PROSPECTUS

Filed pursuant to
Rule 424(b)(3)
Registration No. 333-110997

[SKY LOGO]

INNOVA, S. DE R.L. DE C.V.

Offer to exchange all of our outstanding unregistered
U.S.$300,000,000 9.375% Senior Notes due 2013

for

U.S.$300,000,000 9.375% Senior Notes due 2013
which have been registered under the Securities Act of 1933

MATERIAL TERMS OF THE EXCHANGE OFFER

o We are offering to exchange the notes that we sold previously in a private
offering for new registered notes.

o The terms of the new notes are identical to the terms of the old notes,
except for the transfer restrictions and registration rights relating to
the outstanding old notes.

o The exchange offer will expire at 5:00 p.m., New York City time, on
March 17, 2004, unless we extend it.

o We will exchange all old notes that are validly tendered and not validly
withdrawn.

o You may withdraw tenders of old notes at any time before 5:00 p.m., New
York City time, on the date of the expiration of the exchange offer.

o Application will be made to list the new notes on the Luxembourg Stock
Exchange.

o We will not receive any proceeds from the exchange offer.

o We will pay the expenses of the exchange offer.

o No dealer-manager is being used in connection with the exchange offer.

o The exchange of old notes for new notes will not be a taxable exchange for
U.S. federal income tax purposes.

YOU SHOULD CAREFULLY REVIEW "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS
PROSPECTUS.

THE INFORMATION CONTAINED IN THIS PROSPECTUS IS EXCLUSIVELY THE RESPONSIBILITY
OF INNOVA AND DOES NOT REQUIRE AUTHORIZATION BY THE COMISION NACIONAL BANCARIA Y
DE VALORES, THE MEXICAN NATIONAL BANKING AND SECURITIES COMMISSION, OR THE CNBV.
THE REGISTRATION WITH THE SPECIAL SECTION OF THE SECURITIES NATIONAL REGISTRY
(SECCION ESPECIAL DEL REGISTRO NACIONAL DE VALORES), MAINTAINED BY THE CNBV,
DOES NOT IMPLY A CERTIFICATION OF THE INVESTMENT QUALITY OF THE NOTES OR
INNOVA'S SOLVENCY. THE NOTES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
SECTION OF THE SECURITIES NATIONAL REGISTRY (SECCION DE VALORES DEL REGISTRO
NACIONAL DE VALORES) AND THEREFORE, THE NOTES ARE NOT SUBJECT TO A PUBLIC
OFFERING NOR INTERMEDIATION IN MEXICO. THE ACQUISITION OF THE NOTES BY ANY
INVESTOR OF MEXICAN NATIONALITY WILL BE MADE UNDER ITS OWN RESPONSIBILITY.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this prospectus is February 13, 2004.

TABLE OF CONTENTS

Incorporation by Reference................................................... ii

Where You Can Find More Information..........................................iii

Limitation of Liability...................................................... iv

Prospectus Summary........................................................... 1

Risk Factors................................................................. 8

The Exchange Offer........................................................... 13

Use of Proceeds.............................................................. 23

Exchange Rates............................................................... 24

Dividends.................................................................... 25

Capitalization............................................................... 26

Selected Consolidated Financial Information.................................. 27

Operating and Financial Review and Prospects................................. 30

Business Developments........................................................ 46

Description of the New Notes................................................. 51

Taxation..................................................................... 85

Plan of Distribution......................................................... 92

General Information.......................................................... 94

Cautionary Statement Regarding Forward-Looking Statements.................... 95

Legal Matters................................................................ 96

Experts...................................................................... 96

Index to Consolidated Financial Statements...................................F-1

Annual Report on Form 20-F of Innova, S. de R.L. de C.V. for the
fiscal year ended December 31, 2002..........................................A-1

We will apply to list the new notes on the Luxembourg Stock Exchange.

WE ARE NOT MAKING AN OFFER TO EXCHANGE NOTES IN ANY JURISDICTION WHERE THE
OFFER IS NOT PERMITTED, AND WILL NOT ACCEPT SURRENDERS FOR EXCHANGE FROM HOLDERS
IN ANY SUCH JURISDICTION.

INCORPORATION BY REFERENCE

The Securities and Exchange Commission, or the SEC, allows us to
"incorporate by reference" information contained in documents we file with them,
which means that we can disclose important information to you by referring you
to those documents. The information incorporated by reference is considered to
be part of this prospectus, and later information that we file with the SEC, to
the extent that we identify such information as being incorporated by reference
into this prospectus, will automatically update and supercede this information.
Information set forth in this prospectus supercedes any previously filed
information that is incorporated by reference into this prospectus, including
our annual report on Form 20-F. We incorporate by reference into this prospectus
the following information and documents:

o our annual report on Form 20-F for the fiscal year ended December 31,
2002 (including exhibits), which we filed with the SEC on June 30,
2003 (SEC File No. 333-7484), a copy of which, excluding exhibits, is
included in this prospectus as Appendix A; and

o any future filings on Form 20-F we make under the Securities Exchange
Act of 1934, or the Exchange Act, as amended, after the date of this
prospectus and prior to the termination of the offering of the notes,
and any future submissions on Form 6-K during this period that are
identified as being incorporated into this prospectus.

You may request a copy of these filings, at no cost, at the office of our
Luxembourg paying agent and transfer agent at the address listed on the back
cover of this prospectus or by writing or calling us at the following address
and phone number:

Investor Relations
Innova, S. de R.L. de C.V.
Insurgentes Sur 694, Piso 8
Colonia Del Valle 03100
Mexico, D.F., Mexico
(52) (55) 5448-4000

You may inspect and copy reports and other information Innova has filed
with the SEC as indicated under "Where You Can Find More Information."

You should rely only on the information contained in this prospectus or to
which we have referred you. We have not authorized any person to provide you
with different information. You should not assume that the information contained
in, or incorporated by reference into, this prospectus is accurate as of any
date other than the date of this prospectus and neither the mailing of this
prospectus nor the issuance of Innova exchange notes shall create any
implication to the contrary.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form F-4 under the
Securities Act with respect to the securities offered by this prospectus. This
prospectus, which forms a part of the registration statement, including
amendments, does not contain all the information included in the registration
statement. This prospectus summarizes certain documents and other information
and we refer you to them for a more complete understanding of what we discuss in
this prospectus. This prospectus incorporates important business and financial
information about us, which is not included in or delivered with this
prospectus. You can obtain documents containing this information through us. IF
YOU WOULD LIKE TO REQUEST THESE DOCUMENTS FROM US, PLEASE DO SO BY MARCH 3,
2004, TO RECEIVE THEM BEFORE THE EXPIRATION OF THE EXCHANGE OFFER.

In connection with our 1997 offering of 12 7/8% senior notes, we agreed to
comply with the informational requirements of the Exchange Act and, in
accordance therewith, file reports and other information with the SEC. Such
information includes annual reports containing consolidated financial statements
and notes thereto, together with an opinion thereon expressed by an independent
public accounting firm, as well as quarterly reports containing unaudited
consolidated financial statements for the first three quarters of each fiscal
year. You may inspect and copy reports and other information Innova has filed
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the SEC's regional offices, located at the
Woolworth Building, 233 Broadway, 13th Floor, New York, New York 10007, and
Citicorp Center, Suite 1400, 500 West Madison Street, Chicago, Illinois
60661-2511. You may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet
site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC at
http://www.sec.gov.

We will make available to the holders of the notes, at the corporate trust
office of The Bank of New York, the trustee under the indenture governing the
notes, at no cost, copies of the indenture as well as our annual report on Form
20-F in English, including a review of operations, and annual audited
consolidated financial statements prepared in conformity with generally accepted
accounting principles in Mexico, or Mexican GAAP, together with a reconciliation
of net income and total stockholders' equity to generally accepted accounting
principles in the United States, or U.S. GAAP. We will also make available at
the office of the trustee our unaudited quarterly consolidated financial
statements in English prepared in accordance with Mexican GAAP. We will also
make these documents available at the office of the Luxembourg Paying Agent.

iii

LIMITATION OF LIABILITY

Most of our directors, executive officers and controlling persons reside
outside of the United States, all or a significant portion of the assets of our
directors, executive officers and controlling persons, and substantially all of
our assets, are located outside of the United States and some of the experts
named in this prospectus also reside outside of the United States. As a result,
it may be difficult for you to effect service of process within the United
States upon these persons or to enforce against them or us in U.S. courts
judgments predicated upon the civil liability provisions of the federal
securities laws of the United States. We have been advised by our Mexican
counsel, Mijares, Angoitia, Cortes y Fuentes, S.C., that there is doubt as to
the enforceability, in original actions in Mexican courts, of liabilities
predicated solely on U.S. federal securities laws and as to the enforceability
in Mexican courts of judgments of U.S. courts obtained in actions predicated
upon the civil liability provisions of U.S. federal securities laws. See "Risk
Factors -- It may be difficult to enforce civil liabilities against us or our
directors, executive officers and controlling persons."

PROSPECTUS SUMMARY

The following summary contains basic information about this offering. It
does not contain all of the information that is important to you. For a more
complete understanding of the offering, we encourage you to read this entire
document, including the financial data, the information set forth under the
heading "Risk Factors," and under "Item 3. Key Information--Risk Factors," and
the financial statements and accompanying notes, included in our annual report
on Form 20-F. All references to "Innova," "we," "us" and words of similar effect
refer to Innova, S. de R.L. de C.V., and, unless the context requires otherwise,
its restricted and unrestricted consolidated subsidiaries. Unless otherwise
indicated, all Mexican Peso information is stated in Pesos in purchasing power
as of June 30, 2003.

OUR COMPANY

Innova, S. de R.L. de C.V. is a Mexican limited liability company with
variable capital or sociedad de responsabilidad limitada de capital variable.
Innova was formed on July 25, 1996 as a result of strategic alliances between
four entities: Grupo Televisa, S.A., or Televisa; The News Corporation Limited,
or News Corporation; Liberty Media International, Inc., or Liberty Media; and
Globo Comunicacoes e Participacoes Ltda. We are one of several Sky
direct-to-home, or DTH, platforms created by the partners and are a joint
venture that Televisa, News Corporation and Liberty Media indirectly own.

We provide digital Ku-band DTH broadcast satellite pay television services
in Mexico under the name "Sky." DTH satellite systems use medium- or high-
powered satellites to deliver signals to satellite antennas installed at homes,
apartment buildings, hotels, restaurants, and other commercial locations. We
launched our DTH service on December 15, 1996 and as of September 30, 2003 we
were broadcasting up to 168 digital channels (107 video, 29 pay-per-view and 32
audio) to approximately 826,100 subscribers, including approximately 46,850
non-residential subscribers. We currently offer subscribers the choice of five
programming packages: Sky Basic (62 video channels, 32 audio channels and 29
pay-per-view channels); Sky Fun (81 video channels, 32 audio channels and 29
pay-per-view channels); Sky Movie City (94 video channels, 32 audio channels and
29 pay-per-view channels); Sky HBO/Max (99 video channels, 32 audio channels and
29 pay-per-view channels); and Sky Universe (115 video channels, 32 audio
channels and 29 pay-per-view channels).

In addition to our pay television services, we currently provide subscriber
management, billing and remittance services for our own subscribers. Once a
subscriber orders programming from us, we transmit an authorization code to the
subscriber's integrated receiver/decoder, or IRD, and Smart Card, permitting the
subscriber to receive programming within moments of placing the order. We
believe that the subscriber management system, or SMS, is essential to providing
pay television services because it provides us with marketing, customer service
and administrative operations support. These elements include: billing and
collection of subscription fees; handling service difficulties and other
inquiries; handling disconnection, alteration, reconnection and relocation of
services; and marketing of additional services.

HOW TO REACH US

Innova, S. de R.L. de C.V. is a limited liability company with variable
capital, or sociedad de responsabilidad limitada de capital variable, organized
under the laws of the United Mexican States. Our principal executive offices are
located at Insurgentes Sur 694, Piso 8, Colonia Del Valle 03100, Mexico, D.F.,
Mexico. Our telephone number at that address is (52) (55) 5448-4000.

THE EXCHANGE OFFER

Set forth below is a summary description of the terms of the exchange
offer. We refer you to "The Exchange Offer" for a more complete description of
the terms of the exchange offer.

New Notes................................ Up to U.S.$300,000,000 aggregate
principal amount of 9.375% Senior
Notes due 2013. The terms of the
new notes and the old notes are
identical in all respects, except
that, because the offer of the
new notes will have been
registered under the Securities
Act, the new notes will not be
subject to transfer restrictions,
registration rights or the
related provisions for increased
interest if we default under the
related registration rights
agreement.

The Exchange Offer....................... We are offering to exchange up
to U.S.$300,000,000 aggregate
principal amount of new notes
for a like aggregate principal
amount of old notes. You may
only tender Rule 144A notes in
denominations of U.S.$10,000 of
principal amount at maturity for
Rule 144A Global Notes and in
denominations of U.S.$1,000 of
principal amount at maturity for
Regulation S Global Notes and,
in both cases, in integral
multiples of U.S.$1,000 in
excess thereof.

In connection with the private
placement of the old notes on
September 19, 2003, we entered
into a registration rights
agreement, which grants holders
of the old notes certain
exchange and registration
rights. This exchange offer is
intended to satisfy our
obligations under the
registration rights agreement.

If the exchange offer is not
completed within the time
period specified in the
registration rights agreement,
we will be required to pay
additional interest on the old
notes.

Resale of New Notes...................... Based on existing interpretations
by the staff of the SEC set forth
in interpretive letters issued
to parties unrelated to us, we
believe that you may offer for
resale, resell, or otherwise
transfer the new notes without
compliance with the registration
and prospectus delivery
requirements of the Securities
Act, provided that:

o you are acquiring the new
notes in the ordinary course
of your business;

o you are not participating, do
not intend to participate, and
have no arrangements or
understandings with any person
to participate in the exchange
offer for the purpose of
distributing the new notes;

o you are not a broker-dealer
that purchased the outstanding
notes directly from us for
resale pursuant to Rule 144A
or any other available
exemption under the U.S.
Securities Act; and

o you are not our "affiliate,"
within the meaning of Rule 405
under the Securities Act.

If any of the statements above
are not true and you transfer
any new notes without delivering
a prospectus that meets the
requirements of the Securities
Act or without an exemption from
registration of your new notes
from those requirements, you may
incur liability under the
Securities Act. We will not
assume or indemnify you against
that liability.

Each broker-dealer that receives
new notes for its own account in
exchange for old notes that were
acquired by such broker-dealer
as a result of market-making or
other trading activities may be
a statutory underwriter and must
acknowledge that it will comply
with the prospectus delivery
requirements of the Securities
Act in connection with any
resale of the new notes. A
broker-dealer may use this
prospectus for an offer to
resell, resale or other transfer
of the new notes. See "Plan of
Distribution."

We are not making the exchange
offer to, nor will we accept
surrenders of old notes for
exchange from, holders of old
notes in any jurisdiction in
which the exchange offer or the
acceptance thereof would not be
in compliance with the
securities or blue sky laws of
the jurisdiction.

Consequences of Failure to Exchange
Old Notes for New Notes.............. If you do not exchange your old
notes for new notes, you will
not be able to offer, sell or
otherwise transfer your old
notes except:

o in compliance with the
registration requirements of
the Securities Act and any
other applicable state
securities laws;

o pursuant to an exemption from
the Securities Act and any
other applicable state
securities laws; or

o in a transaction not subject
to the Securities Act and any
other applicable state
securities laws.

Old notes that remain outstanding
after completion of the exchange
offer will continue to bear a
legend reflecting these
restrictions on transfer. In
addition, upon completion of the
exchange offer, you will not be
entitled to any rights to have
the resale of old notes
registered under the Securities
Act. We currently do not intend
to register under the Securities
Act the resale of any old notes
that remain outstanding after the
completion of the exchange offer,
except for a requirement to file
a shelf registration statement
in certain limited circumstances.

Expiration Date.......................... The exchange offer will expire at
5:00 p.m., New York City time, on
March 17, 2004, unless we extend
it. We do not currently intend to
extend the exchange offer.

Interest on the New Notes................ Interest on the new notes will
accrue at the rate of 9.375%
from the date of the last
periodic payment of interest on
the old notes or, if no interest
has been paid, from the original
issue date of the old notes. No
additional interest will be paid
on old notes tendered and
accepted for exchange.

Conditions to the Exchange Offer......... The exchange offer is subject to
customary conditions, which we
may waive in our sole
discretion, including that:

o the exchange offer does not
violate applicable law or any
applicable interpretation of
the SEC staff;

o the old notes are validly
tendered in accordance with
the exchange offer;

o no action or proceeding would
impair our ability to proceed
with the exchange offer; and

o any governmental approval has
been obtained, that we
believe, in our sole
discretion, is necessary for
the consummation of the
exchange offer as outlined in
this prospectus.

The exchange offer is not
conditioned upon any minimum
principal amount of old notes
being tendered for exchange. See
"The Exchange Offer --
Conditions."

Procedures for Tendering Old Notes....... If you wish to accept the
exchange offer, you must
complete, sign and date the
letter of transmittal and mail
or otherwise deliver it,
together with your old notes to
be exchanged and any other
required documentation, to The
Bank of New York, the exchange
agent, at the address specified
on the cover page of the letter
of transmittal. Alternatively,
you can tender your old notes by
following the procedures for
book-entry transfer. Questions
regarding the tender of old
notes or the exchange offer
generally should be directed to
the exchange agent at one of its
addresses specified in "The
Exchange Offer -- Exchange
Agent." See "The Exchange Offer
-- Procedures for Tendering" and
-- Guaranteed Delivery
Procedures."

Guaranteed Delivery Procedures........... If you wish to tender your old
notes and you cannot deliver the
required documents to the
exchange agent by the expiration
date, you may tender your old
notes according to the
guaranteed delivery procedures
described under the heading "The
Exchange Offer -- Guaranteed
Delivery Procedures."

Acceptance of Old Notes and Delivery of New
Notes................................ We will accept for exchange any
and all old notes that are
properly tendered in the
exchange offer before 5:00 p.m.,
New York City time, on the
expiration date, as long as all
of the terms and conditions of
the exchange offer are met. We
will deliver the new notes
promptly following the
expiration date.

Withdrawal Rights........................ You may withdraw the tender of
your old notes at any time
before 5:00 p.m., New York City
time, on the expiration date of
the exchange offer. To withdraw,
you must send a written notice
of withdrawal to the exchange
agent at one of its addresses
specified in "The Exchange Offer
-- Exchange Agent." See "The
Exchange Offer -- Withdrawal of
Tenders."

Taxation................................. We believe that the exchange of
old notes for new notes should
not be a taxable transaction for
U.S. federal income tax
purposes. For a discussion of
certain other U.S. and Mexican
federal tax considerations
relating to the exchange of the
old notes for the new notes and
the purchase, ownership and
disposition of new notes, see
"Taxation."

Exchange Agent........................... The Bank of New York is the
exchange agent. The address,
telephone number and facsimile
number of the exchange agent are
set forth in "The Exchange Offer
-- Exchange Agent" and on the
back cover of this prospectus.

Use of Proceeds.......................... We will not receive any proceeds
from the issuance of the new
notes. We are making the
exchange offer solely to satisfy
our obligations under the
registration rights agreement.
See "Use of Proceeds" for a
description of our use of the
net proceeds received in
connection with the issuance of
the old notes.

SUMMARY OF TERMS OF THE NEW NOTES

The terms of the new notes and the old notes are identical in all respects,
except that, because the offer of the new notes will have been registered under
the Securities Act, the new notes will not be subject to transfer restrictions,
registration rights or the related provisions for increased interest if we
default under the registration rights agreement. Unless otherwise specified,
references in this section to the "notes" mean the U.S.$300,000,000 aggregate
principal amount of old notes issued on September 19, 2003 and up to an equal
principal amount of new notes we are offering hereby. The new notes will be
issued under the same indenture under which the old notes were issued and, as a
holder of new notes, you will be entitled to the same rights under the indenture
that you had as a holder of old notes. The old notes and the new notes will be
treated as a single series of debt securities under the indenture.

ISSUER............................. Innova, S. de R.L. de C.V.

NOTES OFFERED...................... U.S.$300 million in principal amount of 9.375% Senior Notes due 2013 that have
been registered under the Securities Act.

MATURITY........................... September 19, 2013

INTEREST PAYMENT DATES............. March 19 and September 19 of each year, commencing March 19, 2004

RANKING............................ The notes will be unsecured general obligations and will rank equally with all
of our existing and future unsecured and unsubordinated indebtedness. The notes
will effectively rank junior to all of our secured indebtedness with respect to
the value of our assets securing that indebtedness and to all of the existing
and future liabilities, including trade payables, of our subsidiaries.

As of June 30, 2003:

(i) the Company had approximately Ps. 6,544.0 million (equivalent to
approximately U.S.$626.9 million using the interbank free market exchange rate,
or the Interbank Rate, as reported by Banco Nacional de Mexico, S.A., or
Banamex, as of June 30, 2003, which was Ps. 10.438 per U.S. Dollar) of
liabilities, U.S.$580 million of which was U.S. Dollar-denominated (not
including the notes but including U.S.$384.7 million of loans plus accrued
interest thereon, from our social part holders), including approximately Ps.
4,015.5 million (equivalent to approximately U.S.$384.7 million) of
indebtedness, all of which was U.S. Dollar-denominated, all of which would have
effectively ranked equal to the notes; and

(ii) our subsidiaries had approximately Ps. 1,177.4 million (equivalent to
approximately U.S.$112.8 million) of liabilities, U.S.$66.6 million of which was
U.S. Dollar-denominated (excluding liabilities to us and excluding guarantees by
subsidiaries of indebtedness of Innova), including approximately Ps. 111.5
million (equivalent to approximately U.S.$10.7 million) of indebtedness, all of
which was U.S. Dollar-denominated and all of which liabilities would have
effectively ranked senior to the notes.

Peso-denominated information in this paragraph is stated in constant Pesos in
purchasing power as of June 30, 2003. The change in the Mexican National
Consumer Price Index, or NCPI, for the six-month period ended June 30, 2003 was
1.215%.

COVENANTS.......................... The indenture governing the notes contains certain covenants relating to Innova
and its restricted subsidiaries, including covenants with respect to:

o limitations on indebtedness;

o limitations on liens;

o limitations on sales and leasebacks;

o limitations on restricted payments;

o limitations on asset sales; and

o limitations on certain mergers, consolidations and similar transactions.

These covenants are subject to a number of important qualifications and
exceptions. See "Description of the New Notes -- Covenants."

CHANGE OF CONTROL.................. If we experience specific changes of control, we must offer to repurchase the
notes at 101% of their principal amount, plus accrued and unpaid interest. See
"Description of the New Notes -- Covenants -- Repurchase of Notes upon a Change
of Control."

ADDITIONAL AMOUNTS................. All payments by us in respect of the notes, whether of principal or interest,
will be made without withholding or deduction for certain Mexican taxes, unless
required by law, in which case, subject to specified exceptions and
limitations, we will pay these additional amounts so that the net amount
received by the holders of the notes after such withholding or deduction will
not be less than the amount that would have been received in the absence of
such withholding or deduction. See "Description of the New Notes -- Additional
Amounts."

OPTIONAL REDEMPTION................ We may redeem the notes, in whole or in part, at our option at any time on or
after September 19, 2008, at the redemption prices listed under "Description of
the New Notes -- Optional redemption."

