATION on November 16, 1999.

4.2.1. ROMAPAR declares that 37,194,802 (thirty seven million, one
hundred and ninety-four thousand, eight hundred and two) Common Shares in NET SERVIÇOS,
held by ROMAPAR, are pledged [caucionadas] in favor of Banco Nacional de Desenvolvimento
Econômico e Social  BNDES, as follows: (i) 16,906,728 (sixteen million, nine hundred and
six thousand, seven hundred and twenty-eight) Common Shares under Amendment no. 1 to
Contract for Financing through Line of Credit no. 97.2.436.5.1 dated December 1, 1997;
(ii) 4,057,615 (four million, fifty-seven thousand, six hundred and fifteen) Common
Shares under Amendment no. 1 to Contract for Financing through Line of Credit no.
98.2.039.5.1 dated March 31, 1998; (iii) 9,298,701 (nine million, two hundred and
ninety-eight thousand, seven hundred and one) Common Shares under Amendment no. 1 to
Contract for Financing through Line of Credit no. 98.2.040.5.1 dated March 31, 1998; and
(iv) 6,931,758 (six million, nine hundred and thirty-one thousand, seven hundred and
fifty-eight) Common Shares under Amendment no. 1 to Contract for Financing through Line
of Credit no. 97.2.101.5.1 dated June 5, 1997.

5. RIGHT OF FIRST REFUSAL AND TRANSFER OF SHARES

5.1. The Agreement Shareholders acknowledge that the cooperation
required to attain the objectives referred to herein must be based, principally, on a
relationship of confidence. The Common Shares in the COMPANY may not be Transferred, made
subject to liens or encumbered during the term of this Agreement, either directly or
indirectly, except to Related Parties, without complying with the provisions of this
Clause. Any transaction involving Preferred Shares held by BNDESPAR, MICROSOFT or RBS,
subject to the provisions of item 4.1.1, shall comply with all the items of this Clause,
including the provisions of items 5.7 and 5.8, in the case of BNDESPAR, of items 5.10 and
5.11, in the case of MICROSOFT, and of items 5.12 to 5.14, in the case of RBS.

5.2. Without prejudice to the rules established in items 5.3 to 5.15
below, should any Agreement Shareholder wish to Transfer part or all of its Common Shares
or, in the case of BNDESPAR and RBS, its Preferred Shares to a third party, it shall
comply with the following rules, with the exception of MICROSOFT, to which the provisions
of this item 5.2 and subitems do not apply, although the provisions of item 5.3 and
following of this Clause do apply to MICROSOFT:

(a) the Agreement Shareholders hereby agree not to sell or offer to
sell any of the shares in the COMPANY owned by them on the date of execution of the
Recapitalization Protocol during a period of 90 (ninety) days from the date of
publication of the first announcement of the public offering of shares referred to in the
Recapitalization Protocol (Lock-up). The prohibition contained in this paragraph does
not apply to: (i) Transfers between each of the Agreement Shareholders and their
respective Related Parties; (ii) RBS, ZERO HORA and their Related Parties, which may
dispose of a total of Preferred Shares not exceeding 11,613,656 (eleven million, six
hundred and thirteen thousand, six hundred and fifty six), with respect to which RBS
acquired, in September 2001, the right to withdrawn such shares from this Shareholders Agreement,
by any means, including but not limited to trades on stock exchanges, with registration
rights and the COMPANYS and its controlling shareholders cooperation or loan
transactions involving the shares issued by the COMPANY, and may pledge or encumber,
including by means of transactions with derivatives, such Preferred Shares during and
after the Lock-up period, acting in coordination with the COMPANY, its Shareholders and
the banks responsible for coordinating the public offering dealt with in the
Recapitalization Protocol, without such disposition or encumbrance being interpreted as a
limitation on RBSs and ZERO HORAs rights, or (iii) GLOBO, which may dispose of its
preferred shares in the COMPANY by any means, including but not limited to trades on the
stock exchange, and may pledge or encumber such shares by any means, as well as pledge
its Common Shares, provided that such common shares are restricted by the Lock-up period
of 90 (ninety) days as above mentioned, for the purpose of raising funds to honor its
commit ment under the Recapitalization Protocol to subscribe unsubscribed shares, subject
to strict compliance with the rules for maintenance of the market value of the shares and
acting in coordination with the COMPANY and the Agreement Shareholders. RBS, ZERO HORA,
their Related Parties and/or GLOBO, when exercising the prerogative described in items
(ii) and (iii) above, shall ensure that the exercise of the prerogative does not
prejudice the successful outcome of the Companys recapitalization process as
contemplated in the Recapitalization Protocol, including the public offering of shares in
the COMPANY. Notwithstanding the Lock-up described herein, the Agreement Shareholders
agree that RBS may sell preferred shares issued by the COMPANY to be acquired as a result
of its participation in the public offering of shares that forms part of the
recapitalization process of the COMPANY dealt with in the Recapitalization Protocol, in
the approximate amount of R$25,000,000.00 (twenty-five million reais) as of the date of
acquisition, without being subject to the rules of Lock-up, coordinated sale or Right of
First Refusal, as provided in this Shareholders Agreement;

(b) during a period of 18 months from the end of the 90-day Lock-up
period, the Agreement Shareholders undertake to sell the shares that are subject to this
Shareholders Agreement only if the sale is carried out in coordination with the other
Agreement Shareholders;

(c) after the period of 18 months established in paragraph (b)
above, the Agreement Shareholders shall have the right to dispose of the shares subject
to the Shareholders Agreement through private negotiation, subject to the Right of First
Refusal of the other Agreement Shareholders, and may also include the transfer of all
rights and duties under this ShareholdersAgreement, with the exception of rights
attaching to the person of BNDESPAR, as a institutional government development agency;

(d) the right of first refusal and the other procedures provided for
in paragraph (c) above shall not apply to (i) BNDESPAR in the case of sale on the stock
market or through public offering of BNDESPARs preferred shares acquired through
conversion of COMPANY 2nd issue debentures or acquired as a result of its participation
in the public offering of shares that forms part of the recapitalization process of the
COMPANY dealt with in the Recapitalization Protocol; or (ii) the Transfer of the
11,613,656 (eleven million, six hundred and thirteen thousand, six hundred and fifty six)
Preferred Shares held by RBS, in respect of which RBS acquired, in September 2001, the
right to withdrawn such shares from this Shareholders Agreement, as described in item
4.1.1 or the Transfer of the 11,613,656 (eleven million, six hundred and thirteen
thousand, six hundred and fifty six) Preferred Shares which RBS has the right to withdraw
from this Shareholders Agreement after September 8, 2002, the Transfer of which shall be
subject to the provisions of items 5.12 to 5.14 of this Clause 5, and the right of first
refusal and the other procedures provided for in paragraph (c) above shall not apply as
well to the Transfer of the preferred shares issued by the COMPANY, in the approximate
amount of R$25,000,000.00 (twenty-five million reais), to be acquired by RBS as a result
of its participation in the public offering of shares that forms part of the
recapitalization process of the COMPANY dealt with in the Recapitalization Protocol;

(e) in addition to the Right of First Refusal provided for in
paragraph (c) above, any and all disposition, transfer, sale or encumbrance for any
reason whatsoever of shares subject to this Shareholders Agreement, which involves the
transfer of all the rights and duties provided for herein, shall be subject to GLOBOs
veto power with respect to the acquirors adhesion to this Shareholders Agreement, in
the event that the said acquiror is a competitor of GLOBO or of its Related Parties, as
determined in good faith by GLOBO. Should GLOBO determine, in good faith, to veto the
sale of shares of any other Agreement Shareholder to a competitor, the Agreement
Shareholder may nevertheless carry out the sale, but without the transfer of rights and
obligations under this Shareholders Agreement, and the competitor may not participate in
the management and administration of the COMPANY, including participation in the Board of
Directors, for so long as the acquiror participates directly or indirectly in the
management or administration of a company or business that competes with GLOBO, its
Related Parties or the COMPANY. In the event of a veto by GLOBO, the Agreement
Shareholder may carry out the sale to the competitor, without transfer of rights and
obligations under this Shareholders Agreement or, alternatively, make a public offer to
sell an equal number of shares, with registration rights and the collaboration of the
COMPANY.

