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

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

   
                      ------------------------------------
                                   Form 20-F/A
                      ------------------------------------
    


[ ]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                                       OR

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

                  For the fiscal year ended December 31, 1997

                                       OR

    [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

             For the transition period from __________ to __________

                     Commission file number _______________


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


                                  Tevecap S.A.
             (Exact name of Registrant as specified in its charter)

         TEVECAP INC.                          THE FEDERATIVE REPUBLIC OF BRAZIL
(Translation of Registrant's                    (Jurisdiction of incorporation
      name into English)                               or organization)

                               Rua do Rocio, 313
                              Sao Paulo, SP Brazil
                                   04552-904
                          (Telephone: 55-11-821-8550)
         (Address and telephone number of principal executive offices)

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

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

                                (Title of Class)
Securities registered or to be registered pursuant to Section 12(g) of the Act:
                                      None
                               ------------------

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

     12-5/8% Senior Notes due 2004 of Tevecap S.A. and guarantees thereof by
each of TVA Sistema de Televisao S.A., Galaxy Brasil S.A., TVA Sul Participacoes
S.A., Comercial Cabo TV Sao Paulo Ltda., TVA Sul Parana Ltda., CCS Camboriu
Cable System de Telecomunicacoes Ltda., TVA Sul Santa Catarina Ltda., TVA Sul
Foz do Iguacu Ltda, TVA Distribuidora S.A., TVA Programadora Ltda. and TVA
Satelite Ltda.

     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:

                            196,712,855 Common 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 _X_              NO ___

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

                     ITEM 17 ____        ITEM 18 __X__

================================================================================
<PAGE>


                                TABLE OF CONTENTS

                                     PART I

   
ITEM 1.       DESCRIPTION OF BUSINESS..........................................1
ITEM 9.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATIONS.......................................37
    

GLOSSARY.....................................................................A-1


                                        i

<PAGE>
       

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

General

     TVA is a leading pay television operator in Brazil and is one of the
country's largest pay television programming distributors. In 1989, TVA was the
first to provide pay television services in Brazil and, in July 1996, the
Company launched DIRECTV, Brazil's first digital Ku-Band service. With
approximately 564,000 subscribers, TVA offers pay television services utilizing
four distribution technologies: MMDS, Cable, digital Ku-Band and digital C-Band.
TVA believes that its ability to strategically deploy alternative technologies
provides it with significant competitive advantages, including the ability to
rapidly enter new markets, maximize penetration of existing markets and deliver
service in the most cost effective manner. Additionally, TVA has interests in
HBO Brasil Partners and ESPN Brasil Ltda., two programming joint ventures (the
"Programming Ventures"). Through owned, affiliated and independent pay
television operators, TVA programming reaches approximately 1.4 million pay
television households. TVA is a majority owned subsidiary of Abril, S.A.
("Abril"), Latin America's leading magazine publishing, printing and
distribution company. TVA's other shareholders are Falcon International
Communications (Bermuda) L.P. ("Falcon International"), The Hearst Corporation
("Hearst"), ABC, Inc. ("ABC") and Chase Manhattan International Finance Ltd.
("CMIF").

     The Company conducts its pay television operations through three owned
operating systems (the "Owned Systems"): TVA Sistema, TVA Sul and Galaxy Brasil.
Through the MMDS and Cable systems of TVA Sistema and TVA Sul, the Company
serves six cities with a combined population of approximately 18 million,
including three of the seven largest cities in Brazil: Sao Paulo (population of
10.2 million), Rio de Janeiro (population of 5.7 million) and Curitiba
(population of 1.5 million). The Company also holds minority interests in
Canbras TVA and TV Filme (the "Operating Ventures"), which together provide pay
television services to an additional seven cities with a total population of 6.5
million. In addition, the Company sells programming to, and receives a per
subscriber fee from, unaffiliated pay television operators ("Independent
Operators").

     The Company, through Galaxy Brasil, is Brazil's exclusive provider of the
premium programming service, DIRECTV, Brazil's first digital direct broadcast
satellite Ku-Band service. Galaxy Brasil receives programming, scheduling and
related services for DIRECTV from Galaxy Latin America ("GLA"), in which TVA
holds a 10.0% equity interest. The other owners of GLA are a unit of Hughes
Electronics, a member of the Cisneros Group and a subsidiary of Grupo MVS.
Through local operating companies such as Galaxy Brasil, GLA plans to provide
DIRECTV service throughout much of Latin America and the Caribbean. The Company,
through TVA Sistema, also currently provides Brazil's only digital C-Band
television service (together with Galaxy Brasil, the "DBS Systems"). The DBS
Systems enable the Company to deliver a greater number of channels than any
other television operator in Brazil and provide TVA with access to substantially
all of Brazil's 36.4 million TV Homes.

     In 1998 the Company expects to complete a corporate reorganization pursuant
to which three recently-created wholly-owned subsidiaries, TVA Distribuidora
S.A., TVA Programadora Ltda. and TVA Satelite Ltda., will serve as holding
companies for the Company's interests in its Cable and MMDS operations, the
Programming Ventures and the DBS systems, respectively. This corporate
reorganization is not expected to result in any change in the Company's
beneficial interests in its current subsidiaries and affiliates.



                                        1


<PAGE>



Programming Distribution and Markets

     The following table sets forth information regarding the markets in which
TVA operates systems and distributes programming:

<TABLE>
<CAPTION>
                                                                                                              Average
                                                                                                              Revenue       Pay
                                                                                                             per Month    Television
                                         Service Launch          TV            Class ABC                        per      Programming
                                              Date              Homes(a)      TV Homes(a)     Subscribers    Subscriber   Channels
                                              ----              --------      -----------     -----------    ----------   --------
<S>                                       <C>                  <C>             <C>               <C>          <C>             <C>
   
Owned Systems
MMDS
TVA Sistema
        Sao Paulo ..................      September 1991       4,400,650       1,917,608         117,304      $40.03          27
        Rio de Janeiro .............        March 1992         2,659,472         964,804          99,874       39.63          26
TVA Sul
        Curitiba ...................        March 1992           568,048         236,560          23,735       35.26          15
Cable(b)
TVA Sistema
        Sao Paulo ..................       October 1994        4,400,650       1,917,608          58,541       37.51          53
TVA Sul
        Curitiba ...................       January 1995          568,048         263,560          15,169       35.57          45
        Camboriu ...................        June 1996             37,618          22,686           6,144       30.88          49
        Foz do Iguacu ..............        June 1996             46,669          29,151           8,541       24.96          50
        Florianopolis ..............      September 1996         155,382          53,001           5,866       33.25          48
                                                                                               ---------
Total MMDS and Cable
  Subscribers ......................           --                     --              --         335,174          --          --
                                                                                               ---------
DBS
TVA Sistema/Galaxy
Brasil(c) ..........................        March 1995        36,400,000      15,238,518         211,209       44.05          76 (d)
Subscribers Awaiting
  Installation .....................           --                     --              --          17,963          --          --
                                                                                               ---------
Total Subscribers-Owned
  Systems ..........................           --                     --              --         564,346          --          --
                                                                                               =========
Households Receiving
  TVA Programming
Owned Systems ......................           --                     --              --         564,346          --          --
                                                                                               ---------
Operating Ventures
MMDS 
TV Filme, Inc.                 
        Brasilia ...................        July 1993            424,542         273,135          63,047      $47.78          24
        Goiania ....................      December 1994          319,434         140,498          29,875       43.95          24
        Belem ......................      December 1994          193,106         123,820          18,322       46.57          24
Cable
Canbras TVA
        Four cities(e) .............        April 1996           222,358         152,773          30,904          --          45
                                                                                               ---------
Total-Operating Ventures ...........           --                     --              --         142,148          --          --
                                                                                               =========
Independent Operators
(53 Independent
  Operators) .......................           --                     --              --         669,543          --          --
                                                                                               ---------
Total ..............................           --                     --              --       1,376,037          --          --
                                                                                               =========
</TABLE>
--------------------

(a)  This data is based on information provided by Pay TV Survey and IBGE.
    

(b)  The Company's Cable Systems in Sao Paulo, Curitiba, Camboriu, Foz do Iguacu
     and Florianopolis had approximately 457,313, 115,302, 18,055, 19,900 and
     29,822 Homes Passed, respectively, as of December 31, 1997.

(c)  This data reflects the Company's digital Ku-Band and digital C-Band
     operations. TV Homes and Class ABC TV Homes information is national
     information for all of Brazil.

   
(d)  Represents Ku-Band operations. C-Band operations provide 26 channels
     (including nine SAP channels).
    

(e)  The four cities served by Canbras TVA are Santo Andre, Sao Bernardo,
     Guaruja and Sao Vicente.


                                        2


<PAGE>



Brazilian Pay Television Market

     Brazil is the largest television and video market in Latin America with an
estimated 36.4 million TV Homes which, as of December 31, 1997, watched on
average approximately 4.0 hours of television per day, figure comparable to that
of the United States. Approximately 7.8 million television sets and 2.4 million
VCR units were sold in Brazil during 1995. The pay television industry in Brazil
began in 1989 with the commencement by the Company of UHF service in Sao Paulo.
As of December 31, 1997, there were an estimated 2.6 million pay television
subscribers, representing approximately 7.0% of Brazilian TV Homes. By
comparison, as of December 31, 1997, 53.5% of TV Homes in Argentina, 14.1% of TV
Homes in Mexico and 72.5% of TV Homes in the United States subscribed to pay
television. Management believes that the number of pay television subscribers in
Brazil will continue to grow as pay television reaches more households both
through the expansion of existing and new MMDS and Cable systems and through
development of nationwide DBS systems. The Ministry of Communications estimates
that Brazil will have 16.5 million pay television subscribers by 2003.

<TABLE>
<CAPTION>
                                                                                                                           United
                                                                Brazil(a)        Argentina(b)         Mexico(b)           States(c)
                                                                ---------        ------------         ---------           ---------
                                                                              (Numbers in Thousands, except percentages)
<S>                                                               <C>                 <C>               <C>                <C>
TV Homes .............................................            36,400              9,500             15,900             95,950
                                                                  ------             ------             ------             ------
        Cable Subscribers ............................             1,758              4,999              1,634             64,375
        MMDS Subscribers .............................               420                 78                454              1,120
        C-Band Subscribers ...........................               165                 --                 --              4,135(d)


        Ku-Band Subscribers ..........................               227                 35                150              4,135(d)
                                                                  ------             ------             ------             ------

Total Subscribers ....................................             2,571              5,112              2,238             69,630
                                                                  ======             ======             ======             ======
Total Subscribers/TV Homes (%) .......................               7.0%              53.5%              14.1%              72.5%
</TABLE>

--------------------
(a)  Pay TV Survey (March 1998).

(b)  Kagan World Media, Inc. (1997).

(c)  National Cable Television Association (1996).

(d) The number represents C-Band and Ku-Band subscribers collectively.


Competitive Advantages

     Management believes that the Company has the following competitive
advantages:

     Superior Quality Programming Lineup. TVA's programming line-up includes
exclusive rights to ESPN Brasil in the Company's major markets, with coverage of
many of Brazil's most important soccer championships, including the Brazilian
Cup and the Sao Paulo and Rio de Janeiro State Championships. The Company
exclusively offers Eurochannel and Bravo Brasil and is also the only Cable and
MMDS operator offering HBO, E! Entertainment Television, Mundo and CBS
Telenoticias in its served markets. Management believes that as the pay
television industry grows, programming will become the critical factor driving
consumer selection of a pay television provider, and that with TVA's
relationships with strong international partners and its exclusive soccer
coverage, TVA will continue to offer superior quality programming.

     Strategic Deployment of Alternative Distribution Technologies. The Company
utilizes four distribution technologies: MMDS, Cable, digital Ku-Band and
digital C-Band. The availability of multiple distribution technologies enables
the Company to capitalize on the population and income characteristics,
topography and competitive dynamics of each of its targeted markets. The Company
has the ability to penetrate new markets quickly

                                        3


<PAGE>



and efficiently and to offer tiered programming at low cost with MMDS. The
Company is expanding its Cable systems, where warranted by economic and
competitive conditions, to build its subscriber base and to prepare for future
opportunities in interactive services and telecommunications. Additionally,
management believes the Company can rapidly penetrate virtually any market
through the continued deployment of its DBS Systems.

     DBS Systems: Nationwide Coverage and Digital Service. Through its DBS
Systems, TVA is capable of offering programming to nearly all of Brazil's 36.4
million TV Homes, including those households in markets where Cable or MMDS
systems are either not developed or not economically viable. Through its DIRECTV
service, TVA is the first provider of Ku-Band pay television services in Brazil
and expects to enroll as subscribers a significant share of those who are
interested in broader, digital quality programming and pay-per-view services.
Through its digital C-Band system, the Company provides 26 channels of
programming (including nine SAP channels) and is capable of providing up to 38
channels of programming (including SAP channels). The Company's only significant
competitor in C-Band pay television service provides six analog channels of
programming in addition to off-air channels. The Company currently targets its
C-Band service to the estimated 4.5 million parabolic C-Band antennae owners in
Brazil, most of whom currently receive only the off-air channels.

     Modern Cable Infrastructure. The Company's Cable systems are constructed
with, or are being upgraded to, either 750 MHz or 550 MHz bandwidth capacity,
the latter of which is readily upgradeable to 750 MHz bandwidth capacity with
only moderate investment. This Cable technology will enable the Company to
provide data transmission and interactive services, including
telecommunications, in the future. Management believes that the Company's major
competitors for Cable service use narrower bandwidths over portions of their
Cable systems and have installed certain types of Cable in households which
currently may prevent them from providing telecommunications or high speed data
delivery through these portions of their systems until substantial additional
investments have been made for system reconstruction or upgrade.

     Strong Strategic Partners. The Company's strategic equity partners continue
to offer valuable expertise. TVA benefits from Abril's extensive experience in
the business of subscriptions and distribution and from the collective
experience of Falcon International, Hearst and ABC with regard to pay television
operations and from access to programming.

Business Strategy

     TVA seeks to be Brazil's largest and most profitable pay television
operator and programming distributor and intends to capitalize on the
convergence and development of voice, video and telecommunications services. The
Company intends to achieve these goals through the following strategies:

     Maximize Penetration in Existing Markets. The Company seeks to increase its
penetration of existing markets by: (i) expanding the range of TVA's Cable
systems by extending its fiber optic and coaxial cable network and by seeking
pre-wiring arrangements with residential housing developers, (ii) improving the
signal quality and coverage of TVA's MMDS systems by using signal repeater
technology, (iii) maximizing penetration by offering tiered subscription options
and developing programming packages to appeal to more households and (iv)
expanding its penetration in ABC Class households through its scheduled
nationwide rollout of DIRECTV service and the continued development of C-Band
service.

     Maximize Customer Retention Through Superior Customer Service. In order to
maximize customer retention, the Company aims to provide a consistently high
level of customer service. The Company has developed or has acquired the right
to use proprietary management information systems which, among other things,
provide Company representatives immediate access to customer records and
correspondence history. This enables TVA to provide high quality service to its
clients while monitoring subscriber payment patterns. The Company's Churn rate,
which reflects the ability of the Company to retain subscribers, averaged
approximately 2.9% per month during the year ended December 31, 1997. The
average monthly Churn rate for MMDS service in 1994 was 1.6%, in 1995

                                        4


<PAGE>



was 1.3%, in 1996 was 2.4% and in 1997 was 4.0%. The average monthly Churn rate
for Cable service in 1994 was less than 1.0%, in 1995 was 1.1%, in 1996 (the
year Cable service was initiated) was 0.8% and in 1997 was 2.1%. The average
monthly Churn rate for C-Band service in 1994 was 5.3%, in 1995 was 0.1%, in
1996 was 2.0% and in 1997 was 2.1%. The average monthly Churn rate for Ku-Band
service was 0.9% in 1997.

     Enhance TVA's Programming Package. In order to maintain and enhance its
position as a provider of superior programming in Brazil, TVA is developing new
programming through the Programming Ventures, as well as through Abril and other
partners. TVA frequently evaluates the demographics of its subscribers and
potential subscribers and seeks to provide programming most in demand. The
Company also takes advantage of opportunities to enter into exclusive
distribution agreements for popular television programming in Brazil. Management
believes that its DIRECTV service, which includes both basic and premium
channels, as well as pay-per-view movies and events from Brazil, other Latin
American countries, Europe, Asia and the United States, further enhances TVA's
programming offerings and positions the Company to be the provider of the widest
selection of popular programming in Brazil.

     Enter New Markets. The Company intends to enter new markets by: (i)
acquiring existing MMDS and Cable operations, (ii) continuing the nationwide
rollout of DIRECTV service and (iii) investing in new operating ventures with
other MMDS and Cable operators.

     Continue Network Enhancement. The Company is positioning itself to provide
high speed data transmission, interactive and other telecommunications services
over its systems and to take advantage of possible deregulation and the growing
demand for these services in Brazil. The Company is expanding its Cable systems
with fiber optic and coaxial cable capable of being upgraded to provide such
enhanced services. In addition, the Company continues to explore the development
of digital compression of MMDS signals.

     Through the implementation of the Company's strategy, the Company has been
able to achieve rapid subscriber growth. The following chart sets forth
information regarding (i) the number of subscribers to the Company's Owned
Systems at December 31, 1994, 1995, 1996 and 1997, (ii) the number of new
installations during the years ended December 31, 1994, 1995, 1996 and 1997, and
(iii) the average installation fee for the year ended December 31, 1997.

                                        5


<PAGE>


<TABLE>
<CAPTION>

                                                                                                                  
                                                                                                                    Average   
                                                                                                                  Installation
                                                                                                                  Fee for the 
                                               Subscribers at                          New Installations              Year    
                                               End of Period (a)                         During Period               Ended    
                                     -------------------------------------   -------------------------------------  Dec. 31,  
                                      1994      1995      1996      1997      1994      1995      1996      1997      1997
                                     -------   -------   -------   -------   -------   -------   -------   -------   -------
<S>                                  <C>       <C>       <C>       <C>        <C>       <C>       <C>       <C>      <C>
MMDS
        Sao Paulo ................    72,425   121,969   126,797   117,304    34,372    75,332    61,235    67,132   $ 65.95
        Rio de Janeiro ...........    28,234    51,664    79,928    99,874    13,855    31,733    48,928    55,707    167.64
        Curitiba .................    11,112    15,260    23,595    23,735     5,972    10,513    17,117    28,890     84.18
                                     -------   -------   -------   -------   -------   -------   -------   -------   -------
Total MMDS .......................   111,771   188,893   230,320   240,913    54,199   117,578   127,280   151,729      --
                                     -------   -------   -------   -------   -------   -------   -------   -------   -------
CABLE
        Sao Paulo ................     1,007    13,885    21,352    58,541       482     6,546     6,907    27,307   $ 29.14
        Curitiba .................      --       1,244    10,377    15,169      --         434     3,794     6,111     40.86
        Foz do Iguacu ............      --        --       7,157     6,144      --        --       2,275     2,576     47.16
        Camboriu .................      --        --       5,209     8,541      --        --       1,596     4,636     91.53
        Florianopolis ............      --        --       1,916     5,866      --        --       1,966     5,514     10.51
                                     -------   -------   -------   -------   -------   -------   -------   -------   -------
Total Cable ......................     1,007    15,129    46,011    94,261       482     6,980    16,538    46,144      --
                                     -------   -------   -------   -------   -------   -------   -------   -------   -------
DBS
C-Band/DIRECTV ...................     2,075    15,126    73,180   211,209     1,914    16,873    66,085   169,755   $481.74
                                     -------   -------   -------   -------   -------   -------   -------   -------   -------
Total Subscribers-Owned
  Systems ........................   114,853   219,148   349,511   546,383    56,595   141,431   209,903   367,628      --
                                     =======   =======   =======   =======   =======   =======   =======   =======   =======
</TABLE>

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

(a)  Excludes backlog, reconnected and disconnected subscribers.


