TV Cidade Deal Boosts Brazils Globo

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Rio De Janerio, Brazil -- Brazilian media conglomerate
Organizaçoes Globo has added even more muscle within the country's pay TV industry
since its NET Brasil programming unit last month signed a licensing agreement with one of
the market's most prominent cable upstarts.

At the same time, the agreement deals a blow to Neo TV, an
upstart program-buying consortium that aims to counter NET's dominance.

Under the deal, cable-system newcomer TV Cidade will carry
NET's brand name and channels on systems in 12 of the 13 towns where it won
government-auctioned cable licenses earlier this year.

TV Cidade is an investor group made up of Brazilian
broadcast companies Sistema Brasileiro de Televisao (SBT) and TV Bandeirantes, along with
U.S.-based private investment funds Hicks, Muse, Tate & Furst Inc. and AIG-GE Capital.

One analyst said Hicks, Muse may have pushed TV Cidade
toward NET because it is believed to be negotiating a broad agreement with Globo's
broadcast unit, and would not want to compete with the company in pay TV. Analysts also
agreed that TV Cidade could benefit from Globo's political strength.

The deal strengthened Globo's already dominant
position in Brazilian pay TV. It controls 64 percent of the sector's 2.73 million
subscribers, mostly through its own operations, but also with affiliation agreements like
the one it struck with TV Cidade, according to independent research firm Pay-TV Survey.

The announcement is bad news for Neo TV, which is backed by
small and mid-sized operators. TV Cidade considered joining the consortium at one point.

Neo TV negotiates blanket carriage rates, though not final
deals, on behalf of its members. Globo does not supply programming to Neo TV-member MSOs.

TV Cidade programming director Silvia Jafet emphasized that
Globo agreed to several of the company's demands in negotiations that took place over
the course of this year. SBT and Bandeirantes are experienced content producers, she
added.

"We will be free to carry self-produced regional
programming," said Jafet, adding that the company intends to "offer a popular
package to our subscribers," something which NET currently does not have.

TV Cidade, which aims to have 400,000 subscribers by 2002,
is operating only in the northeastern town of Aracaju, where it has 9,000 subscribers. In
December, it plans to launch service at its second operation in Niteroi, a suburb of Rio
de Janerio.

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