5.3. Without prejudice to the rules provided for under item 5.2
above, in the event that any of the Agreement Shareholders wishes to Transfer part or all
of its Common Shares or, in the case of BNDESPAR, MICROSOFT and RBS, its Preferred Shares
as well, subject to the provisions of item 5.4 of this Clause 5, to a third party (the Proponent),
it shall give notice in writing to the other Agreement Shareholders, stating in such
notice for exercise of the Right of First Refusal (the Notice): (i) the name and
particulars of the Proponent and, if the Proponent is a company, the Notice shall also
identify the shareholders or members of the Proponent that hold, directly or indirectly,
control over the Proponent and/or equity interests that represent 10% (ten percent) or
more of its voting and/or total capital; (ii) the price and terms and conditions for
payment; (iii) the parcel of shares to be acquired (the Offered Shares); (iv) other
relevant terms and conditions of the offer (the Offer) and (v) a statement by the
offering shareholder (the Offering Shareholder) as to whether it intends to accept the
Offer.

5.3.1. The other Agreement Shareholders shall have 30 (thirty) days
from the date of receipt of the Notice to inform the Offering Shareholder, in writing, as
to whether they intend to exercise, in proportion to their holdings in the Common Shares
and Preferred Shares (after deduction of the Offering Shareholders holding) the Right of
First Refusal to acquire the Offered Shares on the terms and conditions of the Offer, in
accordance with the following rules and procedures:

5.3.2. Should any of the Agreement Shareholders fail to inform the
Offering Shareholder of its interest in exercising the Right of First Refusal to acquire
the Offered Shares within the time period referred to in item 5.3.1 above, or fail to do
so effectively, the Common Shares and Preferred Shares allocated to such Agreement
Shareholder(s) shall be offered, in the proportions established herein, to the remaining
Agreement Shareholders, which may exercise the Right of First Refusal and acquire the
whole of the Offered Shares or, alternatively, relinquish the acquisition of such Offered
Shares and not exercise the Right of First Refusal over such Offered Shares, which shall
then be acquired by the Proponent, in accordance with the provisions of item 5.3.4 below.

5.3.3. Within 30 (thirty) days from the date of receipt of notice
from the Agreement Shareholders that they intend to exercise the Right of First Refusal,
the Offered Shares shall be transferred to the Agreement Shareholders who have exercised
the Right of First Refusal, upon payment of the price on the terms and conditions of the
Offer.

5.3.4. If, upon expiry of the time period for responding to the
Notice, none of the Agreement Shareholders have given notice that it intends to exercise
the Right of First Refusal or the Agreement Shareholders have relinquished the
acquisition, in the manner provided for in item 5.3.2, the Offering Shareholder may
transfer the Offered Shares to the Proponent, on the same terms and conditions set out in
the Offer.

5.3.5. If the Offer is modified in any of its terms or conditions,
the Offering Shareholder shall give a new Notice to the other Agreement Shareholders and
the procedure set out in this item 5.3 and subitems hereto shall be repeated.

5.3.6. If the Offering Shareholder does not transfer the Offered
Shares to the Proponent within a period of 90 (ninety) days from the date of the Notice,
the Right of First Refusal shall revive and the procedure set out in this item 5.3 and
subitems hereto shall be repeated.

5.3.7. The provisions relating to the Right of First Refusal
contained herein shall apply to Transfer of right to subscribe Common Shares and, in the
case of BNDESPAR, MICROSOFT and RBS, Preferred Shares as well, arising out of capital
increases and Common Share and Preferred Share subscription bonuses issued by NET SERVIÇOS,
provided, however, that the time periods established in items 5.3.1 and 5.3.3 shall be
reduced to 15 (fifteen) days.

5.4. The Right of First Refusal and the other procedures provided
for in item 5.3 and subitems thereto shall not apply to (i) BNDESPAR in the case of sale
on the stock market or through public offering of BNDESPARs preferred shares acquired
through conversion of COMPANY 2nd issue debentures or acquired as a result of its
participation in the public offering of shares that forms part of the recapitalization
process of the COMPANY dealt with in the Recapitalization Protocol; or (ii) the Transfer
of the 11,613,656 (eleven million, six hundred and thirteen thousand, six hundred and
fifty six) Preferred Shares held by RBS, in respect of which RBS acquired, in September
2001, the right to withdrawn such shares from this Shareholders Agreement, as described
in item 4.1.1 or the Transfer of the 11,613,656 (eleven million, six hundred and thirteen
thousand, six hundred and fifty six) Preferred Shares, which RBS has the right to
withdraw from this Shareholders Agreement after September 8, 2002, the Transfer of which
shall be subject to the provisions of items 5.12 to 5.14 of this Clause 5, and the Right
of First Refusal and the other procedures provided for in item 5.3 and subitems thereto
shall not apply as well to the Transfer of the preferred shares issued by the COMPANY, in
the approximate amount of R$25,000,000.00 (twenty-five million reais), to be acquired by
RBS as a result of its participation in the public offering of shares that forms part of
the recapitalization process of the COMPANY dealt with in the Recapitalization Protocol.

5.5. The restrictions on Transfer of Common Shares provided for
herein shall not apply (i) to the transfer in trust of 1 (one) share by the Agreement
Shareholders to each of the members of the board of directors of NET SERVIÇOS or (ii) to
Transfers between DISTEL, ROMAPAR, GLOBOPAR, BRADESPLAN, BRADESPAR S.A., BNDESPAR,
MICROSOFT B.V., MICROSOFT CORPORATION, RBS PARTICIPAÇÕES, ZERO HORA and their respective
Related Parties at any time, including during the Lock-up dealt with in item 5.2. The
restrictions on Transfers under this Clause 5 shall not prevent MICROSOFT from carrying
out, in good faith, hedge transactions (including transactions with derivatives) with one
or more investment banks of international standing as a means to protect itself from
fluctuations in the market price of Preferred Shares, provided that such transactions do
not result in any Transfer of Preferred Shares that is not in compliance with the
provisions of this Clause 5. To avoid any possible questions of interpretation, such
hedge transactions shall at no time and in no circumstances give MICROSOFT the right to
transfer ownership of Preferred Shares after expiry of the period of time in which
MICROSOFT is authorized to carry out the Transfer of Preferred Shares in accordance with
the provisions of this Clause 5.

5.6. In the event of transfer of Common Shares or Preferred Shares
to Related Parties under the terms of item 5.5 above, (i) the Related Party shall be
subrogated in all the rights and obligations of the Agreement Shareholder which
transferred the shares, becoming party to this Shareholders Agreement and (ii) in the
event of a change in Control of the Related Party, the Agreement Shareholders shall have
the right to exercise the Right of First Refusal to acquire all shares in NET SERVIÇOS
held by the Related Party, which shall be bound to sell its shares in NET SERVIÇOS to the
Agreement Shareholders, in accordance with the procedures set out in item 5.3 and
subitems thereto, at a price to be fixed by a first-rank financial institution, which
shall evaluate the shareholding of the Related Party in NET SERVIÇOS.

5.7. Any Transfer of Common Shares, Preferred Shares, subscription
rights, subscription bonuses, debentures exchangeable or convertible into Common Shares
or Preferred Shares, or any other securities that attribute, directly or indirectly, an
interest in the capital of NET SERVIÇOS contrary to the provisions of this ShareholdersAgreement
shall automatically be null and void, and NET SERVIÇOS shall be prohibited from effecting
the Transfer or entering the Transfer in its securities registers, except in the case of
alienation of Common Shares and Preferred Shares held by BNDESPAR under the Share
Purchase and Sale Option Agreement defined in item 4.2 of this Shareholders Agreement,
to which the Right of First Refusal rules set out in this item do not apply.

5.8. It is agreed among the Agreement Shareholders that BNDESPAR, at
its sole and exclusive discretion, may, subject to the provisions of the Share Purchase
and Sale Option Agreement, sell on the stock exchange, subject to condition precedent or
by means of a public offer, the whole or part of its Common Shares and Preferred Shares,
provided that BNDESPAR shall (i) communicate its intention to sell the Common Shares or
Preferred Shares to the other Agreement Shareholders, 15 (fifteen) days in advance; and
(ii) comply with the Right of First Refusal provided for in this Clause 5. For the
purposes of the exercise of the Right of First Refusal, the time period shall begin to
run on the date of the sale of Common Shares or Preferred Shares subject to condition
precedent, which condition shall be set out in the relevant published notice of sale.
Upon exercise of the Right of First Refusal by any of the Agreement Shareholders, the
sale subject to condition precedent referred to in this item shall be deemed to be void,
and the voidability of the sale shall be set out in the relevant published notice of
sale. The procedure described in this item shall not apply, however, to BNDESPARs
preferred shares acquired through conversion of COMPANY 2nd issue debentures or acquired
as a result of its participation in the public offering of shares that forms part of the
recapitalization process of the COMPANY dealt with in the Recapitalization Protocol.