Ownership

     Tevecap is a majority owned subsidiary of Abril, the leading magazine
publishing, printing and distribution company in Latin America. Abril publishes
approximately 200 weekly, bi-weekly and monthly titles. During 1997, the
combined monthly paid circulation of Abril and its affiliates averaged 190
million copies. TVA benefits from Abril's extensive experience in the business
of subscriptions and distribution, advertising synergies, common research
resources and financial analysis and support. Certain of Tevecap's other
shareholders provide the Company with access to additional international
programming and certain technical and financial expertise. As of December 31,
1997, the Company's shareholders had invested, in aggregate, approximately
$288.0 million in the Company, and Tevecap's ownership was as follows: Abril,
56.5%; Falcon International, 14.2%; Hearst, 10.0%; ABC, 10.0%; and CMIF, 9.3%.
Following a $100 million capital contribution by Abril in February 1998,
Tevecap's current ownership is as follows: Abril, 62.2%; Falcon International,
12.3%; Hearst, 8.7%; ABC, 8.7%; and CMIF, 8.1%.

Distribution Operating Systems

     TVA and the Operating Ventures distribute programming through four
different technologies: MMDS, Cable, digital Ku-Band and digital C-Band. The
availability of multiple distribution technologies enables the Company to
exploit the population and income characteristics, topography and competitive
dynamics of each of its markets.

     MMDS

     TVA's strategy of rapidly deploying an extensive MMDS network has allowed
it to enter new markets quickly and develop broad geographic coverage which the
Company may expand utilizing signal repeaters. TVA has developed Brazil's
largest MMDS network, and with the Operating Ventures, serves the country's
major metropolitan areas. MMDS systems are typically easier to deploy and
require relatively little capital investment for construction and maintenance as
compared to Cable systems. Programming is transmitted by signals through the

                                        6


<PAGE>



air from microwave transmitters to a small receiving antenna located at a
subscriber's home or dwelling unit. At the subscriber's location, the microwave
signals are converted to frequencies that can pass through a conventional
coaxial cable into a decoder located near a television set. All of the Company's
MMDS systems use addressable converters, which permit the Company to offer
tiered pricing options that are expected to attract new customers, retain
existing customers and reduce Churn. In accordance with Brazilian regulations,
each MMDS license allows an MMDS operator to provide service to households in a
circular area within a radius of up to 50 kilometers, depending on the technical
capability of the operator. It is expected that expansion into such newly
available territory would require minimal additional capital spending by the
Company. However, tall buildings and other tall structures may block reception
of an MMDS signal. See "--Regulatory Framework." MMDS is being used in other
emerging pay television markets such as Venezuela and Hong Kong, and in Mexico,
where Cable has a strong incumbent position.

     TVA owns five MMDS licenses and operates MMDS systems in Sao Paulo, Rio de
Janeiro and Curitiba, which have an aggregate population of approximately 17.4
million. TVA serves 240,913 MMDS subscribers in these three cities. During the
year ended December 31, 1997, TVA averaged approximately 900 net new MMDS
subscribers per month. The MMDS systems of TVA offer between 15 and 27 channels
of programming. TVA also holds interests in three MMDS licenses through TV
Filme, an Operating Venture, which operates MMDS systems in Brasilia, Goiania
and Belem and has 111,244 MMDS subscribers. See "--Regulatory Framework--MMDS
Regulations." During the year ended December 31, 1997, the Operating Ventures
averaged approximately 2,800 net new MMDS subscribers per month.

     Cable

     TVA has recently emphasized the strategic deployment of Cable service and
currently operates Cable systems in Sao Paulo, Curitiba and three other cities.
Cable service involves a broad band network employing radio frequency
transmission through coaxial and/or fiber optic cable. Cable systems consist of
four major parts: a headend, a distribution network, a subscriber network and a
house terminal. The programming is collected from the headend, then processed
and fed into the distribution path consisting of trunk and distribution cable,
which consists of coaxial and/or fiber optic cables. The signal is then fed into
a subscriber network that is either located in an apartment building or a
subscriber's home. Most of the Company's systems are constructed with either 750
MHz or 550 MHz bandwidth capacity, the latter of which is readily upgradeable to
750 MHz bandwidth capacity. The Company's four newly acquired systems in
Curitiba (2), Camboriu (1) and Foz do Iguacu (1) are being upgraded to 550 MHz
bandwidth capacity. The Company's new system in Florianopolis is being
constructed to 550 MHz bandwidth capacity. It is expected that this technology
will enable the Company to provide interactive services, including
telecommunications in the future. In addition, the Company's Cable systems
generally use addressable converters, which allow the provision of pay-per-view
services and enable TVA to upgrade, downgrade or disconnect a subscriber's
service from the headend on short notice.

     TVA, through TVA Sistema and TVA Sul, owns six Cable licenses and operates
Cable systems in Sao Paulo, Curitiba (where TVA originally owned three licenses
that were later merged into one license), Camboriu, Florianopolis and Foz do
Iguacu, which have an aggregate population of approximately 11.9 million and
94,261 subscribers. As of December 31, 1997, TVA had deployed approximately
2,500 kilometers of its Cable network, including 444 kilometers of fiber optic
cable, including a 395 kilometer fiber optic loop in Sao Paulo and a 49
kilometer fiber optic network in Curitiba. The Company is also upgrading or
constructing the three recently acquired Cable systems. As a result of this
buildout, as of December 31, 1997, TVA Cable systems passed 457,313 homes in Sao
Paulo, approximately 115,302 homes in Curitiba and a total of 640,392 homes
throughout all of the Company's Cable systems. As of December 31, 1997, Canbras
TVA, an Operating Venture, had an existing Cable network of 628 kilometers, with
186,237 Homes Passed and 30,904 subscribers. Canbras TVA is constructing Cable
networks in ten cities in the greater Sao Paulo area with a combined population
of over 2.8 million. By comparison, TVA's largest competitor in Sao Paulo for
Cable service had, as of the same date, 1.0 million Homes

                                        7


<PAGE>



Passed. TVA and Canbras TVA currently offer between 45 and 53 analog channels of
programming (including off-air channels) on their Cable systems, depending on
the market, and have the capability of offering up to 78 analog channels. During
the year ended December 31, 1997, TVA and Canbras TVA averaged approximately
4,000 and 1,900 net new Cable subscribers per month, respectively.

     DIRECTV

     In July 1996, TVA launched, on a limited basis, Brazil's DIRECTV service,
Brazil's first Ku-Band service. A nationwide rollout of DIRECTV was launched in
November 1996, at which time TVA initiated a publicity campaign supported by a
nationwide network of trained installers. By comparison, DIRECTV, Inc., a unit
of Hughes Electronics, started its DIRECTV service in the United States in June
1994 and had, as of December 31, 1997, approximately 3.6 million subscribers for
this service.

   
     Galaxy Brasil receives programming from GLA, including programming which
GLA purchases from TVA. Additionally, GLA provides scheduling and related
services to Galaxy Brasil for use with DIRECTV. GLA distributes programming to
Brazil through the transmission of an encoded signal via the Galaxy VIII-i
(launched in December 1997 and replacing the Galaxy III-R satellite) satellite
utilizing 32 transponders to a subscriber's 60 centimeter dish antenna which can
be mounted outside a window or on a rooftop. The signal is then transmitted to
an integrated receiver decoder in the subscriber's home. A single antenna may
serve a single family dwelling or a multifamily dwelling, such as an apartment
building, in which case each apartment needs to be equipped with a decoder. A
unit of Hughes Electronics leases the Galaxy VIII-i satellite and provides the
use of the satellite and related services to GLA, which, in turn, charges Galaxy
Brasil a royalty on a per subscriber basis for the use of the satellite
transponders and related services. The orbital location of the Galaxy VIII-i
satellite enables the Company to offer more than 150 channels through DIRECTV
service to substantially all of the TV Homes in Brazil, substantially all of
which are able to use a 60-centimeter dish antenna due to the Galaxy VIII-i's
expanded footprint. In addition, the Galaxy VIII-i satellite provides a
significant improvement in signal quality, even under adverse weather
conditions, although tall buildings and other tall structures may block
reception of the DIRECTV programming signal. With DIRECTV service, TVA provided
76 channels of video programming (including 24 pay-per-view channels) and 33
channels of audio programming as of April 1, 1998. TVA owns and has made a
substantial investment in a satellite uplink center for the Brazilian DIRECTV
service in Tambore in greater Sao Paulo (the "Tambore Facility"). The Tambore
Facility is used to uplink programming to the Galaxy VIII-i satellite.
    

     In August 1997, DIRECTV, after a significant reduction of operational costs
and the consummation of the Galaxy Brasil Leasing Facility and certain
financings under the SurFin Credit Facility, reduced its installation fee to
$399 (as compared to an original installation price of $990), making the product
more competitive compared with other technologies. This new price expanded the
market of potential subscribers, as the monthly subscription cost became
substantially similar to, and competitive with, that of other pay television
operators in the same market. In early 1999, the decoders used by DIRECTV will
be manufactured in Brazil, which will generate additional cost savings. Antennas
used by DIRECTV are already being produced in Brazil at competitive prices.

     DIRECTV created a new regional structure in February 1998, with regional
managers, supervisors and sales teams. New sales points have been set up at
locations where distributors are located and which attract a large volume of
customers, such as shopping centers and hypermarkets. In addition, the Company
is installing multipoint distribution units in buildings in large cities,
allowing residents in such buildings to share access to such units, thereby
encouraging sales in such cities.

 
                                        8


<PAGE>


     C-Band

     TVA has offered C-Band service since 1993, and is the only pay television
operator to deliver a digital C-Band signal in Brazil. TVA's C-Band service
consists of the transmission of a digital encoded signal via the Brasilsat
satellite utilizing four transponders to a satellite antenna 1.1 meters in
diameter located at a subscriber's home, where the signal passes through an
integrated receiver decoder. A single antenna may serve a single family dwelling
or a multifamily dwelling, such as an apartment building, in which case each
apartment needs to be equipped with a decoder. The Brasilsat satellite was
launched in July 1994 and is owned by Empresa Brasileira de Telecomunicacoes
(Brazilian Telecommunications Company, or "Embratel"), the Brazilian
Government-owned company authorized to provide satellite telecommunications
services utilizing the Sistema Brasileiro de Telecomunicacoes por Satelite
(Brazilian Satellite Telecommunications System, or "SBTS"). TVA utilizes the
Brasilsat satellite pursuant to three satellite transponder leases that expire
on May 30, 2002, November 20, 2003, and November 24, 2003, respectively. The
orbital location of the Brasilsat satellite enables TVA to provide C-Band
service throughout Brazil with little or no interference. However, tall
buildings and other tall structures may block reception of C-Band programming.
The Brasilsat satellite has an expected useful life of approximately 12 to 15
years from the date of launch.

     TVA's C-Band service provides the Company with national coverage via
satellite transmission and a large preinstalled market. As of December 31, 1997,
there were approximately 4.5 million parabolic C-Band antennae in use in Brazil,
most of which receive only off-air channels. This installed base represents the
Company's target market for its digital C-Band service and the Company expects
to attract these viewers through marketing and promotional initiatives. TVA is
able to deliver 38 channels of programming (including nine SAP channels) in
addition to the off-air channels and currently delivers 26 channels (including
nine SAP channels) as compared to the six channels in addition to the off-air
channels offered by its only significant competitor for this service. As of
December 31, 1997, TVA provided service to 68,309 C-Band subscribers throughout
much of Brazil. During the year ended December 31, 1997, TVA averaged
approximately 1,500 net new C-Band subscribers per month.

Recent Acquisitions

     Since January 1996, TVA has purchased four existing Cable systems, two in
Curitiba and one in each of two other cities in southern Brazil, and has
purchased a license to operate a Cable system in a fourth city. As of the
respective dates of their acquisitions, the two systems in Curitiba had a total
of 4,515 subscribers, and the systems in the two other cities had a total of
8,298 subscribers. The four acquired systems had in the aggregate, as of
December 31, 1996, Cable networks comprising approximately 482 kilometers. The
Company is upgrading the operations of the four existing Cable systems and is
constructing a cable system in the fourth city.

The Owned Systems

     TVA Sistema and TVA Sul

     TVA Sistema and TVA Sul operate the Company's MMDS, Cable and C-Band
businesses. TVA holds a 98.0% equity interest in TVA Sistema, and Robert Civita,
a Brazilian national, holds the remaining 2.0% equity interest. The Company
holds an 86.0% equity interest in TVA Sul, and Abril holds the remaining 14.0%.


                                        9


<PAGE>



     GLA and Galaxy Brasil

     Pursuant to a Partnership Agreement, dated February 13, 1995, GLA was
formed as a general partnership. As of April 11, 1997, GLA was converted into a
Delaware limited liability company. Such conversion did not materially affect
the governance of GLA or TVA's ownership interest in GLA. Under a Limited
Liability Company Agreement, dated April 11, 1997 (the "GLA Agreement"), GLA is
managed by a seven-member Executive Committee to which DIRECTV Latin America,
Inc. ("DLA") can appoint four members and each of the other partners, including
Tevecap, can appoint one member as long as such partner holds at least an eight
percent equity interest in GLA. The GLA Agreement provides for local operating
agreements between GLA and local operators throughout South America, Central
America, Mexico and the Caribbean which will govern the relationship between GLA
and such local operator. The GLA Agreement stipulates that the local operator in
Brazil shall be Galaxy Brasil, 100.0% of the equity interest of which is
currently owned by Tevecap, but up to 12.5% of which may be purchased by DTI and
up to 12.5% of which may be purchased by Darlene Investments, a member of the
Cisneros Group. Tevecap, in turn, has an option to purchase up to 15.0% of the
equity interest of the local operator in Venezuela, all of which is currently
owned by Darlene Investments. The current partners in GLA have also agreed to
"seek and maintain" equity positions in other local operators. The Company has
agreed to make capital contributions under the GLA Agreement of $33.5 million,
of which $27.8 million had been contributed as of July 1, 1997. The GLA
Agreement places restrictions, including first negotiation, approval and
tag-along rights, on the transfer of capital stock or voting securities of each
of the current partners in GLA and in certain circumstances their parent
entities. In connection with the conversion of GLA into a limited liability
company, GLA's uplink facility was transferred to California Broadcast Center,
LLC, a Delaware limited liability company formed on April 11, 1997 and owned by
two units of Hughes Electronics.

     Pursuant to a Local Operating Agreement (the "Local Operating Agreement")
between GLA and Galaxy Brasil, dated July 29, 1996, GLA has agreed to provide to
Galaxy Brasil the exclusive right and ability to supply the DIRECTV service in
Brazil. In accordance with a formula based on the number of subscribers, Galaxy
Brasil is obligated to pay a periodic royalty to GLA. In addition, TVA may not
own or engage in any other Ku-Band service and GLA may not own or engage in any
other pay television service in Brazil. GLA, upon the occurrence of certain
events, has the right to terminate the Local Operating Agreement, or to
terminate Galaxy Brasil's exclusive rights to distribute DIRECTV programming.
Such events include breach of any material obligation of Galaxy Brasil to GLA
and the failure of Galaxy Brasil to meet certain specified performance goals.

The Operating Ventures

     The Operating Ventures also operate MMDS (TV Filme) or Cable (Canbras TVA)
systems. TVA holds a 36.0% equity interest in each of Canbras TVA Cabo and TV
Cabo Santa Branca (the "Canbras TVA Companies"). Canbras Participacoes Ltda., a
Brazilian company ("Canbras-Par") holds the remaining interests in Canbras TVA
Cabo and TV Cabo Santa Branca. Canbras-Par is an affiliate of Canbras Holdings
Ltd. and Canbras Communications Corp., a publicly-traded Canadian company, which
are affiliates of Bell Canada International, Inc., an affiliate of BCE Inc.,
Canada's largest telecommunications group. The Canbras Association Agreement
provides for each of the Canbras TVA companies to be governed by a management
committee of three members, one of which TVA has the right to designate. In
addition, TVA agreed to supply to the Canbras TVA companies all programming
regularly supplied to the Owned Systems at "most favored prices" and other terms
at which programming is provided to the Owned Systems or to third parties in
arm's-length transactions. TVA will continue to provide MMDS service, where
possible, to customers in the Santo Andre and Sao Bernardo operating area of the
Canbras TVA Companies until cable service is available in these areas. Canbras
TVA Cabo and TV Cabo Santa Branca will compensate TVA for each subscriber that
transfers from TVA's MMDS system to a Canbras TVA Cable system. The Company
agreed to grant to Canbras-Par a "right of first refusal" to participate in
Cable licenses that the Company may obtain, directly or indirectly, and
Canbras-Par granted to the Company a similar "right of first refusal" to
participate in Cable licenses acquired by Canbras-Par. The term of the Canbras
Association Agreement is for so long as Canbras-Par or its assignee owns shares
"in companies which have the objective of

                                       10


<PAGE>



engaging in the cable TV business." The Canbras Association Agreement does not
specify the terms and conditions on which any co-investments in Cable licenses
are to be made, and such terms and conditions will be negotiated in good faith,
on a case-by-case basis, in connection with any future cable license
investments.