In addition, on or before September 19, 2006, we may, at our option and subject
to certain requirements, use the net proceeds from one or more qualified equity
offerings to redeem up to 35% of the aggregate principal amount of the notes at
109.375% of their principal amount, plus accrued and unpaid interest. See
"Description of the New Notes -- Optional redemption."

REDEMPTION FOR CHANGES IN
MEXICAN WITHHOLDING TAXES.......... In the event that, as a result of certain changes in law affecting Mexican
withholding taxes, we become obligated to pay additional amounts in excess of
those attributable to a Mexican withholding tax rate of 10%, the notes will be
redeemable, as a whole but not in part, at our option at any time at 100% of
their principal amount plus accrued and unpaid interest, if any. See
"Description of the New Notes -- Additional Amounts."

FORM OF NOTES; PAYMENT............. The notes will be issued in fully registered book-entry form, without coupons,
in denominations of U.S.$1,000 of principal amount at maturity and in
integral multiples of U.S.$1,000 in excess thereof.

GOVERNING LAW...................... The notes and the indenture are and will be governed by New York law.

RISK FACTORS ...................... See "Risk factors," beginning on page 8, and "Item 3. Key information -- Risk
factors" in our annual report on Form 20-F and the other information in this
prospectus for a discussion of factors you should carefully consider before
deciding to participate in the exchange offer.

LUXEMBOURG LISTING................. We will apply to list the new notes on the Luxembourg Stock Exchange.

TRUSTEE, PAYING AGENT, REGISTRAR
AND TRANSFER AGENT................. The Bank of New York.

LUXEMBOURG PAYING AGENT, TRANSFER
AGENT AND LISTING AGENT............ The Bank of New York (Luxembourg) S.A.

For more complete information regarding the new notes, see "Description of the
New Notes."

RISK FACTORS

Before you invest in the notes, you should be aware that there are various
risks associated with such an investment, including the ones listed below, in
our annual report for the year ended December 31, 2002 on Form 20-F, as well as
risk factors listed in other documents incorporated herein or therein by
reference as set forth under "Incorporation by Reference." You should carefully
consider these risk factors, as well as the other information incorporated by
reference herein and contained in this prospectus, in evaluating an investment
in the notes.

Information as of June 30, 2003, set forth below in "Although we used the
net proceeds from the offering of the old notes to refinance some of our
indebtedness, we continue to have substantial indebtedness and may incur
additional indebtedness" and "We are a holding company with our assets held
primarily by our subsidiaries; the ability of our subsidiaries to pay dividends
or make cash distributions to us may be limited; creditors of those companies
have a claim on their assets that is senior to that of holders of the notes" is
presented in constant Mexican Pesos in purchasing power as of June 30, 2003.
This information is not directly comparable to the financial information
included in our annual report on Form 20-F, which, unless otherwise indicated,
is presented in constant Mexican Pesos in purchasing power as of December 31,
2002. The change in the NCPI for the six-month period ended June 30, 2003 was
1.215%. Further, this information is not directly comparable to the information
included in "Capitalization," which unless otherwise indicated, is presented in
constant Mexican Pesos in purchasing power as of September 30, 2003. The change
in the NCPI for the three-month period from June 30, 2003 to September 30, 2003
was 1.031%.

ALTHOUGH WE USED THE NET PROCEEDS FROM THE OFFERING OF THE OLD NOTES TO
REFINANCE SOME OF OUR INDEBTEDNESS, WE CONTINUE TO HAVE SUBSTANTIAL INDEBTEDNESS
AND MAY INCUR ADDITIONAL INDEBTEDNESS.

We have a substantial amount of indebtedness outstanding, even after our
redemption of approximately U.S.$287 million principal amount of our 12 7/8%
senior notes due 2007 consummated on October 20, 2003. In addition to our
indebtedness that will be due under the new notes and the U.S.$88 million in
principal amount outstanding under our 12 7/8% senior notes due 2007, as of June
30, 2003, we had approximately U.S.$128.1 million in satellite transponder
obligations. For a description of our outstanding indebtedness as of September
30, 2003, see "Capitalization."

Although the indentures governing the notes offered hereby, the old notes
and our 12 7/8% senior notes due 2007 limit our ability and the ability of our
subsidiaries to incur additional indebtedness, we may, nonetheless, incur
additional indebtedness in connection with our business, including borrowings to
fund investments and acquisitions, such as our possible acquisition of the
equity or assets of DIRECTV Mexico described herein. Our substantial debt may
have important negative consequences for us, including the following:

o our ability to obtain additional financing for acquisitions, working
capital, investments or other expenditures could be impaired or
financing may not be available on terms favorable to us;

o a substantial portion of our cash flow will be used to make principal
and interest payments on our debt, reducing the funds that would
otherwise be available to us for our operations and future business
opportunities;

o a substantial decrease in our net operating cash flow or an increase
in our expenses could make it difficult for us to meet our debt
service requirements and force us to modify our operations;

o we may be placed at a competitive disadvantage if we have
significantly more indebtedness than our competitors;

o we will be more vulnerable to the effects of general economic
downturns or to delays or increases in the costs of developing our
network; and it will be more difficult for us to respond to changes
affecting our financing, construction, development or operating plans.

If we cannot generate sufficient cash flow from operations to meet our
obligations (including payments on the notes at their maturity), then our
indebtedness (including the notes) may have to be refinanced. Any such
refinancing may not be effected successfully or on terms that are acceptable to
us. In the absence of such refinancings, we could be forced to dispose of assets
in order to make up for any shortfall in the payments due on our indebtedness,
including interest and principal payments due on the notes, under circumstances
that might not be favorable to realizing the best price for such assets.
Further, any assets may not be sold quickly enough, or for amounts sufficient to
enable us to make any such payments. If we are unable to sell sufficient assets
to repay this debt we could be forced to issue equity securities to make up any
shortfall. Any such equity issuance would be subject to the approval of our
shareholders, who have the voting power to prevent us from raising money in
equity offerings.

WE ARE A HOLDING COMPANY WITH OUR ASSETS HELD PRIMARILY BY OUR
SUBSIDIARIES; THE ABILITY OF OUR SUBSIDIARIES TO PAY DIVIDENDS OR MAKE CASH
DISTRIBUTIONS TO US MAY BE LIMITED; CREDITORS OF THOSE COMPANIES HAVE A CLAIM ON
THEIR ASSETS THAT IS SENIOR TO THAT OF HOLDERS OF THE NOTES.

We are a holding company that conducts our operations and holds a
substantial portion of our operating assets through our subsidiaries. As a
result, we receive substantially all of our operating income from our
subsidiaries through dividends and fees related to administrative services
provided to our operating subsidiaries, including the funds necessary to service
our indebtedness, including our notes. Innova is the only company obligated to
make payments under the notes. Our subsidiaries are separate and distinct legal
entities and they will have no obligation, contingent or otherwise, to pay any
amounts due under the notes or to make any funds available for any of those
payments. The notes will be senior unsecured obligations of Innova ranking pari
passu with other unsubordinated and unsecured obligations. Claims of creditors
of our subsidiaries, including trade creditors and banks and other lenders, will
effectively have priority over claims of the holders of the notes with respect
to the assets of our subsidiaries. In addition, our ability to meet our
financial obligations, including obligations under the notes, will depend in
significant part on our receipt of cash dividends, advances and other payments
from our subsidiaries. In general, Mexican corporations may pay dividends only
out of net income, which is approved by shareholders. The social part holders
must then also approve the actual dividend payment after we establish mandatory
legal reserves and satisfy losses for prior fiscal years. The ability of our
subsidiaries to pay such dividends or make such distributions will be subject
to, among other things, applicable laws and, under certain circumstances,
restrictions contained in agreements or debt instruments to which we, or any of
our subsidiaries, are parties. For a description of our outstanding debt, see
"Item 5. Operating and financial review and prospects" in our annual report on
Form 20-F.

Secured creditors of Innova and certain creditors preferred by statute will
have priority over the holders of the notes with respect to the assets securing
such indebtedness. In addition, creditors of Innova, including holders of the
notes, will be limited in their ability to participate in distributions of
assets of our subsidiaries to the extent that the outstanding shares of any of
our subsidiaries are either pledged as collateral to our other creditors or are
not owned by us. See "Operating and Financial Review and Prospects" herein and
"Item 5. Operating and financial review and prospects" in our annual report on
Form 20-F. At June 30, 2003, our subsidiaries had approximately Ps. 1,177.4
million (equivalent to approximately U.S.$112.8 million) of liabilities,
U.S.$66.6 million of which was U.S. Dollar-denominated (excluding liabilities to
us and excluding guarantees by subsidiaries of indebtedness of Innova),
including approximately Ps. 111.5 million (equivalent to approximately U.S.$10.7
million) of indebtedness, all of which was U.S. Dollar-denominated. All of these
liabilities rank senior to the notes.

OUR INDENTURES LIMIT OUR ABILITY TO CONDUCT OUR BUSINESS, WHICH COULD
NEGATIVELY AFFECT OUR ABILITY TO FINANCE FUTURE CAPITAL NEEDS AND ENGAGE IN
OTHER BUSINESS ACTIVITIES.

The covenants in the indenture relating to our senior notes due in 2007 and
in the indenture relating to the notes offered hereby contain a number of
significant limitations on our ability to:

o respond to market or economic conditions;

o provide for capital expenditures; and

o take advantage of business opportunities.

These restrictive covenants contained in our indentures could negatively
affect our ability to finance our future capital needs, engage in other business
activities or withstand a future downturn in our business or the economy.

NEWS CORPORATION HAS ACQUIRED AN INDIRECT INTEREST IN DIRECTV MEXICO, OUR
DTH COMPETITOR, AND WE MAY CONSIDER A TRANSACTION INVOLVING DIRECTV MEXICO.

Our Social Part Holders Agreement provides that neither Televisa nor News
Corporation may directly or indirectly operate or acquire an interest in any
business that operates a DTH satellite system in Mexico (subject to certain
limited exceptions). As discussed in our annual report on Form 20-F, News
Corporation announced that it reached a definitive agreement to acquire a
substantial stake in Hughes Electronics Corporation, or Hughes, including an
indirect interest in Grupo Galaxy Mexicana, S. de R.L. de C.V., or Grupo Galaxy,
which operates under the name DIRECTV Mexico. This acquisition was consummated
in late December 2003. News Corporation's acquisition of an indirect interest in
the Mexican operations of Grupo Galaxy required the consent of Televisa, which
News Corporation did not obtain. Televisa and News Corporation are currently
discussing a resolution of this matter, although no assurances can be given
that a resolution can be reached. Televisa has advised Innova that it believes
that News Corporation's conduct constitutes a breach of the Social Part Holders
Agreement, and that Televisa reserves all of its rights in this regard.

As part of the discussions with News Corporation, we may consider entering
into negotiations with respect to Grupo Galaxy's assets or securities. Any such
transaction could involve our incurring a material amount of debt financing. The
indentures relating to our 12 7/8% senior notes due 2007 and the notes offered
hereby provide flexibility to enter into such a transaction, and to incur
indebtedness generally in connection with the acquisition of assets and rights
related to our DTH satellite business. Any such transaction would be subject to
a number of conditions, including reaching a definitive agreement and obtaining
regulatory approvals. No assurances can be given that any such transaction will
be consummated. See "Description of the New Notes -- Covenants," "Item 3. Key
information -- Risk factors -- Risk factors related to our business -- One of
our owners, News Corporation, may acquire significant interests in DIRECTV, our
DTH competitor in Mexico, and PanAmSat, our sole provider, and we cannot predict
what effect this will have on us," "-- We have significant transactions with our
owners who are involved in related businesses which creates the potential for
conflicts of interest" and "-- Our equity holders have, or may acquire,
interests in businesses which compete with us for customers and business
opportunities" in our annual report on 20-F.

IF WE ARE UNABLE TO COMPLY WITH THE RESTRICTIONS AND COVENANTS IN OUR DEBT
AGREEMENTS, THERE COULD BE A DEFAULT UNDER THE TERMS OF THESE AGREEMENTS, WHICH
COULD RESULT IN AN ACCELERATION OF PAYMENT DUE OF FUNDS THAT WE HAVE BORROWED.

A failure to comply with the obligations contained in our indentures or any
other debt instrument to which we are a party could result in an event of
default under such agreements. An event of default would permit the acceleration
of the related debt and would require us to pay the holders of such debt. Such
an acceleration would likely also result in an event of default under the notes,
which would permit you to accelerate the notes. An event of default also might
result in a default under future debt agreements that contain cross-acceleration
or cross-default provisions. In the event of any acceleration, we may not have
sufficient funds to repay all of such indebtedness, including the notes, or be
able to fund alternative financing. Even if we could obtain alternative
financing, we cannot assure you that it would be on terms that are favorable or
acceptable to us.

WE MAY NOT HAVE SUFFICIENT FUNDS TO MEET OUR OBLIGATION UNDER THE INDENTURE
TO REPURCHASE THE NOTES UPON A CHANGE OF CONTROL.

Upon the occurrence of a change of control, we will be required to
repurchase each holder's notes at a price of 101% of the principal amount plus
accrued and unpaid interest, if any, to the date of purchase. We may not have
the financial resources necessary to meet our obligations in respect of our
indebtedness, including the required repurchase of notes, following a change of
control. If an offer to repurchase the notes is required to be made and we do
not have available sufficient funds to repurchase the notes, an event of default
would occur under the indenture. The occurrence of an event of default could
result in acceleration of the maturity of the notes and other indebtedness. See
"Description of the New Notes."

JUDGMENTS OF MEXICAN COURTS ENFORCING OUR OBLIGATIONS IN RESPECT OF THE
NOTES WOULD BE PAID ONLY IN PESOS.

Under the Ley Monetaria, or the Mexican Monetary Law, in the event that any
proceedings are brought in Mexico seeking performance of our obligations under
the notes, pursuant to a judgment or on the basis of an original action, we may
discharge our obligations denominated in any currency other than Mexican Pesos
by paying Mexican Pesos converted at the rate of exchange prevailing on the date
payment is made. This rate is currently determined by Banco de Mexico, or the
Mexican Central Bank, every business day in Mexico, and published the next
business day in the Diario Oficial de la Federacion, or the Official Gazette of
the Federation of Mexico.

In addition, in the case of our bankruptcy, or concurso mercantil, or
judicial reorganization, our foreign currency-denominated liabilities, including
our liabilities under the notes, will be converted into Mexican Pesos at the
rate of exchange applicable on the date on which the declaration of bankruptcy
or judicial reorganization is effective, and the resulting amount, in turn, will
be converted to inflation-indexed units. Our foreign currency-denominated
liabilities, including our liabilities under the notes, will not be adjusted to
take into account any depreciation of the Peso as compared to the U.S. Dollar
occurring after the declaration of bankruptcy or judicial reorganization. Also,
all obligations under the notes will cease to accrue interest from the date of
the bankruptcy or judicial reorganization declaration, will be satisfied only at
the time those of our other creditors are satisfied and will be subject to the
outcome of, and amounts recognized as due in respect of, the relevant bankruptcy
or judicial reorganization proceeding.

IT MAY BE DIFFICULT TO ENFORCE CIVIL LIABILITIES AGAINST US OR OUR
DIRECTORS, EXECUTIVE OFFICERS AND CONTROLLING PERSONS.

We are organized under the laws of Mexico. Most of our directors, executive
officers and controlling persons reside outside of the United States, all or a
significant portion of the assets of our directors, executive officers and
controlling persons, and substantially all of our assets, are located outside of
the United States, and some of the experts named in this prospectus also reside
outside of the United States. As a result, it may be difficult for you to effect
service of process within the United States upon these persons or to enforce
against them or us in U.S. courts judgments predicated upon the civil liability
provisions of the federal securities laws of the United States. We have been
advised by our Mexican counsel, Mijares, Angoitia, Cortes y Fuentes, S.C., that
there is doubt as to the enforceability, in original actions in Mexican courts,
of liabilities predicated solely on U.S. federal securities laws and as to the
enforceability in Mexican courts of judgments of U.S. courts obtained in actions
predicated upon the civil liability provisions of the U.S. federal securities
laws. See "Limitation of Liability."

INCREASED SUBSCRIBER TURNOVER AND/OR INCREASED SUBSCRIBER ACQUISITION COSTS
COULD ADVERSELY AFFECT OUR FINANCIAL PERFORMANCE.

A higher rate of customer turnover (e.g., customers switching to another
pay-TV provider), or churn, would adversely affect our results of operations
because we would lose revenues from customers that churned and because churn
would require us to acquire more new subscribers just to maintain the same level
of subscribers. Any increase in marketing costs in an attempt to retain our
existing customers may cause us to increase our subscription rates, which could
increase churn. Churn can also increase due to factors beyond our control,
including a slowing

economy, signal theft, a maturing subscriber base and competition. The cost of
adding a new subscriber, which generally includes promotional discounted rates
and fees, is a significant factor in determining operating income and
profitability for us and other participants in the pay-TV industry. We cannot
assure you that we will continue to be able to manage our churn rates or
subscriber retention costs to continue to improve our financial performance.
Similarly, any material increase in subscriber acquisition costs from current
levels could have an adverse effect on our business and results of operations.
See "Item 5. Operating and financial review and prospects" in our annual report
on Form 20-F.

THERE MAY NOT BE A LIQUID TRADING MARKET FOR THE NEW NOTES, WHICH COULD
LIMIT YOUR ABILITY TO SELL YOUR NEW NOTES IN THE FUTURE.

The new notes are being offered to the holders of the old notes. The new
notes will constitute a new issue of securities for which, prior to the exchange
offer, there has been no public market, and the new notes may not be widely
distributed. Accordingly, an active trading market for the new notes may not
develop. If a market for any of the new notes does develop, the price of such
new notes may fluctuate and liquidity may be limited. If a market for any of the
new notes does not develop, purchasers may be unable to resell such new notes
for an extended period of time, if at all.

The liquidity of any market for the notes will depend on the number of
holders of the notes, the interest of securities dealers in making a market in
the notes and other factors. Accordingly, we cannot assure you as to the
development or liquidity of any market for the notes. If an active trading
market does not develop, the market price and liquidity of the notes may be
adversely affected. If the notes are traded, they may trade at a discount from
their initial offering price depending upon prevailing interest rates, the
market for similar securities, general economic conditions, our performance and
business prospects and certain other factors.

Factors such as the following may have a significant effect on the market
price of the notes:

o actual or anticipated fluctuations in our operating results;

o our perceived business prospects;

o general economic conditions, including prevailing interest rates, in
Mexico and elsewhere around the world; and

o the market for similar securities.

YOUR FAILURE TO TENDER OLD NOTES IN THE EXCHANGE OFFER MAY AFFECT THEIR
MARKETABILITY.

If old notes are tendered for exchange and accepted in the exchange offer,
the trading market, if any, for the untendered and tendered but unaccepted old
notes will be adversely affected. Your failure to participate in the exchange
offer will substantially limit, and may effectively eliminate, opportunities to
sell your old notes in the future.

We issued the old notes in a private placement exempt from the registration
requirements of the Securities Act. Accordingly, you may not offer, sell or
otherwise transfer your old notes except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws, or
pursuant to an exemption from the securities laws, or in a transaction not
subject to the securities laws, and we have no current intention to register the
old notes. If you do not exchange your old notes for new notes in the exchange
offer, or if you do not properly tender your old notes in the exchange offer,
your old notes will continue to be subject to these transfer restrictions after
the completion of the exchange offer. In addition, after the completion of the
exchange offer, you will no longer be able to obligate us to register the old
notes under the Securities Act.

THE EXCHANGE OFFER

PURPOSE OF THE EXCHANGE OFFER

We issued and sold the old notes in a private placement on September 19,
2003. In connection with that issuance and sale, we entered into a registration
rights agreement with the initial purchasers of the old notes. In the
registration rights agreement we agreed to, among other things:

o use our best efforts to file with the SEC a registration statement
within 90 days following the original issue date of the old notes,
relating to an offer to exchange the old notes for the new notes;

o use our reasonable best efforts to cause the registration statement to
be declared effective under the Securities Act within 150 days of the
original issue date;

o use our best efforts to keep the exchange offer registration statement
effective until the closing of the exchange offer; and

o use our best efforts to cause the exchange offer to be consummated not
later than 180 days following the original issue date.

These requirements under the registration rights agreement will be
satisfied when we complete the exchange offer. However, if we fail to meet any
of these requirements and under some other circumstances, then the interest rate
borne by the notes that are affected by the registration default with respect to
the first 90-day period, or portion thereof, will be increased by an additional
interest of 0.25% per annum upon the occurrence of each registration default.
The amount of additional interest will increase by an additional 0.25% per annum
each 90-day period, or portion thereof, while a registration default is
continuing until all registration defaults have been cured, provided that the
maximum aggregate increase in the interest rate will in no event exceed one
percent (1%) per annum. Upon

o the filing of the exchange offer registration statement after the 90th
calendar day following the original issue date of the old notes;

o the effectiveness of the exchange offer registration statement after
the 150th calendar day following the original issue date;

o the consummation of the exchange offer;

o the effectiveness of the shelf registration statement after the 180th
calendar day following the original issue date; or

o the date on which all new notes are saleable pursuant to Rule 144(k)
under the Securities Act or any successor provision,

the interest rate on the notes will be reduced to the original interest rate set
forth on the cover page of this prospectus if Innova is otherwise in compliance
with this paragraph. If after any such reduction in interest rate, a different
event specified above occurs, the interest rate will again be increased pursuant
to the foregoing provisions.

We will apply to list the new notes on the Luxembourg Stock Exchange. The
Luxembourg Stock Exchange will be informed and notice may be published in a
daily newspaper of general circulation in Luxembourg prior to commencing the
exchange offer. You may obtain documents relating to the exchange offer and
complete the exchange of your old notes for new notes at the office of The Bank
of New York (Luxembourg) S.A., our paying and transfer agent in Luxembourg, at
the Aerogolf Centre, 1A Hoehenhof, L-1736, Senningerberg Luxembourg. The results
of the exchange offer, including any increase in the rate, will be provided to
the Luxembourg Stock Exchange and may be published in a daily newspaper of
general circulation in Luxembourg.

We will keep the registration statement for the exchange offer effective
for not less than 20 business days after the notice of the exchange offer is
mailed to holders (or longer, if required by applicable law).

Under the registration rights agreement, our obligations to register the
new notes will terminate upon the completion of the exchange offer. However, we
will be required to file a "shelf" registration statement for a continuous
offering by the holders of the outstanding notes if:

o we are not permitted to file the exchange offer registration statement
or to consummate the exchange offer because the exchange offer is not
permitted by applicable law or SEC policy;

o for any reason, the exchange offer registration statement is not
declared effective within 150 days following the original issue date
of the old notes or the exchange offer is not consummated within 180
days following the original issue date;

o upon the request of the initial purchasers in certain circumstances;
or

o a holder is not permitted to participate in the exchange offer or does
not receive fully tradable exchange notes pursuant to the exchange
offer.

During any 365-day period, we will have the ability to suspend the
availability of such shelf registration statement for up to two periods of up to
45 consecutive days (except for the consecutive 45-day period immediately prior
to the maturity of the notes), but no more than an aggregate of 60 days during
any 365-day period, if our Board of Directors determines in good faith that
there is a valid purpose for the suspension.