5.9. BNDESPAR, subject to the provisions of the Share Purchase and
Sale Option Agreement, BRADESPAR, MICROSOFT and RBS shall have, at their sole and
exclusive discretion, from and after November 16, 2002, the right to proceed to a public
offer of Preferred Shares on the American securities market and, to that end, BNDESPAR,
BRADESPAR, MICROSOFT and RBS may, after expiry of the time period referred to above, (i)
include their Preferred Shares in any public offering that NET SERVIÇOS may make on the
American market; or (ii) request, once only in every 12-month period, that NET SERVIÇOS
take such measures and steps as may be required to register such Preferred Shares for the
purpose of a public offering on the American market. The Right of First Refusal provided
for under item 5.3 of this Shareholders Agreement shall not apply in the circumstances
described in this item. The right described in (i) and (ii) above shall be conditional
upon execution, by the interested parties, of specific documents under American
legislation and regulations, substantially in the terms of the Registration Rights
Agreement entered into by MICROSOFT and GLOBO CABO S.A. (now NET SERVIÇOS) on November
16, 1999. BNDESPAR, BRADESPAR, RBS and NET SERVIÇOS may sign the said Registration Rights
Agreement at any future date upon request by any of such Agreement Shareholders. NET SERVIÇOS
and MICROSOFT hereby agree to amend the Registration Rights Agreement so that any
reference to preferred shares of the COMPANY shall read as a reference to common shares,
in the same quantity, after conversion of preferred shares in the COMPANY into common
shares and listing of shares in the COMPANY for trading on the BOVESPA New Market.

5.9.1. Should Common Shares in NET SERVIÇOS be registered on the
American securities market, the provisions in (i) and (ii) of item 5.9 above shall apply
to the Common Shares held by BNDESPAR, BRADESPAR, MICROSOFT and RBS.

5.9.2. BRADESPAR, RBS and BNDESPAR shall have the same rights
established in item 5.9 above, to the extent applicable, in respect of the Brazilian
securities market, subject (again to the extent applicable to the Brazilian securities
market) to the provisions of item 2.2.3 of the Registration Rights Agreement.

5.10. Common Shares and Preferred Shares held by MICROSOFT may not
be Transferred to other Agreement Shareholders or to third parties, with the exception of
MICROSOFTs Related Parties, prior to November 16, 2002. This restriction shall not apply
if NET SERVIÇOS, despite MICROSOFTs reasonably founded objection, in the cases described
in (i) and (ii) below, and despite MICROSOFTs objection, even if unfounded, in the case
described in (iii) below, adopts any of the measures referred to below. MICROSOFTs
objection shall be made by vote at a Prior Meeting or in the minutes of a Board of
Directors Meeting, as the case may be:

(i) on two occasions adopts any action listed in paragraphs (d), (g)
or (l) of item 8.5; or

(ii) on one occasion adopts two of any of the actions listed in
paragraphs (d), (g), (h) or (l) of item 8.5; or

(iii) on one occasion, adopts any action listed in paragraphs (f)
and (i) of item 8.5.

Upon occurrence of any of the events described above, while
MICROSOFT is a Qualified Investor, MICROSOFT may transfer its Common Shares and Preferred
Shares at any time to any person, subject, however, to the restrictions set out in items
5.10.1 and 5.10.2 below. NET SERVIÇOS, in the manner provided for in art. 40 of Law no.
6404/76, shall inform the financial institution of the restriction established in this
item of the Shareholders Agreement, within 5 (five) days from execution of this
instrument, so that the financial institution may register the said restrict ion.

5.10.1 MICROSOFT may not alienate its Common Shares or Preferred
Shares to any NET SERVIÇOS Competitor.

5.10.2 The prohibition against sale of Common Shares and Preferred
Shares to any NET SERVIÇOS Competitor established in item 5.10.1 above does not apply if
the sale is made on a stock exchange in the United States or on NASDAQ, after
registration in the manner referred to in item 5.9 above, in a quantity compatible with
that negotiated on that market in the past and provided that the terms and conditions of
the sale (including the price, the quantity of shares and the identity of the purchaser)
have not been negotiated in advance between MICROSOFT (or its representatives of any
kind) and the purchaser of the Common Shares or Preferred Shares. Any block trade shall
be made in such a way that the volume acquired by any one investor is not incompatible
with the concept of the prohibition against sale to a NET SERVIÇOS Competitor.

5.11. Should MICROSOFT exercise the option to acquire the preferred
shares in NET SERVIÇOS currently held by DISTEL under the Purchase Option entered into
between MICROSOFT CORPORATION and DISTEL on November 16, 1999, the rules established in
item 5.9 of this Shareholders Agreement shall apply to the said preferred shares. For
the purposes of this Shareholders Agreement, the said preferred shares shall, upon
acquisition by MICROSOFT, become Preferred Shares within the meaning of this Shareholders Agreement.

5.12. Subject to the rules contained in item 5.2(b), after September
8, 2002, RBS shall have the right to withdraw the remaining 11,613,656 (eleven million,
six hundred and thirteen thousand, six hundred and fifty six) Preferred Shares from this
ShareholdersAgreement, and may sell such shares by public offer to sell and/or
transactions on the Stock Exchange, with registration rights, and may rely upon the total
cooperation of NET SERVIÇOS and its controlling shareholders. In that event, RBS shall
make its best efforts to respect the following principles, which shall not be interpreted
as limiting RBS rights:

a) Maintenance of the market value of shares in NET SERVIÇOS;

b) Coordinated action with the NET SERVIÇOS and its controlling
shareholders; and

c) Adequate information regarding the use of funds and any plans for
future dispositions of blocks of shares, so as to ensure that the principle set out in
paragraph (a) above is respected.

5.13. RBS undertakes to choose a bank and other market participants,
all of first rank and with proven experience in local and international capital markets,
to make the public offers of Preferred Shares referred to in item 5.12 above. The costs
of engaging such participants and other fees for registration of the public offers here
referred to shall be borne by RBS.

5.14. Notwithstanding the provisions of this Shareholders Agreement,
RBS may, at any time, pledge, give as security, encumber or in any other manner dispose
of (including by means of trades on the stock exchange and/or transactions with
derivatives) 11,613,656 (eleven million, six hundred and thirteen thousand, six hundred
and fifty six) of its Preferred Shares, which shares shall have been withdrawn from this
Shareholders Agreement, and such Preferred Shares may be sold through one or more public
offers, subject to a minimum interval of 12 months between each offer, and/or direct
sales on the stock exchange, without any limitation as to the interval between direct
sales on the stock exchange.

5.15. Should GLOBO make a public offer of shares in NET SERVIÇOS
within 90 (ninety) days from the date mentioned in item 5.12 above (September 8, 2002),
RBS shall have the right to participate in such public offer jointly with GLOBO, offering
RBS Preferred Shares in a quantity that is no more that 35% (thirty-five percent) of the
volume under the offer made by GLOBO.

5.16. A Transfer of shares in NET SERVIÇOS, in the terms established
in this Clause 5, by any Agreement Shareholder, shall immediately be communicated by the
Agreement Shareholder in question to the Brazilian Securities Commission (Comissão de
Valores Mobiliários) and BOVESPA, in accordance with art. 116-A of Law no. 6404/76, as
amended by Law no. 10.303/2001.

6. TAG-ALONG RIGHT

6.1. Alienation of Control of NET SERVIÇOS by any Agreement
Shareholder, acting alone or not, by means of a single transaction or by successive
transactions, directly or indirectly, shall be agreed to only on the condition that the
acquiror undertakes to carry out, within a period of no more than 90 (ninety) days, a
public offer to acquire the common and preferred shares of the remaining shareholders of
NET SERVIÇOS, so as to ensure that such remaining shareholders have the opportunity to
sell their shares to the acquiror of Control of NET SERVIÇOS at a price that is 100% of
the price paid per voting share in the NET SERVIÇOS Control block, in accordance with the
provisions of the Bylaws of the COMPANY.