     TVA holds a 14.7% equity interest in TV Filme. The remaining interests are
held by Warburg, Pincus Investors, L.P., which currently holds a 38.8% equity
interest; members of the Lins family, Brazilian nationals, who currently hold a
16.2% equity interest; public shareholders, who currently hold a 28.15% equity
interest; and certain individuals with a combined 2.15% equity interest. On July
29, 1996, TV Filme completed a public offering of 2.5 million shares of its
common stock in the United States at an initial price of $10.00 per share.
Pursuant to a programming agreement, TVA provides programming to TV Filme, and
TV Filme has agreed to use 50.0% of the channel capacity of each of its MMDS
systems in Brasilia, Goiania and Belem (the "TV Filme Service Area") to
broadcast TVA programming so long as (i) the quality of TVA programming, in the
reasonable judgment of TV Filme, remains compatible with the taste and standards
of TV Filme's subscribers, (ii) TVA continues to own, directly or indirectly,
10.0% of TV Filme's common stock and (iii) TVA remains a subsidiary of Abril.
Within the TV Filme Service Area, TVA may not provide TVA programming to any
Cable or other MMDS pay television service provider and TVA may not compete with
TV Filme as an MMDS service provider. TV Filme also has a nonexclusive license
to TVA programming in 19 cities in which TV Filme has pending license
applications, subject to any exclusive license previously granted by TVA to
other pay television service providers in such cities and which exclusive
license TVA, using its best efforts, is unable to renegotiate to allow TVA to
provide for TV Filme to have a nonexclusive license. TVA may not charge TV Filme
an amount greater than the minimum rates charged by TVA to other subscription
television operators, nor may such charges exceed comparable rates for other
programming of a similar nature. The terms of the programming agreement
terminate on July 20, 2004. From time to time, in connection with the
programming agreement, TV Filme has agreed to enter into additional agreements
with the Company regarding specified channels. The agreements typically have two
year terms and determine the monthly fees which TV Filme pays for such channels.

Programming

     TVA

     TVA, through its MMDS, Cable and C-Band systems, currently provides a
programming package consisting of 15 to 53 television channels. TVA programming
emphasizes sports, movies, and news with a secondary emphasis on general
entertainment.

     With respect to MMDS and Cable service in TVA's markets, TVA is currently
the sole provider of ESPN Brasil, HBO Brasil, E! Entertainment Television,
Mundo, CBS Telenoticias, Bravo Brasil, RTPi and Eurochannel. In addition, TVA
has distribution rights to certain of Brazil's most important soccer
championships, including the Brazilian Cup and the Sao Paulo and Rio de Janeiro
State Championships. TVA has entered into two Programming Ventures, ESPN do
Brasil Ltda. ("ESPN Brasil Ltda.") and HBO Brasil Partners, through which it
distributes a large volume of programming which management believes is
especially important to its subscribers. ESPN Brasil Ltda. is a joint venture
between Tevecap and ESPN Brazil, Inc. (a subsidiary of ESPN, Inc.), each of
which holds a 50.0% equity interest. ESPN, Inc. is a joint venture between ABC
and Hearst. ESPN, Inc. provides the programming of the US channel ESPN2 to ESPN
Brasil Ltda., which packages such programming with Brazilian and other
international content and provides such packaged programming to TVA. Pursuant to
a Quotaholders Agreement, dated June 26, 1995 (the "ESPN Agreement"), ESPN
Brasil has the right to transmit "ESPN2 Service" programming as well as all
library programming of ESPN. The Company has the exclusive right to broadcast
the programming of ESPN Brasil Ltda. in Sao Paulo, Rio de Janeiro, Curitiba,
Brasilia, Belem and Goiania. The Company also acts as the exclusive sales
representative of ESPN Brasil programming with respect to sales to other
Brazilian pay television providers and receives a commission in connection
therewith. The Company is also the sole advertising agent for ESPN Brasil until
June 1999 and receives a commission on advertising sales. ESPN Brasil Ltda., in
turn, receives on an exclusive basis from the Company all rights to soccer and
other sporting events

                                       11


<PAGE>



acquired by the Company after February 24, 1995. ESPN Brazil, Inc. has the right
to terminate the ESPN Agreement and dissolve ESPN Brasil Ltda. in the event that
a Brazilian court issues a non-appealable decision that the Company did not have
the right to grant these rights to ESPN Brasil. TVA's mandatory capital
contributions to ESPN Brasil Ltda. are subject to a maximum aggregate amount of
$5.0 million, whether in the form of loans or subscriptions for additional
quotas. The ESPN Agreement is effective until June 17, 2045 and automatically
renewable for a 50-year period.

     HBO Brasil Partners is a joint venture between TVA, which as of December
31, 1997, held a 24.0% equity interest, and HBO Ole Partners, a joint venture
among Time-Warner, Sony, Ole Communications, Inc. and BVI Television
Investments, Inc. (an affiliate of Disney Enterprises, Inc.), which as of the
same date held the remaining 76.0% equity interest. HBO Brasil Partners has
exclusive programming contracts with Sony, Time-Warner and certain independent
programming distributors. HBO Brasil Partners, through an affiliate, provides
the programming for HBO Brasil to TVA. Pursuant to a Partnership Agreement dated
April 15, 1994 (the "HBO Agreement"), HBO Brasil Partners is managed by a
Partners' Committee comprised of an equal number of agents appointed by TVA and
HBO Ole Partners, the other partner. The HBO Agreement provides for the Company
to enter into an affiliation agreement with HBO Brasil Partners, pursuant to
which the Company pays a monthly fee per subscriber to the partnership.

     In addition to the Programming Ventures, TVA has entered into a number of
other programming agreements. The Bravo Company, a joint venture among NBC and
certain other parties, provides international movies and arts programming for
the Bravo Brasil channel on an exclusive basis to TVA for distribution in
Brazil. TVA customizes Bravo Brasil with the insertion of Brazilian arts and
movie programming. Eurochannel is a channel assembled exclusively by TVA with
programming from the German channel Deutsche Welle, the Spanish channel
Radiotelevision Espanola, the French channel TF1, European movies, and series
acquired from the BBC. TVA distributes its programming through its own
operations and through sales of programming to the Operating Ventures, Galaxy
Latin America, the Independent Operators and, to a lesser extent, to competing
pay television providers.

     In addition, TVA offers non-exclusive programming from major international
subscription television programming providers, including such channels as ESPN
International, CNN, TNT, Fox, and the Discovery Channel.

     TVA currently offers subscribers the following channels, among others:

     HBO Brasil is the dominant first-run pay television movie channel in
Brazil. HBO Brasil airs 24 hours a day offering an average of 12 different films
per day with limited commercial slots. All films are either subtitled or dubbed
into Portuguese. In the case of dubbed versions, viewers can listen to the
original soundtrack on an SAP channel. TVA also offers HBO Brasil2, transmitting
HBO Brasil films with a six hour time shift. Recently, in some locations, TVA
began offering Cinemax, an HBO premium movie channel with a film library
complimentary to that of HBO.

     ESPN Brasil, offered exclusively by TVA, began transmission on June 17,
1995. TVA negotiated agreements with the major Brazilian soccer confederations,
providing TVA, as of the 1997 season, exclusive first choice coverage of soccer
games of the Brazilian Cup, the Sao Paulo State Championship and the Brazil Cup.
ESPN Brasil's programming centers around these exclusive soccer games and other
exclusive Brazilian and international sports entertainment programs, mixed with
programming from ESPN2.

     ESPN International is the second sports channel offered by TVA, for which
TVA recently signed a new non-exclusive 50-year contract automatically renewable
for another 50-year period. ESPN International offers a number of different
sporting events, which include auto racing, National Football League games,
professional tennis

                                       12


<PAGE>



matches, Major League Baseball games, and National Basketball Association games.
ESPN  International  also currently provides  Portuguese  language  commentaries
exclusively to TVA.

     CNN International features news and information programming, offering
international news coverage concerning politics, business, financial and
economic developments, 24 hours a day.

     TNT is a movie channel which, pursuant to a non-exclusive agreement with
Turner International, Inc., offers the Turner Network Television movie
collection, including over 5,000 classic movie titles from MGM. In addition, TNT
airs children's programming, documentaries and sporting events. The movies
presented by TNT are broadcast in stereo sound and subtitled or dubbed in
Portuguese or Spanish. In the case of dubbed versions, viewers can listen to the
original soundtrack on a SAP channel.

     Cartoon Network is an animated cartoon channel targeted to children that
offers programs such as The Flintstones, The Jetsons, The Smurfs, Yogi Bear and
other classic series.

     Discovery Brasil is comprised of programming shown on the US Discovery
Channel, based on topics in the areas of nature, science and technology,
history, adventure and world cultures. Recently, TVA began offering Discovery
Kids, a 24-hour channel featuring the best of Discovery programming for
children.

     The Fox Channel presents movies, as well as programs from the 2,000 titles
in Fox's library. Fox also presents American television series, such as L.A.
Law, M*A*S*H, and The Simpsons, among many others. Recently, TVA began offering
Fox Kids, a 24-hour channel featuring the best of Fox programming for children.

     Eurochannel is specially assembled and packaged by TVA and offers
subscribers European programming. The channel presents programs from the Spanish
Radiotelevision Espanola, the German Deutsche Welle, the BBC, the news from the
French TF1, as well as a variety of quality European films. News, sports, music
and variety shows are also offered.

     MTV Brasil is a 24-hour channel produced by MTV Brasil, a joint venture
company owned by Abril and an indirect subsidiary of Viacom International. MTV
Brasil is entirely produced in Brazil in Portuguese. MTV Brasil has licensing
agreements with the MTV Network, a division of Viacom International, and
transmits a combination of music and other video clips, cartoons and local
programming.

     Sony Entertainment is primarily a situation-comedy channel, consisting of
Sony's film library, including Friends, Seinfeld, Mad About You and E.R.

     The Warner Channel is a family entertainment channel, with new and classic
cartoons, children's programs and movies.

     Bravo Brasil is an arts and movie channel, following the same concept as
the US version of the Bravo channel, showing high quality, cultural events, such
as classical music, jazz, opera, ballet and European movies. TVA inserts local
programming, such as Brazilian music and movies, as well as shows performed in
Brazil by international artists.

     CMT-Country Music Television is a 24-hour channel with the best of country
music programming, including videoclips, shows and interviews with the famous
American country artists.

     Mundo presents 24 hours per day of documentaries, biographies and great
moments in sports, music and history, including selected programming from the
History Channel.

     Cinemax is a 24-hour movie channel offering a different variety of movie
each day of the week.

                                       13


<PAGE>



     E! Entertainment  Television presents 24 hours per day of reports regarding
movies, television, fashion and the arts.

     CBS Telenoticias is the first international news channel in the Portuguese
language. Its programming includes international news, the most important news
from Brazil and other Latin American countries, as well as selected programs and
documentaries from CBS/Eye on People.

     MGM Gold is a movie and series channel with selected productions from the
Metro-Goldwin-Mayer studios.

     The New Travel Channel/People+Arts is a 24-hour channel presenting
documentaries about arts, personalities and cultures from different countries
around the world.

     Nickelodeon is a 24 hour channel for children offering programs such as
Rugrats and Bananas in Pijamas.

     RTPi, Radiotelevisao Portuguesa Internacional, is a Portuguese state-owned
general entertainment channel produced and assembled in Portugal, airing music
events, talk shows, movies, news and documentaries, exclusive to TVA.

     TVA's complete channel offerings as of April 1, 1998 are as follows:

Channel                                   Description
-------                                   -----------
HBO Brasil..............................  movie channel
HBO Brasil 2............................  HBO Brasil with a six-hour time shift
ESPN Brasil.............................  sports channel
ESPN International......................  sports channel
CNN ....................................  news channel
TNT.....................................  movie channel
Cartoon Network.........................  cartoon channel
Discovery Brasil........................  science and documentary channel
Fox Channel.............................  movie channel
Eurochannel.............................  European variety programming channel
MTV Brasil..............................  music channel
RTPi....................................  Portugal's state television channel
CMT.....................................  music channel
TV5.....................................  French variety programming channel
WorldNet................................  American news and variety channel
RTVE....................................  Spanish variety channel
Deutsche Welle..........................  German variety channel
America 2...............................  Argentine variety channel
TeleUno.................................  Spanish variety channel
Sony Entertainment......................  situation comedy channel
The Warner Channel......................  family entertainment channel
Bravo Brasil............................  arts and movies channel
Cinemax.................................  movie channel
Mundo...................................  documentary channel
E! Entertainment Television.............  American variety channel
MGM Gold................................  movies and series channel


                                       14


<PAGE>



Channel                                     Description
-------                                     -----------
NHK.......................................  Japanese variety programming channel
RAI.......................................  Italian variety programming channel
ART.......................................  Arabian variety programming channel
CBS Telenoticias..........................  news channel
Discovery Kids............................  documentary channel
Nickelodeon...............................  cartoon channel
Travel Channel/People+Arts................  documentary channel
Fox Kids..................................  cartoon channel
CNN Espanol...............................  news channel
CV Sports ................................  Argentine sports channel
CV Noticias ..............................  Argentine news channel
Dubai ....................................  Arabian variety programming channel
Hallmark .................................  movie channel
Adulto ...................................  adult movie channel
SBT.......................................  national off-air channel
Globo ....................................  national off-air channel
CNT/Gazeta................................  national off-air channel
Bandeirantes..............................  national off-air channel
Record....................................  national off-air channel
Manchete..................................  national off-air channel
Cultura...................................  national off-air channel
CBI.......................................  local off-air channel
Rede Mulher...............................  local off-air channel
Rede Vida.................................  local off-air channel
TV Senado.................................  local off-air channel
TV Educativa Rio..........................  local off-air channel
TV Camara.................................  local off-air channel
TV Legislativa............................  local off-air channel
Canal Comunitario.........................  local off-air channel
Canal Universitario.......................  local off-air channel
Canal de Sao Paulo........................  local off-air channel
Canal 21..................................  local off-air channel
Rede Gospel...............................  local off-air channel
TV Educacao ..............................  local off-air channel

     DIRECTV

     The DIRECTV programming package offered by Galaxy Brasil as of April 1,
1998 consisted of 76 video channels (including 24 pay-per-view channels),
certain of which, such as Bravo Brasil, CMT Brasil and Eurochannel, are provided
by TVA, and 33 audio channels. Programming includes movies, news, athletic
events and other programs available on a pay-per-view basis. The complete
DIRECTV service channel offerings, other than pay-per-view, as of April 1, 1998,
were as follows:

Channel                                    Description
-------                                    -----------
HBO Brasil...............................  movie channel
HBO Brasil 2.............................  HBO Brasil with a six-hour time shift
ESPN Brasil..............................  sports channel
ESPN International.......................  sports channel
Eurochannel..............................  European variety programming channel
CMT Brasil...............................  music channel
E! Entertainment Television..............  American variety channel
Mundo....................................  documentary channel


                                       15


<PAGE>



Channel                                   Description
-------                                   -----------
MGM Gold................................  movies and series channel
MTV Brasil..............................  music channel
MTV Latino..............................  music channel
RTPi....................................  Portugal's state television channel
CNN International.......................  news channel
CNN Espanol.............................  news channel
CBS Telenoticias........................  news channel
TNT.....................................  movie channel
Cartoon Network.........................  cartoon channel
Discovery Brasil........................  science and documentary channel
Sony Entertainment......................  situation comedy channel
Bravo Brasil............................  art and movie channel
Deutsche Welle..........................  German variety channel
TVE.....................................  Spanish variety channel
Tele Uno................................  Spanish variety channel
Warner Channel..........................  family entertainment channel
CBS Telenoticias........................  CBS news channel in Spanish
Bloomberg...............................  business news channel
Multipremier............................  Mexican movie channel
ZAZ.....................................  Mexican children's programming channel
Travel Channel..........................  travel programming channel
NHK.....................................  Japanese general entertainment channel
TV Chile International..................  Chilean programming channel
CNT/Gazeta..............................  national off-air channel
TV Senado...............................  local off-air channel
TV Educativa Rio........................  local off-air channel
TV Cultura..............................  local off-air channel
Nickelodeon.............................  children's programming channel
Discovery Kids..........................  children's programming channel
Locomotion..............................  children's programming channel
Disney Weekend..........................  children's programming channel
BBC World...............................  world news channel
TV Chile................................  Chilean programming channel
Playboy TV..............................  adult programming channel
AdulTVision.............................  adult programming channel
Adult Weekend...........................  adult programming channel
Classe..................................  education channel
Hallmark................................  television movie channel
Travel Channel/People & Arts............  documentary channel
RAI International.......................  Italian variety channel

Operations

     Marketing.  The Company  periodically  conducts  marketing surveys to gauge
consumer  preferences and evaluate new and existing markets. TVA also frequently
evaluates the demographics of the subscribers to its

                                       16


<PAGE>



programming, seeking to provide programming most in demand. In each market,
TVA's marketing staff typically applies one or more of the following programs to
attract subscribers: (i) extensive marketing tied to regional events such as
soccer matches, (ii) neighborhood promotional events featuring large screen
broadcasts of its channel offerings, (iii) direct mailings, (iv) telemarketing,
(v) television, billboard, magazine and newspaper advertisements, (vi) prewiring
arrangements with residential housing developers and (vii) other promotional
marketing activities, including referral programs and promotional gifts.

     Installation. The installation package delivered to a new subscriber
depends upon the type of programming delivery service chosen by the subscriber.
The MMDS installation package features a standard rooftop mount linked to an
antenna and related equipment, including a decoder, located at the subscriber's
location. Cable service requires the installation of a cable line and a decoder
at the subscriber's dwelling. Ku-Band satellite service typically involves
installation of a 60-centimeter dish antenna, which can be mounted outside a
subscriber's window or on the rooftop of a subscriber's building or house,
together with a decoder located at the subscriber's dwelling. As with Ku-Band
service, C-Band service installation includes the installation of a dish
antenna, although of a greater size (1.1 meters in diameter) and a decoder and
related equipment at the subscriber's home. DBS installations at single-family
homes require an entire installation package, while installations at multiple
dwelling units in which drop lines are installed require only a decoder at each
subscriber's location and therefore are less costly to the Company. Once a new
subscriber has requested service, the amount of time a subscriber waits for the
commencement of service depends on several factors, including type of service,
whether the subscriber has access to Cable, whether the subscriber is in a
single family home or multiple dwelling unit, whether the topography of the
surrounding area makes MMDS service viable and whether the subscriber is located
in an area of Brazil that can be reached by C-Band or Ku-Band service. TVA
provides installation service with its own personnel and through local
subcontractors. TVA or such subcontractor attempts to complete installation and
begin service within 30 days of a subscription order.