We will, in the event of the filing of a shelf registration statement,
provide to each holder of notes that are covered by the shelf registration
statement copies of the prospectus which is a part of the shelf registration
statement and notify each such holder when the shelf registration statement has
become effective. A holder of notes that sells the notes pursuant to the shelf
registration statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with the sales and will be bound by the
provisions of the registration rights agreement which are applicable to the
holder (including certain indemnification obligations).

Once the exchange offer is complete, we will have no further obligation to
register any of the old notes not tendered to us in the exchange offer. See
"Risk Factors -- Your failure to tender old notes in the exchange offer may
affect their marketability."

EFFECT OF THE EXCHANGE OFFER

Based on interpretations by the SEC staff set forth in Exxon Capital
Holdings Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated
(available June 5, 1991), Warnaco, Inc. (available October 11, 1991), Shearman &
Sterling (available July 2, 1993) and other no-action letters issued to third
parties, we believe that you may offer for resale, resell and otherwise transfer
the new notes issued to you in the exchange offer without compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided:

o you are acquiring the new notes in the ordinary course of your
business;

o you are not engaging in and do not intend to engage in a distribution
of the new notes;

o you have no arrangements or understandings with any person to
participate in the exchange offer for the purpose of distributing the
new notes; and

o you are not our "affiliate," within the meaning of Rule 405 under the
Securities Act.

If you are not able to make these representations, you are a "restricted
holder." As a restricted holder, you will not be able to participate in the
exchange offer, you may not rely on the interpretations of the SEC staff set
forth in the no-action letters referred to above and you may only sell your old
notes in compliance with the registration and prospectus delivery requirements
of the Securities Act or under an exemption from the registration requirements
of the Securities Act or in a transaction not subject to the Securities Act.

In addition, each broker-dealer that is not a restricted holder that
receives new notes for its own account in exchange for old notes that it
acquired as a result of market-making activities or other trading activities may
be a statutory underwriter and must acknowledge in the letter of transmittal
that it will deliver a prospectus meeting the requirements of the Securities Act
upon any resale of such new notes. This prospectus may be used by those
broker-dealers to resell new notes they receive pursuant to the exchange offer.
We have agreed that, for a period of 90 days after the completion of the
exchange offer, we will make this prospectus available to any broker-dealer for
use by the broker-dealer in any resale. By acceptance of this exchange offer,
each broker-dealer that receives new notes under the exchange offer agrees to
notify us prior to using this prospectus in a sale or transfer of new notes. See
"Plan of Distribution."

Except as described above, this prospectus may not be used for an offer to
resell, a resale or other transfer of new notes.

To the extent old notes are tendered and accepted in the exchange offer,
the principal amount of old notes outstanding will decrease with a resulting
decrease in the liquidity in the market for the old notes. Old notes still
outstanding following the completion of the exchange offer will continue to be
subject to transfer restrictions.

TERMS OF THE EXCHANGE OFFER

Upon the terms and subject to the conditions of the exchange offer
described in this prospectus and in the accompanying letter of transmittal, we
will accept for exchange all old notes validly tendered and not withdrawn before
5:00 p.m., New York City time, on the expiration date. We will issue U.S.$1,000
principal amount of new notes in exchange for each U.S.$1,000 principal amount
of old notes we accept in the exchange offer. You may tender some or all of your
old notes pursuant to the exchange offer; however, you may only tender old notes
in denominations of U.S.$10,000 of principal amount at maturity for Rule 144A
Global Notes and in denominations of U.S.$1,000 of principal amount at maturity
for Regulation S Global Notes and, in both cases, in integral multiples of
U.S.$1,000 in excess thereof.

The new notes will be substantially identical to the old notes, except
that:

o the offering of the new notes has been registered under the Securities
Act;

o the new notes will not be subject to transfer restrictions; and

o the new notes will be issued free of any covenants regarding
registration rights and free of any provision for additional interest.

The new notes will evidence the same debt as the old notes and will be
issued under and be entitled to the benefits of the same indenture under which
the old notes were issued. The old notes and the new notes will be treated as a
single series of debt securities under the indenture. For a description of the
terms of the indenture and the new notes, see "Description of the New Notes."

The exchange offer is not conditioned upon any minimum aggregate principal
amount of old notes being tendered for exchange. As of the date of this
prospectus, an aggregate of U.S.$300,000,000 principal amount of old notes is
outstanding. This prospectus is being sent to all registered holders of old
notes. There will be no fixed record date for determining registered holders of
old notes entitled to participate in the exchange offer.

We intend to conduct the exchange offer in accordance with the applicable
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the SEC. Holders of old notes do not have any appraisal

or dissenters' rights under law or under the indenture in connection with the
exchange offer. Old notes that you do not tender for exchange in the exchange
offer will remain outstanding and will continue to accrue interest and will be
entitled to the rights and benefits you, as a holder, have under the indenture
relating to the old notes.

We will be deemed to have accepted for exchange validly tendered old notes
when we have given oral or written notice of the acceptance to the exchange
agent. The exchange agent will act as agent for the tendering holders of old
notes for the purposes of receiving the new notes from us and delivering the new
notes to the tendering holders. Subject to the terms of the registration rights
agreement, we expressly reserve the right to amend or terminate the exchange
offer, and not to accept for exchange any old notes not previously accepted for
exchange, upon the occurrence of any of the conditions specified below under "--
Conditions." All old notes accepted for exchange will be exchanged for new notes
promptly following the expiration date. If we decide for any reason to delay for
any period our acceptance of any old notes for exchange, we will extend the
expiration date for the same period.

If we do not accept for exchange any tendered old notes because of an
invalid tender, the occurrence of certain other events described in this
prospectus or otherwise, such unaccepted old notes will be returned, without
expense, to the holder tendering them or the appropriate book-entry will be
made, in each case, as promptly as practicable after the expiration date.

We are not making, nor is our Board of Directors making, any recommendation
to you as to whether to tender or refrain from tendering all or any portion of
your old notes in the exchange offer. No one has been authorized to make any
such recommendation. You must make your own decision whether to tender in the
exchange offer and, if you decide to do so, you must also make your own decision
as to the aggregate amount of old notes to tender after reading this prospectus
and the letter of transmittal and consulting with your advisers, if any, based
on your own financial position and requirements.

EXPIRATION DATE; EXTENSIONS; AMENDMENTS

The term "expiration date" means 5:00 p.m., New York City time, on March
17, 2004, unless we, in our sole discretion, extend the exchange offer, in which
case the term "expiration date" shall mean the latest date and time to which the
exchange offer is extended.

If we determine to extend the exchange offer, we will notify the exchange
agent of any extension by oral or written notice. We will notify the registered
holders of old notes of the extension no later than 9:00 a.m., New York City
time, on the business day immediately following the previously scheduled
expiration date.

We reserve the right, in our sole discretion:

o to delay accepting for exchange any old notes;

o to extend the exchange offer or to terminate the exchange offer and to
refuse to accept old notes not previously accepted if any of the
conditions set forth below under "-- Conditions" have not been
satisfied by the expiration date; or

o subject to the terms of the registration rights agreement, to amend
the terms of the exchange offer in any manner.

Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice to the registered
holders of old notes. If we amend the exchange offer in a manner that we
determine to constitute a material change, we will promptly disclose the
amendment in a manner reasonably calculated to inform the holders of the old
notes of the amendment.

Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, we will have no obligation to publish,

advertise or otherwise communicate any public announcement, other than by making
a timely release to a financial news service.

During any extension of the exchange offer, all old notes previously
tendered will remain subject to the exchange offer, and we may accept them for
exchange. We will return any old notes that we do not accept for exchange for
any reason without expense to the tendering holder as promptly as practicable
after the expiration or earlier termination of the exchange offer.

INTEREST ON THE NEW NOTES AND THE OLD NOTES

Any old notes not tendered or accepted for exchange will continue to accrue
interest at the rate of 9.375% per annum in accordance with their terms. The new
notes will accrue interest at the rate of 9.375% per annum from the date of the
last periodic payment of interest on the old notes or, if no interest has been
paid, from the original issue date of old notes. Interest on the new notes and
any old notes not tendered or accepted for exchange will be payable
semi-annually in arrears on March 19 and September 19 of each year, commencing
on March 19, 2004.

PROCEDURES FOR TENDERING

Only a registered holder of old notes may tender those notes in the
exchange offer. To tender in the exchange offer, a holder must complete, sign
and date the letter of transmittal, have the signatures thereon guaranteed if
required by the letter of transmittal, and mail or otherwise deliver such letter
of transmittal, together with all other documents required by the letter of
transmittal, to the exchange agent at one of the addresses set forth below under
"-- Exchange Agent," before 5:00 p.m., New York City time, on the expiration
date. In addition, either:

o the exchange agent must receive, before the expiration date, a timely
confirmation of a book-entry transfer of the tendered old notes into
the exchange agent's account at The Depository Trust Company, or DTC,
or the depositary, according to the procedure for book-entry transfer
described below; or

o the holder must comply with the guaranteed delivery procedures
described below.

A tender of old notes by a holder that is not withdrawn prior to the
expiration date will constitute an agreement between that holder and us in
accordance with the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal.

The method of delivery of old notes, letters of transmittal and all other
required documents to the exchange agent, including delivery through DTC, is at
the holder's election and risk. Instead of delivery by mail, we recommend that
holders use an overnight or hand delivery service. If delivery is by mail, we
recommend that holders use certified or registered mail, properly insured, with
return receipt requested. In all cases, holders should allow sufficient time to
assure delivery to the exchange agent before the expiration date. Holders should
not send letters of transmittal or other required documents to us. Holders may
request their respective brokers, dealers, commercial banks, trust companies or
other nominees to effect the above transactions for them.

Any beneficial owner whose old notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and that wishes
to tender those notes should contact the registered holder promptly and instruct
it to tender on the beneficial owner's behalf.

We will determine, in our sole discretion, all questions as to the
validity, form, eligibility (including time of receipt), acceptance of tendered
old notes and withdrawal of tendered old notes, and our determination will be
final and binding. We reserve the absolute right to reject any and all old notes
not properly tendered or any old notes the acceptance of which would, in the
opinion of us or our counsel, be unlawful. We also reserve the absolute right to
waive any defects or irregularities or conditions of the exchange offer as to
any particular old notes either before or after the expiration date. Our
interpretation of the terms and conditions of the exchange offer as to any
particular old notes either before or after the expiration date, including the
instructions in the letter of transmittal, will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of old notes for

exchange must be cured within such time as we shall determine. Although we
intend to notify holders of any defects or irregularities with respect to
tenders of old notes for exchange, neither we nor the exchange agent nor any
other person shall be under any duty to give such notification, nor shall any of
them incur any liability for failure to give such notification. Tenders of old
notes will not be deemed to have been made until all defects or irregularities
have been cured or waived. Any old notes received by the exchange agent that are
not properly tendered and as to which the defects or irregularities have not
been cured or waived will be returned by the exchange agent to the tendering
holders or, in the case of old notes delivered by book-entry transfer within
DTC, will be credited to the account maintained within DTC by the participant in
DTC which delivered such old notes, unless otherwise provided in the letter of
transmittal, as soon as practicable following the expiration date.

In addition, we reserve the right in our sole discretion (1) to purchase or
make offers for any old notes that remain outstanding after the expiration date,
(2) as set forth below under "-- Conditions," to terminate the exchange offer
and (3) to the extent permitted by applicable law, purchase old notes in the
open market, in privately negotiated transactions or otherwise. The terms of any
such purchases or offers could differ from the terms of the exchange offer.

By signing, or otherwise becoming bound by, the letter of transmittal, each
tendering holder of old notes (other than certain specified holders) will
represent to us that:

o it is acquiring the new notes in the ordinary course of its business;

o it is not engaging in and does not intend to engage in a distribution
of the new notes;

o it has no arrangements or understandings with any person to
participate in the exchange offer for the purpose of distributing the
new notes; and

o it is not our "affiliate," within the meaning of Rule 405 under the
Securities Act, or, if it is our affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities
Act to the extent applicable.

If the tendering holder is a broker-dealer that will receive new notes for
its own account in exchange for old notes that were acquired as a result of
market-making activities or other trading activities, it may be deemed to be an
"underwriter" within the meaning of the Securities Act. Any such holder will be
required to acknowledge in the letter of transmittal that it will deliver a
prospectus in connection with any resale of these new notes. However, by so
acknowledging and by delivering a prospectus, the holder will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.

BOOK-ENTRY TRANSFER

The exchange agent will establish a new account or utilize an existing
account with respect to the old notes at DTC promptly after the date of this
prospectus, and any financial institution that is a participant in DTC's systems
may make book-entry delivery of old notes by causing DTC to transfer these old
notes into the exchange agent's account in accordance with DTC's procedures for
transfer. However, the exchange for the old notes so tendered will be made only
after timely confirmation of the book-entry transfer of old notes into the
exchange agent's account, and timely receipt by the exchange agent of an agent's
message and any other documents required by the letter of transmittal. The term
"agent's message" means a message transmitted by DTC to, and received by, the
exchange agent and forming a part of a book-entry confirmation, that states that
DTC has received an express acknowledgment from a participant in DTC tendering
old notes that are the subject of the book-entry confirmation stating (1) the
aggregate principal amount of old notes that have been tendered by such
participant, (2) that such participant has received and agrees to be bound by
the terms of the letter of transmittal and (3) that we may enforce such
agreement against the participant.

Although delivery of old notes must be effected through book-entry transfer
into the exchange agent's account at DTC, the letter of transmittal, properly
completely and validly executed, with any required signature guarantees, or an
agent's message in lieu of the letter of transmittal, and any other required
documents, must be

delivered to and received by the exchange agent at one of its addresses listed
below under "-- Exchange Agent," before 5:00 p.m., New York City time, on the
expiration date, or the guaranteed delivery procedure described below must be
complied with.

Delivery of documents to DTC in accordance with its procedures does not
constitute delivery to the exchange agent.

All references in this prospectus to deposit or delivery of old notes shall
be deemed to also refer to DTC's book-entry delivery method.

GUARANTEED DELIVERY PROCEDURES

Holders who wish to tender their old notes and (1) whose old notes are not
immediately available or (2) who cannot deliver a confirmation of book-entry
transfer of old notes into the exchange agent's account at DTC, the letter of
transmittal or any other required documents to the exchange agent prior to the
expiration date or (3) who cannot complete the procedure for book-entry transfer
on a timely basis, may effect a tender if:

o the tender is made through an eligible institution;

o before the expiration date, the exchange agent receives from the
eligible institution a properly completed and duly executed notice of
guaranteed delivery, by facsimile transmission, mail or hand delivery,
listing the principal amount of old notes tendered, stating that the
tender is being made thereby and guaranteeing that, within three New
York Stock Exchange, Inc. trading days after the expiration date, a
duly executed letter of transmittal together with a confirmation of
book-entry transfer of such old notes into the exchange agent's
account at DTC, and any other documents required by the letter of
transmittal and the instructions thereto, will be deposited by such
eligible institution with the exchange agent; and

o the properly completed and executed letter of transmittal and a
confirmation of book-entry transfer of all tendered old notes into the
exchange agent's account at DTC and all other documents required by
the letter of transmittal are received by the exchange agent within
three New York Stock Exchange, Inc. trading days after the expiration
date.

Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their old notes according to the guaranteed
delivery procedures described above.

WITHDRAWAL OF TENDERS

Except as otherwise provided in this prospectus, you may withdraw your
tender of old notes at any time prior to 5:00 p.m., New York City time, on the
expiration date.

For a withdrawal to be effective, the exchange agent must receive a written
or facsimile transmission notice of withdrawal at one of its addresses set forth
below under "-- Exchange Agent." Any notice of withdrawal must:

o specify the name of the person who tendered the old notes to be
withdrawn;

o identify the old notes to be withdrawn, including the principal amount
of such old notes;

o be signed by the holder in the same manner as the original signature
on the letter of transmittal by which the old notes were tendered and
include any required signature guarantees; and

o specify the name and number of the account at DTC to be credited with
the withdrawn old notes and otherwise comply with the procedures of
DTC.

We will determine, in our sole discretion, all questions as to the
validity, form and eligibility (including time of receipt) of any notice of
withdrawal, and our determination shall be final and binding on all parties. Any
old notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the exchange offer and no new notes will be issued with
respect thereto unless the old notes so withdrawn are validly retendered. You
may retender properly withdrawn old notes by following one of the procedures
described above under "-- Procedures for Tendering" at any time prior to the
expiration date.

Any old notes that are tendered for exchange through the facilities of DTC
but that are not exchanged for any reason will be credited to an account
maintained with DTC for the old notes as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer.

CONDITIONS

Despite any other term of the exchange offer, we will not be required to
accept for exchange, or to issue new notes in exchange for, any old notes, and
we may terminate the exchange offer as provided in this prospectus prior to the
expiration date, if:

o the exchange offer, or the making of any exchange by a holder of old
notes, would violate applicable law or any applicable interpretation
of the SEC staff;

o the old notes are not tendered in accordance with the exchange offer;

o you do not represent that you are acquiring the new notes in the
ordinary course of your business, that you are not engaging in and do
not intend to engage in a distribution of the new notes, and that you
have no arrangement or understanding with any person to participate in
a distribution of the new notes and you do not make any other
representations as may be reasonably necessary under applicable SEC
rules, regulations or interpretations to render available the use of
an appropriate form for registration of the new notes under the
Securities Act;

o any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the exchange
offer which, in our judgment, would reasonably be expected to impair
our ability to proceed with the exchange offer; or

o any governmental approval has not been obtained, which we believe, in
our sole discretion, is necessary for the consummation of the exchange
offer as outlined in this prospectus.

These conditions are for our sole benefit and we may assert them regardless
of the circumstances giving rise to any of these conditions, or we may waive
them, in whole or in part, at any time and from time to time in our reasonable
discretion. Our failure at any time to exercise any of the foregoing rights
shall not be deemed a waiver of the right and each right shall be deemed an
ongoing right which may be asserted at any time and from time to time.

If we determine in our reasonable judgment that any of the conditions
are not satisfied, we may:

o refuse to accept and return to the tendering holder any old notes or
credit any tendered old notes to the account maintained within DTC by
the participant in DTC which delivered the old notes; or

o extend the exchange offer and retain all old notes tendered before the
expiration date, subject to the rights of holders to withdraw the
tenders of old notes (see "-- Withdrawal of Tenders" above); or

o waive the unsatisfied conditions with respect to the exchange offer
prior to the expiration date and accept all properly tendered old
notes that have not been withdrawn or otherwise amend the terms of the
exchange offer in any respect as provided under "-- Expiration Date;
Extensions; Amendments." If a waiver constitutes a material change to
the exchange offer, we will promptly disclose the waiver by means of a
prospectus supplement that will be distributed to the registered
holders, and we will

extend the exchange offer for a period of five to ten business days,
depending upon the significance of the waiver and the manner of
disclosure to the registered holders, if the exchange offer would
otherwise expire during such five to ten business day period.

In addition, we will not accept for exchange any old notes tendered, and we
will not issue new notes in exchange for any of the old notes, if at that time
any stop order is threatened or in effect with respect to the registration
statement of which this prospectus constitutes a part or the qualification of
the indenture under the Trust Indenture Act of 1939, as amended.

EXCHANGE AGENT

The Bank of New York has been appointed as the exchange agent for the
exchange offer. All signed letters of transmittal and other documents required
for a valid tender of your old notes should be directed to the exchange agent at
one of the addresses set forth below. Questions and requests for assistance,
requests for additional copies of this prospectus or of the letter of
transmittal and requests for notices of guaranteed delivery should be directed
to the exchange agent addressed as follows:

BY REGISTERED MAIL, OVERNIGHT CARRIER OR HAND DELIVERY: FACSIMILE TRANSMISSION:
The Bank of New York (212) 298-1915
Corporate Trust Operations Confirm by Telephone:
Reorganization Unit (212) 815-6331
101 Barclay Street
Floor 7 East
New York, New York 10289
Attention: Giselle Guadalupe

FOR INFORMATION WITH RESPECT TO THE EXCHANGE OFFER, CALL:
Giselle Guadalupe of the Exchange Agent
at (212) 815-6331

Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.

FEES AND EXPENSES

We will bear the expenses of soliciting tenders. We have not retained any
dealer-manager in connection with the exchange offer and will not make any
payments to brokers, dealers or others soliciting acceptance of the exchange
offer. The principal solicitation is being made by mail; however, additional
solicitation may be made by facsimile, telephone or in person by our officers
and employees.

We will pay the expenses incurred in connection with the exchange offer.
These expenses include fees and expenses of the exchange agent and the trustee,
accounting and legal fees, printing costs, and related fees and expenses.

TRANSFER TAXES

Holders who tender their old notes for exchange will not be obligated to
pay any transfer taxes in connection with the exchange offer.

ACCOUNTING TREATMENT

We will record the new notes in our accounting records at the same carrying
values as the old notes on the date of the exchange. Accordingly, we will
recognize no gain or loss, for accounting purposes, as a result of the

exchange offer. Under Mexican GAAP, the expenses of the exchange offer and the
unamortized expenses relating to the issuance of the old notes will be amortized
over the term of the new notes.

CONSEQUENCES OF FAILURE TO EXCHANGE

Holders of old notes who do not exchange their old notes for new notes
pursuant to the exchange offer will continue to be subject to the restrictions
on transfer of the old notes as set forth in the legend printed thereon as a
consequence of the issuance of the old notes pursuant to an exemption from the
Securities Act and applicable state securities laws. Old notes not exchanged
pursuant to the exchange offer will continue to accrue interest at 9.375% per
annum, and the old notes will otherwise remain outstanding in accordance with
their terms. Holders of old notes do not have any appraisal or dissenters'
rights under Mexican law in connection with the exchange offer.

In general, the old notes may not be offered or sold unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. Upon completion of the exchange offer, holders of old notes will not be
entitled to any rights to have the resale of old notes registered under the
Securities Act, and we currently do not intend to register under the Securities
Act the resale of any old notes that remain outstanding after completion of the
exchange offer.

USE OF PROCEEDS

We will not receive any cash proceeds from the exchange offer. We are
making this exchange offer solely to satisfy our obligations under the
registration rights agreement. In consideration for issuing the new notes, we
will receive old notes in an aggregate principal amount equal to the value of
the new notes. The old notes surrendered in exchange for the new notes will be
retired and canceled. Accordingly, the issuance of the new notes will not result
in any change in our indebtedness.

We received approximately U.S.$296.0 million in net proceeds from the sale
of the old notes after deducting estimated discounts and offering expenses. We
used all of these net proceeds, together with available cash, to redeem
U.S.$287.0 million in principal amount of our outstanding 12 7/8% senior notes
due 2007, and to pay Mexican withholding taxes, a redemption premium and accrued
interest. This redemption was consummated on October 20, 2003. For a description
of our outstanding indebtedness as of September 30, 2003, see "Capitalization."