6.2. In the event that any one of the Qualified Investors that
possesses, individually, more than 50% (fifty percent) of the Common Shares subject to
the ShareholdersAgreement alienates the whole of such Common Shares, the remaining
Qualified Investors shall have the right to sell their Common Shares and Preferred
Shares, in part or in whole, together with the Common Shares alienated by the said
Qualified Investor, on the same terms and conditions as to price and terms of payment,
provided that they exercise that right by notice to the alienating Qualified Investor
within the time period established for exercise of the Right of First Refusal under item
5.3 of this Shareholders Agreement.

6.2.1. In the event that the Qualified Investor that holds more than
50% (fifty percent) of the Common Shares subject to the Shareholders Agreement alienates
a part of such Common Shares, thus reducing its shareholding to less than 50% (fifty
percent) of the Common Shares subject to the Shareholders Agreement, the remaining
Qualified Investors shall have the tag-along right provided for in item 6.2 above.

7. DRAG-ALONG OBLIGATION

7.1. Should GLOBO intend to sell Common Shares representing Control
of NET SERVIÇOS to a third party or parties that are not subject to the same ultimate
control as BRADESPAR, BNDESPAR, MICROSOFT or RBS, and/or carry out a transaction of
equivalent substance and scope, including the assignment and transfer of preemptive
rights to subscription of capital and/or securities convertible into shares with voting
rights in NET SERVIÇOS, which results in a Transfer of Control of NET SERVIÇOS,
BRADESPAR, BNDESPAR, MICROSOFT and RBS undertake to participate in the transaction, at
GLOBOs request, on the same terms and conditions, including as to price and terms of
payment, on a pro rata basis, in proportion to the number of Common Shares held by each
of them.

7.1.1. Item 7.1 above shall apply to BNDESPAR only if the sale is
made for a price that is equal to or greater than that to which BNDESPAR is entitled
under the Share Purchase and Sale Option Agreement.

7.2.2. The transaction referred to in item 7.1 above does not
exclude GLOBOs obligation to comply with the Right of First Refusal under this
ShareholdersAgreement.

7.2. If at any time the ratio between Net Indebtedness and EBITDA of
NET SERVIÇOS is greater than 6 (six), any of the Agreement Shareholders, acting
individually or collectively, shall have the right to alienate its shares in NET SERVIÇPOS
to a third party, subject to the Right of First Refusal under Clause 5 and may, in
addition, require the remaining Agreement Shareholders to sell their shares in NET SERVIÇOS
on the same terms and conditions, including as to price and terms of payment, on a pro
rata basis, in proportion to the number of Common Shares held by each of them.

7.2.1. The right of each Agreement Shareholder to sell its Common
Shares and to require that the remaining Agreement Shareholders sell their Common Shares
together with the first Agreement Shareholder shall come into effect only after the ratio
between Net Indebtedness and EBITDA for the COMPANY has been greater than 6 (six) for two
consecutive quarters. The said right shall be in effect for a period of 6 months from the
first business day following the disclosure of the financial statements for the second
quarter in which the ratio between Net Indebtedness and EBITDA is greater than 6, and
shall be automatically extended for consecutive periods of 3 (three) months, in the event
that the ratio between Net Indebtedness and EBITDA remains greater than 6 (six),
according to the quarterly financial statements of the COMPANY.

7.2.2. The extension for consecutive periods of 3 months (three)
mentioned in the preceding item shall automatically be interrupted in the event that the
ratio between Net Indebtedness and EBITDA falls below 6 (six), according to the quarterly
financial statements of NET SERVIÇOS. The Agreement Shareholders agree that, for the
purposes of determining the ratio between Net Indebtedness and EBITDA, the period of 12
(twelve) months immediately preceding the base date for the quarterly financial
statements in question shall be used.

8. EXERCISE OF VOTING RIGHTS AT SHAREHOLDERS MEETINGS AND BOARD OF
DIRECTORS MEETINGS.

8.1. The Agreement Shareholders undertake always to attend, and
exercise the voting rights attached to their shares at, General Shareholder Meeting(s) of
the COMPANY (Shareholders Meetings), either directly or through their duly appointed
representatives, voting in a uniform manner, as established at the Prior Meeting referred
to in item 8.2 below, and to instruct the directors nominated by them to vote at all
meetings of the board of directors (Board of Directors Meetings) in accordance with
decisions taken at the Prior Meeting, subject to the provisions below.

8.2. In order to implement the rule established in item 8.1 above,
the representatives of the Agreement Shareholders shall meet no later than 3 (three)
business days prior (Prior Meeting) to the Shareholders Meeting or Board of Directors Meeting,
as the case may be, to consider, discuss and adopt a decision concerning the matters on
the agenda for the Shareholders Meeting or Board of Directors Meeting, subject to the
following provisions:

8.2.1. Prior Meetings shall be called by any of the Agreement
Shareholders, by notice sent to each of the Agreement Shareholders, which may indicate,
in writing, their representatives at the Prior Meeting. 8.3. The following matters shall
be subject to unanimous approval at a Prior Meeting, by all the Agreement Shareholders:

(a) a change in the purposes of the COMPANY;

(b) acquisition of corporate control, the holding of interests in
other companies, joint ventures and consortia foreign to the purposes of the COMPANY;

(c) sale to third parties of permanent assets in an amount greater
than 20% (twenty percent) of the total consolidated assets of the COMPANY for the quarter
immediately preceding the month of the transaction.

8.4. Relevant Matters for Shareholders Meetings, under item 8.5
below, shall be approved only by favorable vote of 51% (fifty-one percent) of the Common
Shares subject to the Shareholders Agreement and must include the favorable vote of
BRADESPAR or BNDESPAR.

8.4.1. The Agreement Shareholders shall require that the members of
the Board of Directors of the COMPANY (Board of Directors) nominated by them comply in
full with decisions taken at Prior Meetings.

8.4.2. The Agreement Shareholders, through their representatives at
ShareholdersMeetings or through the members of the Board of Directors nominated by them,
undertake not to obstruct consideration of, and/or voting on, any matter at Shareholders Meetings
or Board of Directors Meetings in the manner decided at a Prior Meeting and undertake
also not to fail to participate in any ShareholdersMeeting or Board of Directors Meeting.

8.4.3. Minutes of decisions taken at Prior Meetings, which bind the
votes of Agreement Shareholders, shall be drawn up in summary form, for all legal
purposes and effects.

8.5. For the purposes of this item, the shareholders in Shareholders Meetings
shall have powers to decide all matters attributed to them by law, and the Relevant
Matters for Shareholders Meetings shall be the following:

(a) change in the authorized limit for capital increases without
need for an amendment to the Bylaws;

(b) issue of shares, convertible debentures, subscription bonuses or
any other security that is convertible and/or exchangeable into voting shares, for public
or private subscription;

(c) reduction in corporate capital or redemption of shares;

(d) change in the policy for payment of dividends and/or interest
over capital;

(e) petition for judicial protection against credit ors or
confession of bankruptcy;

(f) amalgamation of the COMPANY or merger of the COMPANY with or
into another that is a MICROSOFT Competitor;

(g) amalgamation of the COMPANY or merger of the COMPANY with or
into another in which GLOBO does not exercise Control;

(h) dissolution and liquidation of the COMPANY;

(i) entry of any Qualified Investor as a shareholder of the COMPANY
that is a MICROSOFT Competitor;

(j) the other matters set out in article 136 of law no. 6404/76;

(l) amendment to the bylaws of the COMPANY that adversely changes
the rights conferred by this instrument on the Agreement Shareholders or the matters
within the powers of the Board of Directors of the COMPANY; and

(m)cancellation of registration of the Company for trading of its
shares on BOVESPA Level 2 or on the New Market, if the shares in COMPANY are listed for
trading on the New Market, within the terms of Clause 2 of this Agreement.

8.6. The matters within the powers of the Board of Directors, listed
below, shall be approved by the favorable vote of a simple majority of directors present
at the meeting, but must include the favorable vote of the director nominated by
BRADESPAR or BNDESPAR:

(a) increase in the capital of the COMPANY, through issue of shares
with voting rights, for public or private subscription;

(b) issue of any securities that are convertible and/or exchangeable
into voting shares;

(c) change in the terms and conditions, or termination, of
concession contracts with operators;

(d) approval and modification of the Financial Plan, Business Plan,
Budget and Investment Plan, as well as of rules concerning investments, level of
indebtedness and other commitments related to the indebtedness and financial policy of
the COMPANY, such as terms and conditions for contracting new debt, hedge policy and
other matters related to indebtedness and financial policy;

(e) election and removal of Officers of the COMPANY;

(f) execution, by the COMPANY, of contracts for content and
programming, and the maintenance or renovation of the commercial relationship between the
COMPANY and NET BRASIL.