   
     Uplink Facilities. A major part of the delivery of TVA's DBS service,
whether Ku-Band or C-Band, is the collection of programming and the
transmission, or uplinking, of such programming to the Galaxy VIII-i satellite
and the Brasilsat satellite, respectively. Upon receipt of programming, the
Company processes, compresses, encrypts, multiplexes (combines with other
channels) and modulates (prepares for transmission to the satellite at a
designated carrier frequency) such programming. The Company uses uplink
facilities of Embratel in Sao Paulo to service its existing C-Band service. TVA
delivers its programming to the Embratel uplink center via microwave
transmission, where it is prepared for transmission to the Brasilsat satellite
using equipment provided by TVA. For its DIRECTV service, the Company has built
the Tambore Facility, an uplink center, for a total cost of approximately $20
million in Tambore in the State of Sao Paulo consisting of an uplink antenna and
ancillary equipment. The Tambore Facility has operated since June 1996 and is
used to uplink Brazilian programming to the Galaxy VIII-i satellite. Through the
Galaxy VIII-i satellite, programming from Galaxy Brasil is mixed with
programming from the California Broadcast Center (the "CBC") in Long Beach and
with programming provided by members of the Cisneros Group through an uplink
facility in Venezuela and by Grupo Frequencia Modulada Television through its
uplink facility in Mexico, for delivery to subscribers in Brazil and other
countries to which GLA provides DIRECTV service. The Tambore Facility and the
uplink facilities in Venezuela, Mexico and the United States are equipped with
full emergency power generation equipment and other emergency facilities to
enable GLA to avoid signal disruptions. As of April 11, 1997, California
Broadcast Center, LLC, a new Delaware limited liability company, was
established, the principal asset of which is GLA's satellite uplink facility.
The new company is owned by two subsidiaries of Hughes Electronics. In
connection with the establishment of the new company, TVA Communications and
Tevecap have agreed, pursuant to an Indemnification Agreement, dated April 11,
1997 (the "Indemnification Agreement"), to provide certain indemnities in favor
of GLA, DLA, the newly-established company and its shareholders. To secure its
obligations under the Indemnification Agreement, Tevecap has agreed to pledge
its equity interest in GLA, as well as any future notes or interest it may hold
relating to the uplink facility.
    

     Programming Facilities. Programming equipment is used to prepare the
programming material for transmission via the Company's MMDS, Cable or DBS
systems, including compression with respect to Cable and Ku-Band service. The
programming equipment inserts commercial or promotional material, if
appropriate, monitors

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<PAGE>



the quality of the picture and sound, and delivers the material to the
multiplexing system. For programming delivered to TVA as taped material, the
programming equipment also compiles the various programming segments, inserting
commercial and promotional material.

     Compression System. The Company also uses its programming facilities to
digitize the programming signals used in TVA's Cable and Ku-Band service.
Digital technology permits the compression and transmission of a digital signal
to facilitate multiple channel transmission through a single channel's
bandwidth, thereby giving broadcasters the ability to offer significantly more
channels than is currently the case with analog systems. Digitized signals are
compressed using the MPEG-1 and MPEG-2 standards. (Moving Pictures Expert Group,
the international video compression standard).

     Conditional Access System. GLA and News Digital Systems Limited ("NDS"), a
wholly-owned subsidiary of News Corporation, are parties to a System
Implementation and License Agreement. Under the Local Operating Agreement, GLA
provides to Galaxy Brasil the use of the access control system licensed from NDS
and the Smart Cards provided by NDS. The Company expects the access control
system to adequately protect DIRECTV programming from unauthorized access. With
Smart Card technology, it is possible to change the access control system in the
event of a security breach allowing TVA to reestablish security. Management
believes that the ability to take electronic measures and to replace the Smart
Cards will provide an effective means to combat unauthorized programming access.

     Subscriber Service. Management believes that delivering high levels of
subscriber service in installation and maintenance enables it to maintain high
levels of subscriber satisfaction and to maximize subscriber retention. To this
end, TVA attempts to promptly schedule installations, provides a subscriber
service hotline in each of the metropolitan areas in which TVA operates,
attempts to promptly provide response repair service, and attempts to make
follow-up calls to new subscribers shortly after installation to ensure
subscriber satisfaction. TVA seeks to instill a subscriber service focus in all
its employees through ongoing training and has established an intra-company
electronic mail system to provide a forum for employees to exchange ideas
concerning ways to increase subscriber satisfaction. TVA also has various
employee bonus programs linked to measures of subscriber satisfaction. To enable
its employees to provide quicker service, TVA is working to decentralize its
subscriber service operations by opening small service offices throughout TVA's
served markets.

     Management Information Systems and Billing. Management believes that TVA's
proprietary management information systems enable TVA to deliver superior
subscriber service, monitor subscriber payment patterns and facilitate the
efficient management of each of its operating systems. Management believes that
TVA's billing procedures are an integral part of its strategy to maintain high
levels of subscriber satisfaction and to maximize subscriber retention.
Subscribers select the day of the month on which payment for that month's
service is due, and pay their bills at a bank through direct transfers, which is
the standard payment method in Brazil.

Competition

     General

     TVA and the Operating Ventures compete with pay television service
providers using Cable, MMDS and DBS transmission technologies. The Company
expects to continue to face competition from a number of existing and future
sources, including potential competition as a result of new and developing
technologies and the easing of regulation in the pay television industry. TVA
believes that competition is and will continue to be primarily based upon
program offerings, customer satisfaction, quality of the system network and
price. Since there is a very limited history of pay television services in
Brazil, there can be no assurance that, based on the potential size of the
Brazilian pay television industry, the pay television market will be able to
sustain a number of competing pay television providers. The Company and the
Operating Ventures also compete with national broadcast networks and

                                       18


<PAGE>



regional and local broadcast stations. TVA's MMDS and Cable operations and its
C-Band satellite service and Ku-Band satellite service may compete for the same
subscribers.

     MMDS and Cable Service

     TVA's principal competitors in Cable service are operations owned or
controlled by Multicanal Participacoes S.A. ("Multicanal"), Net Brasil S.A.
("Net Brasil"), Globo Cabo S.A. ("Globo Cabo") and RBS Participacoes S.A.
("RBS"). Multicanal and Net Brasil operate Cable systems throughout much of
Brazil, including Sao Paulo, Rio de Janeiro, Curitiba and several other large
metropolitan areas. Globo Cabo has Cable systems in approximately 18 cities
including Brasilia. RBS operates Cable services in 19 cities in Brazil and
provides MMDS service in Porto Alegre. Net Brasil also provides MMDS service in
Recife, and has a license to provide MMDS service in Curitiba. Globo
Comunicacoes e Participacoes Ltda. ("Globo Par") and TV Globo, the owners of
Brazil's most popular off-air channels (together, "Globo"), control, or have
significant interests, in each of Multicanal, Net Brasil and Globo Cabo. RBS
also holds an interest in Multicanal. The systems controlled by Multicanal, Net
Brasil, Globo Cabo and RBS offer a similar number of channels of programming at
prices comparable to those charged for TVA's MMDS and Cable Service. Each of
these systems broadcasts programming purchased from TVA as well as from other
services.

     DBS Service

     Management believes its only competitor in DBS service is Net Sat Servicos
Ltda. ("Net Sat") in which Globo Par also has a controlling interest and whose
other equity holders include News Corporation plc, a subsidiary of The News
Corporation Limited and Grupo Televisa, S.A., of Mexico. TVA offers 26 channels
of programming with its C-Band service, compared to the six channels offered by
Net Sat's C-Band service. However, while monthly charges are comparable and
TVA's digital C-Band service offers more channels, often with better picture
quality, the analog decoder necessary for Net Sat's C-Band service is
significantly less expensive than the digital decoder TVA's subscribers must
purchase. TVA's Ku-Band service currently offers 110 channels of audio and video
programming, including 24 pay-per-view channels, as compared to the 101 audio
and video channels of programming offered by Net Sat (including pay-per-view
channels). In addition, Tectelcom-Tecnica em Telecomunicacoes announced its
intention to provide Ku-Band service of up to 76 audio and video channels in the
second quarter of 1998.

     Off-Air Broadcast Television

     Broadcasting services are currently available to substantially all of the
Brazilian population without payment of a subscription fee by six
privately-owned national broadcast television networks and a government-owned
national public television network. The six national broadcast television
networks and their local affiliates currently provide services to nearly all
Brazilian TV Homes without payment of a subscription fee. The national broadcast
television networks and local broadcast stations receive a significant portion
of their revenues from the sale of television advertising, which revenues are
based in part on the audience share and ratings for the networks' programs.
Programming offered by pay television providers, including TVA, directly
competes for audience share and ratings with the programming offered by
broadcast television networks as well as regional and local television
broadcasters. The six national broadcast television networks are Globo, SBT,
Bandeirantes, TV Manchete, TV Record and Gazeta/CNT. The national television
networks utilize one or more satellites to retransmit their signals to their
local affiliates throughout Brazil.


                                       19


<PAGE>



     Programming Sales

     TVA competes with a variety of Brazilian and international programming
providers for sales of its programming to the Operating Ventures and Independent
Operators. In addition, TVA competes with other pay television operators to
purchase programming from some of these Brazilian and international sources.

Regulatory Framework

     The subscription television industry in Brazil is subject to regulation by
the Brazilian Ministry of Communications pursuant to Law No. 9472/97 ("Law
9472") and Law No. 9295/96 ("Law 9295"). The Ministry of Communications has to
date granted concessions for MMDS, Cable, DBS, and UHF licenses. This authority
was delegated in July 1997 to the Agencia Nacional de Telecomunicacoes
("ANATEL"), a division of the Ministry of Communications.

     MMDS Regulations

     General. Law 9472 authorizes ANATEL, among other things, to issue, revoke,
modify and renew licenses within the spectrum available to MMDS systems, to
approve the assignments and transfer of control of such licenses, to approve the
location of channels that comprise MMDS systems, to regulate the kind,
configuration and operation of equipment used by MMDS systems, and to impose
certain other reporting requirements on channel license holders and MMDS
operators. The licensing and operation of MMDS channels are currently governed
by Decree No. 2196/97 ("Decree 2196"), Ordinance No. 254/97 (as amended by
Ordinance No. 319/97, "Ordinance 254") and Rule No. 002/Rev. 97 ("Rule 002").
Under these regulations, MMDS is defined as the special service of
telecommunication which uses microwaves to transmit codified signals to be
received in pre-established points on a contractual basis.

     Licenses. ANATEL grants licenses and regulates the use of channels by MMDS
operators to transmit video programming, entertainment services and other
information. A maximum of 31 MMDS channels (constituting a spectrum bandwidth of
186 MHz) may be authorized for use in an MMDS market. While licenses are usually
granted for the use of up to 16 channels, depending on technical feasibility and
the existence of competition, ANATEL can grant a license for all 31 channels
available in one specific area. If the license is for 16 or more channels, at
least two channels must be reserved for educational and cultural programming. If
the license involves 15 or fewer channels, there is no obligation to reserve any
channel for educational and cultural purposes. In each of the Company's Sao
Paulo and Rio de Janeiro markets, up to 31 MMDS channels are available for MMDS
(in addition to any local off-air VHF/UHF channels which are offered).

     An MMDS license is granted for a renewable period of 15 years. The
application for renewal of a license must be filed with ANATEL during the period
from 18 months before the end of the license term. To renew the license, the
license holder must (i) meet applicable legal and regulatory requirements, (ii)
have complied with all legal and contractual obligations during the term of such
license and (iii) meet certain technical and financial requirements.

     Under the most recently promulgated provisions of Rule 002, each license
holder and its affiliates may be granted permission to operate MMDS systems in
different areas of Brazil, provided that no holder may be granted licenses for
(i) more than seven municipalities with a population equal to or exceeding
700,000 inhabitants and (ii) more than 12 municipalities with a population
between 300,000 and 700,000 inhabitants. The restrictions only apply to areas in
which the MMDS system operator (or an affiliate thereof) faces no competition
from other pay television services, excluding services that utilize a satellite
to transmit their signal. Rule 002 grants the Ministry of Communications full
discretion to alter or eliminate the restrictions. The term affiliate is defined
by Rule 002 as any legal entity that directly or indirectly holds at least 20%
of the voting capital. The Company currently controls five MMDS licenses in
cities of more than 700,000 inhabitants (Sao Paulo (2), Rio de Janeiro, Curitiba
and Porto

                                       20


<PAGE>



Alegre), but in each such city TVA has at least one competitor. Prices for pay
television services may be freely established by the system operator, although
ANATEL may interfere in the event of abusive pricing. The Ministry of
Communications may impose penalties including fines, suspension or revocation of
the license if the license holder fails to comply with applicable regulations or
becomes legally, technically or financially unable to provide MMDS service.
ANATEL also may intervene to the extent operators engage in unfair practices
intended to eliminate competition.

     The Ministry of Communications awards licenses to use MMDS channels based
upon applications demonstrating that the applicant is qualified to hold the
license, that the proposed market is viable and that the operation of the
proposed channels will not cause impermissible interference to other permitted
channels. After the Ministry of Communications determines that an application
has met these requirements, it publishes a notice requesting comments from all
parties interested in providing the same services in the same or a near area.
Depending on the comments received, the Ministry of Communications may decide to
open a public bid for the service in that area, although it has not done so in
the past. In the case of a public bid, applicants would be evaluated based on a
number of factors including the applicant's proposed schedule for implementing
commercial operations, the applicant's commitment to local programming and the
extent to which the applicant provides free programming to local cultural and
educational institutions. Once an MMDS license application is granted by the
Ministry of Communications, the license holder must finalize construction and
begin operations within 12 months, which period may be extended by an additional
12 months.

     In addition to qualifying under the application process described above, a
license holder must also demonstrate that its proposed signal does not violate
interference standards in the area of another MMDS channel license holder. To
this end, existing license holders are given a 30-day period in which to
ascertain and comment to the Ministry of Communications whether the new license
holder's proposed signal will interfere with existing signals. The area covered
by the services is exclusive to a radius of five to 50 kilometers around the
transmission site, depending on the technical capability of the operator.

     Other Regulations. MMDS license holders are subject to regulation with
respect to the construction, marketing and lighting of transmission towers
pursuant to the Brazilian Aviation Code and certain local zoning regulations
affecting construction of towers and other facilities. There may also be
restrictions imposed by local authorities. The subscription television industry
also is subject to the Brazilian Consumer Code. The Consumer Code entitles the
purchasers of goods or services to certain rights, including the right to
discontinue a service and obtain a refund if the services are deemed to be of
low quality or not rendered adequately. For instance, in case of a suspension of
the transmission for a given period, the subscriber shall be entitled to a
discount on the monthly fees. Rule No. 002 contains certain provisions relating
to consumer rights, including a provision for mandatory discounts in the event
of interruption of service. The Company, as of December 31, 1997, had not been
required to repay any amounts or provide any discounts due to interruptions of
service. However, the Company does refund prepaid installation service fees when
the Company discovers such service is unavailable for whatever reason.

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

     Cable Regulation

     General. Cable services in Brazil are licensed and regulated by the
Ministry of Communications pursuant to Law No. 8977/95 ("Law 8977"), Decree No.
2206/97 ("Decree 2206"), which authorized the regulation of Cable Services, and
Ordinance 256/97 ("Ordinance 256"), which approved the Norma Compementar do
Servico de TV a Cabo regulating the granting of licenses for, and the operation
of, Cable services. Until Law 8977 was enacted 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 ("Ordinance 250"),

                                       21


<PAGE>



and its successor, Ordinance No. 36, issued by the Ministry of Communications on
March 21, 1991 ("Ordinance 36").

     Ordinance 250 regulated the distribution of television signals ("DISTV") by
physical means (i.e., by Cable) 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 250,
101 authorizations were granted by the Ministry of Communications to local
operators to commercially exploit DISTV services. Although Ordinance 250 did not
specifically address Cable services, a number of DISTV operators (including the
Company's Cable systems) began to offer Cable services based on DISTV
authorizations.

     Licenses. Under Law 8977, a Cable operator must obtain a license from
ANATEL in order to provide Cable services in Brazil. All Cable licenses are
nonexclusive licenses to provide Cable services in a service area. Cable
licenses are granted by ANATEL for a period of 15 years and are renewable for
equal and successive periods. Renewal of the Cable license by ANATEL is
mandatory 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.

     Ordinance No. 256/97 ("Ordinance 256") imposes restrictions on the number
of areas that can be served by a Cable television system operator (or an
affiliate thereof). Pursuant to Ordinance 256, a Cable system operator (or an
affiliate thereof) 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 (or an affiliate thereof)
faces no competition from other pay television services, excluding services that
utilize a satellite to transmit their signal. Ordinance 256 grants the Ministry
of Communications full discretion to alter or eliminate the restrictions. The
term affiliate is defined by Ordinance 256 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 under common ownership of at least 20% of their
respective voting capital. The Company currently controls two Cable licenses in
cities of more than 700,000 inhabitants (Sao Paulo and Curitiba), but in each
such city TVA has at least one competitor.

     Generally, only legal entities that are headquartered in Brazil and that
have 51.0% of their voting capital by Brazilian-born citizens or persons who
have held Brazilian citizenship for more than 10 years are eligible to receive a
license to operate Cable systems in Brazil. In the event that no private entity
displays an interest in providing Cable services in a particular service area,
ANATEL may grant the local public telecommunications operator a license to
provide Cable services.

     Cable operators that previously provided Cable services under a DISTV
authorization granted under Ordinance 250 were required under Law 8977 to file
applications to have their DISTV authorizations converted into Cable licenses.
Ordinance 256 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 the restrictions. The Company's Cable systems, all of which were
operating under DISTV authorizations, applied for conversion of their DISTV
authorizations and received approval for such conversion from the Ministry of
Communications.

     Cable licenses for service areas not covered by existing authorizations
will be granted pursuant to a public bidding process administered by ANATEL
after prior public consultation. All such licenses shall be nonexclusive
licenses. In order to submit a bid for a license, a bidder must meet certain
financial and legal prerequisites. After such prerequisites are met, a bidder
must then submit a detailed bid describing its plan to provide Cable services in
the service area. In the qualification phase of the bidding process, ANATEL
assigns a number of points to each bid based on certain weighted criteria,
including the timetable for offering subscription programming; the time
allocated to local public interest programming; the number of channels allocated
to educational and cultural programming; and the number of establishments, such
as schools, hospitals and community centers, to which basic

                                       22


<PAGE>



service programming will be offered free of charge. After calculating the number
of points awarded to each bidder, ANATEL will then apply a formula based on the
population of the service area to select the winning bid from among those
bidders that meet certain defined minimum qualifying thresholds. For service
areas with a population of 700,000 or more inhabitants, the qualified bidder
that submits the highest bid for the license will be selected. For service areas
with a population between 300,000 and 700,000 inhabitants, the winning bid is
selected based on the highest product obtained by multiplying the number of
points awarded in the qualification phase and the amount bid for the license.
For service areas with less than 300,000 inhabitants, the winning bid is
selected on the basis of the number of points awarded in the qualification phase
and the payment of a fixed fee.

     Once a Cable 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
for cause at the discretion of ANATEL.