EXCHANGE RATES

Since November 1991, Mexico has had a free market for foreign exchange, and
since December 1994, the Mexican government has allowed the Peso to float freely
against the U.S. Dollar. The Peso declined sharply in December 1994 and
continued to fall under conditions of high volatility in 1995. In 1996, the Peso
fell more slowly and was less volatile. Relative stability characterized the
foreign exchange markets during the first three quarters of 1997. The fall of
the Hang Seng Index of the Hong Kong Stock Exchange on October 24, 1997 marked
the beginning of a period of increased volatility in the foreign exchange
markets with the Peso falling over 10% in just a few days. During 1998, the
foreign exchange markets experienced volatility as a result of the financial
crises in Asia and Russia and the financial turmoil in countries such as Brazil
and Venezuela. More recently, the economic and financial crises in Argentina and
Venezuela have resulted in volatility in the foreign exchange markets, have
caused instability in the Latin American financial markets and could continue to
have a negative impact on the value of the Peso. See "Item 3. Key information --
Risk factors -- Risk factors related to Mexico -- Developments in other emerging
markets, countries or the United States may affect us and the prices for our
securities" in our annual report on Form 20-F. We cannot assure you that the
Mexican government will maintain its current policies with regard to the Peso or
that the Peso will not further depreciate or appreciate significantly in the
future.

The following table sets forth, for the periods indicated, the high, low,
average and period end free market exchange rate for the purchase of U.S.
Dollars, expressed in nominal Pesos per U.S. Dollar. All amounts are stated in
Pesos per U.S. Dollar. As of February 6, 2004, the free market exchange rate for
the purchase of U.S. Dollars as reported by the Board of Governors of the
Federal Reserve Bank was Ps.11.13 per U.S. Dollar.

Exchange Rate(1)
--------------------------------------------------
High Low Average(2) Period End
----- ----- ---------- ----------

Year Ended December 31,
1999................................... 10.60 9.24 9.56 9.48
2000................................... 10.09 9.18 9.47 9.62
2001................................... 9.97 8.95 9.33 9.16
2002................................... 10.43 9.00 9.75 10.43
2003................................... 11.41 10.11 10.80 11.24
Month Ended
June 30, 2003.......................... 10.74 10.24 10.50 10.46
July 31, 2003.......................... 10.59 10.34 10.46 10.59
August 29, 2003........................ 11.06 10.59 10.78 11.06
September 30, 2003..................... 11.04 10.77 10.92 11.00
October 31, 2003....................... 11.32 10.97 11.18 11.06
November 30, 2003...................... 11.40 10.98 11.15 11.40
December 31, 2003...................... 11.41 11.17 11.25 11.24
January 31, 2004....................... 11.10 10.81 10.92 11.01

(1) The free market exchange rate is the Noon Buying Rate for Pesos reported by
the Board of Governors of the Federal Reserve Bank.

(2) Annual average rates reflect the average of month-end rates. Monthly
average rates reflect the average of daily rates.

The Mexican economy has suffered balance of payment deficits and shortages
in foreign exchange reserves. While the Mexican government does not currently
restrict the ability of Mexican or foreign persons or entities to convert Pesos
to U.S. Dollars, we cannot assure you that the Mexican government will not
institute restrictive exchange control policies in the future, as has occurred
from time to time in the past. To the extent that the Mexican government
institutes restrictive exchange control policies in the future, our ability to
transfer or to convert Pesos into U.S. Dollars and other currencies for the
purpose of making timely payments of interest and principal of indebtedness, as
well as obtaining foreign programming and other goods, would be adversely
affected. See "Item 3. Key information -- Risk factors--Risk factors related to
Mexico--Currency fluctuations or the devaluation and depreciation of the Peso
could limit the ability of us and others to convert Pesos into U.S. Dollars or
other currencies and/or adversely affect our financial condition" in our annual
report on Form 20-F.

DIVIDENDS

We have not declared or paid any dividends. Under our Social Part Holders
Agreement and bylaws, dividends may be paid in Pesos or U.S. Dollars as
determined by our equity holders. The U.S. Dollar value of any dividends would
be affected by the exchange rate if paid in Pesos. The indentures governing our
12 7/8% senior notes due 2007 and our 9.375% senior notes due 2013 restrict our
ability to declare dividends under certain conditions.

CAPITALIZATION

The following table presents the capitalization of Innova as of September
30, 2003:

o based on our unaudited consolidated financial information;

o reflecting the consummation of our offering of U.S.$300 million of
notes on September 19, 2003 and the application of the net proceeds,
together with available cash, as described in this prospectus under
"Use of Proceeds" and "Business Developments -- Recent Developments --
Refinancing our Indebtedness"; and

o further reflecting the capitalization of approximately Ps. 4.3 billion
of loans outstanding as of September 9, 2003 made by our equity owners
or their affiliates to us since December 1998, as described under
"Business Developments -- Recent Developments -- Refinancing our
Indebtedness."

The amounts set forth in this section are presented in accordance with
Mexican GAAP in constant Mexican Pesos in purchasing power as of September 30,
2003. This information, therefore, is not directly comparable to our unaudited
consolidated financial statements as of June 30, 2003 and for the six-month
periods ended June 30, 2003 and 2002, included elsewhere in this prospectus,
which, unless otherwise indicated, is presented in constant Mexican Pesos in
purchasing power as of June 30, 2003, and our consolidated financial statements
as of December 31, 2002 and 2001, and for the three years ended December 31,
2002, 2001 and 2000, which are included in Innova's 2002 Form 20-F, which,
unless otherwise indicated, is presented in constant Mexican Pesos as of
December 31, 2002. The change in NCPI for the three-month period ended September
30, 2003 was 1.031% and for the nine-month period ended September 30, 2003 was
2.258%. This table should be read in conjunction with "Use of Proceeds" and
"Business Developments -- Recent Developments -- Refinancing our Indebtedness,"
appearing elsewhere in this prospectus. Except as disclosed in this prospectus,
there has been no material change in the capitalization of our company since
September 30, 2003.

AS OF SEPTEMBER 30, 2003
--------------------------------------
(THOUSANDS (THOUSANDS
OF PESOS) OF U.S. DOLLARS)(1)
---------------- -------------------

CASH AND CASH EQUIVALENTS....................................... Ps. 3,698,488 U.S.$ 336,226
=============== ===============
SHORT-TERM DEBT:
Senior Exchange Notes due 2007(2)............................ 3,159,296 287,209
Satellite transponders obligation............................ 60,533 5,503
Due to affiliated companies and other related parties(3)..... 435,609 39,601
Accrued interest............................................. 9,460 860
--------------- ---------------
TOTAL SHORT-TERM DEBT........................................ 3,664,898 333,173
--------------- ---------------
LONG-TERM DEBT:
Satellite transponders obligation............................ 1,393,964 126,724
12 7/8% Senior Notes due 2007................................ 968,704 88,064
9.375% Senior Notes due 2013................................. 3,302,400 300,218
--------------- ---------------
TOTAL LONG-TERM DEBT......................................... 5,665,068 515,006
--------------- ---------------
SOCIAL PART HOLDERS' DEFICIT:
Contributed capital ......................................... 6,224,421 565,857
Earned capital............................................... (9,518,190) (865,290)
--------------- ---------------
TOTAL SOCIAL PART HOLDERS' DEFICIT........................... (3,293,769) (299,433)
--------------- ---------------
TOTAL CAPITALIZATION............................................ Ps. 6,036,197 U.S.$ 548,746
=============== ===============

(1) Peso amounts were converted to U.S. Dollars solely for convenience at the
noon buying rate of Ps. 11.00 per U.S.$1.00 on September 30, 2003. Such
conversions should not be construed as representations that the Peso
amounts actually represent such U.S. Dollar amounts or could be converted
into U.S. Dollars at the rate indicated, or at all.

(2) Due to the scheduled redemption of approximately $287 million in principal
amount of our 12 7/8% senior notes on October 20, 2003, this amount of debt
was re-classified from long-term to short-term. As described in "Business
Developments -- Recent Developments -- Refinancing our Indebtedness," this
redemption was consummated on October 20, 2003. As of the date of this
prospectus, all of our remaining obligations under the 12 7/8% senior notes
are long-term obligations.

(3) This liability arises in connection with our transactions with affiliated
companies for various services and licenses, including, but not limited to,
uplink and downlink of signals, broadcast rights, advertising time and
license royalties. See Note 9 to our consolidated annual financial
statements in Form 20-F, for a more detailed description of these
liabilities.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following tables present our summary consolidated financial information
as of and for each of the periods indicated. This data is qualified in its
entirety by reference to, and should be read together with, our audited year-end
financial statements and our unaudited interim financial statements. The
following data for each of the years ended December 31, 1998, 1999, 2000, 2001
and 2002 has been derived from our audited year-end financial statements,
including the consolidated balance sheets as of December 31, 2001 and 2002, and
the related consolidated statements of income and changes in financial position
for the years ended December 31, 2000, 2001 and 2002 and the accompanying notes,
available in our annual report for the fiscal year ended December 31, 2002 on
Form 20-F. The data as of June 30, 2003 and for the six-month periods ended June
30, 2002 and 2003 has been derived from the unaudited condensed consolidated
financial statements included in this prospectus. In the opinion of our
management, the unaudited condensed consolidated financial statements include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of these financial statements. The data should also be read
together with "Operating and Financial Review and Prospects."

Our consolidated annual financial statements were prepared in accordance
with Mexican GAAP, which differs in certain respects from U.S. GAAP. Note 21 to
the consolidated annual financial statements, contained in our annual report on
Form 20-F and Note 16 to the unaudited condensed consolidated financial
statements included herein, describes the principal differences between Mexican
GAAP and U.S. GAAP as they relate to Innova and provides a reconciliation to
U.S. GAAP of net losses and total stockholders' deficit.

The exchange rate used in translating Mexican Pesos into U.S. Dollars in
calculating the convenience translations included in the following tables is
determined by reference to the Interbank Rate, as reported by Banamex, as of
December 31, 2002 and June 30, 2003, which was Ps. 10.46 per U.S. Dollar and Ps.
10.438 per U.S. Dollar, respectively. The exchange rate translations contained
in this prospectus should not be construed as representations that the Mexican
Peso amounts actually represent the U.S. Dollar amounts presented or that they
could be converted into U.S. Dollars at the rates indicated. Since the financial
information set forth below for the six-month periods ended June 30, 2002 and
2003 is presented in constant Mexican Pesos in purchasing power as of June 30,
2003, the financial information is not directly comparable to the financial
information included in our annual report on Form 20-F, which, unless otherwise
indicated, is presented in constant Mexican Pesos in purchasing power as of
December 31, 2002. Under Mexican GAAP, because Mexican inflationary rates were
below 3% for the six-month period ended June 30, 2003, we are not required to
restate our year-end financial results in constant June 30, 2003 Mexican Pesos.
The change in NCPI for the six-month period ended June 30, 2003 was 1.215%.

AS OF AND FOR THE YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2002(1)
---- ---- ---- ---- ---- -------
(IN THOUSANDS OF CONSTANT DECEMBER 31, 2002 MEXICAN PESOS OR THOUSANDS OF U.S. DOLLARS)(3)

STATEMENT OF OPERATIONS DATA:
Net sales..........................Ps. 975,450 Ps.1,818,748 Ps.2,560,159 Ps.3,266,037 Ps.3,432,872 U.S.$328,065
Depreciation and amortization...... (484,592) (686,129) (844,580) (948,335) (925,078) (88,406)
Operating (loss) profit............ (1,515,875) (1,152,571) (1,075,591) (278,925) 9,021 862
Total integral results of
financing(4)...................... (757,800) 140,295 (352,022) (70,661) (1,647,800) (157,473)
Other (expenses) income, net....... (8,024) 11,702 - - (22,126) (2,114)
Transponder services-Solidaridad 2
and repointing costs(5)........... - - (430,916) - (25,933) (2,478)
Restructuring charges(5)........... - - - (13,576) (6,495) (621)
Loss before provisions for taxes... (2,281,699) (1,000,574) (1,858,529) (363,162) (1,693,333) (161,825)
Provisions for taxes(5)............ (7) (36) (130) (46,283) (75,530) (7,218)
Net loss........................... (2,281,707) (1,000,610) (1,858,659) (409,445) (1,768,863) (169,043)
Net sales (U.S. GAAP)(6)...........Ps. 995,820 Ps.1,871,574 Ps.2,559,502 Ps.3,140,996 Ps.3,315,976 U.S.$316,894
Operating (loss) (U.S. GAAP)(6).... (2,823,320) (992,734) (1,050,993) (791,319) (76,471) (7,308)
Net (loss) income (U.S. GAAP)(6)... (3,218,113) 205,678 (1,408,456) (930,659) (1,799,801) (171,999)
BALANCE SHEET DATA:
Property and equipment, net(5).....Ps. 1,874,772 Ps.1,912,071 Ps.1,908,759 Ps.1,952,176 Ps.1,544,905 147,640
Satellite transponders, net(7)..... - - 1,400,722 1,215,450 1,240,997 118,597
Total other non-current assets..... 999,185 560,236 348,739 217,865 104,928 10,088
Total assets....................... 4,061,656 3,288,200 3,949,773 3,774,327 3,441,543 328,894
Total assets (U.S. GAAP)(6)........ 4,492,453 3,231,926 4,018,517 4,099,139 3,679,766 351,660
Net liabilities.................... 2,394,805 2,877,900 4,763,418 5,301.180 6,905,899 659,967
Net liabilities (U.S. GAAP)(6)..... 3,482,449 2,711,814 4,120,190 5,050,833 6,850,753 654,697
Due to affiliated companies and
related parties(5)................ 300,520 243,283 244,129 349,626 433,420 41,420
Senior notes(5).................... 5,001,751 4,281,409 3,976,797 3,637,930 3,924,000 375,000
Owners' loans(5)................... 333,505 760,378 1,565,268 2,720,201 3,242,793 309,900
Satellite transponders
obligation(7)..................... - - 1,472,221 1,358,277 1,421,655 135,862
Stockholders' deficit.............. (2,394,805) (2,877,900) (4,763,224) (5,301,180) (6,905,899) (659,967)
Capital stock...................... 1,348,201 1,913,116 1,913,116 1,913,116 1,913,116 182,828
Stockholders' deficit (U.S. GAAP)(6) (3,482,449) (2,711,814) (4,120,190) (5,050,833) (6,850,753) (654,697)
OTHER FINANCIAL INFORMATION:
Interest expense................... (703,161) (695,944) (742,589) (903,853) (983,057) (93,947)
Ratio of EBITDA/interest expense... N/A N/A N/A 1.0x 1.3x
Ratio of total debt/EBITDA......... N/A N/A N/A 12.0x 9.9x
Capital expenditures............... 803,245 621,420 686,130 802,722 317,512 30,343
Ratio of earnings to fixed
charges(9)........................ -2.2x -0.4x -1.5x 0.6x -0.7x
Ratio of earnings to fixed charges
(U.S. GAAP)(9).................... -3.5x -0.2x -0.9x 0.0x -0.7x
Cash (used for) provided by
operating activities(10).......... (1,528,672) (309,007) (393,875) 96,814 (333,077) (31,831)
Cash (used for) provided by
financing activities(10).......... 1,656,679 920,318 2,249,850 702,176 872,040 83,337
Cash (used for) provided by
investing activities(10).......... (75,954) (621,423) (2,118,676) (802,722) (317,512) (30,343)
EBITDA(8)..........................Ps.(1,031,283) Ps. (466,442) Ps. (231,011) Ps. 669,410 Ps. 934,099 U.S.$ 89,268
OTHER DATA:
Number of employees................ 288 434 857 2,366 1,834
Number of subscribers.............. 266,000 410,000 590,300 692,000 705,900
Cost per subscriber................U.S.$ 430 U.S.$ 440 U.S.$ 405 U.S.$ 451 U.S.$ 447

SIX MONTHS ENDED JUNE 30,
----------------------------------------------
2002 2003 2003(2)
---- ---- -------
(IN THOUSANDS OF CONSTANT JUNE 30, 2003
MEXICAN PESOS OR THOUSANDS OF U.S. DOLLARS)(3)

STATEMENT OF OPERATIONS DATA:
Net sales..........................Ps. 1,755,260 Ps.1,824,343 U.S.$174,779
Depreciation and amortization...... (492,652) (394,786) (37,822)
Operating (loss) profit............ (55,161) 163,009 15,617
Total integral results of
financing(4)...................... (994,047) (393,005) (37,651)
Other (expenses) income, net....... (2,880) (2,236) (214)
Transponder services-Solidaridad 2
and repointing costs(5)........... (14,769) - -
Restructuring charges(5)........... (3,205) (1,740) (167)
Loss before provisions for taxes... (1,070,062) (233,972) (22,415)
Provisions for taxes(5)............ (33,358) 27,593 2,644
Net loss........................... (1,103,420) (206,379) (19,772)
Net sales (U.S. GAAP)(6)...........Ps. 1,687,230 Ps.1,771,708 U.S.$169,736
Operating (loss) (U.S. GAAP)(6).... (111,663) 163,119 15,627
Net (loss) income (U.S. GAAP)(6)... (1,139,068) (202,293) (19,380)
BALANCE SHEET DATA:
Property and equipment, net(5).....Ps. 1,756,625 1,420,480 136,087
Satellite transponders, net(7)..... 1,269,593 1,208,498 115,779
Total other non-current assets..... 153,736 85,204 8,163
Total assets....................... 3,769,352 3,402,876 326,008
Total assets (U.S. GAAP)(6)........ 4,021,176 3,643,231 349,035
Net liabilities.................... 6,337,962 7,181,647 688,029
Net liabilities (U.S. GAAP)(6)..... 6,251,294 7,136,423 683,696
Due to affiliated companies and
related parties(5)................ 272,248 368,020 35,258
Senior notes(5).................... 4,012,868 4,040,547 387,100
Owners' loans(5)................... 3,731,815 4,072,196 390,132
Satellite transponders
obligation(7)..................... 1,428,663 1,392,536 133,410
Stockholders' deficit.............. (6,337,962) (7,181,647) (688,029)
Capital stock...................... 1,936,265 1,936,265 185,502
Stockholders' deficit (U.S. GAAP)(6) (6,251,294) (7,136,423) (683,696)
OTHER FINANCIAL INFORMATION:
Interest expense................... (478,000) (522,310) (50,039)
Ratio of EBITDA/interes expense.... 1.2x 1.5x
Ratio of total debt/EBITDA......... 10.6x 8.8x
Capital expenditures............... 138,527 193,993 18,585
Ratio of earnings to fixed
charges(9)........................ -1.2x 0.6x
Ratio of earnings to fixed charges
(U.S. GAAP)(9).................... -1.3x 0.6x
Cash (used for) provided by
operating activities(10).......... (339,445) 501,768 48,071
Cash (used for) provided by
financing activities(10).......... 718,098 (151,252) (14,491)
Cash (used for) provided by
operating activities(10).......... (138,527) (193,993) (18,585)
EBITDA(8)..........................Ps. 437,491 Ps. 557,795 U.S.$ 53,439
OTHER DATA:
Number of employees................ 1,983 1,869
Number of subscribers.............. 695,300 809,000
Cost per subscriber................U.S.$ 447 U.S.$ 316

NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA:

(1) Translated solely for convenience into U.S. Dollars and at the Interbank
Rate for Mexican Pesos on December 31, 2002 of Ps. 10.46 per U.S.$1.00.

(2) Translated solely for convenience into U.S. Dollars and at the Interbank
Rate for Mexican Pesos on June 30, 2003 of Ps. 10.438 per U.S.$1.00.

(3) Except for ratios, employee numbers, subscriber numbers, and cost per
subscriber.

(4) Includes interest expense, interest income, foreign exchange gains and
(losses), net gain from monetary position and other net gains or (losses)
from non-monetary assets. See Note 3 to our consolidated annual financial
statements contained in our Form 20-F.

(5) Amounts include principal and accrued interest. See the notes to our
consolidated annual financial statements contained in our Form 20-F.

(6) The principal differences between Mexican GAAP and U.S. GAAP as they relate
to us consist of differences in the capitalization and amortization of
pre-operating expenses, the provision for costs associated with re-pointing
our subscriber's antennas from the Solidaridad 2 satellite to the PAS-9
satellite, the provision for the redundant use of Solidaridad Satellite,
the reversal of certain other accruals, the capitalization of financing
costs, the restatement of property and equipment, and the recognition of
revenue. See Note 21 to our consolidated annual financial statements
contained in our Form 20-F.

(7) Beginning in 2000, we accounted for the agreement for the use of 12
transponders on the PAS-9 satellite as a capital lease, recognizing a
satellite transponder asset and corresponding liability equal to the net
present value of the monthly payments over the lease term. The satellite
transponder asset is depreciated on a straight-line-basis over the lease
term. Part of the monthly payments are recognized in our income statements
as interest expense and part as a reduction of the satellite obligation.
Our income statement also recognizes on a monthly basis the amortization of
the net present value of our satellite transponder asset. Our other
satellite transponder agreements have been accounted for as operating
leases. See Note 6 to our consolidated annual financial statements
contained in our Form 20-F.

(8) EBITDA represents the operating income, before depreciation and
amortization, of Innova and its restricted and unrestricted subsidiaries.
EBITDA is not a U.S. GAAP or Mexican GAAP measurement. The EBITDA disclosed
here is not necessarily comparable to EBITDA disclosed by other companies
because EBITDA is not uniformly defined. Further, the EBITDA presented in
this table is different than consolidated EBITDA as defined in either of
our indentures governing our 12 7/8% Senior Notes due 2007 or the notes
issued hereby. Innova evaluates operating performance based on several
factors, including EBITDA, its primary financial measure of operating
income (loss) before non-cash depreciation of tangible assets and
amortization of intangible assets. Innova considers EBITDA an important
indicator of the operational strength and performance of its businesses,
including the ability to provide cash flows to service debt and fund
capital expenditures. EBITDA eliminates the uneven effect of considerable
amounts of non-cash depreciation of tangible assets and amortization of
intangible assets. Additionally, we believe EBITDA is commonly used by
financial analysts and others in the DTH industry. However, this measure
does not represent cash flow of Innova and its restricted and unrestricted
subsidiaries for the periods presented and should not be considered as an
alternative to net income as an indicator of our operating performance or
as an alternative to cash flow as a source of liquidity. EBITDA should be
considered in addition to, not as a substitute for gross profit, operating
income (loss), net loss and other measures of financial performance
reported in accordance with accounting principles generally accepted in
Mexico. In addition, EBITDA should not be used as a substitute for our
measures of changes in financial position.

The following table sets forth a reconciliation of Innova's EBITDA to net
loss under Mexican GAAP, for the five years ended December 31, 1998, 1999,
2000, 2001 and 2002, and for the six months ended June 30, 2002 and 2003.