8.7. Contracts between NET SERVIÇOS and Agreement Shareholders or
their Related Parties, which do not involve content and programming and consequently do
not involve NET BRASIL, shall be submitted for approval by the Board of Directors, by
simple majority of votes, provided, however, that only those Directors who have no
conflict of interest with respect to the contracting party may vote.

8.7.1. The transactions contemplated in this item 8.7 do not
constitute relevant matters for the purposes of the special majority provided for in item
8.6 above.

8.8. The Agreement Shareholders further agree that, subject to the
special majority provided for in item 8.6 above, the Board of Directors may determine
that contracts of low value, to be defined by the Board of Directors, entered into
between the COMPANY and Related Parties in connection with common and everyday
transactions in the business of NET SERVIÇOS may be exempted from the requirement for
approval by the Board of Directors within the terms of 8.7.

8.9. With respect to the negotiations between the COMPANY and NET
BRASIL in connection with the role to be played by NET BRASIL in defining and contracting
programming to be distributed by the COMPANY, the following principles shall be adopted
and observed, in addition to the principle of contracting on terms and conditions that
reflect the business practices usually adopted by the COMPANY with third parties, and
subject also to existing contracts between NET BRASIL and third party programming
suppliers: (a) NET BRASIL shall have exclusivity in the licensing of content to the
Company, which in turn shall have exclusivity as the vehicle for land distribution (MMDS
and Cable) of NET BRASIL content in the geographic areas in which the controlled
companies of the Company currently operate, in accordance with their respective licenses,
and in the operating areas of any operators that the COMPANY may acquire, subject,
however, to any contracts that NET BRASIL may have entered into with third parties prior
to such acquisitions. In geographic areas in which controlled companies of the Company do
not yet have licenses to operate and NET BRASIL has not yet licensed content to another
operator, the controlled companies of the COMPANY shall have priority in licensing and,
should they obtain the said license, (b) NET BRASIL shall, upon request, make available
to the COMPANY documentation related to the contracting of content to third parties
licensed by NET BRASIL; and (c) NET BRASIL shall submit to the approval of the Company
not only new content and programming contracts but also the replacement and renovation of
content distributed by the operators, and such matters shall be subject to the approval
of the Board of Directors of the COMPANY, which may approve such matters by simple
majority of votes of directors present at the meeting, provided, however, that the simple
majority of votes must include the favorable vote of the director appointed by BNDESPAR
or the director appointed by BRADESPAR.

8.9.1. Furthermore, the Agreement Shareholders hereby agree and
undertake so to instruct the members of the Board of Directors, that in the event that
commercial relations between NET BRASIL and Net Sat Serviços Ltda. (SKY) break off, the
Company shall be authorized to terminate any agreement with NET BRASIL relating to
programming on approval of the Board of Directors of the Company, which may approve such
decision by simple majority of votes, provided, however, that the simple majority of
votes must include the favorable vote of the Director appointed by BNDESPAR or the
Director appointed by BRADESPAR, and, moreover, NET BRASIL shall furnish to the COMPANY a
list setting out the terms and conditions of each commitment to third parties assumed by
NET BRASIL in the name of the COMPANY, so that the Board of Directors of the COMPANY is
aware of such commitments at the time that it considers the question of termination of
the contract with NET BRASIL. In the event that the Board of Directors of the Company
resolves to terminate the contract between the COMPANY and NET BRASIL, and in any other
event of termination of the said contract and upon expiry of the term of the said
contract, the COMPANY is hereby authorized by the Agreement Shareholders to continue
using the trademark NET in all its products and services for a period of nor more than
30 (thirty) months from the date of termination of the contract with NET Brasil, in
accordance with the provisions on licensing of the trademark contained in the Agreement
for Agency, Services, Trademark Licensing and other Covenants entered into between the
COMPANY and NET BRASIL. Notwithstanding termination of the contract with NET BRASIL, the
COMPANY shall remain liable for honoring all commitments to third parties assumed by NET
BRASIL in the name of the COMPANY, which NET BRASIL is unable to cancel.

8.9.2. The Agreement Shareholders undertake to take and to authorize
all measures that may be necessary to modify the contract between the COMPANY and NET
BRASIL, which establishes the current business relationship between them, so that the
contract ceases to make reference to the option to purchase equipment granted to NET
BRASIL in the event of early termination of the contract.

8.9.3. Without prejudice to the above, the Agreement Shareholders
undertake to take all measures to ensure that the following terms and conditions are met
in maintaining the current commercial relationship between the COMPANY and NET BRASIL:

(a) NET BRASIL shall provide services for identification,
development and/or contracting of national and international content, as defined in the
letter amending the Agreement for Agency, Services, Trademark Licensing and other
Covenants entered into between the COMPANY and NET BRASIL, as well as of trademarks for
the COMPANY and its operators;

(b) NET BRASIL shall administer existing programming contracts,
making its best commercially reasonable efforts to renegotiate the prices and terms of
such contracts to the benefit of the COMPANY;

(c) NET BRASIL shall develop and propose new content and programming
contracts to the COMPANY and the operators, and such matters shall be subject to the
approval of the Board of Directors of the COMPANY, which may approve such matters by
simple majority of votes, provided, however, that the simp le majority of votes must
include the favorable vote of the director appointed by BNDESPAR or the director
appointed by BRADESPAR;

(d) NET BRASIL waives its right to sell the data bank of the COMPANYs
and the operators subscribers and shall have only the right to access such information
in order properly to perform its functions;

(e) NET BRASIL shall act in such a way that there is no margin or
profit for NET BRASIL in any of the contracts with operators related to the COMPANY;

(f) NET BRASIL shall continue to maintain the COMPANY and the
operators informed as to the conditions and terms in force under the programming
contracts, to furnish a list under the terms of item 8.9.1 of this ShareholdersAgreement
and to allow an audit to be carried out to determine whether the programming contracts,
NET BRASILs performance and the provisions of paragraph (e) above are being properly
carried out; and

(g) NET BRASIL shall grant to the operators related to the COMPANY
the right to use up to two minutes of advertising space per hour of programming on
Globosat channels, under rules and procedures adopted by Globosat and accepted by the
COMPANY, and such space shall be sold through Globosat.

9. BOARD OF DIRECTORS

9.1. The Board of Directors of the COMPANY shall be formed of at
least 9 (nine) and no more than 12 (twelve) members and an equal number of alternates,
all shareholders of NET SERVIÇOS and nominated by Qualified Investors. Each Qualified
Investor shall have, individually, the right to nominate at least one member of the Board
of Directors of the COMPANY.

9.2. Should any other shareholder of the COMPANY other than a
Qualified Investor validly argue for election of a member or members of the Board of
Directors through cumulative voting or separate voting at a Shareholders Meeting, the
total number of directors on the Board of Directors shall be determined, taking into
account the number of directors nominated by shareholders other than Qualified Investors,
so as to ensure that at least 9 (nine) directors are nominated by Qualified Investors in
the manner provided for below.

9.2.1. Should any one of the Qualified Investors hold, individually,
more than 50% (fifty percent) of the common shares in the capital of the COMPANY, that
Qualified Investor shall nominate at least one-half plus one of the members of the Board
of Directors of the COMPANY and, if necessary, the number of members on the Board of
Directors shall be increased to permit such nomination, without prejudice to the right of
each Qualified Investor to nominate at least 1 (one) director.

9.2.2. In the event that no Qualified Investor holds, individually,
more than 50% (fifty percent) of the common shares in the capital of the COMPANY but one
of the Qualified Investors holds, individually, more than 50% (fifty percent) of the
Common Shares subject to this Shareholders Agreement, that Qualified Investor shall
nominate at least one-half plus one of the members of the Board of Directors of the
COMPANY from among those nominated by the Qualified Investors, without prejudice to the
right of each Qualified Investor to nominate at least 1 (one) director.