     Any transfer of a Cable license is subject to the prior approval of ANATEL.
A license generally may not be transferred by a licensee until it has commenced
providing Cable services in its service area. Transfers of shares causing a
change in the control of a license or the legal entity which controls a license
also is subject to the prior approval of ANATEL. ANATEL must receive notice of
any change in the capital structure of a licensee, including any transfer of
shares or increase of capital that do not result in a change of control.

     A license can be revoked, upon the issue of a judicial decision, in the
event the licensee lacks 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 8977, 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 8977; or
suspends its activities for more than thirty consecutive days without
justification, unless previously authorized by ANATEL.

Cable Related Service Regulation

     General. Brazilian telecommunications services are governed primarily by
(i) Article 21 of the Federal Constitution, as amended by Amendment No. 8 of
August 15, 1995 ("Amendment 8"), (ii) the Telecommunications Code (Law No. 4117
of August 27, 1962, as amended), (iii) Law 9472 and (iv) Law 9295. The Brazilian
Government also has issued detailed regulations covering specific areas of
telecommunications services, including radio broadcasting, paging, trunking,
subscription television, Cable television and cellular telephony. ANATEL is
responsible for the regulation of telecommunications services in Brazil. Prior
to its amendment in 1995, Article 21 of the Federal Constitution required the
Brazilian Government to operate directly, or through concessions granted to
companies whose shares are controlled by the Brazilian Government, all
telephone, telegraph, data transmission and other public telecommunications
services. This constitutional requirement was the basis for the establishment of
the state-owned telephone monopoly, Telebras, which holds controlling interests
in 27 regional telephone operating companies. With the adoption of Amendment 8,
Article 21 was modified to permit the Brazilian Government to operate
telecommunications services either directly or through authorizations,
concessions or permissions granted to private entities. In particular, Amendment
8 removed the constitutional requirement that the Brazilian Government must
either directly operate or control the shares of companies which operate
telecommunications services. Even with the adoption of Amendment 8, the
Brazilian Government still retains broad regulatory powers over
telecommunications services. Notwithstanding the existence of the Telebras
monopoly, private companies have been permitted under Brazilian law to provide a
number of telecommunications services other than telephony, including radio
broadcasting, paging, trunking, subscription television and cable television
services. However, fixed public telephony and cellular telephony were
exclusively provided by Telebras through its regional telephone operating
companies. While Amendment 8 permits the Brazilian Government to authorize
private companies to provide such services, further action on the part of the
Brazilian legislature will be required before private entities may actually
provide fixed telephony services.

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<PAGE>



     High-Speed Cable Data Services. Law 8977 and Decree 2208, among other
things, authorize cable television operators, such as the Company, in addition
to furnishing video and audio signals on their cable networks, to utilize their
networks for the transmission of meteorological, banking, financial, cultural,
prices and other data. This broad grant of authority is understood to permit
Cable television operators to furnish services such as interactive home banking
and high-speed Cable data services to subscribers through their cable television
networks, although a simplified licensing procedure for high-speed Cable data
services may be installed by ANATEL in the future.

     Cable Telephony. In accordance with Law 8977, the Company is not permitted
to furnish fixed telephone services in Brazil without a specific license to do
so. Therefore, absent a change in Brazilian law, the Company would not be
permitted to furnish cable telephony on its network. There are, however, certain
limited regulatory exceptions pursuant to which private entities other than
Telebras and the regional telephone operating companies have been permitted to
provide limited fixed telephony services in Brazil. Under one particular
exception, certain private telephone networks (Centrais Privadas de Comutacao
Telefonica or "CPCT") serving "condominiums" (as such term is defined under
Brazilian law) have been permitted to interconnect their private telephone
networks to the public telephone network operated by the local telephone
operating company. A CPCT is comparable to a private branch exchange (PBX) found
in some larger apartment complexes, hotels and businesses in the United States.
Under Brazilian law, the term "condominium" refers to residential and
nonresidential buildings or building complexes that have entered into a legal
association. In practice, a condominium desiring to establish a CPCT will
generally contract with a private service provider to install, operate and
maintain the CPCT and to secure interconnection with the public telephone
network. Ordinance No. 119/90 of 10 December 1990 ("Ordinance 119"), which was
issued by the predecessor to the Ministry of Communications, sets forth
requirements for the interconnection of CPCTs with the public telephone network.
In general the installation, operation and maintenance of a CPCT does not
require any authorization from the Ministry of Communications or Telebras. In
order to interconnect with the public telephone network, a CPCT must comply with
the requirements set forth in Ordinance 119. Such requirements primarily relate
to meeting technical equipment certification and acceptance standards. Assuming
that such standards are met, the regional telephone operating company is
required under Ordinance 119 to interconnect the CPCT requesting interconnection
to the public telephone network. The Company believes that, under current
Brazilian law, Cable television operators can utilize their Cable television
networks in order to facilitate the installation and operation of a CPCT.
Furthermore, under the authority granted by Ordinance 119, CPCTs may be
interconnected through Cable television networks to the public telephone
network.

     Satellite Service Regulation. On October 1, 1991, the Ministry of
Communications enacted Ordinance No. 230 to regulate telecommunications services
via satellite in Brazil ("Ordinance 230"). Under Ordinance 230 any company
authorized to broadcast television by any means is also authorized to broadcast
by satellite transmission. The Company has operated satellite pay-television
services since 1993 through a contract signed with Embratel.

     Ordinance No. 281, issued by the Ministry of Communications on November 28,
1995, partially amended Ordinance 230 allowing only companies to which a
concession, permission or authorization had been granted previously by the
Ministry of Communications to provide telecommunications services via satellite.
Companies that were already operating satellite telecommunications services
without such authorization were given a period of 60 days to seek such
authorization. The Company applied for such authorization within the 60-day
period, and on April 23, 1996, the Ministry of Communications issued Ordinance
No. 87/96 ("Ordinance 87"), granting TVA the non-exclusive permission to operate
a pay television service via satellite. Such authorization is valid for a term
of fifteen years, commencing October 26, 1994. Ordinance 87 further provides
that TVA has the obligation to (a) render services continuously and efficiently
in order to fully satisfy users, (b) in an emergency or disaster, render
services to the entities that require services without charge, and (c) meet the
technical adequacy requirements which the Ministry of Communications considers
essential to guarantee fulfillment of the obligations under the permission
granted. In addition, on April 23, 1996, Galaxy Brasil received approval from
the Ministry of Communications, pursuant to Ordinance No. 86/96 ("Ordinance
86"), to operate satellite services via the Galaxy III-R satellite, leased

                                       24


<PAGE>


by Hughes  Electronics.  Galaxy  Brasil  also  received  approval to operate the
corresponding ground transmission station pursuant to Ordinance 86.

     Satellite-based pay television services are today regulated by Law 9295/96
("Law 9295"), Law 9472/97 (the "General Law"), Decree 2196/97, which regulates
special telecommunications services, including DBS services, Decree 2195/97,
which regulates the transmission of signals via satellite, and Ordinance 321/97,
which relates specifically to satellite-based pay television services. Law 9295
authorizes the Executive branch of the Brazilian federal Government, within
three years, to limit the ownership by non-Brazilian entities of the voting
capital of entities providing satellite-based pay television services to a
maximum of 49%. In addition, the General Law broadly authorizes the Executive
branch to limit non-Brazilian ownership of telecommunications service providers.
Law 9295 also provides that the granting of concessions for the transmission of
signals via satellite by private companies will occur after December 31, 1997.

     On May 21, 1997, the Ministry of  Communications  issued  Ordinance No. 321
("Ordinance  321")  governing the granting of licenses to provide  satellite pay
television services.

       

ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with the Financial
Statements (including the notes thereto) included in this Annual Report. For the
purposes of the following discussion, all dollar amounts, with the exception of
average installation and subscriber fees, are set forth in thousands of US
dollars.

     This Management's Discussion and Analysis of Financial Condition and
Results of Operations reflects the historical results of the Company. Due to the
limited operating history, startup nature, translations of Brazilian currency
into US dollars, and rapid growth of the Company, period-to-period comparisons
of financial data are not necessarily indicative, and should not be relied upon
as an indicator of the future performance of the Company.

Overview

     Since its inception in 1989, the Company has been in a developmental or
buildout stage. The TV Group, representing the more mature operations of the
Company, has experienced, and continues to experience, rapid growth. In
addition, the Company, through Galaxy Brasil, initiated Ku-Band DIRECTV service
on a limited basis in July 1996. Despite its growth and positive operating cash
flow for the year ended December 31, 1997, the Company continues to sustain
substantial net losses due primarily to insufficient revenue with which to fund
build-out, interest expense and charges for depreciation and amortization. Net
losses incurred by the Company since inception have been funded principally by
(i) net contributions of approximately $388,000 from the Company's shareholders
(consisting of $288,000 as of December 31, 1997 and a $100,000 capital increase
in February 1998), (ii) borrowings from Abril under the Abril Credit Facility
and subordinated shareholder loan to Galaxy Brasil and (iii) bank loans and
other borrowings made from time to time. Management expects the financial
results of the Company to improve as the operation of the Ku-Band service
matures and the number of subscribers for the Company's Ku-Band service and TV
Group services continues to grow. There can be no assurance, however, that the
number of the Company's subscribers will grow, or that the Company's financial
performance will improve.


                                       25


<PAGE>



Results of Operations

     The following table sets forth for the periods indicated certain statements
of operations data expressed in US dollar amounts and as a percentage of net
revenue:

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                 -----------------------------------------------------------------
                                         1995                   1996                  1997
                                   ------------------    -------------------    ------------------
                                             % of Net               % of Net              % of Net
                                   Amount     Revenue    Amount      Revenue    Amount     Revenue
                                   ------     -------    ------      -------    ------     -------
<S>                              <C>            <C>     <C>            <C>     <C>            <C>

Statement of Operations
  Data:
Gross revenues
Monthly subscriptions .......    $  62,496      66.1%   $ 123,020      62.1%   $ 221,234      67.4%
Installation ................       26,045      27.6       61,717      31.2       90,806      27.7
Indirect programming ........        2,866       3.0       11,377       5.7       22,810       6.9
Other .......................       10,603      11.2       15,724       7.9       18,596       5.7
Revenue taxes ...............       (7,506)     (7.9)     (13,747)     (6.9)     (25,104)     (7.6)
                                 ---------    ------    ---------    ------    ---------    ------
Net revenue .................       94,504     100.0      198,091     100.0      328,342    100.00
                                 ---------    ------    ---------    ------    ---------    ------
Direct operating expenses ...       62,026      65.6      112,297      56.7      176,958      53.9
Selling, general and
  administrative expenses ...       46,902      49.6       81,455      41.1      116,254      35.4
Depreciation and
  Amortization ..............       13,268      14.0       28,216      14.2       56,381      17.2
Allowance for inventory
  obsolescence ..............         --        --          2,250       1.1        7,438       2.3
                                 ---------    ------    ---------    ------    ---------    ------
Total operating expenses ....      122,196     129.3      224,218     113.2      357,031     108.7
                                 ---------    ------    ---------    ------    ---------    ------
Operating loss ..............      (27,692)    (29.3)     (26,127)    (13.2)     (28,689)     (8.7)
                                 ---------    ------    ---------    ------    ---------    ------
Interest income .............        3,118       3.3        5,813       2.9       10,764       3.3
Interest expense ............      (17,745)    (18.8)     (17,520)     (8.8)     (56,553)    (17.2)
Translation (loss) gain .....         (339)     (0.4)         473       0.2         (136)      0.0
Equity in (losses) income
  of affiliates .............       (3,672)     (3.9)      (8,532)     (4.3)      (6,851)     (2.1)
Gain on issuance of shares by
  equity investees ..........            0       0.0        2,317       1.2        1,160       0.4
Other nonoperating
  (expenses) income, net ....        4,389       4.6       (6,009)     (3.0)      (2,028)     (0.6)
Minority interest ...........          871       0.9        1,849       0.9          916       0.3
Income tax expense ..........            0       0.0         (156)     (0.1)                   0.0
                                 ---------    ------    ---------    ------    ---------    ------
Net loss ....................    $(41,070)    (43.5)%    (47,892)    (24.2)%    (81,417)    (24.8)%
                                 =========    ======    =========    ======    =========    ======
</TABLE>

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

     The table below sets forth the number of subscribers at December 31, 1996
and December 31, 1997 for the Owned Systems.

                                                   December 31,   December 31,
Owned Systems Subscribers                              1996          1997
                                                      -------       -------
MMDS(a) .......................................       230,320       240,913
Cable .........................................        46,011        94,261
DIRECTV and Digital C-Band ....................        73,180       211,209
                                                      -------       -------
                                                      349,511       546,383
Paid Subscribers Awaiting Installation(b) .....        31,124        17,963
                                                      -------       -------
Total Owned Systems ...........................       380,635       564,346
                                                      =======       =======
--------------------
(a)  Includes UHF subscribers
(b)  Subscribers who have paid an installation fee but are awaiting the
     installation of service.


                                       26


<PAGE>



     The table below sets forth at December 31, 1997 and December 31, 1996 the
approximate number of television households which received TVA's programming
through the Owned Systems and the Operating Ventures and through sales of
programming to the Independent Operators.

Households Receiving TVA Programming

                                               December 31,       December 31,
                                                  1996               1997
                                                ---------          ---------
Total Owned Systems ......................        380,635            564,346
Operating Ventures .......................         85,256            142,148
Independent Operators ....................        564,499            669,543
                                                ---------          ---------
Total ....................................      1,030,390          1,376,037
                                                =========          =========

     Revenues. Revenues consist primarily of Monthly subscriptions revenue
(which principally consists of monthly fees paid by subscribers to the Company
for programming services, including equipment use), Installation revenue,
Indirect programming revenue (which consists of payments made to the Company for
the sale of its programming to the Independent Operators) and Other revenue
(which consists of Advertising revenues and Other revenues). Revenue taxes
consist of a 2.65% tax on Advertising revenue and a 7.65% tax on the balance of
revenues, in each case charged by the Brazilian Government.

     Monthly subscriptions revenue for the year ended December 31, 1997 was
$221,234, as compared to $123,020 for the comparable period in 1996, an increase
of $98,214 or 79.8%. This increase was principally attributable to an increase
in the subscriber base and average monthly fees for existing subscribers from
$39.15 to $40.50 and for new subscribers from $43.70 to $45.05 per
subscriber. The average monthly subscription price during the year ended
December 31, 1997, was $43.82 for MMDS service, $42.01 for Cable service, $34.66
for C-Band service and $50.00 for the Ku-band service, as compared to $44.94,
$38.59, $38.02, and $40.20, respectively, for the year ended December 31, 1996.

     Installation revenue for the year ended December 31, 1997 was $90,806, as
compared to $61,717 for the same period of 1996, an increase of $29,089 or
47.1%. This increase was the result of a strong sales performance during the
year of 1997, principally for the Company's Ku-band operation, and occurred in
spite of a decrease in average installation fees. The average installation fee
during the year ended December 31, 1997 was $103.58 for MMDS service, $35.89 for
Cable service, $347.03 for C-Band service and $513.12 for Ku-Band service, as
compared $134.48, $36.61, $649.98 and $877.00 respectively, during the year
ended December 31, 1996. The decrease in average installation fees was
attributable primarily to reduced equipment costs and increased competition.

     Indirect programming revenue for the year ended December 31, 1997 was
$22,810, as compared to $11,377 for the comparable period of 1996, an increase
of $11,443, or approximately 100%. This increase was principally attributable to
the increase in the number of Independent Operators' subscribers for the period.
The number of Independent Operators' subscribers increased by 104,954 during the
year ended December 31, 1997, as compared to an increase of 222,800 during the
same period of the prior year. Independent Operators pay a fee to the Company
based on the number of subscribers to such Independent Operators' systems and
the number of channels purchased from the Company. The average monthly fee paid
to the Company by an Independent Operator during the year ended December 31,
1997 was $2.60 per subscriber.

     Other revenue for the year ended December 31, 1997 was $18,596, as compared
to $15,724 for the comparable period of 1996, an increase of $2,872. This change
included a decrease in Advertising revenue to $4,947 from $7,532, a decrease of
$2,585, and an increase in Other to $13,649 from $8,192, an increase of $5,457.
The decrease in Advertising revenue was attributable to a shift in advertising
on ESPN International programming (the Advertising revenues from which were
reported as Advertising revenues in the Company's consolidated financial
statements), to advertising sales on ESPN Brasil Ltda. programming (the
Advertising revenues from which

                                       27


<PAGE>



were not reported in the Advertising revenues line of the Company's consolidated
financial statements but as part of the Company's Equity in (losses) income of
affiliates). The increase in Other revenues was principally due to increased
commissions for sales of HBO Brasil and ESPN Brasil advertising as well as sales
of TVA magazine to independent programming providers.

     Revenue taxes for the year ended December 31, 1997 were $25,104, as
compared to $13,747 for the same period of the prior year, an increase of
$11,357.

     For the reasons noted above, Net revenue for the year ended December 31,
1997 was $328,342, as compared to $198,091 for the comparable period in the
previous year, an increase of $130,251.

     Direct operating expenses. Direct operating expenses include Payroll and
benefits, Programming, Transponder lease cost, Technical assistance, Vehicle
rentals, TVA magazine and Other costs. These expenses, with the exception of
C-Band Transponder lease costs, are variable expenses which increase as the
number of subscribers increases and the Company's systems grow, and are also
dependent on the type of service subscribers select. Direct operating expenses
for the year ended December 31, 1997 were $176,958, as compared to $112,297 for
the same period in 1996, an increase of $64,661. This increase was primarily
attributable to expenses incurred to service the increase in the number of
subscribers for such period in 1997 compared to the same period in 1996. Payroll
and benefits expense increased to $29,904 from $27,203, an increase of $2,701,
as a result of the hiring of more than 95 new employees and an increase in the
amounts of commissions paid to employees. Programming costs increased to $95,231
from $42,391, an increase of $52,840, as a result of changes implemented in the
programming purchased by the Company. Transponder lease cost increased to
$13,895 from $10,847, an increase of $3,048, as a result of an increase in
subscribers of the Company's Ku-Band operation, which cost is variable, and the
leasing of a fourth transponder in 1997. Technical assistance costs decreased
from $5,507 to $1,863, a decrease of $3,644; Vehicle rentals expense decreased
from $1,862 to $1,075, a decrease of $787; and the expense of publishing TVA
Magazine increased to $7,737 from $6,842, an increase of $895. Other costs
include commissions for third party sales, transportation of equipment and
materials, third party services, maintenance and other miscellaneous expenses.
For the year ended December 31, 1997, Other costs were $27,253, as compared to
$17,645 for the same period the prior year, an increase of $9,608.