AS OF AND FOR THE YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2002
---- ---- ---- ---- ---- ----
(IN THOUSANDS OF CONSTANT DECEMBER 31, 2002 MEXICAN PESOS
OR THOUSANDS OF U.S. DOLLARS)(1)

EBITDA............ Ps.(1,031,283) Ps. (466,442) Ps. (231,011) Ps.669,410 Ps. 934,099 U.S.$ 89,268

Less: Depreciation
and amortization... 484,592 686,129 844,580 948,335 925,078 88,406
------------- ------------ ------------ ---------- ------------ -------------

Operating loss
(profit)........... 1,515,875 1,152,571 1,075,591 278,925 (9,021) (862)
Plus: Other
non-operating
income............. 729,861 847,919 552,398 833,192 509,679 48,708
Less: Other
non-operating
costs and expenses. 1,495,693 695,958 1,335,466 963,712 2,287,563 218,613
------------- ------------ ------------ ---------- ------------ -------------
Net Loss......... Ps. 2,281,707 Ps.1,000,610 Ps.1,858,659 Ps.409,445 Ps.1,768,863 U.S.$ 169,043
- ------------------------------------------------------------------------------------------------------------------------

SIX MONTHS ENDED JUNE 30,
-------------------------
2002 2003 2003(2)
---- ---- -------
(IN THOUSANDS OF CONSTANT JUNE 30,
2003 MEXICAN PESOS OR THOUSANDS
OF U.S. DOLLARS)

EBITDA............ Ps. 437,491 Ps.557,795 U.S.$53,439
Less: Depreciation
and amortization... 492,652 394,786 37,822
------- ------- ------
Operating loss
(profit)........... 55,161 (163,009) (15,617)
Plus: Other
non-operating
income............. 205,115 156,898 15,031
Less: Other
non-operating
costs and expenses. 1,253,374 526,286 50,420
--------- ------- ------
Net Loss......... Ps.1,103,420 Ps.206,379 U.S.$19,772
- ------------------------------------------------------------------------

(9) This prospectus relates to exchange offers being made for the existing
notes. Because the terms of the new notes are essentially identical to the
terms of the existing notes, we do not expect the exchange offer to alter
our ratios of earnings to fixed charges. For purposes of computing the
ratio of earnings to fixed charges, earnings consist of consolidated income
(loss) from continuing operations before provisions for income tax and
employees' profit sharing plus amortization of capitalized interest and
fixed charges, less capitalized interest costs. Fixed charges consist of
interest expense (expensed or capitalized) plus amortization of debt
expense and discount related to indebtedness, and estimated interest
portion of rent expenses (estimated to be one-third of rents). Under U.S.
GAAP the ratio of earnings to fixed charges differs from Mexican GAAP due
to the impact of U.S. GAAP adjustments and other income statement
reclassifications. Under Mexican GAAP, earnings in 1998, 1999, 2000 and
2002 were insufficient to cover fixed charges by Ps. 2,281.7 million, Ps.
1,000.6 million, Ps. 1,858.5 million and Ps. 1,693.3 million, respectively.
For the six months ended June 30, 2002, earnings were insufficient to cover
fixed charges by Ps. 1,070.1 million. Under U.S. GAAP, earnings in 1998,
1999, 2000 and 2002 were insufficient to cover fixed charges by Ps. 3,797.3
million, Ps. 853.7 million, Ps. 1,408.3 million and Ps. 1,724.3 million,
respectively. For the six months ended June 30, 2002, earnings were
insufficient to cover fixed charges by Ps. 1,105.7 million. See Exhibit
12.1 to this prospectus for further information regarding the
reconciliation of these figures to U.S. GAAP.

(10) In 1998, guidance was issued for Mexican companies regarding the
preparation of cash flow information on a price level adjusted basis. Under
this guidance, Mexican companies are required to present a cash flow
statement on a U.S. GAAP basis in constant Pesos with the effects of
inflation on cash and cash equivalents stated separately in a manner
similar to the concept of presenting the effects of exchange rate changes
on cash and cash equivalents as required by SFAS 95.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion together with our unaudited
condensed consolidated interim financial statements and the accompanying notes,
or our interim financial statements, which appear elsewhere in this prospectus,
and our year-end consolidated financial statements and the accompanying notes on
Form 20-F. This information, which analyzes financial data presented in constant
Mexican Pesos in purchasing power as of June 30, 2003, is not directly
comparable to the financial information included in our annual report on Form
20-F, or our year-end financial statements, which, unless otherwise indicated,
is presented in constant Mexican Pesos in purchasing power as of December 31,
2002. The change in the NCPI for the six-month period ended June 30, 2003 was
1.215%. Further, this information is not directly comparable to the information
included in "Capitalization," which, unless otherwise indicated, is presented in
constant Mexican Pesos in purchasing power as of September 30, 2003. The change
in NCPI for the three-month period from June 30, 2003 to September 30, 2003 was
1.031%.

This prospectus contains forward-looking statements that reflect our plans,
estimates and beliefs. Our actual results could differ materially from those
discussed in the forward-looking statements. Factors that could cause or
contribute to these differences include, but are not limited to, those discussed
below and elsewhere in this prospectus, particularly in "Risk Factors." In
addition to the other information in this prospectus, holders of old notes
should consider carefully the following discussion and the information set forth
under "Risk Factors" before participating in the exchange offer. For more
information on the forward-looking statements we use in this prospectus, see
"Cautionary Statement Regarding Forward-Looking Statements."

PREPARATION OF FINANCIAL STATEMENTS

Our financial statements have been prepared in accordance with Mexican
GAAP, which differ in some significant respects from U.S. GAAP and generally
accepted accounting principles adopted in other countries. Note 16 to our
interim financial statements and Note 21 to our year-end financial statements
describe the principal differences between Mexican GAAP and U.S. GAAP as they
relate to us and reconciles net loss and total stockholders' deficit to U.S.
GAAP.

CRITICAL ACCOUNTING POLICIES

In our annual report for the year ended December 31, 2002 on Form 20-F, we
identified certain key accounting policies and estimates on which our financial
condition and results of operations are dependent. Those same key accounting
policies remain critical to analyzing our financial condition and results of
operations. The application of these key accounting policies often involves
complex considerations and assumptions and the making of subjective judgments or
decisions on the part of our management. In the opinion of our management, our
most critical accounting policies under both Mexican GAAP and U.S. GAAP are
those related to the allowance for doubtful accounts receivable, the carrying
value and valuation of long-lived assets, the recognition of certain reserves
and accruals under Mexican GAAP and deferred income taxes. For a description of
our principal accounting policies, see Notes 2, 3 and 21 to our year-end
consolidated financial statements incorporated herein by reference.

ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE

We maintain allowances for doubtful accounts receivable for estimated
credit losses based upon our historical experience and specific customer
collection issues that we identify. We recognize an allowance for all accounts
receivable outstanding greater than 90 days and write-off all receivables
outstanding greater than 120 days against the allowance.

During the first six months of 2003, we recorded additional allowances for
doubtful accounts to reflect the increased risk of uncollectibility, resulting
mainly from the general deterioration in economic conditions in Mexico.

In order to mitigate the risk of uncollectibility, we perform credit checks
on all customers, bill one month in advance and have implemented a "blocking"
system for late paying customers.

A significant difference between the amount of the reserve that we
establish based on our estimates of uncollectible accounts and actual amounts of
unpaid receivables could have a material adverse impact on our future operating
results.

CARRYING VALUE AND VALUATION OF LONG-LIVED ASSETS

We have recognized on our balance sheet certain long-lived assets including
our satellite transponder asset, which was recognized in 2000. These long-lived
assets are evaluated for impairment when events and circumstances indicate that
the asset's carrying value may not be recoverable. We recognize impairment
losses to the extent we believe that the carrying value exceeds the anticipated
estimated future net cash flows generated by the asset. Different assumptions
regarding such cash flows could materially affect our analysis of
recoverability. Further, as discussed in "Item 3. Risk factors -- Key
Information -- our significant debt levels limit our ability to fund our
operations, affect our profitability and could lead to difficulties in obtaining
new sources of financing required to continue operations" in our annual report
on Form 20-F and elsewhere in this prospectus, in past years we did not generate
positive cash flows from operations and we depended on funding from our equity
owners; however, during the last five quarters we did not require funding from
our equity owners. If we require and do not receive such funding in the future,
or if our assumptions regarding future positive cash flows are not correct, we
may need to recognize significant impairment losses and accelerated depreciation
of the carrying value of these assets.

As of April 2002, we stopped utilizing the service of the Solidaridad 2
satellite, continuing only with the service of the PAS-9 satellite. In December
2002, transmission equipment with a book value of Ps. 38.3 million were
associated with Solidaridad 2 and we decided to recognize an impairment charge
amounting to Ps.30.8 million for the equipment that could not be utilized by the
PAS-9 satellite (which was included in the "Transponder services - Solidaridad 2
and reorientation cost" line item), and to create a spare-part inventory for the
remaining Ps. 7.5 million transmission equipment that could be utilized by the
PAS-9 satellite. This impairment loss, together with the payments for the use of
Solidaridad 2 in the first quarter of 2002 amounting to Ps.14.1 million, was
reflected as a nonrecurring charge of Ps.25.9 million in 2002. The nonrecurring
charge was partially offset by the reversal of unutilized provisions recorded in
2000 amounting to Ps.19.0 million. See Notes 5 and 15 to our consolidated
financial statements.

DEFERRED INCOME TAXES

Under both Mexican GAAP and U.S. GAAP, we are required to record deferred
income tax assets and liabilities by using enacted tax rates in order to give
effect to temporary differences between the book and tax basis of assets and
liabilities. If enacted tax rates change, we adjust the deferred tax assets and
liabilities, through the provision for income taxes in the period of change, to
reflect the enacted tax rate expected to be in effect when the deferred tax
items reverse. We also record a valuation allowance to reduce our deferred tax
assets to the amount that is more likely than not to be realized. While we have
considered future taxable income and tax planning strategies in assessing the
need for the valuation allowance, if we were to determine that we would be able
to realize our deferred tax assets in the future in excess of the net recorded
amount, an adjustment to the deferred tax asset would increase income in the
period such determination was made. Should we determine that we would not be
able to realize all or part of our net deferred tax asset in the future, an
adjustment to the deferred tax asset would be charged to income in the period
such determination was made.

EFFECTS OF INFLATION, CURRENCY EXCHANGE FLUCTUATIONS AND TRANSLATION EFFECTS

The following table sets forth, for the periods indicated:

o the percentage that the Peso devalued or appreciated against the U.S.
Dollar;

o the Mexican inflation rate;

o the U.S. inflation rate; and

o the percentage change in Mexican gross domestic product, or GDP,
compared to the prior period.

SIX MONTHS ENDED JUNE 30,
-------------------------
2002 2003
---- ----

(Appreciation) devaluation of the Mexican Peso as compared to the U.S.
Dollar(1).................................................. 8.5% (0.2)%
Mexican inflation rate(2)....................................... 2.6 1.2
U.S. inflation rate(3).......................................... 1.8 1.5
Increase (decrease) in Mexican GDP(4)........................... 2.0 0.2

- ----------
(1) Based on changes in the Interbank Rate, as reported by Banamex, as of the
end of each period, which were as follows: Ps. 9.96 as of June 30, 2002;
and Ps. 10.44 per U.S. Dollar as of June 30, 2003.
(2) Based on changes in the NCPI from the previous period, as reported by the
Mexican Central Bank, which were as follows: 100.012 as of June 30, 2002,
and 104.154 as of June 30, 2003.
(3) As reported by the Federal Reserve Bank of New York.
(4) As reported by the Instituto Nacional de Estadistica, Geografia e
Informatica.

Mexican GAAP requires that our financial statements recognize the effects
of inflation, so long as the inflation rate for the period being analyzed was
greater than 3%. Except as disclosed in this prospectus, financial data for all
periods presented in our financial statements and in this prospectus have not
been restated in constant Pesos in purchasing power as of June 30, 2003 in
accordance with the third amendment to Bulletin B-10 because the NCPI for the
six months ended June 30, 2003 was 1.215%.

For the six months ended June 30, 2003, in nominal terms, the Peso
appreciated against the U.S. Dollar by 0.2% and the rate of inflation was 1.2%.
For the six-month period ending June 30, 2002, the Peso depreciated 8.5% and the
rate of inflation in Mexico was 2.6%. The rate of inflation in Mexico has
declined substantially during the last few years as compared to historical
rates. Nonetheless, at approximately 4.2% per annum (as measured from June 2002
to June 2003), Mexico's current level of inflation remains higher than the
annual inflation rates of its main trading partners. See "Item 3. Key
Information -- Risk factors -- Risk factors related to Mexico -- Mexico Has
Experienced Adverse Economic Conditions," and "Item 5. Operating and financial
review and prospects -- Effects of inflation, currency exchange fluctuations and
translation effects" included in our annual report on Form 20-F, for additional
discussion regarding the effects of inflation in our business.

U.S. DOLLAR-DENOMINATED OBLIGATIONS, COSTS AND EXPENSES

Any devaluation of the Peso will likely adversely affect our liquidity and
results of operations by increasing the Peso equivalent of U.S.
Dollar-denominated operating costs and expenses.

We have incurred and expect to continue to incur approximately 70% of our
obligations payable in U.S. Dollars, while our revenues continue to be generated
primarily in Mexican Pesos. Therefore, we are subject to currency exchange rate
risk. In addition to our obligations with respect to the new notes offered
hereby and our 12 7/8% senior notes due 2007, our U.S. Dollar-denominated
obligations will also continue to include satellite signal reception and
retransmission fees, programming commitments and equipment costs. We have not
had any U.S. Dollar-denominated revenues since 1998 other than interest income
on certain restricted investments, while our U.S. Dollar-denominated operating
costs and expenses have been significant and are expected to continue to exceed
U.S. Dollar-denominated revenues, if any. During the six months ended June 30,
2003, approximately 37% of our total operating expenses, not considering
interest expense of Ps. 512.1 million, were U.S. Dollar-denominated.

For the six months ended June 30, 2003, we did not engage in any hedging or
other transactions to manage the risks associated with foreign currency or
interest rate fluctuations. Because we do not currently engage in hedging
activity, shifts in currency exchange rates could decrease the value of our
revenues relative to our costs, resulting in a material adverse effect on our
financial position. See "Item 3: Key information -- Risk factors -- Risk factors
related to Mexico -- Currency fluctuations or the devaluation or depreciation of
the Peso could limit the ability of us and others to convert Pesos into U.S.
Dollars or other currencies and/or adversely affect our financial condition"
included in our annual report on Form 20-F. We may consider entering into
transactions to hedge the risk of exchange rate fluctuations if we are able to
obtain hedging arrangements on commercially satisfactory terms.

NEW ACCOUNTING PRONOUNCEMENTS

In March 2003, the MIPA issued Bulletin C-15 "Impairment and Disposition of
Long-Lived Assets." Bulletin C-15 requires (i) the recognition and measurement
of the impairment of long-lived assets to held and used, including goodwill, and
(ii) the measurement of long-lived assets to be disposed of by sale. Bulletin
C-15 is effective for periods beginning on January 1, 2004, with early adoption
recommended.

We are currently evaluating the impact of this Bulletin on our results of
operation and financial position. However, we do not believe that the adoption
of this Bulletin will have a material impact on our results of operation and
financial position. See also Note 14 to our interim financial statements and
"Item 5 -- Operating and financial review and prospects -- New accounting
pronouncements" in our annual report on Form 20-F.

RECENTLY-ISSUED U.S. GAAP PRONOUNCEMENTS

In April 2003 the Financial Accounting Standards Board, or FASB, issued
Statement No. 149, or SFAS 149, Amendment of SFAS No. 133 on Derivative
Instruments and Hedging Activities. SFAS 149 amends and clarifies accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities under SFAS 133. In particular, it
(1) clarifies under what circumstances a contract with an initial net investment
meets the characteristic of a derivative as discussed in SFAS 133, (2) clarifies
when a derivative contains a financing component, (3) amends the definition of
an underlying to conform it to the language used in FIN 45 and (4) amends
certain other existing pronouncements.

SFAS No. 149 is effective for contracts entered into or modified after June
30, 2003, except as stated below and for hedging relationships designated after
June 30, 2003.

The provisions of SFAS 149 that relate to SFAS 133 Implementation Issues
that have been effective for fiscal quarters that began prior to June 15, 2003
should continue to be applied in accordance with their respective effective
dates. In addition, certain provisions relating to forward purchases or sales of
when-issued securities or other securities that do not yet exist should be
applied to existing contracts as well as new contracts entered into after June
30, 2003. SFAS 149 should be applied prospectively. We do not expect that the
adoption of this Statement will have a material impact on our results of
operations and financial position.

In May 2003 the FASB issued Statement of Financial Accounting Standards No.
150 ("SFAS 150"), Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS 150 modifies the accounting
for certain financial instruments that, under previous guidance, issuers could
account for as equity. The Statement requires that those instruments be
classified as liabilities in statements of financial position.

SFAS 150 affects an issuer's accounting for three types of freestanding
financial instruments, namely:

o mandatorily redeemable shares, which the issuing company is obligated
to buy back in exchange for cash or other assets;

o financial instruments, other than outstanding shares, that do or may
require the issuer to buy back some of its equity shares in exchange
for cash or other assets; and

o unconditional obligations that can be settled with equity shares, the
monetary value of which is fixed, tied solely or predominantly to a
variable such as a market index, or varies inversely with the value of
the issuer's equity shares.

SFAS 150 does not apply to features embedded in financial instruments that
are not derivatives in their entirety.

In addition to its requirements for the classification and measurement of
financial instruments within its scope, SFAS 150 also requires disclosures about
alternative ways of settling such instruments and the capital structure of
entities, all of whose shares are mandatorily redeemable.

SFAS 150 is effective for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. We are currently evaluating the
impact of SFAS 150 on our results of operations and financial position. See also
Note 17 to our interim financial statements and "Item 5 -- Operating and
financial review and prospects -- Recently issued U.S. GAAP pronouncements" in
our annual report on Form 20-F.

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

1. The equity investment at risk is not sufficient to permit the entity
to finance its activities without additional subordinated financial
support from other parties, which is provided through other interests
that will absorb some or all of the expected losses of the entity.

2. The equity investors lack one or more of the following essential
characteristics of a controlling financial interest:

a. The direct or indirect ability to make decisions about the
entity's activities through voting rights or similar rights.

b. The obligation to absorb the expected losses of the entity if
they occur, which makes it possible for the entity to finance its
activities.

c. The right to receive the expected residual returns of the entity
if they occur, which is the compensation for the risk of
absorbing the expected losses.

This Interpretation applies immediately to variable interest entities
created after January 31, 2003, and to variable interest entities in which an
enterprise obtains an interest after that date. It applies in the first fiscal
year or interim period beginning after June 15, 2003, to variable interest
entities in which an enterprise holds a variable interest that it acquired
before February 1, 2003. On October 10, 2003, the FASB issued FASB Staff
Position 46-6, which defers the effective date for applying the provisions of
FIN 46 to interim or annual periods ending after December 15, 2003. The
Interpretation applies to public enterprises as of the beginning of the
applicable interim or annual period.

This Interpretation may be applied prospectively with a cumulative-effect
adjustment as of the date on which it is first applied or by restating
previously issued financial statements for one or more years with a
cumulative-effect adjustment as of the beginning of the of the first year
restated. The Company is currently evaluating the impact of this Interpretation,
however it is not expected that the adoption of this Interpretation will have a
material impact on its results of operations and financial position. See also
Note 16 to our interim financial statements.

OPERATING RESULTS

Overview. We operate a digital Ku-band DTH satellite pay television service
in Mexico. We were formed on July 25, 1996 and we launched our digital Ku-band
DTH service on December 15, 1996. From our inception to the launch of DTH
services, we were engaged principally in development and start-up activities.

commitments, expenses of increasing our subscriber base and financing costs.
While we began receiving revenues from subscriptions in 1997, our operating
costs, expenses and financing costs incurred exceeded these revenues during each
of our six full years of operations. We expect to continue to experience net
losses and negative cash flow for the next several years while we develop and
expand our DTH service. See "Item 3: Key Information -- Risk factors -- Risk
factors related to our business -- We may never generate revenue sufficient to
cover our costs," included in our annual report on Form 20-F. Since our
inception, we have relied substantially upon proceeds from our senior notes and
loans and capital contributions by Televisa, News Corporation and Liberty Media
to fund our operations. Although we have not required any funding from our
equity holders for the last six quarters (including the quarter ended September
30, 2003), our expansion plans will continue to require substantial capital
expenditures and investments, and we cannot assure you that our business will
generate net profits or positive cash flow. See "-- Liquidity and Capital
Resources."

During the six-month period ended June 30, 2003, we continued to
concentrate on managing and expanding our subscriber base and its quality,
further developing the infrastructure and points of sale for distribution of our
DTH service and acquiring quality programming. We increased our subscriber base
11.9% from over 723,200 subscribers as of June 30, 2002 to approximately 809,000
subscribers as of June 30, 2003, even while facing several adverse situations
such as highly competitive market conditions and the economic recession. This
trend in our subscriber base continued through the third quarter of 2003. As of
September 30, 2003, the number of gross active subscribers was 826,100,
including 46,850 commercial subscribers. This increase of 17,100 net subscribers
represents a 2.1% increase in the three months ended September 30, 2003.

We believe four elements continue to drive our growing subscriber base:

o our superior programming content, including our exclusive events;

o our extensive distribution network and direct sales force;

o our competitive pricing policy; and

o our enhanced TV features.

In over six full years of operations, we have derived most of our revenues
from DTH programming fees, subscription fees, installation fees, rental fees and
membership fees all paid by our subscribers. We currently lease downconverters
IRDs to our subscribers, and since October 2000 we have retained title to the
antennas and low noise block downconverters, or LNBs, and provided them to our
subscribers to use as part of their subscriptions. Until we retained title to
this equipment in October 2000, the various fees we charged were substantially
similar to our current Sky Kit sales. IRD rental fees, subscription fees,
membership fees along with advertising sales revenue, accounted for
approximately 36.3% of our revenues in the six-month period ended June 30, 2003.
Programming fees, channel fees, pay-per-view fees, and special events fees
accounted for approximately 59.5% of our revenue in the six-month period ended
June 30, 2003. All of our revenues are generated in Mexico, principally from
consumers. Our DTH revenues are principally a function of the number of
subscribers, the mix of programming packages selected by the subscribers and the
rates charged.

Our principal operating costs and expenses originate from:

o programming costs;

o subscriber management (including call center costs);

o the costs of providing, replacing and refurbishing equipment for
subscribers;

o transmission and related functions, including uplink and downlink
services; and

o marketing and administration.

Our programming includes Televisa's four over-the-air channels, which we
offer on a DTH exclusive basis, and certain pay-TV exclusive soccer games and
special events. Our distribution network includes an in-house sales force and 12
external, third-party master wholesalers, incorporating more than 3,650 points
of sale. In addition to these basic programming costs, we incurred further
programming and free special events costs during the first six months of 2003 in
order to continue to offer high profile sporting events, such as the Mexican
Soccer Tournaments, the 2003 U.S. Open Tennis Tournament, the Mexican Baseball
league, Golf Tournaments and reality shows, such as Big Brother2 and Big Brother
VIP2, for current and potential subscribers to introduce them to Sky's new
product offerings.

Programming represents our largest cost at the present time. Subscriber
management expenditures include our costs to operate our SMS and conditional
access system, both of which are largely dependent on DTH subscriber levels.
Transmission and related costs, including technical costs, are largely dependent
upon the number of transponders serving Innova. See "Item 4: Information on the
Company -- Business overview -- Operations -- Satellites," included in our
annual report on Form 20-F.

Our capital expenditures include the purchase of technical equipment,
software and systems and IRDs. Our operating costs and capital expenditures from
inception through fiscal year 2002 were financed by capital contributions and
loans made by our equity owners, the proceeds of our senior notes, and by our
own generated cash flow. In 2003, however, we have generated the necessary
liquidity to cover our capital expenditures incurred in the first six months of
2003 from cash flow from operations. See "-- Liquidity and Capital Resources."