9.2.3. In the event that no Qualified Investor holds, individually,
more than 50% (fifty percent) of the Common Shares subject to this Shareholders Agreement,
the election of members of the Board of Directors of the COMPANY by Qualified Investors
shall be carried out by adopting, at a Prior Meeting, a procedure similar to that of
cumulative voting provided for under Law no. 6404/76, by which the Qualified Investors
shall distribute their votes, at their sole discretion, on the basis of the total number
of directors to be elected by the Qualified Investors and subject to the right of each of
them to elect one director, in the manner provided for in item 9.1 above, provided,
however, that only the number of votes of each Qualified Investor that exceeds the
minimum necessary to nominate one director, under the procedure provided for in this item
9.2.3 (without taking into consideration the percentage necessary to meet the concept of
Qualified Investor) may be joined to the votes of other Qualified Investors. If all
positions on the Board of Directors are not filled in the above manner, the remaining
positions shall be elected by a simple majority of votes attached to the Common Shares
subject to this Shareholders Agreement that are held by Qualified Investors.

9.3. The Agreement Shareholders undertake to cast their votes at
ShareholdersMeetings so as to elect the directors nominated by each of the Agreement
Shareholders in the manner provided for in this Agreement.

9.3.1. Without prejudice to the provisions of item 13.2(a) of this
ShareholdersAgreement, each of the Agreement Shareholders shall have the right to
require, at any time, the removal of any member of the Board of Directors of the COMPANY
that has been nominated by that Agreement Shareholder and the other Agreement
Shareholders undertake to take the measures necessary to cause removal of such director.

9.3.2. In the event of removal, resignation, replacement or any
other event that results in a vacancy on the Board of Directors of the COMPANY, the
Agreement Shareholder that nominated the member to the vacant position shall have the
right to nominate his replacement (or a new alternate, if the Agreement Shareholder opts
to confirm the original alternate in the position), and the other Agreement Shareholders
undertake to vote in accordance with the decision of the Agreement Shareholder.

10. NEW BUSINESS WITHIN THE SCOPE OF THE COMPANYS CORPORATE PURPOSES

10.1. GLOBO, RBS and the controlling shareholders, direct and
indirect, of GLOBO and RBS undertake to use NET SERVIÇOS, for themselves and through
their controlled companies, as the instrument for participation in business related to
the supply of cable television services in Brazil or other services for communication of
content, using the same network used to transmit cable television programs (including,
but not limited to, broadband internet connection services), with the exception of any
transitory minority interests (Transitory Interest) and with the exception of RBSinterest
in Multitel Comunicações Ltda., as defined in the definition of NET SERVIÇOS Competitor
under this Agreement. Transitory Interest shall mean that in which GLOBO, RBS or its
controlling shareholders are shareholders for a period of no longer than 1 (one) year and
hold no more than 30% (thirty percent) of the voting capital and 30% (thirty percent) of
the total capital of the company in which the interest is held. If GLOBO, RBS or its
controlling shareholders sell the Transitory Interest to NET SERVIÇOS, the sale price
shall be less than the purchase price of the Transitory Interest.

11. INTERESTS IN NET SERVIÇOS COMPETITORS

11.1. BRADESPAR undertakes, for itself and its Related Parties, to
invest in NET SERVIÇOS Competitors only as a financial investor and without participating
in management. In the event that BRADESPAR does not comply with its undertaking, it shall
lose its right to participate in Prior Meetings under this Shareholders Agreement.

11.2. MICROSOFT and any MICROSOFT Related Party undertake (i) not to
participate in the Board of Officers [Diretoria] or in the Board of Directors and (ii)
not to make any relevant investment (relevant investment being an interest equal to or
greater than 10% (ten percent) of the capital), in any NET SERVIÇOS Competitor, either
directly or indirectly.

11.3. BNDESPAR may, at its sole discretion, invest in any NET SERVIÇOS
Competitor.

12. CONFLICT WITH RBS

12.1. In the event that (i) an investment by NET SERVIÇOS in
business other than those listed in Clause 10 above is approved by resolution of the
Board of Directors or by the shareholders at a Shareholders Meeting and such investment
represents a conflict of interests for RBS; or (ii) any of the matters defined in items
8.5 and 8.6(c) is approved and such approval creates a conflict of interests for RBS in
the South of Brazil and in either event RBS voted against the resolution, RBS may, if it
cannot eliminate the conflict internally, alternatively:

(i) give notice of such conflict of interest to the Qualified
Investors and to NET SERVIÇOS, within 30 (thirty) days of the date on which the
resolution that gave rise to the conflict was adopted;

(ii) require that GLOBO exchange all and not less than all the
common shares held by RBS in the capital of NET SERVIÇOS for preferred shares with
registration rights, at a rate of 75 (seventy-five) preferred shares for each lot of 100
(one hundred) common shares; or

(iii) after effective listing of the shares of the COMPANY for
trading on the BOVESPA New Market, within the terms of Clause 2 of this ShareholdersAgreement,
withdraw from this Shareholders Agreement all and not less than all common shares held
by it, in order to sell such shares on the market, with registration rights, subject to
the Right of First Refusal under item 5.3 of this instrument.

12.2. Should RBS elect to exchange with GLOBO the whole of RBS common
shares for preferred shares, it shall notify GLOBO (with copy to the other Qualified
Investors and to NET SERVIÇOS) to effect the exchange within 30 (thirty) days from
receipt of the notice.

12.3. Should RBS elect to give notice to the other Qualified
Investors and to NET SERVIÇOS under item 12.1(i) above, the administrators of NET SERVIÇOS
shall, within 30 (thirty) days from receipt of the notice, hold a meeting with RBS to
discuss and analyze possible ways to resolve the conflict, in order to allow the
investment to be made by NET SERVIÇOS with injury to RBS or to NET SERVIÇOS.

12.4. NET SERVIÇOS shall, within a further 30 (thirty) from the date
of the meeting, propose a solution to the conflict, on the basis of the discussion
between the parties. Such solution may consist in (i) acceptance of competition between
RBS and NET SERVIÇOS, if such is the conflict, in which case it shall be deemed to have
been eliminated; or (ii) another proposal to RBS.

12.5. If NET SERVIÇOS proposes a solution to the conflict, RBS shall
have 30 (thirty) days from receipt of the proposal to advise whether it accepts, or not,
the proposal.

12.6. If RBS does not agree with the solution to the conflict
proposed by NET SERVIÇOS, the Presidents of RBS and NET SERVIÇOS shall meet within a
further period of 60 (sixty) days from the notice given by RBS in order to seek
alternative solutions to the conflict. If NET SERVIÇOS and RBS do not arrive at a
satisfactory solution to the conflict at the meeting between their Presidents, NET SERVIÇOS
and RBS shall have an addition 30 (thirty) days to reexamine the situation, during which
time the ultimate controlling shareholders of NET SERVIÇOS shall be directly and
personally involved in the negotiations and shall hold, personally, at least one meeting
with a view to ending the conflict.

12.7. If at the end of the 210 (two hundred and ten) days referred
to in the items above, the conflict has not been resolved by the parties, RBS may notify
GLOBO to exchange, within 30 (thirty) days from receipt of such notice, all and not less
than all the common shares held by RBS in the capital of NET SERVIÇOS for preferred
shares with registration rights, at a rate of 90 (ninety) preferred shares for each lot
of 100 (one hundred) common shares.

12.8. The exchange of shares provided for under items 12.1(ii) and
12.7 above shall be subject to the Right of First Refusal under Clause 5 of this
ShareholdersAgreement. All notices must be given in the manner provided for in item 16.1
of this Shareholders Agreement.

13. PERFORMANCE OF THE AGREEMENT

13.1. Performance of the obligations assumed under this Shareholders Agreement
may be enforced by the Agreement Shareholders through arbitral decision issued by the
Market Arbitration Chamber, if applicable, or by judicial decision, both subject to
specific performance in accordance with article 118§3 of Law no. 6404/76, in combination
with articles 461, 632, 639 and following of the Code of Civil Procedure. Payment of
damages for breach of the provisions of this Shareholders Agreement does not alone
constitute sufficient reparation and does not exclude specific performance as provided
for hereunder or release the party responsible for breach of this Shareholders Agreement
from any other consequence under the law.

13.2. Without prejudice to the provisions of item 13.1 above or of
any other item of this Shareholders Agreement regarding the application and effects of
article 118 §§8 and 9 of Law no. 6404/76, the Agreements Shareholders shall have the
right to require, in the courts or in an arbitral forum created by BOVESPA, as the case
may be:

(a) suspension or annulment of any decision at a Shareholders Meeting,
Board of Directors Meeting or board of officers [Diretoria] meeting that accepts as
valid a vote cast by any of the Agreement Shareholders or member of the Board of
Directors contrary to the provisions of this ShareholdersAgreement, which vote should
not be counted under the provisions of article 118§8 of Law no. 6404/76, as amended by
Law no. 10.303/2001;

(b) immediate cancellation or suspension of registration of a
Transfer or promise to Transfer shares made by any Agreement Shareholder without
complying with the rules under this Shareholders Agreement; and

(c) a judicial order, or decision of the Market Arbitration Chamber,
if applicable, to replace the act of the Agreement Shareholder, in the event of a refusal
to exercise voting rights, as provided for under item 8.1 and/or to perform any other
obligation under this Shareholders Agreement.