     Selling, general and administrative expenses. Selling, general and
administrative expenses include Payroll and benefits expense for selling,
administrative, financial and human resources, Advertising and promotion, Rent
expense, Other administrative expenses, and Other general expenses. Selling,
general and administrative expenses for the year ended December 31, 1997 were
$116,254, as compared to $81,455 for the same period of 1996, an increase of
$34,799. The Company has experienced increasing Selling, general and
administrative expenses as a result of its increased pay television activities
and the associated administrative costs, including costs related to opening and
maintaining additional facilities and an overall increase in Payroll and
benefits expense resulting from an increase in the number of employees.
Advertising and promotion expense increased to $37,525 from $21,355, an increase
of $16,170, as a result of an increase in the number of subscribers and
promotional activity.

     Depreciation, Amortization and Provision for equipment and inventory
obsolescence. Depreciation and Amortization includes depreciation of systems,
equipment, installation materials, installation personnel and organizational
costs and amortization of concessions. Provision for equipment and inventory
obsolescence represents charges for lost and obsolete equipment and material.
Depreciation and Amortization for the year ended December 31, 1997 was $56,381,
as compared to $28,216 for the same period of 1996, an increase of $28,165.
Provision for equipment and inventory obsolescence for the year ended December
31, 1997 was $7,438 as compared to $2,250 for the comparable period in 1996, an
increase of $5,188.

     For the reasons noted above, Operating loss for the year ended December 31,
1997 was $28,689 compared to $26,127 for the comparable period in 1996, an
increase of $2,562.


                                       28


<PAGE>


     Interest income. Interest income for the year ended December 31, 1997 was
$10,764, as compared to $5,813 for the same period in 1996, an increase of
$4,951, principally due to interest received on invested portions of the
proceeds of the Senior Notes due 2004 issued in November 1996 (the "Notes").

     Interest expense. Interest expense for the year ended December 31, 1997 was
$56,553, as compared to $17,520 for the same period of 1996, an increase of
$39,033 principally attributable to the interest paid on the Notes.

   
     Equity in losses (income) of affiliates and Gain on issuance of shares by
equity investee. For the year ended December 31, 1997, Equity in losses (income)
of affiliates amounted to a loss of $6,851, as compared to a loss of $8,532 in
the same period of 1996, a decrease in loss of $1,681. The loss was principally
related to the sustained losses at ESPN Brasil. The Gain on issuance of shares
by equity investees amounted to $1,160 for the year ended December 31, 1997 and
was due to a capital gain from HBO Brasil Partners in connection with the
entrance of Buena Vista Investments, Inc. (an affilate of Disney Enterprises
Inc.) as a partner in HBO Ole Partners.
    

     Other non-operating (expenses) income. Other non-operating (expenses)
income for the year ended December 31, 1997 was an expense of $2,028, as
compared to $6,009 in the same period in 1996, a decrease of $3,981. The Other
non-operating expenses for the year ended December 31, 1997 consisted primarily
of charges for provision of certain equipment and material installed in the
homes of subscribers whose service was terminated.

     Minority interest. The Minority interest of $916 for the year ended
December 31, 1997 represents Mr. Leonardo Petrelli's 14.0% share in aggregate
losses of TVA Sul.

     Net loss. For the reasons noted above, Net loss for the year ended December
31, 1997 was $81,417, as compared to $47,892 for the comparable period in 1996,
an increase of $33,525.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

     The table below sets forth the number of subscribers at December 31, 1995
and December 31, 1996 for the Owned Systems.

                                                   December 31,   December 31,
Owned Systems Subscribers                             1995          1996
-------------------------                            -------       -------
MMDS(a) ......................................       188,893       230,320
Cable ........................................        15,129        46,011
DIRECTV and Digital C-Band ...................        15,126        73,180
                                                     -------       -------
                                                     219,148       349,511
Paid Subscribers Awaiting Installation(b) ....        18,343        31,124
                                                     -------       -------
Total Owned Systems ..........................       237,491       380,635
                                                     =======       =======
--------------------
(a)  Includes UHF subscribers.

(b)  Subscribers who have paid an installation fee but are awaiting the
     installation of service.

     The table below sets forth at December 31, 1995 and December 31, 1996 the
approximate number of television households which received TVA's programming
through the Owned Systems and the Operating Ventures and through sales of
programming to the Independent Operators.


                                       29


<PAGE>



Households Receiving TVA Programming


                                                December 31,       December 31,
                                                   1995               1996
                                                 ---------          ---------

Total Owned Systems ......................         237,491            380,635
Operating Ventures .......................          35,572             85,256
Independent Operators ....................         341,699            564,499
                                                 ---------          ---------
Total ....................................         614,762          1,030,390
                                                 =========          =========

     Revenues. Monthly subscriptions revenue for the year ended December 31,
1996 was $123,020, as compared to $62,496 for the comparable period in 1995, an
increase of $60,524. This increase was principally attributable to an increase
in subscriber base and an increase in the amount of average monthly fees for
existing subscribers from $30.43 to $39.15 per subscriber and for new
subscribers from $39.48 to $43.70 per subscriber. The average monthly
subscription price during the year ended December 31, 1996, was $44.94 for MMDS
service, $38.59 for Cable service and $38.02 for C-Band service, as compared to
$44.04, $38.12 and $41.37, respectively, for the year ended December 31, 1995.
The average monthly subscription price for Ku-Band service from its introduction
in July 1996 to December 31, 1996, was $40.20. Galaxy Brasil contributed $2,266
to monthly subscription revenue for the year ended December 31, 1996.

     Installation revenue for the year ended December 31, 1996 was $61,717, as
compared to $26,045 for the comparable period in 1995, an increase of $35,672.
This increase was principally attributable to the increase in the number of new
subscribers and also to an increase in the average installation fee for C-Band
service from $586.79 to $649.98. The average installation fee during the year
ended December 31, 1996 was $134.48 for MMDS service, $36.61 for Cable service
and $649.98 for C-Band service, as compared to $169.70, $81.87 and $586.79
respectively, for the year ended December 31, 1995. The average installation fee
for Ku-Band service from its introduction in July 1996 to December 31, 1996, was
$877. The net number of subscribers added to the Company's Owned Systems during
the year ended December 31, 1996 was 130,363, as compared to 104,295 added
during the same period of 1995. Galaxy Brasil contributed $15,609 to
Installation revenue for the year ended December 31, 1996. After an initial
rollout in July 1996, Galaxy Brasil began enrolling subscribers.

     Indirect programming revenue for the year ended December 31, 1996 was
$11,377, as compared to $2,866 for the comparable period of 1995, an increase of
$8,511. This increase was principally attributable to the increase in the number
of Independent Operators' subscribers for the period. The number of Independent
Operators' subscribers increased by 222,800 during the year ended December 31,
1996, as compared to an increase of 252,026 during the same period of the prior
year. Independent Operators pay a fee to the Company based on the number of
subscribers to such Independent Operators' systems and the number of channels
purchased from the Company. The average monthly fee paid to the Company by an
Independent Operator during the year ended December 31, 1996 was $1.44 per
subscriber.

     Other revenue for the year ended December 31, 1996 was $15,724, as compared
to $10,603 for the comparable period of 1995, an increase of $5,121. This change
included a decrease in Advertising revenue to $7,532 from $8,377, a decrease of
$845, and an increase in Other to $8,192 from $2,226, an increase of $5,966. The
decrease in Advertising revenue was attributable to a shift in advertising sales
from advertising on ESPN International programming (the Advertising revenues
from which were reported as Advertising revenues in the Company's consolidated
financial statements), to advertising sales on ESPN Brasil Ltda. programming
(the Advertising revenues from which were not reported in the Advertising
revenues line of the Company's consolidated financial statements but as part of
the Company's Equity in (losses) income of affiliates). The increase in Other
revenues was principally due to the increase in sales of TVA magazine, technical
assistance, commissions for sales of HBO Brasil and ESPN Brasil advertising as
well as sales of ESPN Brasil programming to independent programming providers.


                                       30


<PAGE>



     Revenue taxes for the year ended December 31, 1996 were $13,747, as
compared to $7,506 for the same period of the prior year, an increase of $6,241.
Galaxy Brasil contributed $1,488 to revenue taxes for the year ended December
31, 1996. Galaxy Brasil began enrolling subscribers and collecting revenue in
July 1996.

     For the reasons noted above, Net revenue for the year ended December 31,
1996 was $198,091, as compared to $94,504 for the comparable period in the
previous year, an increase of $103,587. Galaxy Brasil contributed $16,530 to Net
revenue for the year ended December 31, 1996.

     Direct operating expenses. Direct operating expenses for the year ended
December 31, 1996 were $112,297, as compared to $62,026 for the same period in
1995, an increase of $50,271. This increase was primarily attributable to
expenses incurred to service the increase in the number of subscribers for such
period in 1996 compared to the same period in 1995. Payroll and benefits expense
increased to $27,203 from $12,520 an increase of $14,683, as a result of the
hiring of more than 217 new employees and an increase in the amounts of
commissions paid to employees. Programming costs increased to $42,391 from
$21,609, an increase of $20,782, as a result of changes implemented in the
programming purchased by the Company. Transponder lease cost increased to
$10,847 from $7,568, an increase of $3,279, as a result of leasing a third
transponder in 1996. Technical assistance costs increased to $5,507 from $5,152,
an increase of $355; Vehicle rentals expense increased to $1,862 from $1,732, an
increase of $130; and the expense of publishing TVA Magazine increased to $6,842
from $3,318, an increase of $3,524. This increase was principally due to the
increase in the number of subscribers. Other costs include commissions for third
party sales, transportation of equipment and materials, third party services,
maintenance and other miscellaneous expenses. For the year ended December 31,
1996, Other costs were $17,645, as compared to $10,127 for the same period the
prior year, an increase of $7,518. Galaxy Brasil contributed $5,854 to Direct
operating expenses, as compared to $1,027 for the comparable period in 1995, an
increase of $4,827 as Galaxy Brasil incurred Payroll and benefits, Vehicle
rentals and other costs consistent with starting this operation.

     Selling, general and administrative expenses. Selling, general and
administrative expenses for the year ended December 31, 1996 were $81,455, as
compared to $46,902 for the same period of 1995, an increase of $34,553. The
Company has experienced increasing Selling, general and administrative expenses
as a result of its increased pay television activities and the associated
administrative costs, including costs related to opening and maintaining
additional facilities and an overall increase of $5,804 in Payroll and benefits
expense, which, for the year ended December 31, 1996 were $27,431, as compared
to $21,627 for the same period of 1995, resulting from an increase in the number
of employees and sales commissions. Advertising and promotion expense increased
to $21,355 from $11,122, an increase of $10,233, as a result of an increase in
the number of subscribers and promotional activity. Galaxy Brasil contributed
$15,328 to Selling, general and administrative expenses for the year ended
December 31, 1996, as compared to $79 for the comparable period in 1995, an
increase of $15,249. Such increase at Galaxy Brasil was due to increases in
Payroll and benefits expense and Other administrative expenses.

     Depreciation, Amortization and Allowance for inventory obsolescence.
Depreciation and Amortization for the year ended December 31, 1996 was $28,216,
as compared to $13,268 for the same period of 1995, an increase of $14,948. This
increase was principally due to the depreciation of additional reception
equipment acquired during 1996, including equipment used in the expansion of the
Company's cable systems and decoders used for DIRECTV and C-Band service.
Allowance for inventory obsolescence for the year ended December 31, 1996 was
$2,250 as compared to $0 for the comparable period in 1995, an increase of
$2,250. This increase was principally due to advances in MMDS reception
equipment technology which resulted in the obsolescence of MMDS reception
equipment previously installed by the Company. Galaxy Brasil contributed $2,858
to Depreciation, Amortization and Allowance for inventory obsolescence for the
year ended December 31, 1996, as compared to $127 for the comparable period in
1995, an increase of $2,731. Such increase was due to depreciation expenses
associated with the Tambore Facility.

     For the reasons noted above, Operating loss for the year ended December 31,
1996 was $26,127, as compared to $27,692 for the comparable period in 1995, a
decrease of $1,565. Galaxy Brasil contributed $7,510

                                       31


<PAGE>



of this loss for the year ended December 31, 1996, as compared to $1,233 for the
comparable period in 1995, an increase of $6,277.

     Interest income. Interest income for the year ended December 31, 1996 was
$5,813, as compared to $3,118 for the same period in 1995, an increase of
$2,695. This increase was principally due to interest received by the Company in
connection with temporarily invested portions of the proceeds of the Notes and
capital contributions in December 1995.

     Interest expense. Interest expense for the year ended December 31, 1996 was
$17,520, as compared to $17,745 for the same period of 1995, a decrease of $225.
In November 1996 the Company issued the Notes and used some of the proceeds to
repay certain outstanding indebtedness bearing interest rates greater than that
applicable to the Notes.

     Equity in losses (income) of affiliates and Gain on issuance of shares by
equity investee. For the year ended December 31, 1996, Equity in losses (income)
of affiliates amounted to a loss of $8,532, as compared to a loss of $3,672 in
the same period of 1995, an increase in loss of $4,860. The primary reason for
this increase in loss was sustained losses at ESPN Brasil, which was formed on
June 15, 1995. The Gain on issuance of shares by equity investees amounted to
$2,317 for the year ended December 31, 1996 and was due to a capital gain from
TV Filme's equity offering in 1996.

     Other non-operating (expenses) income. Other non-operating (expenses)
income for the year ended December 31, 1996 was an expense of $6,009, as
compared to income of $4,389 in the same period in 1995, an increase in expense
of $10,398. This increase was primarily due to costs incurred in 1996 in
connection with the negotiations resulting in the investment in the Company by
certain shareholders in December 1995, a loss of unrecovered decoders installed
in the homes of subscribers whose service was terminated, and the organization
of TVA Sul as a holding company. The Other non-operating expenses for the year
ended December 31, 1996 consisted primarily of fees paid in connection with the
investment of Falcon International and Hearst/ABC Parties in the Company. The
Other non-operating income for the comparable period of 1995 consisted primarily
of income from the sale of movie inventory and other assets.

     Minority interest. The Minority interest of $1,849 for the year ended
December 31, 1996 represents Mr. Leonardo Petrelli's 13.0% share of the
aggregate losses of TVA Sul.

     Net loss. For the reasons noted above, Net loss for the year ended December
31, 1996 was $47,892, as compared to $41,070 for the comparable period in 1995,
an increase of $6,822.


                                       32


<PAGE>



Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

     The table below sets forth the number of subscribers at December 31, 1995
and December 31, 1994 for the Owned Systems.

                                                  December 31,     December 31,
Owned System Subscribers                             1994             1995
                                                    -------          -------
MMDS(a) ........................................    111,771          188,893
Cable ..........................................      1,007           15,129
Digital C-Band .................................      2,075           15,126
                                                    -------          -------
                                                    114,853          219,148


Paid Subscribers Awaiting Installation(b) ......     13,956           18,343
                                                    -------          -------
Total Owned Systems ............................    128,809          237,491
                                                    =======          =======


--------------------
(a)  Includes UHF subscribers.

(b)  Subscribers who have paid an installation fee but are awaiting the
     installation of service.

     The table below sets forth at December 31, 1995 and December 31, 1994 the
approximate number of television households which received TVA's programming
through the Owned Systems and the Operating Ventures and through sales of
programming to the Independent Operators.

Households Receiving TVA Programming

                                                  December 31,      December 31,
                                                    1994              1995
                                                   -------           -------
Total Owned Systems ........................       128,809           237,491
Operating Ventures .........................         7,640            35,572
                                                   -------           -------

Independent Operators ......................        89,673           341,699
                  Total ....................       226,122           614,762
                                                   =======           =======

     Revenues. Monthly subscriptions revenue for the year ended December 31,
1995 was $62,496, as compared to $27,976 for the comparable period in 1994, an
increase of $34,520. This increase was attributable to the net addition of
104,295 subscribers to the Company's Owned Systems, and the increase in the
average monthly fee for existing subscribers to $33.24 from $27.80, an increase
of $5.44, and for new subscribers to $39.48 from $31.87, an increase of $7.61.
The average monthly subscription price during the year ended December 31, 1995
was $44.04 for MMDS service and $38.12 for Cable service, as compared to $42.48
and $26.26, respectively, for the year ended December 31, 1994. The average
monthly subscription price for C-Band service for the year ended December 31,
1995 was $41.37. In 1994, the Company's C-Band service was in its initial phase
of operations. In addition, Galaxy Brasil's Ku-Band service was under
development in 1995. The Company was able to increase the monthly fee as the
market price for pay television increased. The increase in the number of
subscribers was due to (i) the continued expansion and penetration of the
Company's MMDS service, including the introduction of signal repeaters in Sao
Paulo and Rio de Janeiro, (ii) the full year benefit of Cable system
construction in Sao Paulo and (iii) the net addition of 13,051 C-Band
subscribers through an aggressive national marketing campaign timed to coincide
with the Company's main competitor focusing on its Cable systems. During each
year, all revenues came from the operation of the TV Group as the operations of
Galaxy Brasil were in development.

     Installation revenue for the year ended December 31, 1995 was $26,045, as
compared to $6,997 for the comparable period in 1994, an increase of $19,048.
This increase was principally attributable to the increase in the number of
installations and to the increase in the average fees for installations. The
average fee for MMDS service installation increased to $169.70 from $119.75, an
increase of $49.95, and the average fee for Cable service

                                       33


<PAGE>



installation increased to $81.87 from $44.69, an increase of $37.18. The C-Band
average installation fee increased to $586.79 from $500.00, an increase of
$86.79. The growth in installations was aided by the continued growing awareness
of pay television in Brazil and the Company's start-up of live broadcasts of the
Brazilian National Soccer Championship, the Sao Paulo State Championship and
other soccer events through ESPN Brasil. As with Monthly subscriptions revenue,
all Installation revenue during each year came from the operations of the TV
Group.

     Indirect programming revenue for the year ended December 31, 1995 was
$2,866, as compared to $1,626 for the comparable period of 1994, an increase of
$1,240. This increase was principally attributable to the increase in the number
of Independent Operators' subscribers for the period, as compared to the same
period in 1994. Such Independent Operators' subscribers increased to 341,699 at
December 31, 1995, as compared to 89,673 at December 31, 1994, an increase of
252,026. The average fee paid during both 1995 and 1994 was $1.50 per subscriber
per month.

     Other revenue for the year ended December 31, 1995 was $10,603, as compared
to $7,173 for the comparable period of 1994, an increase of $3,430. This
increase included an increase in Advertising revenue to $8,377 from $5,727, an
increase of $2,650. The growth in Advertising revenue was due to the increase in
the subscriber base, an increase in the amount of advertising time sold by the
Company per hour of programming and an increase in the rate charged for
advertising time.

     Revenue taxes for 1995 were $7,506, as compared to $872 for the prior year,
an increase of $6,634. This increase was primarily attributable to a Government
imposed 5.0% increase in the tax rate, which increased Revenue taxes to 7.65%
from 2.65%, imposed on the Company's Gross revenues (excluding Advertising
revenue, which is taxed at 2.65%).