Net Sales. Our recurring revenues consist of fees paid by subscribers to
receive one of our programming packages and pay-per-view services. Net sales of
Ps. 1,824.3 million for the six months ended June 30, 2003, increased by Ps.
69.1 million or 3.9% as compared to June 30, 2002, mainly due to the sustained
growth of our subscriber base.

We have experienced a continued upward trend in the number of subscribers
each year since our inception, which generally increases our net sales. Our
subscriber base experienced a 14.6% growth during the first six months of 2003,
as compared to 4.5% for the first six months of 2002. As of June 30, 2003, we
had approximately 809,000 subscribers as compared to approximately 723,200 at
the end of June 30, 2002.

Effective January 15, 2002, we increased the prices of our programming
packages, the IRD rental fee and other related services by approximately 12.5%
on a weighted-average basis primarily to minimize the negative impact of the new
10% tax on telecommunication services. So far in 2003 we have not increased
prices for our services. For more information regarding the new
telecommunications tax, see "Item 4: Information on the Company -- Business
overview -- Mexican regulation of DTH services -- Telecommunications tax."

Cost of Sales. Cost of sales increased by Ps. 17.0 million or 3.0% to Ps.
570.5 million for the six months ended June 30, 2003, as compared to the six
months ended June 30, 2002. This increase was due to higher subscriber
activations and related costs, as well as higher U.S. Dollar-denominated costs,
such as programming costs, resulting from the growth of our subscriber base and
the devaluation of the Peso against the U.S. Dollar, as compared to the six
months ended June 30, 2002.

For the six months ended June 30, 2003 and 2002, we incurred a total of Ps.
358.2 million and Ps. 347.2 million in programming fees, respectively,
representing an increase of Ps. 11.0 million or 3.2% from June 30, 2002 to 2003.
These increases resulted primarily from the growth in the number of our
subscribers. Most of our programming agreements require us to pay a fee based
upon the number of subscribers receiving the programming service. As our
subscriber base increases, we experience an overall increase in our programming
fees, but, in some cases, benefit from volume based discount rates. Programming
fees are expected to continue to increase in 2003, albeit at a slower rate, as
the number of subscribers and audience levels increase and we receive the
benefit of larger volume based discounts.

We receive uplink and downlink services from DTH TechCo Partners, or
TechCo, at its Florida facilities and from Televisa at its Mexico City facility.
For the first six months of 2003, we expensed approximately Ps. 63.2

million for these costs as compared to approximately Ps. 61.9 million for the
six months ended June 30, 2002. Under the terms of the agreement between Innova
and TechCo, we will pay TechCo. Ps. 99.2 million (approximately U.S.$9.5
million) per year for uplink and downlink services over the ten-year life of the
agreement. We have also entered into an agreement with Televisa for the
provision of uplink and downlink, play out and compression services relating to
locally-sourced programming, at its Mexico City facility. We estimate that our
future annual commitments under these arrangements with Televisa will be Ps.
44.9 million (approximately U.S.$4.3 million) per year. We negotiate these fees
with Televisa on at least an annual basis and we believe that the fees we paid
for these services are comparable to what we would have paid an unaffiliated
third party for similar services.

We currently retain ownership of all of the Sky Kit equipment, including
the antenna, Smart Card and low noise block, in order to more easily remove the
equipment when a subscriber cancels the service or we cancel the service for
lack of payment. Because we now retain ownership of these assets, we record them
in property, plant and equipment and amortize them over three years.

Concession fees paid to the Mexican government and to the actors and
artists guild are currently recorded in cost of sales. Our payment of 3.5% of
programming revenues and subscriber maintenance fees each year to the Mexican
government under the terms of our concessions is included in our cost of sales.
This payment will continue through the remainder of our concessions. See "Item
4. Information on the company -- Business overview -- Mexican regulation of DTH
services -- Our concessions," in our annual report on Form 20-F.

Administrative Expenses. Administrative expenses include all costs
associated with our finance and administrative functions. These costs include
labor, salaries and benefits, insurance, and professional fees. In the six
months ended June 30, 2003, our administrative expenses decreased Ps. 1.7
million or 2.9% to Ps. 56.4 million from Ps. 58.1 million for the six months
ended June 30, 2002. This decrease resulted primarily from our budgetary
controls, which have resulted in lower administrative expenses. We also
experienced lower salary and other employment-related costs due to lower
employee headcount.

Selling Expenses. Selling expenses consist of direct and indirect personnel
costs for our sales force, commissions and bonuses we pay to distributors and
independent sales agents, advertising and marketing costs, bad debt expenses and
expenses associated with promotional materials. In the six months ended June 30,
2003, our selling expenses decreased Ps. 29.7 million or 6.5% to Ps. 429.4
million from Ps. 459.1 million for the same period in the prior year. This
decrease was primarily due to lower expenses associated with offering fewer free
special events to subscribers.

Other Operating Expenses. Other operating expenses include direct and
indirect customer service costs, such as call center and repair service
personnel, equipment maintenance and repairs and IRD refurbishment costs. Other
operating expenses of Ps. 210.2 million for the six months ended June 30, 2003,
decreased by Ps. 36.9 million or 14.9%, as compared to the six months ended June
30, 2002. This result was mainly due to lower operating personnel costs,
resulting from reduced headcount, and related expenses.

Depreciation and Amortization. Depreciation and amortization includes
depreciation of property and equipment and amortization of intangible assets and
pre-operating expenses. We recorded Ps. 394.8 million in depreciation and
amortization for the six months ended June 30, 2003, as compared to Ps. 492.7
million for the six months ended June 30, 2002. The decrease of Ps. 97.9
million, or a 19.9% decline, was primarily due to lower amortization during the
first-half of 2003 since certain intangible assets were fully amortized in 2002,
and a lower asset depreciation charge. The lower asset depreciation charge is
due to the fixed assets (principally IRDs) we acquired costing less than the
assets they replaced.

Integral Results of Financing. The integral result of financing can have a
significant impact on the financial statements of a company in periods of high
inflation. Mexican GAAP requires companies to present all financial effects of
operating and financing the business under inflationary conditions in their
income statements. Integral result of financing primarily includes:

o interest earned on cash and temporary investments, interest paid on
borrowed funds and interest earned and paid on accounts of affiliated
companies;

o foreign exchange gains or losses associated with monetary assets and
liabilities denominated in foreign currencies; and

o net gains or losses resulting from holding monetary assets and
liabilities exposed to inflation.

Our foreign currency-denominated assets and liabilities affect our foreign
exchange position. We record a foreign exchange gain or loss if the exchange
rate of the Peso rises or falls compared to the other currencies in which our
monetary assets or liabilities are denominated. On the other hand, if we have
monetary liabilities that exceed our monetary assets during period of inflation,
we will generate a monetary gain.

Our net integral results of financing improved principally due to a
significant foreign exchange rate gain. Our foreign exchange gain in the first
six months of 2003 was primarily due to the appreciation of the Mexican Peso
versus the U.S. Dollar of approximately 0.2%. Any devaluation of the Peso will
likely affect our liquidity and results of operations, considering our
substantial U.S. Dollar-dominated indebtedness, operating costs and expenses,
while our revenues are primarily Peso-denominated. Any decrease in the value of
the Peso against the U.S. Dollar could also cause us to incur foreign exchange
losses, which would reduce our net income.

PROVISION FOR TAXES

The corporate income tax rate in Mexico was 35% in 2002 and 34% for the
first six months of 2003, and is expected to decrease 1% each year in each of
the following two years. From January 1, 2002 on, Mexican entities may no longer
defer 5% of their corporate income tax on reinvested earnings.

Also, dividends, either in cash or in any other form, are currently not
subject to Mexican withholding tax.

We are also subject to an asset tax on the book value of certain assets.
However, any income tax payments can be credited against asset tax payments. In
2002 and the first six months of 2003 the asset tax rate was 1.8%. Under Mexican
law, taxpayers cannot deduct from their asset tax basis debt contracted with
nonresident companies or financial intermediaries. We challenged these
provisions of Mexico's asset tax law but at the same time, and in order to avoid
penalties and interest payments in the event we could lose the appeal, we paid
approximately Ps. 43.7 million of tax on assets for the year ended December 31,
2001 in March of 2002; approximately Ps. 45.7 million in monthly payments during
the year ended December 31, 2002; and approximately Ps. 7.6 million for the
months of January and February 2003.

We were exempt from the asset tax in 1999, and only a minimal amount was
due in 2000. For more information on this proceeding, see "Item 10. Additional
Information -- Legal Proceedings," included in our annual report on Form 20-F.

Mexican law requires Mexican entities to pay employees profit sharing in an
aggregate amount equal to 10% of our taxable income (calculated without
reference to inflation adjustments or tax loss carry forwards). This profit
sharing is in addition to agreed compensation and benefits. We have not been
required to pay employee profit sharing because we have not generated taxable
income.

On October 30, 2003, the President of Mexico granted a tax holiday equal to
100% of the 10% excise tax on telecommunications, effective November 1, 2003 and
applicable only over the tax payable from this date and going forward. Although
the resolution provided for a November 1, 2003, effective date, the Ministry of
Finance and Public Credit has not yet issued rules or regulations to implement
the tax holiday, and we cannot assure you that we will be subject to this
benefit.

We continue proceedings to recover the approximately U.S.$18.0 million and
U.S.$14.0 million that we have already paid in this tax for 2002 and the first
nine months of 2003, respectively; however, we cannot assure you that we will be
able to recover these amounts, even if we obtain as favorable a resolution for
our amparo proceedings for 2003 as we did for the year 2002.

U.S. GAAP RECONCILIATION

Our consolidated financial statements are prepared in accordance with
Mexican GAAP, which differs in certain significant respects from U.S. GAAP. Our
U.S. GAAP net loss for the six month period ended June 30, 2003 was Ps. 202.3
million as compared to a net loss of Ps. 1,139.1 million for the six month
period ended June 30, 2002. The decrease in the net loss is primarily due to the
reasons discussed under Mexican GAAP. There were no new U.S. GAAP adjustments
for the six month period ended June 30, 2003. See Note 16 to the interim
financial statements for a complete disclosure of the U.S. GAAP net loss and
stockholders' equity.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception, we have been funded principally with capital
contributions and loans from our equity owners as well as the proceeds from our
12 7/8% senior notes. We have experienced, and expect to continue experiencing
during the next few years, cumulative net losses and therefore will require
continued access to various financing sources. The roll-out and expansion of our
Ku-band DTH pay television service has required substantial amounts of capital
from inception through June 30, 2003 for:

o satellite transponder capacity;

o uplink and downlink services;

o the construction of additional transmission facilities and related
equipment and acquisition of call center and subscriber management
assets;

o the acquisition of Sky Kit components and the installation of the
equipment at subscribers' locations;

o the acquisition of assets from Grupo Medcom, S.A. de C.V., Imbursa,
S.A. de C.V., Sociedad de Inversion de Capitales and Alejandro Palma;
and

o the funding of other operating losses and working capital
requirements.

Through December 31, 2002, we used our capital, received primarily from our
owners, for the funding of operating losses and other working capital
requirements, including satellite transponder service costs, for payment of
interest to bondholders and for the acquisition of Sky Kit components. However,
for the first time since our inception, we have not required any capital
contributions or loans from our owners to fund our capital needs for the first
nine months of 2003. So far in 2003, for the balance of the year, we have not
required and do not expect to require capital contributions or loans from our
owners in order to continue to meet working capital requirements.

We hold our cash and cash-equivalent assets in both Pesos and U.S. Dollars.
For the six months ended June 30, 2003, resources provided by operating
activities amounted to Ps. 501.8 million as compared to resources used by
operating activities of (Ps. 339.4) million for the six months ended June 30,
2002. This variance from period to period was primarily due to our improved
operating results. At the same time, resources used in financing

activities totaled Ps. 151.3 million for the six months ended June 30, 2003 as
compared to resources provided in financing activities of Ps. 718.1 million for
the six months ending June 30, 2002. This variance was due to the effect of
foreign exchange rate gains or losses caused by the Peso's depreciation and
relative appreciation against the U.S. Dollar between the two six-month periods.
Resources used in investing activities totaled Ps. 194.0 million for the six
months ended June 30, 2003, as compared to Ps. 138.5 million for the six months
ended June 30, 2002. The variance from period to period was principally due to
higher capital expenditures due to our new SMS, implemented during 2003.

The amount of our capital expenditures in the long term will depend on
numerous factors beyond our control or ability to predict, including the
availability of financing, nature of future expansion and acquisition
opportunities, economic conditions, subscriber demand, competition and
regulatory developments. For the first half of 2003, we incurred total capital
expenditures of approximately U.S.$24.3 million, which included the purchase of
Sky Kit components (e.g. IRDs, antennas and accessories), new SMS software and
computer equipment. We generated the necessary liquidity to cover these costs,
as well as our satellite transponder costs and our interest payments to holders
of our 12 7/8% senior notes due 2007, from cash flow from operations. Based on
our current business plan, we anticipate that our capital expenditure
requirements for the remainder of 2003 will be approximately U.S.$20.0 million,
but we cannot provide assurance that this will be the case. These anticipated
capital expenditures do not include potential acquisitions, which we could make
to expand our business and/or to enter into complementary businesses. In the
future, we may consider acquisitions of investments in, or joint ventures with,
other companies. See "Risk Factors -- News Corporation has acquired an indirect
interest in DIRECTV Mexico, our DTH competitor, and we may consider a
transaction involving DIRECTV Mexico." Although historically we have relied upon
funding from our equity owners to finance our operations, for the first six
months of 2003, we did not require additional funding from our shareholders.
This was primarily due to positive cash flow from operations and the current
balance of cash resources available. We do not expect to require shareholder
funding in the second half of 2003 to finance liquidity requirements.

Historically, our owners have made amounts in loans and equity available to
us, depending on our monthly funding requirements for capital expenditures and
operations. Our owners increased our equity capital by U.S.$49.0 million in 1999
pro rata, based on their respective equity interests in us. Our owners also
loaned us and, in one instance, our subsidiary Novavision, a total of U.S.$41.6
million in 1999. The owners lent us another U.S.$81.0 million in 2000,
U.S.$132.8 million in 2001 and U.S.$29.5 million in 2002. On July 22, 2002, we
entered into a credit agreement with our owners to memorialize the terms of
certain of the loans described above. This credit agreement also requires us to
execute promissory notes to evidence the loans we received from our owners from
2000 to 2002 as well as to evidence any new loans we obtain from our owners. The
loans bore a fixed interest rate of 9% per annum and were payable at maturity,
including any applicable withholding taxes, and matured ten years from the date
of disbursement. Effective as of September 9, 2003, our owners capitalized all
loans made by them or any of their affiliates to us. The amount of the loans and
accrued interest capitalized as of September 9, 2003 was approximately Ps. 4.3
billion. The capitalization did not affect the percentage ownership interests of
our owners. The lenders contributed, assigned and transferred to Innova
Holdings, S. de R.L. de C.V., a newly incorporated limited liability company
with variable capital, all their loans and accrued interest owing at the time of
the capitalization in exchange for social parts in Innova Holdings. Innova
Holdings, in turn, contributed, assigned and transferred such loans and accrued
interest to us. In exchange for this capital contribution, Innova issued to
Innova Holdings new Series C limited-voting social parts. After giving effect to
the capitalization, Televisa continues to indirectly own 60%, News Corporation
continues to indirectly own 30% and Liberty Media continues to indirectly own
10% of Innova.

In addition to loans from our equity owners, we have accessed the debt
markets to raise the necessary funds for our capital expenditures. On April 1,
1997, we issued U.S.$375 million in principal amount of 12 7/8% senior notes due
2007. The notes bear interest, semi-annually, at a rate of 12 7/8% and mature on
April 1, 2007. These notes are redeemable at our option, in whole or in part, at
any time on or after April 1, 2002, at specified redemption prices. On October
20, 2003, we redeemed U.S.$287 million in principal amount of these notes.
Accordingly, U.S.$88 million in principal amount remains outstanding. In
September 2003, we issued U.S.$300 million of senior notes in a private offering
at a price of 100%. The notes bear interest at a rate of 9.375% and mature on
September 19, 2013. After deducting underwriting discounts and commissions and
fees and expenses, the net proceeds received were approximately U.S.$296
million. We used U.S.$287 million to redeem this amount of principal of our
12 7/8%

senior notes. The indentures governing our senior notes restrict the amount of
any future indebtedness we can incur and in some instances restricts how we can
use the amounts we receive in loans from our owners, if any. For further
discussion of our indebtedness to our owners, see "Item 7: Major Shareholders
and Related Party Transactions -- Related Party Transactions -- Loans and
Capital Contributions from Our Owners," included in our annual report on Form
20-F. We believe that in response to this refinancing and our improving
operational and financial performance, combined with our strong shareholder
sponsorship, the ratings agencies upgraded our credit ratings. On September 4,
2003, Standard and Poor's upgraded Innova's foreign currency corporate credit
ratings from B-/Stable to B+/Positive. On September 25, 2003, Moody's upgraded
Innova's ratings from B3/Stable to B2/Stable.

We expect to continue to meet our additional ordinary course financing
requirements principally through cash flow from operations and, if needed,
additional capital contributions or loans from our owners. In the event of
significant expenditures or acquisitions, we could make use of other sources of
liquidity such as public or private offerings of equity and/or debt securities,
and/or commercial bank loans if they come available. Although our owners
informally committed to lend us or contribute to us up to approximately
U.S.$25.0 million during fiscal year 2003, we did not require any of this
funding, as our cash flow from operations has met our needs during fiscal 2003.
We cannot assure you, however, that we will not require additional loans from
our owners in future years. We have no current arrangements with respect to
sources of additional financing other than our owners. We cannot assure you that
additional financing will be available to us or, if available, that such
financing can be obtained on terms acceptable to us. Our ability to obtain
future financing is limited by the terms of the indentures governing our senior
notes and may be further limited by the terms of any future financing
arrangements. Failure to obtain future financing could delay or prevent our
development and expansion plans, impair our ability to meet our debt service
requirements (including our obligations with respect to the senior notes) or
other obligations (such as transponder service commitments), and have a material
adverse effect on our business. See "Item 3: Key Information -- Risk Factors --
Risk Factors Related to Our Business -- Our Significant Debt Levels Limit Our
Ability to Fund Our Operations and Could Lead to Difficulties in Obtaining New
Sources of Financing Required to Continue Operations" included in our annual
report on Form 20-F.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

Innova's contractual obligations and commercial commitments consist
primarily of credit facilities, as described above. The following table provides
details regarding Innova's contractual and commercial obligations subsequent to
June 30, 2003:

PAYMENTS DUE BY PERIOD
(IN THOUSANDS OF U.S. DOLLARS)

LESS THAN 12-36 36-60 AFTER 60
--------- ------ ------ --------
TOTAL 12 MONTHS MONTHS MONTHS MONTHS
--------- ------ ------ ------
BEYOND
2003-2004 2004-2006 2006-2008 2008

LONG-TERM LOANS
Senior Exchange Notes
due 2007(1)....................... $375,000 $287,000 - $88,000 -
Notes offered hereby................ $300,000 - - - $300,000

OTHER LONG-TERM OBLIGATIONS
Capital lease - satellite
transponder(2).................... $248,600 $20,400 $40,800 $40,800 $146,600
Advertising agreement with Televisa(3) $7,668 $7,668 - - -
Advertising agreement with TV
Azteca(4)......................... $4,200 $2,100 $2,100 - -
Software and License agreement
with CSG (New SMS)(5)............. $5,014 $123 $1,147 $1,021 $2,723
Reality shows BigBrother2 and
BigBrother VIP2 from Televisa(6) $2,300 $2,300 - - -
Rights to rebroadcast TV
Azteca channels(4)................ $300 $300 - - -
Other liabilities...................
------------------------------------------------------------------------
TOTAL CONTRACTUAL OBLIGATIONS $943,082 $319,891 $44,047 $129,821 $449,323
------------------------------------------------------------------------

(1) In April 1997, Innova issued U.S. Dollar-denominated senior unsecured fixed
rate notes in an aggregate principal amount of U.S.$375 million, with
semi-annual interest payable at a rate of 12 7/8% per annum. See "Item 5.
Operating and Financial Review and Prospects -- Liquidity and Capital
Resources" included in our annual report on Form 20-F. On October 20, 2003,
we used the net proceeds of the offering of the new notes to redeem
U.S.$287 million in principal amount of our 12 7/8% senior notes due 2007.
See "Business Developments -- Recent Developments -- Refinancing our
Indebtedness."

(2) In February 1999, Innova entered into a U.S. Dollar-denominated agreement
with PanAmSat for the use of 12 transponders on the PAS-9 satellite. The
term of the agreement is for the expected economic useful life of the
satellite, which was approximately 15 years at launch. Accordingly, under
generally accepted accounting principles the agreement is accounted for as
a capital lease, and we recognized on our balance sheet a satellite
transponder asset and a corresponding liability equal to the net present
value of the monthly payments of U.S.$1.7 million over the 15 year term of
the agreement. See "Item 5. Operating and financial review and prospects --
Results of operations -- Cost of sales," in our annual report on Form 20-F.

(3) See "Item 7. Major shareholders and related party transactions -- Related
party transactions -- Ongoing service arrangements with other related
parties -- Advertising," in our annual report on Form 20-F.

(4) See "-- Trend Information" below for more details.

(5) Includes license fees and technical support services. See "Item 10:
Additional information -- Material contracts -- New subscriber management
system contract" in our annual report on Form 20-F.

(6) See "Item 7. Major shareholders and related party transactions -- Related
party transactions -- Programming arrangements with related parties" in our
annual report on Form 20-F.

AMOUNT OF COMMITMENTS EXPIRING BY PERIOD
(IN THOUSANDS OF U.S. DOLLARS)

LESS THAN 12-36 36-60 AFTER 60
--------- ------ ------ --------
TOTAL 12 MONTHS MONTHS MONTHS MONTHS
----- --------- ------ ------ --------
2003- 2004- 2006- SUBSEQUENT TO
2004 2006 2008 2008

Systems agreement with NDS(1)................. $8,700 $8,700 - - -
Consulting services agreement with CSG(2)..... $3,865 $3,865 - - -
---------------------------------------------------------------
$12,565 $12,565 - - -
---------------------------------------------------------------

(1) See "Item 7. Major shareholders and related party transactions -- Related
party transactions -- Ongoing service arrangements with other related
parties -- Systems agreement between Innova and NDS" in our annual report
on Form 20-F.

(2) See "Item 10. Additional information -- Material contracts -- New
subscriber management system contract" in our annual report on Form 20-F.

RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

We do not have any significant internal research and development programs.
We generally purchase any new technologies used to upgrade our services from our
suppliers.

TREND INFORMATION

For the first three quarters of 2003, we have continued to grow our
subscriber base. As of September 30, 2003, we had approximately 826,100
subscribers, an increase of 2.1% as compared with approximately 809,000
subscribers as of June 30, 2003. These subscriber numbers include approximately
46,850 commercial subscribers as of September 30, 2003, which increased from
approximately 33,700 commercial subscribers as of September 30, 2002. Our
commercial subscribers generate substantially less revenue per subscriber than
our residential subscribers. We believe the increase in subscriber activations
is due to the quality of our programming content and our promotional programs.

Although our subscriber base continues to grow in the aggregate, we
continue to experience customer cancellations. We believe the main factor
causing subscriber cancellations during the first three quarters of 2003, as
with the end of 2002, was the continuing weakness in the Mexican economy and
signal theft. Nevertheless, we experienced a decrease in the rate of subscriber
cancellations as compared to the nine months ended September 30, 2002.