14. TERM OF THE AGREEMENT

14.1. This Shareholders Agreement shall be in effect for a term of
10 (ten) years from the date of its execution.

14.2. Without prejudice to the provisions in items 14.1 and 14.6 and
excepting the Tag-Along Right provided for under item 6.1 of this Shareholders Agreement
and any other specific provision to the contrary, the rights and obligations under this
Shareholders Agreement in respect of each one of the Agreement Shareholders are
conditional upon the Agreement Shareholder holding (together with its Related Parties
that have acquired Common Shares in the manner provided for in item 5.5 above) at least
6% (six percent) of the total common shares in the COMPANY, and such rights shall be
automatically extinguished in respect of such Agreement Shareholder if its holding falls
below that level, subject, however, to the provisions of items 14.3, 14.4 and 14.5 below.

14.2.1. The Agreement Shareholders hereby agreed that they shall
discuss the possibility of reducing the percentage referred to above to 5% (five percent)
of total voting capital, immediately after full paying-in of all the shares issued as a
result of the recapitalization process dealt with in the Recapitalization Protocol.

14.3. For the effects of item 14.2 above, reductions in the
shareholdings of the Agreement Shareholders resulting from mergers and amalgamations
involving the COMPANY shall not be taken into account.

14.4. For the effects of item 14.2 above, reductions in MICROSOFTs
shareholdings resulting from an increase of capital, at any time, arising out of the 2nd
public issue of convertible debentures by NET SERVIÇOS shall not be taken into account.
The right to exercise the Purchase Option held by MICROSOFT CORPORATION, even though
unexercised, ensures that the said preferred shares shall be taken into account in
calculating the percentage referred to in item 14.2.

14.5. BNDESPAR shall enjoy all the rights established under this
instrument, even if BNDESPAR transfers the whole of its Common Shares and Preferred
Shares to an investment fund managed by a financial institution, provided that BNDESPAR
is the sole and exclusive participant in the investment fund and the investment fund
manager, at any time and from time to time, has been approved in advance by NET SERVIÇOS.

14.6. In the event of a dilution of BRADESPARs and/or BNDESPARs
and/or MICROSOFTs holdings in the capital of NET SERVIÇOS, such that they have holdings
smaller than those referred to in items 14.2 and 14.2.1 above, the obligation to comply
with the Right of First Refusal dealt with in items 5.2 and 5.3 and subitems thereto
shall continue to apply, in the case of BRADESPAR and/or BNDESPAR, and, in the case of
MICROSOFT, the obligation is restricted to item 5.3 and subitems thereto and the other
items of Clause 5 applicable to MICROSOFT. The obligation established in this item does
not apply to BRADESPAR if the sale of its shares is made on the stock exchange.

14.7. The Agreement Shareholders agree that BNDESPAR may, at its
sole and exclusive discretion and at any time, sell the whole or part of its preferred
shares resulting from conversion of NET SERVIÇOS 2nd issue debentures or acquired as a
result of its participation in the public offering of shares that forms part of the
recapitalization process of the COMPANY dealt with in the Recapitalization Protocol, by
means of an auction or public offer on the stock exchange, and in that event the Right of
First Refusal dealt with in Clause 5 of this Shareholders Agreement shall not apply.

15. FILING OF THE AGREEMENT

15.1. This Shareholders Agreement shall be filed at the
headquarters of NET SERVIÇOS, registered in the corporate books and share registers and
its provisions shall be complied with by NET SERVIÇOS in accordance with, and for the
purposes of, article 118 of Law no. 6404/76. This Shareholders Agreement shall also be
filed with the Brazilian Securities Commission [Comissão de Valores Mobiliários - CVM] in
accordance with article 17(IV) of CVM Instruction no. 2002 and with BOVESPA.

16. GENERAL PROVISIONS

16.1. Any notice, notification, request or communication in
connection with this Shareholders Agreement, and any communication involving the COMPANY
and the Agreement Shareholders, including communications for the purpose of receiving or
providing information, shall be sent by letter, fax or other means, with proof of
receipt, to the following addresses:

(i) if to MICROSOFT:

Microsoft CorporationOne Microsoft WayRedmond, Washington 98052-6399U.S.A.
Fax:425-936-7329Attention: Chief Financial Officer; General Counsel, Finance and
Administration

Microsoft B.V. 1119 PE Schiphol-Rijk Holland Care of Microsoft
Corporation

With copies to:

Microsoft Informática Ltda. Av. Nações Unidas, 12.901, Torre Norte,
27o andar 04578-000, São Paulo - SP Brasil Fax: (11) 5504-2228 Attention: Luiz A. Sette

Pinheiro Neto Advogados Rua Boa Vista, 254, 9o andar 01014-907, São
Paulo - SP Brasil Fax: (11) 237-8600 Attention: Raphael de Cunto

(ii) if to BRADESPAR:

A/c BRADESPAR S.A. Av. Brigadeiro Faria Lima no 3064, 6o andar
Jardim Paulistano  São Paulo, SP Brasil Fax: (11) 3049-3935 Attention: Mário da Silveira
Teixeira Júnior Rômulo de Mello Dias

With copies to:

Demarest & Almeida Advogados Av. Pedroso de Moraes, 1201 05419-001  São
Paulo  SP Brasil Fax: (11) 3888-1700 Attention: Rogério Cruz Themudo Lessa Nadine S.M.
Baleeiro Teixeira

(iii) if to GLOBO:

A/c GLOBOPAR Av. Afrânio de Melo Franco no 135, 1o andar 22430-060,
Rio de Janeiro - RJ Brasil Fax: (21) 2512-6195 Attention: Ronnie Vaz Moreira Fax: (21)
2512-5889 Attention: Ronaldo Tostes Mascarenhas

(iv) if to BNDESPAR:

BNDES Participações S.A. - BNDESPAR Av. República do Chile, no 100,
19o e parte do 20o andar 20001-970, Rio de Janeiro - RJ Brasil Fax: (21) 2533-1572
Attention: José Mauro Mettrau Carneiro da Cunha

(v) if to NET SERVIÇOS

NET Serviços de Comunicação S.A. Rua Verbo Divino, no 1.356, 1o andar
04719-002, São Paulo - SP Brasil Fax: (11) 5186-2655 Attention: Luiz Antônio Viana

With copies to:

Barbosa, Müssnich & Aragão Av. Almirante Barroso, no 52, 32o andar
20031-000, Rio de Janeiro - RJ Brasil Fax: (21) 2262-5536 Attention: Paulo Cezar Aragão e
Pedro Lanna Ribeiro

Debevoise & Plimpton 875 Third Avenue New York, New York 10022
U.S.A. Fax: 1-212-909-6836 Attention: Michael J. Gillespie

(vi) if to RBS:

A/c RBS Participações S.A. Avenida Érico Veríssimo, no 400, 6o andar
90160-180, Porto Alegre - RS Brasil Fax: (51) 3218-6244 Attention: Carlos Melzer Luciana
Ribeiro

(vii) if to NET BRASIL:

Avenida Brasil, no 1612 01430-001, São Paulo - SP Brasil Fax: (21)
2273-2770 Attention: Alberto Pecegueiro

16.2. No modification to this Shareholders Agreement shall be made
except by writing signed by all the Agreement Shareholders.

16.3. This Shareholders Agreement governs all the relations between
the Agreement Shareholders with respect to the matters dealt with herein, with the
exception of (i) the Share Purchase and Sale Option Agreement and the (ii) Purchase
Option, both defined in item 4.2, and binds the Agreement Shareholders and their
successors, revoking and replacing all earlier agreements, written or oral, between
Agreement Shareholders with respect to NET SERVIÇOS. For greater clarity, the shareholders agreement
between Globo Cabo Holding S.A. (now DISTEL), MAJOLI (succeeded by BRADESPLAN), BNDESPAR
and MICROSOFT dated November 16, 1999 and Amendment no. 1 thereto are hereby expressly
revoked.

