U.S. Top Cats Exiting Brazil


Four large U.S. companies are exiting one of Brazil's
leading pay television players, TVA.

The partners that are leaving are: The Walt Disney
Co.'s ABC Inc.; Falcon Cable TV Corp.'s sister company, Falcon International
Communications; Hearst Corp.; and Chase Manhattan International Finance Ltd.

They jointly hold a 38 percent stake in TVA, with the
remainder owned by powerful Brazilian publishing company Grupo Abril, which founded the

TVA is a pioneer in the pay TV business in Brazil, with
wholly owned hardwire and wireless systems serving some 550,000 customers and equity
stakes in a family of channels that include Brazilian versions of Home Box Office, MTV:
Music Television, Bravo and ESPN. The company has also invested in the Brazilian division
of direct-to-home platform DirecTv.

Industry sources put a valuation of between $150 million
and $250 million on TVA, making the foursome's investment worth between $57 million
and $95 million.

Word of the American partners' plans to exit TVA was
confirmed by a top official at one of the four U.S. companies. He also explained: "We
are going to restructure the whole company, and we have hired an investment bank to do

The American investors' decision to depart Brazil
apparently coincided with the resignation of TVA's chief executive, Raul Rosenthal.
TVA announced last week that Rosenthal would be replaced by Jose Augusto Pinto Moreira,
Abril's chief financial officer.

Pinto Moreira would neither confirm nor deny that the
partners would be exiting, only saying, "They are analyzing their investments."

He confirmed, however, that TVA will be restructured, and
that this involves dividing TVA's separate businesses into three companies.

The source from the American company suggested that Abril
is expected to keep TVA's programming assets, while the cable-operations side of the
business will be sold to a third party. The most likely scenario for DirecTv is for Abril
to become the sole Brazilian investor.

However, Jose Antonio Ríos, president and CEO of Galaxy
Latin America, the parent company of DirecTv, strongly denied that there would be any
change in the current set of shareholders in the company. "This is absolutely
false," he said.

As far as the restructuring, Pinto Moreira said, "One
of the reasons for doing it is that in this way, we and the market can evaluate the
company in a more precise way. And secondly, this will allow a reorganization of our
partnerships in accordance with the wishes of our partners, thus avoiding conflicts of
interest between DTH, cable and so on."

The American-partner source remained vague concerning
exactly why the foursome were divesting their interest in TVA.

But it is well known in Brazil that the marriage between
them and Abril has been rocky -- apparently more so for Falcon than for the others.
Sources indicated that Falcon expressed interest in exiting the company last year. Mark
Nathanson, chairman and CEO of Falcon Cable, did not return calls on the subject at press

Since the U.S. companies sent a "task force" to
TVA in 1996, there have been massive changes in staff and in the whole direction of the
company. Pinto Moreira is the fourth CEO of TVA in two-and-a-half years.

Despite the upheaval, the partners helped to turn around a
company that was hemorrhaging cash when they arrived in the mid-1990s to one described by
Andrew Tisdale, head of investment banking in Brazil at Morgan Stanley, as "on a
sounder financial footing."

TVA reached positive operating cash flow in 1996. Its
subscriber count jumped 57 percent between year-end 1996 and year-end 1997. And according
to TVA's financial director, Douglas Duran, revenue is expected to increase by 50
percent this year.

Revenue jumped from $200 million to $400 million between
1996 and 1997. TVA's operating cash flow this year is expected to be $55 million,
according to one media analyst.

Mark Sena, senior vice president of international at Tampa,
Fla.-based brokerage firm Communications Equity Associates Inc., said he expected
potential investors in Brazil's nascent pay business to take note of the U.S.
companies' departure there.

"But I don't think that it will dramatically hurt
the financing sources. The new cable operators that are now developing start with a clean
slate, and they don't have the baggage that TVA accumulated over the years" as a
pioneer in the business, he said.

"I can assure you that [the exodus] has nothing to do
with an overall lack of interest in the Brazilian marketplace," added Bryan Sorge,
vice president of international at Denver-based investment bank Daniels & Associates.

"While Brazil has tremendous opportunities, it is also
extremely complicated -- legally, competitively and culturally -- factors that even the
most sophisticated investors minimize," Sena explained.

Rosenthal plans to take up a position with Brazilian bank
Bozzano, Simonsen. Pinto Moreira emphasized that Rosenthal's exit has nothing to do
with his "professional conduct or the company restructuring.

"Raul had been invited by Bozzano, Simonsen some time
ago and, at some point, he felt that the invitation was the sort that one cannot
refuse," he said. Rosenthal himself was not available to comment.

In a recent memo sent to TVA staff, which announced
Rosenthal's departure, Roberto Civita, chairman and CEO of Abril, said the
company's programming director, Luis Gleiser, will report to Civita's oldest son
and heir apparent, Giancarlo Civita, who now occupies a new post, general director of
entertainment for Grupo Abril. According to the memo, the promotion marks "a first
step to further integrate TVA's programming-production operations and those of Grupo