We reported a net loss of Ps. (385.6) million for the three months ended
September 30, 2003, as compared to a net loss of Ps. (340.7) million in the same
period of 2002. This result was primarily due to the foreign exchange loss of
Ps. (483.1) million in this third quarter of 2003 as compared to a foreign
exchange loss of Ps. (250.6) million during the third quarter of 2002. We
reported a net loss of Ps. (594.1) million for the nine months ended September
30, 2003, as compared to a net loss of Ps. (1,456.6) million for the same period
in the prior year. The Company's foreign exchange loss in the first nine months
of 2003 was primarily due to the lower depreciation of the Mexican Peso versus
the U.S. Dollar of approximately 5.2% from December 31, 2002 to September 30,
2003 versus a depreciation of the Mexican Peso versus the U.S. Dollar of
approximately 11.4% from December 31, 2001 to December 30, 2002. Additional
devaluations of the Peso will negatively continue to affect our liquidity and
results of operations, considering our substantial U.S. Dollar-denominated
indebtedness, operating costs and expenses, while our revenues are primarily
Peso-denominated. Any decrease in the value of the Peso against the U.S. Dollar
could cause us to incur foreign exchange losses, which would reduce our net
income.

lose the appeal, we paid approximately Ps. 43.7 million of tax on assets for the
year ended December 31, 2001 in March of 2002; approximately Ps. 45.7 million in
monthly payments during the year ended December 31, 2002; and approximately Ps.
7.6 million for the months of January and February 2003. On March 19, 2003, the
court issued a resolution in our favor. Since the declaratory judgment was
favorable to us, to the extent that the Asset Tax Law is not amended, we will be
able to deduct debts payable to nonresidents from the asset tax basis. As of
today, we have already recovered the amounts paid as described above. See "Item
10. Additional information -- Taxation -- Mexican taxation" and "Item 5.
Operating and financial review and prospects -- Results of operations --
Provision for taxes" in our annual report on Form 20-F.

On July 24, 2003, after consulting with DTH industry officials, President
Fox announced that the 10% excise tax that has been imposed on DTH services
since January 1, 2002, would be rescinded. On October 30, 2003, the Federal
Executive Branch published in the Official Gazette of the Federation of Mexico,
a tax holiday equal to 100% of the 10% excise tax on telecommunications,
effective November 1, 2003 and applicable only to the tax payable from this date
and going forward. Although the resolution provided for a November 1, 2003,
effective date, the Ministry of Finance and Public Credit has not yet issued
rules or regulations to implement the tax holiday, and we cannot assure you that
we will be subject to this benefit.

We continue proceedings to recover the approximately U.S.$18.0 million and
U.S.$14.0 million that we have already paid due to this tax for 2002 and the
first nine months of 2003, respectively; however, we cannot assure you that we
will be able to recover these amounts, even if we obtain as favorable a
resolution for our amparo proceedings for 2003 as we did for the year 2002.

On March 18, 2003, DIRECTV Latin America, LLC, or DLA, announced that it
had filed a voluntary petition for bankruptcy protection, under Chapter 11 of
the U.S. Bankruptcy Code, in the U.S. Bankruptcy Court in Wilmington, Delaware.
DLA cited its debt burden and high fixed costs and listed liabilities of
U.S.$1.6 billion as of the end of 2002. DLA also reported a loss of 54,000 net
subscribers in the first quarter of 2003 or 7% of its subscriber base. DLA is a
competitor of ours that provides DTH programming and services in Mexico through
an affiliated Mexican operating company, Grupo Galaxy, or DIRECTV Mexico.
According to its 2002 annual report, Hughes owns approximately 75% of DLA and
holds significant indirect interest in DIRECTV Mexico. On December 23, 2003, Fox
Entertainment Group, Inc., a 22.0% owned News Corporation subsidiary, acquired a
34% ownership interest in Hughes. The businesses contained in Hughes include a
leading U.S. satellite broadcaster, DIRECTV, which has more than 12 million
subscribers; an 81% equity holding in satellite operator PanAmSat; and Hughes
Network Systems, a provider of broadband satellite network solutions. As a
result of News Corporation's acquisition of Hughes, News Corporation acquired an
indirect interest in DIRECTV Mexico, our DTH competitor.

Our Social Part Holders Agreement provides that neither Televisa nor News
Corporation may directly or indirectly operate or acquire an interest in any
business that operates a DTH satellite system in Mexico (subject to certain
limited exceptions). We cannot predict what impact either the DLA bankruptcy or
News Corporation's acquisition of an interest in Hughes will have on the
competitive environment for DTH in Mexico. See "Risk Factors -- News Corporation
has acquired an indirect ownership interest in DIRECTV Mexico, our DTH
competitor, and we may consider a transaction involving DIRECTV Mexico" in this
prospectus for a discussion of a potential dispute between Televisa and News
Corporation, and "Item 3. Key information -- Risk factors -- Risk factors
related to our business -- We face intense competition in the pay television
market in Mexico," "-- We have significant transactions with our owners who are
involved in related businesses which creates the potential for conflicts of
interest," "-- One of our owners, News Corporation, may acquire significant
interests in DIRECTV, our DTH competitor in Mexico, and

PanAmSat, our sole satellite provider, and we cannot predict what effect this
will have on us" and "-- Our equity holders have, or may acquire, interests in
businesses in Mexico which compete with us for customers and business
opportunities" and "Item 4. Information on the Company -- Business overview --
Competition" in our annual report on Form 20-F.

On April 14, 2003, a U.S. Bankruptcy Judge authorized DIRECTV Mexico to
reject its agreement for the exclusive rights, in several Latin America
countries including Mexico, to broadcast the 2006 FIFA World Cup soccer
tournament. As a result, we believe the programming disadvantage we faced in
2002, when DIRECTV Latin America had the exclusive Latin American rights to
broadcast the World Cup soccer tournament, may be reduced. We cannot predict
what effect this will have on our ability to attract new subscribers or retain
existing subscribers. See "Item 3. Key information -- Risk factors -- Risk
factors related to our business -- We face intense competition in the pay
television market in Mexico" and "-- We may not be successful in expanding or
maintaining our subscriber base which we must do to service our debt and achieve
profitability" in our annual report on Form 20-F.

BUSINESS DEVELOPMENTS

The following describes various developments in our business affairs since
December 31, 2002. You should read the following discussion together with "Item
4. Business Overview" in our annual report on Form 20-F to obtain further
information regarding our business history, development and the market in which
we compete.

OUR STRATEGY

We believe that the Ku-band DTH satellite pay television industry in Mexico
offers substantial opportunities for growth due to the large potential market
size, high number of addressable households and low penetration of pay-TV
services in Mexico. We believe that Mexico is the second largest television
market in Latin America after Brazil, with approximately 19.6 million television
households as of December 31, 2002. Mexico remains one of the least penetrated
pay-TV markets in the Latin American region, with an estimated 3.6 million
pay-TV subscriber households (excluding households receiving unauthorized cable,
Ku-band and C-band services), representing approximately 18.4% of the Mexican
television market, as of December 31, 2002. We believe that our potential
subscriber base principally consists of households with an annual household
income of at least Ps. 202,945, as well as commercial establishments such as
hotels, restaurants and bars. We estimate that, as of December 31, 2002, Mexico
had approximately 4.5 to 5.0 million households with annual income of at least
Ps. 202,945, representing approximately 23.0% to 25.5% of the country's total
television households. Of these households, we estimate that 3.5 million to 4.0
million could receive DTH service. Mexico has a strong demand for entertainment
programming as the average television household in Mexico watches more than
seven hours of television daily, according to figures from the Instituto
Brasilero de Opinion Publica y Estadistica.

We believe that Mexico represents one of the largest and most attractive
markets for Ku-band DTH satellite pay television services in Latin America. We
seek to further consolidate our position as the leading provider of DTH
satellite services in Mexico. We believe that we can achieve our business
objective by offering a broad range of high quality programming via superior
satellite service at a competitive price. Through these means, we intend to
increase our market share by persuading our competitors' customers to switch to
our service and capitalizing on any projected increase in demand for pay
television services in Mexico.

We intend to continue implementing our business strategy through the
following means:

Offering High Quality Programming. Televisa and News Corporation are major
sources of programming content and have granted us exclusive DTH broadcast
rights in Mexico to program services or channels over which Televisa and News
Corporation have control (including over-the-air, cable, sports and pay-per-view
services). In addition to sports, news and general entertainment programming,
Televisa provides us with exclusive DTH broadcast rights to its four
over-the-air broadcast channels, which are among the most popular television
channels in Mexico. We are the only DTH service that offers all of the
over-the-air broadcast signals from Mexico City as well as signals from the
State of Mexico, Guadalajara, Mexicali, Monterrey, Puebla/Veracruz and Tijuana.
News Corporation has also granted us DTH broadcast rights in Mexico to Canal
Fox, one of the leading entertainment pay television channels in Mexico and
Latin America, Fox News, a 24-hour news channel, Speed Channel, a channel
primarily devoted to motor sports, and National Geographic. Although we can
provide no assurances that our relationship with Televisa and News Corporation
will not be affected by News Corporation's acquisition of an indirect interest
in DIRECTV Mexico, we believe that, through our relationship with Televisa and
News Corporation, we have negotiated, and believe that we will be able to
continue to negotiate, favorable terms for programming both with third-party
content providers in Mexico and with international suppliers from the United
States, Europe and Latin America.

Providing Exclusive Events and Enhanced TV Features. In addition to our
general programming, we provide exclusive events and enhanced TV features. We
set aside five extra channels exclusively for special events, known as Sky
Events, which include boxing matches, concerts, sports and movies. As part of
our regular service, we offer three channels with interactive features:
Interactive News, Interactive Sports and Interactive Kids. Some events are
broadcast using these features to show camera angles for auto races, reality
shows and certain soccer matches, as well as to watch instant replays of
sporting events. Sky interactive also allows subscribers to watch different
content on the same channel and to select the content they prefer to display on
the full screen. These exclusive events and enhanced TV features broaden our
market appeal.

Capitalizing on Relationships with Televisa and News Corporation. In addition to
programming, Televisa and News Corporation provide technology, extensive
distribution networks and infrastructure support to Innova, giving us a
significant competitive edge in the DTH satellite market in Mexico. We believe
that we will continue to benefit from cross-promotional opportunities with
Televisa's established media and entertainment businesses in Mexico and the rest
of the Spanish-speaking world. We also have access to technology developed by
News Corporation and its affiliates on terms no less favorable to Innova than
those available to unaffiliated third parties. Although we can provide no
assurances that our relationship with our sponsors will not be affected by News
Corporation's acquisition of an indirect interest in DIRECTV Mexico, we believe
the synergies with, and experience of, our sponsors will continue to benefit
us. See "Risk Factors - News Corporation has acquired an indirect ownership
interest in DIRECTV Mexico, our DTH competitor, and we may consider a
transaction involving DIRECTV Mexico" in this prospectus.

Providing Superior Digital Ku-band DTH Satellite Service. Our digital
Ku-band DTH satellite technology offers larger coverage, greater channel
selection, and enhanced video and audio quality as compared to our competitors'
terrestrial broadcast, cable, Multipoint Microwave Distribution System, or MMDS,
and C-band DTH television services. We believe that a substantial number of the
country's television households are unlikely to be serviced by cable or MMDS due
to the country's mountainous terrain and the high cost of offering cable or MMDS
services in many areas of the country. In contrast, the satellite footprint of
PAS-9 that we utilize covers virtually all of the television households in
Mexico. In addition, we use satellites we believe are less susceptible to signal
interference from adverse weather conditions than the service currently
available from the competing Ku-band DTH service.

Offering Competitive Rates and Fees. We believe our subscription fees and
programming prices are competitive with those offered by other pay television
platforms. We currently charge our subscribers the following fees: a one-time
fee for subscription, installation and activation; a monthly programming fee; a
monthly rental fee for the integrated receiver and other hardware; and an annual
membership fee. In order to remain competitive, we have lowered our subscription
fee several times and offered special promotion on several occasions. See "Item
4. Information on the company -- Business overview -- Programming and services
- -- Distribution, sales and marketing" and "-- Competition" in our annual report
on Form 20-F for further information regarding our and our competitors' fee
structures.

Implementing Aggressive Marketing Campaigns. We continue to advertise
extensively throughout Mexico to heighten the growing interest in DTH satellite
technology. Our marketing strategy includes advertising through national and
regional television, radio, newspapers, magazines, billboards, direct mail,
Internet, movie and airport advertising, sponsorship of special events and
promotional activities at restaurants, bars, cultural or other social events. We
also offer promotions intended to attract subscribers from other pay-TV systems,
including offering free subscription, installation and activation to potential
subscribers. In addition to advertising, in October 2000, we formed our own
sales force in order to complement our existing distribution network, increase
market penetration in Mexico's main cities, improve the quality of our
subscriber base and reduce the acquisition cost of new subscribers. Over the
past three years, we have established direct sales forces in Mexico City,
Guadalajara, Monterrey, Puebla, Tijuana, Culiacan, Leon, Queretaro, Merida,
Acapulco, Hermosillo, La Paz, and Torreon.

Emphasizing Customer Service. We designed a customer service program based
on Televisa's experience with its existing Mexican cable operations and News
Corporation's experience with British Sky Broadcasting plc. We have made
significant investments in hardware and software to manage the growth of our DTH
platform and to enhance customer service. These include our new SMS, which we
have recently implemented, and our call center. Currently, the new SMS is in
service and its stabilization is substantially complete, and we expect the new
SMS to provide more effective management and billing services to our
subscribers. We have also improved the efficiency of our call center by using
interactive voice response, predictive dialer and customer management
relationship systems. We believe that customer service is an important factor in
developing customer loyalty and differentiating our service from that of our
competitors.

Operating on a Break-Even Cash Flow Basis. An important objective of ours
has been to operate on a break-even cash flow basis. During the last three
quarters of 2002 and for the first nine months of 2003, for the first time since
we commenced operations, we achieved positive cash flow provided by operating
activities. In order to help finance our operating activities, our owners have
informally committed to either (i) lend U.S.$25 million to us this year pursuant
to the terms of our credit agreement with our shareholders, which is described
above in

"Operating and Financial Review and Prospects," or (ii) contribute additional
capital to us this year in an amount equal to U.S.$25 million; however, to date
we have not borrowed any of this amount. We currently believe that we will not
need to borrow any of these available funds this year in order to finance our
liquidity requirements, although no assurances can be given in this regard. If
we do not borrow any of the funds made available to us by our owners in 2003,
this will be the first full calendar year since our formation that we have not
received new funding from our owners in order to help satisfy our liquidity
requirements.

RECENT DEVELOPMENTS

Financial Performance. Our financial performance has continued to improve
during 2003. For the nine months ended September 30, 2003, we reported net
revenue of Ps. 2,775.0 million, representing an increase of Ps. 115.2 million,
or 4.3%, as compared to net revenue for the nine months ended September 30,
2002. This increase is mainly due to the growth of our subscriber base. Our
EBITDA for the nine months ended September 30, 2003, improved by Ps. 149.7
million, or 21.2%, to Ps. 857.1 million, as compared to Ps. 707.4 million the
nine months ended September 30, 2002. Our EBITDA improvement was due to higher
revenues and lower operating expenses as compared to the comparable period in
2002. Additionally, our capital expenditures continued to decrease for the first
three quarters of 2003, primarily as a result of continued decreases in the cost
per IRD, the number of IRDs purchased based on our subscriber growth, and
because we continue to improve our ability to recover and refurbish IRDs. For
the remainder of this fiscal year, we anticipate that our capital expenditures
for IRDs will remain flat or slightly decrease as we are currently
re-negotiating our IRD supply contracts with all of our vendors. Nevertheless,
our capital expenditures could increase should we be unable to renegotiate these
supply contracts on favorable terms or we experience a significant increase in
IRD requirements due to an increase in subscribers or should we require IRDs
with new technology or functionality. Our remaining 2003 IRD purchase obligation
is anticipated to be approximately U.S.$4.8 million. Peso-denominated
information in this paragraph is stated in constant Pesos in purchasing power as
of September 30, 2003. The change in the NCPI for the three-month period ended
September 30, 2003 was 1.031%. For a discussion of our unaudited results of
operations as of and for the six months ended June 30, 2003, see "Operating and
Financial Review and Prospects."

Subscriber Base. As of September 30, 2003, the number of our gross active
subscribers increased to 826,100, including 46,850 commercial subscribers. This
represents a 12.7% increase from 732,700 subscribers, including 33,700
commercial subscribers as of September 30, 2002 or approximately 93,400 gross
active subscribers, as new subscribers substantially exceeded subscriber
cancellations during this twelve-month period. We believe the increase in the
subscriber base was primarily due to the sustained increase in customer
activations in response to the high quality of our programming content, special
programming and exclusive events, as well as to our aggressive marketing
campaigns. In addition to increasing the number of subscribers, we continue to
improve our subscriber base quality by, among other things, encouraging new and
current subscribers to pay their monthly programming services through automatic
charges to a credit card.

The continued growth of our subscriber base is subject to our continued
efforts to reduce subscriber turnover and pirating of pay television signals. In
an attempt to mitigate the latter, in July 2003, we agreed to create the
Asociacion Nacional de TV Restringida with a group of pay television providers
in order to primarily combat piracy, among other things. We cannot guarantee
that the efforts of this group will prove successful in deterring piracy. See
"Item 3. Key information -- Risk factors -- Risk factors related to our business
- -- We could lose subscribers and revenue if others are able to steal our
signals" in our annual report on Form 20-F.

The growth of our subscriber base also depends on our ability to offer the
services that our customers demand and to respond effectively to technological
developments in the pay television industry that may allow our competitors to
offer new and expanded services. See "Item 3. Key information -- Risk factors --
Risk factors related to our business -- We may not be successful in expanding or
maintaining our subscriber base which we must do to service our debt and achieve
profitability" and "-- Changes in technology could render our service obsolete
or increase our costs" in our annual report on Form 20-F. Recently, the
Secretaria de Comunicaciones y Transportes, which regulates the pay television
industry in Mexico, authorized cable television providers to begin providing the
services of bi-directional data transmission, which permits them to provide
their customers enhanced television, interactive programming services,
near-video-on-demand services, video-on-demand services and e-commerce

applications. We are reviewing this development; however, we cannot anticipate
what impact the offering of such services by our competitors will have on our
subscriber growth or results of operations, and we cannot assure you that we
will be able to offer comparable services to continue to attract sufficient
subscribers to grow our subscriber base. See "Item 4. Information on the company
- -- Business overview --Competition -- Cable television and MMDS" in our annual
report on Form 20-F.

Programming. During the second and third quarters of 2003, we continued to
enhance our programming content by adding shows on a pay television exclusive
basis, including the Big Brother 2 and the Big Brother VIP 2 reality shows, the
Wimbledon and U.S. Open Tennis Tournaments, boxing matches, certain matches of
the Mexican 2002-2003 Closing Soccer Tournament and 2003-2004 Opening Soccer
Tournament, and certain matches of the Mexican Baseball league. We also added
the LPGA, U.S. PGA and U.S. Senior PGA Golf Tournaments on a non-exclusive
basis. In addition to new programming contracts, we continue to operate under
arrangements with a number of third-party programming providers. These providers
currently provide a number of programming alternatives for both our basic and
premium digital services packages. Substantially all of these arrangements are
on a non-exclusive basis, are denominated in U.S. Dollars and are for limited
terms, typically one to two years, and may be renewed at our option upon their
expiration. We cannot assure you, however, that these arrangements will not be
terminated, or that we will be able to renew these contracts and arrangements
upon their expiration, or if so, upon similar or otherwise favorable terms.

Subscriber Management System. In November 2003, we successfully implemented
our new SMS to support the growth of our subscriber base. Currently this system
is in service and its stabilization is substantially complete. Our current
agreement with NDS plc related to the maintenance of our old SMS will be
terminated.

Directors. Our Board of Directors currently consists of the following
persons appointed by Televisa: Emilio Fernando Azcarraga Jean, Alexandre Moreira
Penna da Silva, Alfonso de Angoitia Noriega, Jose Antonio Baston Patino, Salvi
Rafael Folch Viadero, and Juan Sebastian Mijares Ortega; and the following
persons appointed by News Corporation: Romulo Pontual, Bruce Churchill, Jacopo
Bracco and Lawrence Jacobs. The alternate directors now include the following
persons appointed by Televisa: Pablo Abel Vazquez Oria, Jose Antonio Lara del
Olmo, Joaquin Balcarcel Santa Cruz, Jorge Lutteroth Echegoyen, Carlos Ferreiro
Rivas, and Maria Azucena Dominguez Cobian; and the following persons appointed
by News Corporation: Paul Haggerty, Paula Wardinski and Emilio Carrillo Gamboa.
The Executive Committee currently consists of: Messrs. Azcarraga Jean, de
Angoitia Noriega, Vazquez Oria, Penna da Silva, Pontual, Churchill and Bracco.
The alternate members include: Messrs. Mijares Ortega, Folch Viadero, Ferreiro
Rivas, Lara del Olmo, Jacobs, Carrillo Gamboa and Ms. Wardinski.

Mexican Economic Conditions. Although the Mexican economy has exhibited
signs of improvement, general macro-economic sluggishness continues. In fact, we
believe the main factor causing the subscriber cancellations we experienced
since January 1, 2003 was the continuing weakness in the Mexican economy. Any
material devaluation or depreciation of the Peso could also thwart any
improvement in the Mexican economy, and accordingly adversely affect our
subscriber growth. Additionally, decreases in the value of the Peso against the
U.S. Dollar could cause us to incur foreign exchange losses, reducing our net
income. Recent political events could further slow economic reform and progress.
The political party of Mexico's President Vicente Fox lost additional seats in
the Mexican midterm congressional voting held in July 2003. The increased party
opposition and legislative gridlock arising out of the elections could further
hinder President Fox's ability to implement his economic initiatives.

On July 24, 2003, after consulting with DTH industry officials, President
Fox announced that the 10% excise tax that has been imposed on DTH services
since January 1, 2002, would be rescinded. On October 30, 2003, the Federal
Executive Branch published in the Official Gazette a tax holiday equal to 100%
of the 10% excise tax on telecommunications, effective November 1, 2003 and
applicable only to the tax payable from this date and going forward. Although
the resolution provided for a November 1, 2003, effective date, the Ministry of
Finance and Public Credit has not yet issued rules or regulations to implement
the tax holiday, and we cannot assure you that we will be subject to this
benefit.

Refinancing our Indebtedness. On October 20, 2003, we used the net proceeds
of the offering of the old notes, together with available cash, to redeem U.S.
$287 million in principal amount of our 12 7/8% senior notes due 2007, and to
pay a redemption premium, accrued interest, Mexican withholding taxes and
related fees and expenses. After redeeming this principal amount, U.S. $88
million in principal amount of the 12 7/8% senior notes remains outstanding. We
believe this refinancing will lower our cost of borrowing.