     For the reasons noted above, Net revenue for the year ended December 31,
1995 was $94,504, as compared to $42,900 for the comparable period the previous
year, an increase of $51,604.

     Direct operating expenses. Direct operating expenses for the year ended
December 31, 1995 were $62,026, as compared to $28,659 for the same period of
1994, an increase of $33,367. This increase was attributable primarily to the
increase in the number of subscribers to the Company's systems which led to
increases in Payroll and benefits expense, Programming expense, Transponder
lease cost, Technical assistance expense, Vehicle rentals expense, TVA Magazine
expense and Other costs. Payroll and benefits expense increased to $12,520 from
$8,022, an increase of $4,498, as the Company added approximately 450 employees.
Programming costs increased to $21,609 from $12,133, an increase of $9,476, as
the Company's subscriber base grew and the Company added four new channels to
each of its distribution systems. Transponder lease cost increased to $7,568
from $1,555, an increase of $6,013, due to an increase in the cost of satellite
transponder leases and the application of a 25.0% tax charged by the Brazilian
Government on transponder lease payments beginning in June 1995. Technical
assistance expense increased to $5,152 from $1,622, an increase of $3,530, due
to an increase in the subscriber base and the upgrade of existing systems for
the receipt of additional channels by subscribers, Vehicle rentals expense
increased to $1,732 from $788, an increase of $944, and TVA Magazine expense
increased to $3,318 from $1,430, an increase of $1,888. These expenses are
variable and increased due to the costs associated with servicing the larger
subscriber base and installing new subscribers. For the year ended December 31,
1995, Other costs were $10,127, as compared to $3,109 for the same period the
prior year, an increase of $7,018. The Company experienced increased expenses as
a result of its increased television activities and associated costs, including
costs related to opening and maintaining additional facilities. Galaxy Brasil
contributed $1,027 to Direct operating expenses for the year ended December 31,
1995, as compared to $0 for the same period of 1994. Galaxy Brasil incurred
Payroll and benefits expense, Vehicle rentals expense and Other costs consistent
with starting its DIRECTV service.

     Selling, general and administrative expenses. Selling, general and
administrative expenses for the year ended December 31, 1995 were $46,902, as
compared to $24,370 for the same period of 1994, an increase of $22,532. The
Company experienced increased Selling, general and administrative expenses as a
result of its

                                       34


<PAGE>



increased pay television activities and associated administrative costs,
including costs related to opening and maintaining additional facilities and an
overall increase in payroll expenses resulting from an increase in the number of
employees. Advertising and promotion expense increased to $11,122 from $3,540,
an increase of $7,582 largely due to the Company's increased promotional
activity, including nationwide C-Band promotion. Galaxy Brasil contributed $79
to Selling, general and administrative expenses for the year ended December 31,
1995, all of which constituted Advertising and rent expenses, as compared to $0
for the same period of 1994.

     Depreciation and Amortization. Depreciation and Amortization expense for
the year ended December 31, 1995 was $13,268, as compared to $6,177 for the same
period of 1994, an increase of $7,091. The increase was due primarily to
increased capitalization of the costs associated with building the MMDS, Cable
and C-Band systems and with the installation of new subscribers. Galaxy Brasil
contributed $127 to Depreciation and Amortization expense (all of which
constituted Depreciation expense) for the year ended December 31, 1995, as
compared to $0 for the comparable period in 1994.

     For the reasons noted above, Operating loss for the year ended December 31,
1995 was $27,692, as compared to $16,306 for the comparable period in 1994, an
increase in loss of $9,303. Galaxy Brasil contributed $11,386 to this loss for
the year ended December 31, 1995, as compared to $0 for the comparable period in
1994.

     Interest income. For the year ended December 31, 1995, Interest income
totaled $3,118, as compared to $21,806 in the similar period in 1994, a decrease
of $18,688. This reduction in Interest income was a result of the shorter period
in which a capital contribution of $125,000 in 1995 earned interest relative to
the length of time a capital contribution of $151,452 earned interest in 1994,
as well as due to the sharp appreciation of the Brazilian real versus the US
dollar upon introduction of the real in late 1994.

     Interest expense. Interest expense for the year ended December 31, 1995 was
$17,745, as compared to $16,413 for the year ended December 31, 1994, an
increase of $1,332.

     Equity in losses (income) of affiliates. For the year ended December 31,
1995, Equity in losses (income) of affiliates was a loss of $3,672, as compared
to income of $383 for the same period in 1994, a decrease of $4,055. The
principal reasons for this reduction were the loss sustained by ESPN Brasil
Ltda. which came into existence during June 1995, and HBO Brasil Partners, which
came into existence in 1994.

     Other non-operating (expenses) income. For the year ended December 31,
1995, Other non-operating (expenses) income was income of $4,389, as compared to
an expense of $1,273 for the same period of 1994, an increase of $5,662. The
primary reasons for this increase were equipment rental income, sales of assets
and a release of certain obligations, among others.

     Minority interest. The Minority interest of $871 for the twelve months
ended December 31, 1995 represents Mr. Leonardo Petrelli's 20.0% share of the
$4,355 in aggregate losses of TVA Curitiba.

     Net loss. For the reasons noted above, Net loss for the year ended December
31, 1995 was $41,070, as compared to $11,997 for the comparable period in 1994,
an increase of $29,073.


                                       35


<PAGE>


Seasonality

     The Company's revenues are seasonal. Generally, during the Brazilian summer
months of January and February the Company experiences lower demand for
installation for each of its services. As a result, the Company experiences a
decrease in Installation revenue of approximately 25% in these months, which
decrease is offset by corresponding decreases in Payroll and benefits expense
(i.e. sales commissions), Advertising and promotion expense and Other costs.

Liquidity and Capital Resources

     Since inception, the Company has sustained losses primarily due to
insufficient revenue to fund start-up costs, interest expense and charges for
depreciation and amortization arising from the development of its pay television
systems. As of December 31, 1997, the Company had incurred cumulative net losses
of over $285,284. During the periods under review, the Company required external
funds to finance its capital expenditures, operating activities and make
payments of principal and interest on its indebtedness. The sources of such
funds have been as follows: (i) cash and cash equivalents of $104,798 at
December 31, 1996, (ii) borrowings from Abril under the Abril Credit Facility,
of which $54,323 was outstanding as of December 31, 1997 (which amount was
subsequently repaid in connection with a capital increase in February 1998) and
a subordinated shareholder loan of $43,963 to Galaxy Brasil, of which $40,909
remained outstanding as of December 31,1997, (iii) borrowings under lines of
credit, of which $50,317 was outstanding as of December 31, 1997, (iv) net
capital contributions of approximately $388,000 from shareholders (consisting of
$288,000 as of December 31, 1997 and a $100,000 capital increase in February
1998), (v) the EximBank Facility, of which $23,277 was outstanding as of
December 31, 1997, (vi) the Galaxy Brasil Leasing Facility, of which $43,463 was
outstanding as of December 31, 1997 and (vii) the Notes, of which $250,000 was
outstanding as of December 31, 1997.

     The Company's liquidity needs will arise primarily from capital
expenditures, debt service requirements and, in certain periods, the funding of
its working capital requirements. As of December 31, 1997, the Company had
approximately $465,009 of indebtedness outstanding, primarily consisting of
$250,000 principal amount of the Notes and loans from shareholders.

     In addition to debt service, the Company will require substantial amounts
of capital for (i) the construction of cable networks and the installation of
equipment at subscribers' locations, (ii) the construction of additional
transmission and headend facilities and related equipment purchases, (iii) the
continued funding of losses and


                                       36
<PAGE>



working capital requirements and (iv) investments in, and maintenance of,
vehicles and administrative offices. In addition, the Company continually
evaluates opportunities to acquire, either directly or indirectly, pay
television licenses and programming rights.

     The Company made purchases of fixed assets of $22,639, $93,029, $125,612
and $247,867, in 1994, 1995, 1996 and 1997 respectively. Management estimates
that $150,930 and $113,762 of capital expenditures will be required in 1998 and
1999, respectively, principally in connection with the purchase of materials and
equipment.

     The Company also has certain commitments that must be funded, including
investments of approximately $35,786 prior to December 31, 1998 in GLA
($15,014), Surfin ($10,000), ESPN Brasil Ltda., ($8,718) and HBO Brasil
Partners, ($2,054). Actual amounts of funds required may vary materially from
these estimates and additional funds could be required in the event of cost
overruns, unanticipated expenses, regulatory changes, engineering design changes
and other technological-driven changes.

     The Company's principal sources of liquidity are borrowings from Abril, the
EximBank Facility, the Galaxy Brasil Leasing Facility, the Notes and the
Company's short-term line of credit (each as described below), together with net
cash provided by operating activities. However, until sufficient cash flow is
generated from operations, the Company will be required to utilize its current
sources of debt funding to satisfy its liquidity needs. The Company had
approximately $1,024 of cash and cash equivalents as of December 31, 1997.

     For the year ended December 31, 1997, net cash used in operating activities
was $13,727, primarily as the result of a net loss for the year of $81,417, an
increase in accounts receivable of $22,475, an increase in pre-paid and other
assets of $11,199 and an increase in inventories of $11,365. The increase was
partially offset by $54,624 of depreciation, a non-cash item and a decrease in
accounts payable to suppliers of $32,989. For the year ended December 31, 1997,
cash used in investing activities was $277,117, primarily as the result of
capital expenditures of $247,867 for the purchase of fixed assets and
investments in equity and cost investments and concessions of $24,877. The
purchases of fixed assets were principally related to the purchase of decoders,
equipment, hardware and materials and labor used for new subscriber
installations. For the year ended December 31, 1997, net cash provided by
financing activities was $187,070, consisting principally of borrowings from the
Abril Credit Facility, the EximBank Facility, the Galaxy Brasil Leasing Facility
and the April subordinated shareholder loan to Galaxy Brasil.
       
     The Abril Credit Facility allows the Company to borrow up to $60,000 on a
revolving basis until December 1998. Since June 1996, the Company has from time
to time requested, and Abril has provided, funds in excess of $60,000. The loans
are generally denominated in reais and bear interest at a rate equal to a
percentage of the CDI rate, the Brazilian interbank lending rate, adjusted at
the beginning of each month. The Company currently has no amounts outstanding
under the Abril Credit Facility. However, the Company will be able to re-borrow
the full amount of such facility, as required. In addition , in 1997 Abril made
a subordinated shareholder loan of $43,963 to Galaxy Brasil, of which $40,909
was outstanding as of December 31,1997.

     On December 9, 1996, TVA Sistema, as Borrower, and Tevecap, as Guarantor,
entered into a credit agreement with The Chase Manhattan Bank for the financing
of C-Band decoders and other related equipment (the "EximBank Facility"). The
Export-Import Bank of the United States of America ("EximBank") also guaranteed
85.0% of the amount of the loan. The loan was made on terms customary for
credits supported by EximBank to Brazilian borrowers with an interest rate of
LIBOR plus a specified margin. The principal amount of the loan was $29,350,
which was dispersed in two tranches, the first in April 1997 in the principal
amount of $11,400 with a term of five years and the second in August 1997 in the
principal amount of $17,950 with a term of 4.5 years. As of December 31, 1997,
the principal amount outstanding under the EximBank Facility was $23,277.


                                       37
<PAGE>


     Galaxy Brasil entered into the Galaxy Brasil Leasing Facility, a five-year
$49,900 sale leaseback facility, during the first quarter of 1997. Under the
Galaxy Brasil Leasing Facility, Galaxy Brasil has access to financing for the
purpose of acquiring dish antennae, decoder boxes and other equipment for its
Ku-Band service. This facility will be available until 2002 and bear interest at
a fixed rate of 12.5% per year. During 1997 Galaxy Brasil drew down the entire
amount available under the Galaxy Brasil Leasing Facility, and had $43,463
outstanding as of December 31, 1997. Galaxy Brasil's payment obligations under
the Galaxy Brasil Leasing Facility are guaranteed by Tevecap.

     On November 26, 1996, Tevecap raised funds in foreign markets through a
private placement amounting to $250,000 12 5/8% Senior Notes (the "Notes").
These Notes mature on November 26, 2004 and are guaranteed by certain of
Tevecap's subsidiaries. The Indenture relating to the Notes contains certain
restrictive covenants which relate to, among others, the ability of Tevecap and
the Guarantors to incur additional indebtedness, declare dividends, effect asset
dispositions, enter into new liens, sell capital stock, enter into mergers
and/or consolidations, invest in non-guarantor subsidiaries that are not
Guarantors and transfer existing businesses. As of December 31, 1997, the
Company was in compliance with all restrictive covenants contained in the
Indenture.

     The Company has also from time to time received contributions and loans
from its shareholders to fund liquidity needs and may continue to receive such
contributions and loans in the future. In addition, as is standard business
practice in Brazil, the Company frequently finances a portion of its working
capital through the deferment of payment terms for the purchase price of
property (typically up to 360 days). These amounts have often subsequently been
refinanced by the Company with short-term bank indebtedness. The Company
currently has lines of credit with terms of 360 days which will continue to be
available after the Offering.

     The Company believes, based on management's internal forecasts and
assumptions relating to its operations, that the aggregate net proceeds from the
sale of the Notes, together with the proceeds from the deferral of payments to
suppliers of fixed assets, the EximBank Facility, the Galaxy Brasil Leasing
Facility, the Abril Credit Facility, the Abril subordinated shareholder loan to
Galaxy Brasil, the $100,000 capital increase in February 1998, additional
leasings and financings and funds generated from operations will be sufficient
to meet its working capital and capital expenditure requirements for at least
the period through December 31, 1998. In the long term, the Company believes,
based on management's internal forecasts and assumptions relating to its
operations, that its existing cash and funds generated from operations, together
with its existing financing facilities agreements, will be sufficient to meet
its working capital and capital expenditure requirements. In the event that the
Company's plans change, its assumptions change or prove inaccurate, or if the
proceeds from the sale of the Notes, the EximBank Facility, the Galaxy Brasil
Leasing Facility, the Abril Credit Facility and projected cash flows otherwise
prove insufficient to fund operations (due to unanticipated expenses, technical
problems, difficulties or otherwise), the Company could be required to seek
additional sources of financing. The Company has no current arrangements with
respect to sources of additional financing and there can be no assurance that
the Company would be able to obtain additional financing on terms acceptable to
the Company, or at all.

     In addition, the Company's liquidity may also be adversely affected by
statutory minimum dividend requirements under applicable Brazilian law.

Accounting for Income Taxes

     The Company has approximately $194,850 of net operating losses ("NOLs") to
offset against regular taxes. These NOLs are unexpirable. Statement of Financial
Accounting Standards No. 109 (Accounting for Income Taxes) ("SFAS 109") requires
that the Company determine whether it is "more-likely-than-not" that the Company
will realize the benefits associated with such losses and provides that in
making such a determination, all negative and positive evidence should be
considered (with more weight given to evidence that is "objective and
verifiable"). SFAS No. 109 indicates that "forming a conclusion that a valuation
allowance is not needed is difficult when there is negative evidence such as
cumulative losses in recent years". The Company has a limited operating history
and has generated losses since its inception. In view of this, the Company has
established a full valuation allowance for the amount of NOL carryforwards in
excess of net taxable temporary differences. This determination was based
primarily on historical losses. Management does, however, believe that the
Company will be profitable in the future and, as such, will be able to utilize
these NOLs.

Recent Accounting Pronouncements

     In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." Management does not believe
that SFAS No. 130 will have a material effect on the Company's consolidated
financial statements, and it has not determined whether the new reporting
provisions under SFAS No. 131 will require supplemental disclosures by the
Company. See Note 23 to the Tevecap Financial Statements.

Year 2000 Date Conversion

     The Company has evaluated the implementation of changes to computer systems
and applications necessary to achieve a year 2000 date conversion with no effect
on customers or disruption to business operations. These actions are necessary
to ensure that the systems and applications will recognize and process the year
2000 and beyond. The Company expects that the implementation of such changes
will be completed during the first quarter of 1999, and will cost approximately
$3,000.


       

                                       38
<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 20-F/A and has duly caused this annual report to be signed on its behalf
by the undersigned, thereunto duly authorized.


TEVECAP S.A.



By: /s/ Jose Augusto P. Moreira
   --------------------------------------
Name:   Jose Augusto P. Moreira
Title:  Officer


By: /s/ Claudio Cesar D'Emilio
   --------------------------------------
Name:   Claudio Cesar D'Emilio
Title:  Officer


   
Date:   June 12, 1998
    

       

                                       39
<PAGE>

                                    GLOSSARY


     ABC: ABC, Inc., formerly known as "Capital Cities/ABC, Inc."

     ABC Class  households:  The highest three  classes of Brazilian  households
based  upon  the  achievement  of  a  total  of  10  points  or  higher  on  the
classification scale used by the Associacao Brasileira de Anunciantes (Brazilian
Advertisers Association) to determine a household's  socio-economic class, which
ranges  from A to E  depending  on  the  education  level  of  the  head  of the
household, the possession by the household of certain items of material comfort,
including automobiles, television sets and other household items, and the hiring
of domestic servants by the household.

     Abril:   Abril  S.A.,  the  leading  magazine   publishing,   printing  and
distribution company in Latin America.

     Abril Credit Facility: A revolving credit facility, dated December 6, 1995,
between Tevecap, as the borrower, and Abril, as the lender.

     BBC: British Broadcasting Corporation.

     BNDES:  Banco National de Desenolvimento  Economico e Social,  the national
development bank owned by the Brazilian Government.

     Brasilsat:  A  satellite  operated by  Embratel  through  which the Company
provides C-Band service.

     C-Band: A satellite  transmission system which provides a signal on the "c"
bandwidth.

     Cable: A Cable network employs  electromagnetic  transmission  over coaxial
and/or  fiber-optic cable to transmit  multiple channels carrying images,  sound
and data between a central facility and individual  customers'  television sets.
Networks may allow  one-way (from a headend to a residence  and/or  business) or
two-way  transmission  from a headend to a residence and/or business with a data
return path for the headend.

     Cable license:  A license that is granted by the applicable  governing body
pursuant to its authority under the communications  laws of a particular country
for the purpose of providing  Cable  services  for a specific  franchise/license
area.

     Canbras: Canbras Communications Corp., a Canadian corporation.

     Canbras Association  Agreement:  Association Agreement dated June 14, 1995,
among Tevecap, TVA Sistema, the Canbras TVA Companies, Canbras and Canbras-Par.

     Canbras TVA Companies: Canbras TVA Cabo and TV Cabo Santa Branca.

     Canbras TVA Cabo: Canbras TVA Cabo Ltda., a Brazilian limitada.