16.4. Except as expressly provided for herein, the rights and
obligations under this Shareholders Agreement may not be assigned or transferred in
whole or in part.

16.5. This Shareholders Agreement shall be governed by the laws of
the Federative Republic of Brazil, subject to the provisions of article 118 of Law no.
6404/76. Any controversy arising out or in relation to the provisions of this ShareholdersAgreement,
taken alone or in conjunction with the Bylaws of the COMPANY, including controversies
related to the validity, effectiveness and interpretation of the Bylaws and this
Shareholders Agreement, or in conjunction with rules issued by the National Monetary
Council [Conselho Monetário Nacional], the Central Bank of Brazil and the Brazilian
Securities Commission [Comissão de Valores Mobiliários] shall be resolved by arbitration.
The arbitration shall be conducted by one or more arbitrators chosen in accordance with
the BOVESPA Market Arbitration Chamber Regulation [Regulamento da Câmara de Arbitragem do
Mercado da BOVESPA].

16.6. Any translation of this Shareholders Agreement into another
language shall have no effect on the rights and obligations between the Agreement
Shareholders.

16.7. The Agreement Shareholders shall adopt all measures necessary
to ensure that the members of the Board of Directors and/or of the Board of Officers
[Diretoria] of NET SERVIÇOS do not approve the grant of loans from NET SERVIÇOS to
controlling shareholders or to any other company that is not controlled directly or
indirectly by NET SERVIÇOS.

16.8. Execution of any instrument between Agreement Shareholders,
regulating the provisions regarding voting rights in Clause 8 and/or provisions regarding
the Right of First Refusal in Clause 5 under this Shareholders Agreement is prohibited.

16.9. In the event of conflict or inconsistency between any
provision under the Recapitalization Protocol and any provision under this Shareholders Agreement,
this Shareholders Agreement shall prevail.

16.10.GLOBO, as controlling shareholder of NET BRASIL, shall permit
and shall cause NET BRASIL to permit the COMPANYs independent external auditors to
examine the books of NET BRASIL and the COMPANY in order to issue, on a halfyearly basis,
a specific report as to whether the transactions between NET BRASIL and the COMPANY have
been carried out at market prices, which shall not exceed those adopted with other
companies.

16.11.This Shareholders Agreement shall be filed at the
headquarters of the COMPANY and, if applicable, shall be registered with the financial
institution acting as depositary of shares issued by the COMPANY, which shall respect,
comply with, and cause compliance with its provisions. The COMPANY or the financial
institution, if applicable, shall enter a note on the margin of the entry registering
shares held by the Agreement Shareholders, with the following text: The shares shown in
this entry, the transfer or encumbrance of such shares by any means, and the exercise of
voting rights attached to such shares, are subject to obligations and a regime
established under the Shareholders Agreement dated July 11, 2002 and any transfer,
encumbrance or exercise of voting rights contrary to that agreement shall be ineffective.

And having so agreed, the Agreement Shareholders and the intervening
parties have executed this instrument in 12 (twelve) counterparts of equal form and
content, in the presence of 2 (two) witnesses:

São Paulo, July 11, 2002

_____________________________________________________ DISTEL HOLDING
S.A.

_____________________________________________________ ROMA PARTICIPAÇÕES
LTDA.

_____________________________________________________ GLOBO COMUNICAÇÕES
E PARTICIPAÇÕES S.A.

_____________________________________________________ BRADESPLAN
PARTICIPAÇÕES S.A.

_____________________________________________________ BNDES PARTICIPAÇÕES
S.A.  BNDESPAR

_____________________________________________________ MICROSOFT B.V.

_____________________________________________________ ZERO HORA
EDITORA JORNALÍSTICA S.A.

_____________________________________________________ RBS PARTICIPAÇÕES
S.A.

Intervening Parties:

_____________________________________________________ NET SERVIÇOS
DE COMUNICAÇÃO S.A.

_____________________________________________________ BRADESPAR S.A.

_____________________________________________________ MICROSOFT
CORPORATION

_____________________________________________________ NET BRASIL S.A.

Witnesses:

1. _____________________________ Tax registration no. (CPF/MF):

2. _____________________________ Tax registration no. (CPF/MF):



EXHIBIT 8.1

Set forth in the table below is a list of our direct and indirect
operating subsidiaries as of March 31, 2003:

|Name of Subsidiary                                      | Direct Interest | Total Interest
|------------------------------------------------------- | --------------- | --------------
|                                                        | (%)            
|Multicanal Telecomunicações S.A                         | 86.00           | 100.00        
|Net Belo Horizonte Ltda(1)                              | 100.00          | 100.00        
|CMA Participações S.A                                   | 50.60           | 97.20         
|Net Brasília Ltda.(1)                                   | 100.00          | 100.00        
|Net Rio S.A                                             | 100.00          | 100.00        
|Net Recife Ltda.(1)                                     | 100.00          | 100.00        
|Net São Paulo Ltda                                      | 94.37           | 100.00        
|Net Campinas Ltda.(1)                                   | 100.00          | 100.00        
|Net Indaiatuba Ltda.(1)                                 | 100.00          | 100.00        
|Net São Carlos S.A.(1)                                  | 100.00          | 100.00        
|Net Franca Ltda.(1)                                     | 100.00          | 100.00        
|Net Sul Comunicações Ltda.(1)                           | 100.00          | 100.00        
|Vicom Ltda(1)                                           | 100.00          | 100.00        
|TV Cabo e Comunicações Jundiaí S.A                      | 50.00           | 50.00         
|Net Brasil S.A                                          | 40.00           | 40.00         
|Horizonte Sul Comunicações Ltda.(2)                     | -               | 100.00        
|DR  Empresa de Distribuições e Recepção de TV Ltda.(2) | -               | 100.00        
|Net Paraná Comunicações Ltda.(2)                        | -               | 100.00        
|Net Joinville Ltda.(2)                                  | -               | 100.00        
|Net Florianópolis Ltda.(2)                              | -               | 100.00        
|Net Curitiba Ltda.(2)                                   | -               | 100.00        
|Net Maringá Ltda.(2)                                    | -               | 100.00        
|Americapar Participações Ltda.(2)                       | -               | 100.00        
|Net Arapongas Ltda.(2)                                  | -               | 100.00        
|TV Cabo Criciúma Ltda.(2)                               | -               | 60.00         
|Net São José do Rio Preto Ltda.(3)                      | 0.01            | 100.00        
|Net Piracicaba Ltda.(3)                                 | -               | 100.00        
|Net Ribeirão Preto S.A.(3)                              | -               | 100.00        
|Net Baurú Ltda.(3)                                      | -               | 100.00        
|Net Goiânia Ltda.(3)                                    | -               | 100.00        
|Net Anápolis Ltda.(3)                                   | -               | 70.00         
|Net Campo Grande Ltda.(3)                               | -               | 100.00        
|Net Sorocaba Ltda.(3)                                   | -               | 100.00        
|Reyc Comércio e Participações Ltda.(3)                  | 0.50            | 100.00        

|(1) | Distel Holding S.A. holds one share.         
|--- | ---------------------------------------------
|(2) | Held through Net Sul Comunicações Ltda.      
|(3) | Held through Multicanal Telecomunicações S.A.



EXHIBIT 12.1

CERTIFICATIONPursuant to 18 United States Code § 1350

The undersigned hereby certifies that to his knowledge, the Annual
Report on Form 20-F for the fiscal year ended December 31, 2002 of Net Serviços de
Comunicação S.A. (the Company) filed with the Securities and Exchange Commission on the
date hereof fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that the information contained in such report fairly
presents, in all material respects, the financial condition and results of operations of
the Company.

| | /s/ Francisco Tosta Valim Filho  
| | ---------------------------------
| | Name: Francisco Tosta Valim Filho
| | Title: Chief Executive Officer   
| | Date: June 30, 2003              



EXHIBIT 12.2

CERTIFICATIONPursuant to 18 United States Code § 1350

The undersigned hereby certifies that to his knowledge, the Annual
Report on Form 20-F for the fiscal year ended December 31, 2002 of Net Serviços de
Comunicação S.A. (the Company) filed with the Securities and Exchange Commission on the
date hereof fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that the information contained in such report fairly
presents, in all material respects, the financial condition and results of operations of
the Company.

| | /s/ Leonardo P. Gomes Pereira  
| | -------------------------------
| | Name: Leonardo P. Gomes Pereira
| | Title: Chief Financial Officer 
| | Date: June 30, 2003