     Canbras TVA: The  operations  of Canbras TVA Cabo and TV Cabo Santa Branca,
in each of which Tevecap  holds a 36.0% equity  interest and Canbras Par holds a
64.0% equity interest.

     Canbras-Par:   Canbras   Participacoes,   Ltda.,   a   Brazilian   limitada
wholly-owned by Canbras.

     CBC:  California  Broadcasting  Center, an uplink center for GLA located in
Long Beach, California.

                                       A-1

<PAGE>

     CBS: CBS, Inc.

     Central Bank: Central Bank of Brazil (Banco Central do Brasil)

     Chase  Parties:  Two wholly owned  subsidiaries  of CMIF through which CMIF
holds its equity interest in Tevecap.

     Churn:  With respect to a pay  television  system for a given  period,  the
quotient expressed as a percentage of (i) the number of subscribers disconnected
from  such  system  less  the  number  of  formerly   disconnected   subscribers
reconnected  to the  system  divided by (ii) the  number of  subscribers  to the
system as of the beginning of the period plus the number of subscribers added to
the system.

     Cisneros Group: Cisneros Group of Companies,  which holds a 10% interest in
GLA through Darlene Investments.

     CMIF: Chase Manhattan International Finance Ltd., an affiliate of The Chase
Manhattan  Bank which holds a 8.1% interest in Tevecap  through two wholly owned
subsidiaries.

     Coaxial cable:  Cable consisting of a central  conductor  surrounded by and
insulated  from  another  conductor.   It  is  the  standard  material  used  in
traditional  Cable  systems.  Signals are  transmitted  through it at  different
frequencies,  giving greater channel capacity than is possible with twisted pair
cable, but less than is allowed by optical fiber.

     Comercial  Cabo Sao Paulo:  Comercial  Cabo TV Sao Paulo Ltda., a Brazilian
limitada in which Tevecap holds a 99% equity interest.

     Company: Tevecap, together with its consolidated subsidiaries.

     CPL:  Cable  Participacoes  Ltda., a Brazilian  limitada,  jointly owned by
Hearst and ABC, which limitada holds a 2.0% equity interest in Tevecap.

     CPCT: Centrais Privadas de Comutacao Telefonica,  certain private telephone
networks  comparable to private branch exchanges (PBX) found in larger apartment
complexes, hotels and businesses in the United States.

     CVM: Comissao de Valores Mobiliarios, the securities commission of Brazil.

     Darlene  Investments:  Darlene  Investments,  LLC, a Cayman Islands limited
liability company which is part of the Cisneros Group of Companies.

     DBS: Direct  broadcast  satellite  service,  operating in C-Band or Ku-Band
width, by which television  programming is transmitted to individual  dwellings,
each served by a single satellite dish.

     DBS  Systems:  Ku-Band  and  C-Band  operations  of Galaxy  Brasil  and TVA
Sistema, respectively.

     DIRECTV:  Brazil's  first  digital  Ku-Band  service,  which is operated by
Galaxy Brasil and Galaxy Latin America.

     DISTV: The  distribution of television  signals by physical means (i.e., by
Cable) to end users,  generally  limited to signals  without  interference  by a
DISTV operator with the signal content.

                                       A-2


<PAGE>



     DLA: DIRECTV Latin America, a California corporation wholly-owned by Hughes
Communications that holds a 60% equity interest in GLA.

     Embratel:   Empresa   Brasileira   de   Telecomunicacoes,   the   Brazilian
government-owned  company  authorized  to provide  satellite  telecommunications
services  utilizing  the Sistema  Brasiliero  de  Telecomunicacoes  por Satelite
(Brazilian Satellite Telecommunications System).

     Equity Subscribers:  Subscribers to the Operating Ventures adjusted for the
Company's equity ownership in the Operating Ventures.

     ESPN:  ESPN, Inc., in which ABC has an 80.0% equity interest and Hearst has
a 20.0% equity interest.

     ESPN Agreement: Quotaholders Agreement, dated June 26, 1995, among Tevecap,
TVA Sistema, ESPN Brazil, Inc. and ESPN Brasil Ltda.

     ESPN Brasil: Programming provided by ESPN Brasil Ltda.

     ESPN Brazil, Inc.: A Delaware corporation wholly owned by ESPN.

     ESPN Brasil  Ltda.:  ESPN do Brasil  Ltda.,  a Brazilian  limitada in which
Tevecap  holds a 50.0%  equity  interest and ESPN  Brazil,  Inc.,  holds a 50.0%
equity interest.

     Event Put: A triggering event under the Stockholders  Agreement pursuant to
which each of the Stockholders (other than Abril) may, in certain circumstances,
demand that Tevecap purchase all or a portion of its shares.

     EximBank: The Export-Import Bank of the United States.

     EximBank  Facility:  A credit  facility,  dated  December  9,  1996,  among
Tevecap, as Guarantor,  TVA Sistema, as borrower,  and The Chase Manhattan Bank,
N.A., as lender.  The EximBank will guarantee 85% of amounts  borrowed under the
EximBank Facility.

     Falcon International: Falcon International Communications (Bermuda L.P.), a
subsidiary of Falcon  International  Communications,  L.L.C., a Delaware limited
liability company.

     Falcon  Time Put: A provision  of the  Stockholders  Agreement  pursuant to
which Falcon  International may, in certain  circumstances,  demand that Tevecap
purchase all or a portion of the shares held by Falcon International.

     Fiber-optic  cable:  Cable made of glass fibers  through  which signals are
transmitted as pulses of light.  Fiber-optic  cable has the capacity for a large
number of channels.

     Financial  Statements:  The audited financial statements of Tevecap and its
subsidiaries and the notes thereto included herein.

     Fox: Twentieth Century Fox Television International.

     Galaxy  Brasil:  Galaxy Brasil S.A., a  wholly-owned  subsidiary of Tevecap
which operates Brazil's first Ku-Band system.

     Galaxy  Brasil  Leasing  Facility:  A five-year,  $49.9  million  lease and
sale-leaseback  facility entered into in March 1997 by Galaxy Brasil, as lessee,
and Citibank, N.A., as lessor.

                                       A-3


<PAGE>


     Galaxy  Latin  America:  Galaxy  Latin  America,  LLC, a  Delaware  limited
liability  company  the  members of which are DLA,  which  holds a 60.0%  equity
interest,  Darlene  Investments,  which  holds  a  20.0%  equity  interest,  TVA
Communications, which holds a 10% equity interest, and Grupo Frecuencia Modulada
Television, which holds a 10.0% equity Interest.

   
     Galaxy VIII-i: A satellite owned and operated by Hughes Communications
through which Galaxy Brasil provides DIRECTV service. Galaxy VIII-i was launched
in December 1997 and replaced Galaxy III-r satellite with respect to the
transmission of GLA programming.
    

     GLA: Galaxy Latin America.

     GLA Agreement: Limited Liability Company Agreement of Galaxy Latin America,
LLC, dated April 11, 1997.

     Globo:  Globo Par and TV Globo, the owners of a number of Brazil's over the
air channels.

     Globo Cabo: Globo Cabo S.A., a Cable service provider in Brazil.

     Globo Par: Globo Comunicacoes e Participacoes Ltda.

     Grupo Midia: Grupo de Midia Sao Paulo.

     Grupo Frecuencia Modulada Television: Grupo Frecuencia Modulada Television,
S.A. de C.V., a Mexican corporation wholly owned by Grupo MVS.

     Grupo MVS: Grupo MVS, S.A. de C.V., a Mexican corporation.

     Guarantors:  TVA Sistema de Televisao  S.A.,  Galaxy  Brasil S.A.,  TVA Sul
Participacoes S.A., Comercial Cabo TV Sao Paulo Ltda., TVA Sul Parana Ltda., CCS
Camboriu Cable System de  Telecomunicacoes  Ltda., TVA Sul Santa Catarina Ltda.,
TVA Sul Foz do Iguacu Ltda, TVA Distribuidora  S.A., TVA Programadora  Ltda. and
TVA Satelite Ltda.

     HABC II:  Hearst/ABC  Video  Services  II, a Delaware  general  partnership
jointly owned by Hearst and ABC, which partnership holds a 15.3% equity interest
in Tevecap.

     HBO Brasil: Programming provided by HBO Brasil Partners.

     HBO Brasil Ltda: A Brazilian limitada,  wholly owned by HBO Partners,  that
distributes HBO programming in Brazil.

     HBO Brasil Partners: HBO Brasil Partners Ltd., a joint venture between TVA,
which holds a 24.0% equity interest,  and HBO Ole Partners,  which holds a 76.0%
equity interest.

     HBO Ole Partners:  A partnership among Time Warner  Entertainment  Company,
L.P., SPE Latin American Acquisition Corporation,  Ole Communications,  Inc. and
BVI Television Investments, Inc.

     Headend: A collection of hardware, typically including satellite receivers,
modulators,  amplifiers  and  videocassette  playback  machines.  Signals,  when
processed, are then combined for distribution within the Cable network.

     Hearst: The Hearst Corporation.

     Hearst/ABC Parties: HABC II and CPL.


                                       A-4


<PAGE>


     Hearst/ABC Programming Agreement:  Programming Agreement, dated December 6,
1995, among Tevecap, Hearst and ABC.

     Homes Passed:  Homes that can be connected to a Cable  distribution  system
without further extension of the distribution network.

     Hughes Communications: Hughes Communications, Inc.

     Hughes Electronics: Hughes Electronics Corporation.

     IBGE: Instituto Brasileiro de Geografia e Estatistica.

     IBOPE: Instituto Brasileiro de Opiniao Publica e Estatistica.

   
     Indenture: The Indenture, dated as of November 26, 1996, among Tevecap,
Tevecap's Restricted Subsidiaries, Chase Manhattan Bank, as trustee, and Chase
Trust Bank, as principal paying agent in connection with the Notes.
    

     Independent Operators: Independent pay television system operators to which
TVA sells programming.

     Interactive  services:  Services  commonly  referred  to as  pay-on-demand,
shop-at-home,  video games, ATM services,  or such other interactive services as
video phone and telephony which can be more easily provided with the development
of high-capacity hybrid fiber optic/coaxial distribution networks.

     Irmaos Reis:  Distribuidora  Irmaos Reis S.A., a Brazilian  corporation  in
which Abril holds a 30.5% equity interest.

     Ku-Band: A satellite  transmission  system which provides a signal over the
"ku" bandwidth.

     License Subsidiaries:  Companies that hold pay television licenses covering
the operation of certain of the Owned Systems.

     Local Operating Agreement:  Local Operating Agreement, dated July 26, 1996,
between GLA and Tevecap.

     LOS:  An  unobstructed  "Line  of  Sight"  from any of the  Company's  MMDS
headends to a subscriber's antenna.

     MGM: Metro Goldwyn Mayer, Inc.

     Ministry of  Communications:  The  Brazilian  Ministry  of  Communications,
authorized to regulate the Brazilian  subscription  television industry pursuant
to the Brazilian Telecommunications Code of 1962.

     MMDS  (Multi-channel  multi-point  distribution  system):  A one-way  radio
transmission  of television  channels over  microwave  frequencies  from a fixed
station transmitting to multiple receiving facilities located at fixed points.

     MMDS license:  A license that is granted by the  applicable  governing body
pursuant to its authority under the communications  laws of a particular country
for the purpose of  providing  MMDS  services  for a specific  franchise/license
area.


                                       A-5


<PAGE>


     MTV Brasil:  MTV Brasil Ltda., a Brazilian  limitada in which Abril holds a
50.0% equity interest and Viasem Brasil  Holdings Ltda. (an indirect  subsidiary
of Viacom International) holds the remaining 50% equity interest.

     Multicanal:  Multicanal  Participacoes  S.A., a Cable  service  provider in
Brazil.

     NBC: National Broadcasting Company, Inc.

     NDS:  News Digital  Systems  Limited,  a  wholly-owned  subsidiary  of News
Corporation.

     Net Brasil: Net Brasil S.A., a Cable and MMDS service provider in Brazil.

     Net Sat: Net Sat Servicos Ltda., TVA's competitor in DBS Service,  in which
Globo Par has a controlling interest and whose other equity holders include News
Corporation,  a subsidiary of The News Corporation  Limited, and Grupo Televisa,
S.A. of Mexico.

     News Corporation: News Corporation plc.

     the Notes:  Tevecap's  250,000,000  12 5/8% Senior Notes due 2004 issued on
November 26, 1996.

     Operating Ventures:  Canbras TVA and TV Filme, two of TVA's  minority-owned
ventures.

     Owned Systems: TVA Sistema, TVA Sul and Galaxy Brasil.

     PanAmSat:  PanAmSat  Corporation,  the  current  owner and  operator of the
PAS-III satellite.

   
     Pay-per-view: Payment made for individual programs rather than a monthly
subscription for a whole channel or group of channels. Pay-per-view channels
currently provide certain popular sporting events or major motion pictures for
which customers may be prepared to make a special payment.
    

     Penetration  rate: The  measurement of the take-up of Cable  services.  The
penetration  rate as of a given date is  calculated  by  dividing  the number of
subscribers  connected  to a system on such  date by the  total  number of homes
passed in such system.

     Programming Ventures: HBO Brasil Partners and ESPN Brasil Ltda.

     RBS: RBS Participacoes S.A., a Cable and MMDS service provider in Brazil.

     Real Plan:  A Brazilian  Government  stabilization  program,  announced  in
December  1993,  aimed at  curtailing  inflation  and building a foundation  for
sustained economic growth.

     Regulatory Put: A provision in the Stockholders Agreement pursuant to which
an Event Put is triggered if the amount of capital  stock held by a  Stockholder
(other  than  Abril)  exceeds  the amount  allowed  under an  appropriate  legal
restriction.

     Revenue per subscriber:  Total revenue derived from a subscriber television
system divided by the average number of subscribers for that period.

     SAP:  Second  Audio  Programming,  which  provides the option of audio in a
second language for the programming on channels for which it is offered.

     SBT:  TVSBT--Canal  4 de Sao  Paulo  S.A.,  a  Brazilian  national  off-air
channel.

                                       A-6


<PAGE>


     Securities Act: United States Securities Act of 1933, as amended.

     Smart Card: Encoded card placed in a decoder used for Ku-Band service.  The
Smart Card is used to regulate access to Ku-Band services.

     Sony: Sony Pictures Entertainment, Inc.

     Stockholders:  HABC II, CPL,  Robert Civita,  Abril,  the Chase Parties and
Falcon International.

     Stockholders  Agreement:  Stockholders  Agreement,  dated December 6, 1995,
among the Stockholders.

     Subsidiary Guarantees:  Guarantees executed by each of Tevecap's Restricted
Subsidiaries (as defined in the Indenture).

     SurFin: SurFin Ltd., a corporation organized under the laws of the Bahamas,
the (direct and  indirect)  shareholders  of which are Tevecap,  holding  20.5%,
DIRECTV  International  Inc., a  subsidiary  of Hughes  Communications,  holding
39.3%,  Darlene  Investments,  holding  20.4%,  and  Grupo  Frecuencia  Modulada
Television, holding 19.8%.

     SurFin Credit Facility: A three year $150.0 million credit facility between
SurFin and Citicorp  USA,  Inc.,  as  administrative  agent,  under a syndicated
credit agreement, dated September 24, 1996.

     Tambore  Facility:  TVA's  Ku-Band  uplink  center  located  in the city of
Tambore in greater Sao Paulo.

     Telecommunications Code: The Brazilian  Telecommunications Code of 1962, as
amended.

     Telephony: The provision of telephone service.

     Tevecap: Tevecap S.A.

     Time Warner: Time Warner Entertainment Company, L.P.

     Trunk:  The  "transportation"  component  within a Cable  and/or  broadband
network architecture that carries the system product to the distribution portion
of the architecture, which in turn goes to customers' homes.

     TV Cabo Santa  Branca:  TV Cabo Santa Branca  Comercio  Ltda.,  a Brazilian
limitada,  in which Tevecap holds a 36% equity  interest and Canbras Par holds a
64.0% equity interest.

     TV Filme: TV Filme, Inc., a Delaware corporation in which Tevecap currently
holds a 14.7% equity interest, Warburg, Pincus Investors, L.P. currently holds a
38.8% equity interest,  members of the Lins family currently hold a 16.2% equity
interest,  public  stockholders  currently  hold a 28.15%  equity  interest  and
certain individuals own the remaining 2.15% equity interest.

     TV Filme Service Area: Brasilia, Belem and Goiania.

     TV Group:  The  operations of TVA excluding the  operations  and results of
Galaxy Brasil.

     TV Homes:  The number of households in a given area possessing at least one
television set.


                                      A-7


<PAGE>


     TV Show Time:  Televisao Show Time Ltda., a Brazilian limitada in which the
estate  of  Matias  Machline  and an  associate  currently  hold a 53.0%  equity
interest and in which the  remaining  47.0% is currently  held by various  Abril
shareholders.

     TVA: Tevecap S.A. and its consolidated subsidiaries and affiliates.

     TVA Brasil: TVA Brasil Radioenlaces S.A., a Brazilian limitada in which the
estate of Matias  Machline  currently holds a 50.0% equity interest and in which
the remaining 50.0% is currently held by various Abril shareholders.

     TVA  Communications:  TVA  Communications  Ltd., a British  Virgin  Islands
company  wholly-owned  by Tevecap,  through  which  Tevecap holds a 10.0% equity
interest in Galaxy Latin America.

     TVA Curitiba: TVA Curitiba Servicos em Telecommunicacoes Ltda., a Brazilian
limitada in which  Tevecap held an 80.0% equity  interest and Leonardo  Petrelli
held a 20.0%  equity  interest  prior to TVA  Curitiba's  merger into TVA Parana
Ltda.  and the  reorganization  of TVA Parana Ltda.  as a subsidiary  of TVA Sul
Participacoes S.A. in October 1996.

     TV Globo:  A provider of off-air  programming in Brazil and an affiliate of
Globo.

     TVA Sistema:  TVA Sistema de Televisao  S.A.,  a Brazilian  corporation  in
which Tevecap holds a 98.0% equity interest Robert Civita, a Brazilian national,
holds a 2.0% equity interest.

     TVA Sul: The operations of TVA Sul Parana Ltda.,  CCS Camboriu Cable System
de  Telecomunicacoes  Ltda.,  TVA Sul Santa  Catarina,  Ltda. and TVA Sul Foz do
Iguacu Ltda., which are wholly-owned subsidiaries of TVA Sul Participacoes S.A.,
a Brazilian  corporation  in which  Tevecap  holds an 86.0% equity  interest and
Abril holds the remaining 14.0% equity interest.

     UHF:  Broadcast of a television  signal at an ultra-high  frequency  over a
given geographical area.

     VCR: Video cassette recorders.

     Viacom International: Viacom International (Netherlands B.V.).


                                       A-8