Further, effective as of September 9, 2003, our owners capitalized all
loans made by them or any of their affiliates to us. The amount of the loans and
accrued interest capitalized as of September 9, 2003 was approximately Ps. $4.3
billion. The capitalization did not affect the percentage ownership interests of
our owners. The lenders contributed, assigned and transferred to Innova
Holdings, S. de R.L. de C.V., a newly incorporated limited liability company
with variable capital, all their loans and accrued interest owing at the time of
the capitalization in exchange for social parts in Innova Holdings. Innova
Holdings in turn contributed, assigned and transferred such loans and accrued
interest to us. In exchange for this capital contribution, Innova issued to
Innova Holdings new Series C limited-voting social parts. After giving effect to
the capitalization, Televisa continues to indirectly own 60%, News Corporation
continues to indirectly own 30% and Liberty Media continues to indirectly own
10% of Innova. See "Capitalization" for further discussion regarding our
outstanding indebtedness as of September 30, 2003.

News Corporation's Acquisition of an Indirect Interest in DirecTV Mexico.
On December 23, 2003, Fox Entertainment Group, Inc., a 82.0% owned News
Corporation subsidiary, acquired a 34% ownership interest in Hughes. The
businesses contained in Hughes include a leading U.S. satellite broadcaster,
DIRECTV, which has more than 12 million subscribers; an 81% equity holding in
satellite operator PanAmSat; and Hughes Network Systems, a provider of broadband
satellite network solutions. As a result of News Corporation's acquisition of
Hughes, News Corporation acquired an indirect interest in DIRECTV Mexico, our
DTH competitor.

Our Social Part Holders Agreement provides that neither Televisa nor News
Corporation may directly or indirectly operate or acquire an interest in any
business that operates a DTH satellite system in Mexico (subject to certain
limited exceptions). We cannot predict what impact either the DLA bankruptcy or
News Corporation's acquisition of an interest in Hughes will have on the
competitive environment for DTH in Mexico. See "Risk Factors -- News Corporation
has acquired an indirect ownership interest in DIRECTV Mexico, our DTH
competitor, and we may consider a transaction involving DIRECTV Mexico" in this
prospectus for a discussion of a potential dispute between Televisa and News
Corporation, and "Item 3. Key information -- Risk factors -- Risk factors
related in our business -- We face intense competition in the pay television
market in Mexico," "-- We have significant transactions with our owners who are
involved in related businesses which creates the potential for conflicts of
interest," "-- One of our owners, News Corporation, may acquire significant
interests in DIRECTV, our DTH competitor in Mexico, and PanAmSat, our sole
satellite provider, and we cannot predict what effect this will have on us" and
"-- Our equity holders have, or may acquire, interests in businesses in Mexico
which compete with us for customers and business opportunities" and "Item 4.
Information on the Company -- Business overview -- Competition" in our annual
report on Form 20-F.

DESCRIPTION OF THE NEW NOTES

We issued the old notes and will issue the new notes (unless the context
otherwise requires, for the purposes of this section, the "Notes" shall be
deemed to refer collectively to the old notes and any new notes) under an
Indenture, dated September 19, 2003, as amended or supplemented through the
expiration date (the "Indenture"), among Innova, as issuer (the "Company"), the
Bank of New York, as Trustee, Registrar, Paying Agent and Transfer Agent (the
"Trustee, Registrar, Paying Agent and Transfer Agent"), the Bank of New York
(Luxembourg), as Luxembourg Paying Agent and Transfer Agent (the "Luxembourg
Paying Agent and Luxembourg Transfer Agent") and the holders and beneficial
owners of the Notes. The terms of the new notes and the old notes are identical
in all respects, except that, because the offer of the new notes will have been
registered under the Securities Act, the new notes will not be subject to
transfer restrictions, registration rights or the related provisions for
increased interest if we default under the related registration rights
agreement. The following summary of certain provisions of the Indenture and the
Notes does not purport to be complete and is subject to, and qualified in its
entirety by, reference to the provisions of the Indenture, including the
definitions of certain terms contained in the Indenture. Capitalized terms not
defined in this section of the prospectus have meanings as set forth in the
Indenture.

GENERAL

The Notes will be unsubordinated obligations of the Company, initially
limited to U.S.$300,000,000 aggregate principal amount, and will mature on
September 19, 2013. Each Note will bear interest at the rate shown on the front
cover of this prospectus from September 19, 2003 or from the most recent
Interest Payment Date to which interest has been paid or provided for, payable
semiannually (to Holders of record at the close of business on the March 4 or
September 4 immediately preceding the Interest Payment Date) on March 19 and
September 19 of each year, commencing March 19, 2004. Interest will be computed
on the basis of a 360-day year of twelve 30-day months. If the exchange offer is
consummated on the terms and within the period contemplated by this prospectus,
no special interest will be payable.

Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, the City of New York (which initially will
be the corporate trust office of the Trustee at 101 Barclay Street, New York,
New York 10286) and in Luxembourg (which initially will be at the offices of the
Paying Agent and Transfer Agent at The Bank of New York (Luxembourg) S.A.,
Aerogolf Centre, IA Hoehenhof, L-1736 Senningerberg Luxembourg); provided that,
at the option of the Company, payment of interest may be made by check mailed to
the Holders at their addresses as they appear in the Security Register. For so
long as the Notes are listed on the Luxembourg Stock Exchange and the rules of
such stock exchange shall so require, the Company shall maintain a Paying Agent
and a Transfer Agent in Luxembourg.

The Notes will be issued only in fully registered form, without coupons, in
denominations of U.S.$10,000 of principal amount at maturity for Rule 144A
Global Notes and in denominations of U.S.$1,000 of principal amount at maturity
for Regulation S Global Notes and, in both cases, in integral multiples of
U.S.$1,000 in excess thereof. See "-- Book-entry; delivery and form." No service
charge will be made for any registration of transfer or exchange of Notes, but
the Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith. In the event
a Note is transferred in part, the Company will issue a new Note in principal
amount equal to the untransferred portion thereof and any new note so issued may
be received at the office of the Trustee in New York or the Paying Agent in
Luxembourg.

The Company may, subject to the covenants described below under "--
Covenants" and applicable law, issue additional Notes under the Indenture. The
Notes offered hereby and any additional Notes subsequently issued would be
treated as a single class for all purposes under the Indenture, including
without limitation, waivers, amendments, redemptions and Offers to Purchase.

For purposes of the Indenture, the U.S. Dollar equivalent of any amounts
denominated in a foreign currency (including Pesos) shall be calculated using
the noon U.S. Dollar buying rate in New York City for wire

transfers of such currency as published by the Federal Reserve Bank of New York
on the date such foreign currency amount is received, incurred or paid.

The old notes and the new notes will be considered collectively to be a
single class for all purposes under the Indenture, including, without
limitation, waivers, amendments, redemptions and Offers to Purchase.

Subject to applicable law, the Trustee and the Paying Agents shall pay to
the Company upon request any monies held by them for the payment of principal or
interest that remains unclaimed for two years, and, thereafter, Holders entitled
to such monies must look to the Company for payment as general creditors.

For so long as the Notes are listed on the Luxembourg Stock Exchange, all
notices regarding the Notes will be valid if published in one daily newspaper in
Luxembourg or in such other manner as the Trustee may approve and will otherwise
comply with applicable Luxembourg Stock Exchange rules and regulations.
Additionally, so long as required under Luxembourg Stock Exchange rules, we will
publish a notice if we intend to redeem the Notes, if we intend to offer to
purchase the Notes, if one of our Subsidiaries becomes a guarantor of the Notes
or if we modify or amend the Indenture. It is expected, however, that
publication of notices will normally be made in the Luxemburger Wort. Any such
notice shall be deemed to have been given on the date of such publication or, if
published more than once or on different dates, on the date of the first such
publication in the required newspaper or newspapers.

OPTIONAL REDEMPTION

The Notes will be redeemable, at the Company's option, in whole or in part,
at any time or from time to time, on or after September 19, 2008 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date that is prior to the Redemption Date to receive interest due on an Interest
Payment Date), if redeemed during the twelve-month period commencing September
19 of the years set forth below:

YEAR REDEMPTION PRICE

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

2008 104.6875%
2009 103.1250%
2010 101.5625%
2011 100.0000%

In addition, if, at any time within the 36-month period following the
Closing Date, the Company receives Net Cash Proceeds from one or more sales of
Common Stock of the Company, the Company may use all or a portion of any such
Net Cash Proceeds to redeem up to 35% of the aggregate principal amount of the
Notes at a Redemption Price (expressed as a percentage of principal amount) of
109.375%, plus accrued and unpaid interest to the Redemption Date (subject to
the rights of Holders of record on the relevant Regular Record Date that is
prior to the Redemption Date to receive interest due on an Interest Payment
Date); provided that (i) at least U.S.$195 million aggregate principal amount of
Notes remains Outstanding after each such redemption and (ii) such redemption
occurs within 90 days of such sales.

In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not listed on a national securities exchange, on a
pro rata basis, by lot or by such other method as the Trustee in its sole
discretion shall deem to be fair and appropriate; provided that no Note of
U.S.$1,000 in principal amount at maturity or less shall be redeemed in part. If
any Note is to be redeemed in part only, the notice of redemption relating to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in principal amount equal to the unredeemed portion thereof
will be issued in the name of the Holder thereof upon cancellation of the
original Note.

The Notes will also be subject to redemption in whole, but not in part, at
the option of the Company at any time at 100% of their principal amount,
together with accrued interest thereon, if any, to the Redemption Date, in the
event the Company has become or would become obligated to pay, on the next date
on which any amount would be payable with respect to such Notes, any Additional
Amounts in excess of those attributable to a withholding tax rate of 10% as a
result of a change in or amendment to the laws (including any regulations, rules
or rulings promulgated thereunder) of Mexico (or any political subdivision or
taxing authority thereof or therein), or any change in or amendment to any
official position regarding the application, administration or interpretation of
such laws, rules, regulations or rulings, including a holding of a court of
competent jurisdiction, which change or amendment is announced or becomes
effective on or after the Closing Date. See "-- Additional Amounts."

RANKING

The Notes will be unsecured, unsubordinated indebtedness of the Company,
will rank pari passu in right of payment with all existing and future unsecured
unsubordinated indebtedness and will be senior in right of payment of principal
and interest to all subordinated indebtedness of the Company.

The Notes will be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries (including trade payables).

FURTHER ISSUES

The Company may, from time to time, without the consent of the Holders of
the Notes, create and issue further notes having the same terms and conditions
as the Notes in all respects, except for the issue date, the issue price and
first payment of interest thereon. Additional notes issued in this manner may be
consolidated with and form a single issue with the Notes.

CERTAIN DEFINITIONS

Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the definition of all terms as well as any other capitalized term
used herein for which no definition is provided.

FOR PURPOSES OF THE FOLLOWING DEFINITIONS, THE COVENANTS DESCRIBED UNDER
"COVENANTS" AND THE INDENTURE GENERALLY, ALL CALCULATIONS AND DETERMINATIONS
SHALL BE MADE IN ACCORDANCE WITH MEXICAN GAAP AS IN EFFECT ON THE CLOSING DATE
AND SHALL BE BASED UPON THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND
ITS RESTRICTED SUBSIDIARIES PREPARED IN ACCORDANCE WITH MEXICAN GAAP AND THE
COMPANY'S ACCOUNTING POLICIES AS IN EFFECT ON THE CLOSING DATE. WHERE
CALCULATIONS OR AMOUNTS ARE DETERMINED WITH REFERENCE TO REPORTS FILED WITH THE
COMMISSION OR THE TRUSTEE, THE INFORMATION CONTAINED IN SUCH REPORTS SHALL
(SOLELY FOR THE PURPOSES OF THE INDENTURE) BE ADJUSTED TO THE EXTENT NECESSARY
TO CONFORM TO MEXICAN GAAP AS IN EFFECT ON THE CLOSING DATE.

"Acquired Indebtedness" means (i) Indebtedness of a Person existing at the
time such Person becomes a Restricted Subsidiary or assumed in connection with
an Asset Acquisition by the Company or a Restricted Subsidiary and not Incurred
in connection with, or in anticipation of, such Person becoming a Restricted
Subsidiary or such Asset Acquisition and (ii) Indebtedness of a Person secured
by a Lien encumbering any asset acquired by such Person, which Indebtedness was
not Incurred in connection with, or in anticipation of, such acquisition;
provided that Indebtedness of such Person which is redeemed, defeased, retired
or otherwise repaid at the time of or immediately upon consummation of the
transactions by which such Person becomes a Restricted Subsidiary or such Asset
Acquisition shall not be Acquired Indebtedness.

"Adjusted Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Company and its Restricted Subsidiaries for such period
determined in conformity with Mexican GAAP; provided that the following items
shall be excluded in computing Adjusted Consolidated Net Income (without
duplication): (i) the net income (or loss) of any Person (other than net income
(or loss) attributable to a Restricted Subsidiary) in

which any Person (other than the Company or any of its Restricted Subsidiaries)
has a joint interest and the net income (or loss) of any Unrestricted
Subsidiary, except, in the case of net income, to the extent of the amount of
dividends or other distributions actually paid to the Company or any of its
Restricted Subsidiaries by such other Person or such Unrestricted Subsidiary
during such period; (ii) solely for the purposes of calculating the amount of
Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of the "Limitation on Restricted Payments" covenant described below
(and in such case, except to the extent includable pursuant to clause (i)
above), the net income (or loss) of any Person accrued prior to the date it
becomes a Restricted Subsidiary or is merged into or consolidated with the
Company or any of its Restricted Subsidiaries or all or substantially all of the
property and assets of such Person are acquired by the Company or any of its
Restricted Subsidiaries; (iii) except in the case of any restriction or
encumbrance permitted under clause (ii) or (iv) of the "Limitation on dividends
and other payment restrictions affecting Restricted Subsidiaries" covenant
described below, the net income of any Restricted Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by the
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Restricted Subsidiary; (iv) any gains or losses (on an after-tax basis, net of
any related fees and expenses) attributable to Asset Sales; (v) except for
purposes of calculating the amount of Restricted Payments that may be made
pursuant to clause (C) of the first paragraph of the "Limitation on Restricted
Payments" covenant described below, any amount paid or accrued as dividends on
Preferred Stock of the Company or any Restricted Subsidiary owned by Persons
other than the Company and any of its Restricted Subsidiaries; and (vi) all
extraordinary gains and extraordinary losses.

"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), including any
write-ups or restatements required under Mexican GAAP (other than with respect
to items referred to in clause (ii) below), after deducting therefrom (i) all
current liabilities of the Company and its Restricted Subsidiaries (excluding
intercompany items) and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, all as set
forth on the most recent quarterly or annual consolidated balance sheet of the
Company and its Restricted Subsidiaries, prepared in conformity with Mexican
GAAP and filed with the Commission or provided to the Trustee pursuant to the
"Commission reports and reports to Holders" covenant.

"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.

"Asset Acquisition" means (i) an Investment by the Company or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged into or consolidated with the
Company or any of its Restricted Subsidiaries; provided that such Person's
primary business is related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such investment or (ii)
an acquisition by the Company or any of its Restricted Subsidiaries of the
property and assets of any Person other than the Company or any of its
Restricted Subsidiaries that constitute substantially all of a division or line
of business of such Person; provided that the property and assets acquired are
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such acquisition.

"Asset Disposition" means the sale or other disposition by the Company or
any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any of its
Restricted Subsidiaries.

"Asset Sale" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale-leaseback transaction, but not the granting
of a Lien) in one transaction or a series of related transactions by the Company
or any of its Restricted Subsidiaries to any Person other than the Company or
any of its Restricted Subsidiaries of (i) all or any of the Capital Stock of any
Restricted Subsidiary, (ii) all or substantially all of the

property and assets of an operating unit or business of the Company or any of
its Restricted Subsidiaries or (iii) any other property and assets (excluding
property, assets or Capital Stock of Unrestricted Subsidiaries) of the Company
or any of its Restricted Subsidiaries other than transactions (A) in the
ordinary course of business of the Company or such Restricted Subsidiary or (B)
that constitute "Restricted Payments" which are permitted under the covenant
"Limitation on Restricted Payments" and, in each case, that are not governed by
the provisions of the Indentures applicable to mergers, consolidations and sales
of all or substantially all of the assets of the Company; provided that "Asset
Sale" shall not include (a) sales, transfers or other dispositions of DTH Units,
inventory, services (including advertising), receivables and other current
assets, (b) sales, transfers or other dispositions of assets for consideration
at least substantially equal to the fair market value of the assets sold or
disposed of, provided that the consideration received would satisfy clause (ii)
of the first sentence of the "Limitation on Asset Sales" covenant, or (c) sales,
transfers or other dispositions of property or equipment that has become worn
out, obsolete or damaged or otherwise unsuitable for use in connection with the
business of the Company or any Restricted Subsidiary, as the case may be,
provided further that a transaction described in clauses (i), (ii) and (iii)
shall constitute an Asset Sale only if the aggregate consideration for such
transfer, conveyance, sale, lease or other disposition is equal to $2.5 million
or more in any twelve-month period.

"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of (a)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.

"Board of Directors" means the Board of Directors of the Company or any
committee thereof, if duly authorized to act under the Company's organizational
documents including with respect to the Indenture.

"Capital Stock" means, with respect to any Person, any and all shares,
social parts, interests, participation or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, whether now outstanding
or issued after the Closing Date, including, without limitation, all Common
Stock and Preferred Stock.

"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with Mexican
GAAP, is required to be capitalized on the balance sheet of such Person.

"Capitalized Lease Obligations" means the discounted present value of the
rental obligations under a Capitalized Lease.

"Change of Control" means such time as (i) a "person" or "group" (within
the meaning of Section 13(d) or 14(d)(2) under the Exchange Act) (other than the
Existing Social Part Holders and their respective Affiliates) becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
more than 50% of the total voting power of the Voting Stock of the Company on a
fully diluted basis; or (ii) any "person" or "group" (other than the Existing
Holders and their respective Affiliates), together with any Affiliates or
Related Persons thereof, shall succeed in having a sufficient number of its
nominees appointed to the Board of Directors such that the nominees, when added
to any existing member remaining on the Board of Directors of the Company after
such appointment who was a nominee of or is an Affiliate or Related Person of
such "person" or "group," will constitute a majority of the Board of Directors
of the Company.

"Clearstream Banking" means Clearstream Banking, societe anonyme, or any
successor.

"Closing Date" means the date on which the Notes were originally issued
under the Indenture, which date is September 19, 2003.

"CNBV" means the Comision Nacional Bancaria y de Valores.

"Common Stock" means, with respect to any Person, any and all shares,
interests, social parts, participation or other equivalents (however designated,
whether voting or nonvoting) of such Person's equity, other than

Disqualified Stock of such Person, whether now outstanding or issued after the
Closing Date, including all Common Stock or Preferred Stock (other than
Disqualified Stock).

"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus the sum of the amounts for such period of (i)
Consolidated Interest Expense, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income, plus (ii) income and asset taxes,
to the extent such amount was deducted in calculating Adjusted Consolidated Net
Income (other than income taxes (either positive or negative) attributable to
extraordinary and non-recurring gains or losses or sales of assets), plus (iii)
depreciation expense, to the extent such amount was deducted in calculating
Adjusted Consolidated Net Income, plus (iv) amortization expense, including
(without limitation) amortization of pre-operating expenses, to the extent such
amount was deducted in calculating Adjusted Consolidated Net Income, plus (v)
foreign exchange losses that are reported below the "operating income" line on
the Company's statement of income, plus (vi) all non-cash items that are
reported below the "operating income" line on the Company's statement of income
(including monetary losses and equity in losses of Persons that are not
Restricted Subsidiaries) reducing Adjusted Consolidated Net Income (other than
items that will require cash payments and for which an accrual or reserve is, or
is required by Mexican GAAP to be, made), plus (vii) any charge related to any
premium or penalty paid in connection with redeeming or retiring any
Indebtedness prior to its stated maturity, less (viii) deferred income taxes and
accrued employee profit sharing amounts (other than deferred income taxes
(either positive or negative) attributable to extraordinary and non-recurring
gains or losses or sales of assets), less (ix) foreign exchange gains that are
reported below the "operating income" line on the Company's statement of income
and less (x) all non-cash items that are reported below the "operating income"
line on the Company's statement of income (including monetary gains that are
reported and equity in earnings of Persons that are not Restricted
Subsidiaries), to the extent increasing Adjusted Consolidated Net Income (other
than items that will result in the receipt of cash payments), all as determined
on a consolidated basis for the Company and its Restricted Subsidiaries in
conformity with Mexican GAAP and on a basis consistent with the methods and
manner such items are reported in the Company's audited consolidated financial
statements included in this prospectus; provided that, if any Restricted
Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA
shall be reduced (to the extent not otherwise reduced in accordance with Mexican
GAAP or otherwise reduced in calculating Adjusted Consolidated Net Income) by an
amount equal to (A) the amount of the Adjusted Consolidated Net Income
attributable to such Restricted Subsidiary multiplied by (B) the quotient of (1)
the number of social parts of outstanding Common Stock of such Restricted
Subsidiary not owned on the last day of such period by the Company or any of its
Restricted Subsidiaries divided by (2) the total number of social parts of
outstanding Common Stock of such Restricted Subsidiary on the last day of such
period.

"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and interest
paid (by any Person) with respect to Indebtedness that is Guaranteed or secured
by the Company or any of its Restricted Subsidiaries) and all but the principal
component of rentals in respect of Capitalized Lease Obligations paid, accrued
or scheduled to be paid or to be accrued by the Company and its Restricted
Subsidiaries during such period; excluding, however, (i) any amount of such
interest of any Restricted Subsidiary if the net income of such Restricted
Subsidiary is excluded in the calculation of Adjusted Consolidated Net Income
pursuant to clause (iii) of the definition thereof (but only in the same
proportion as the net income of such Restricted Subsidiary is excluded from the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof) and (ii) any premiums, fees and expenses (and any
amortization or write-off thereof) paid or payable in connection with the
offering of the Notes, the exchange offer or Shelf Registration Statement with
respect to the Notes, all as determined on a consolidated basis (without taking
into account Unrestricted Subsidiaries) in conformity with Mexican GAAP.

"Consolidated Leverage Ratio" means, on any Transaction Date, the ratio of
(i) the aggregate amount of Indebtedness of the Company and its Restricted
Subsidiaries on a consolidated basis as of the end of the most recent fiscal
quarter to (ii) the aggregate amount of Consolidated EBITDA for the four
preceding fiscal quarters in each case for which financial statements of the
Company have been filed with the Commission or provided to the relevant Trustee
pursuant to the "Commission Reports and Reports to Holders" covenant described
below (such four fiscal

quarter period being the "Four Quarter Period"); provided that (A) pro forma
effect shall be given to any Indebtedness (including, if applicable, the Notes)
Incurred during such Four Quarter Period or subsequent to the end of the Four
Quarter Period and on or prior to the Transaction Date, in each case as if such
Indebtedness has been Incurred, and the proceeds thereof had been applied, on
the first day of such Four Quarter Period; (B) pro forma effect shall be given
to any Indebtedness that was outstanding during such Four Quarter Period or
thereafter but that is not outstanding or is to be repaid, defeased or satisfied
on the Transaction Date, as if such Indebtedness had been repaid, defeased or
satisfied on the first day of the Four Quarter Period; (C) pro forma effect
shall be given to Asset Sales, Asset Dispositions and Asset Acquisitions
(including giving pro forma effect to the application of proceeds of any Asset
Sale or Asset Disposition) that occur during the period beginning on the first
day of the Four Quarter Period and ending on the Transaction Date (the
"Reference Period") as if they had occurred and such proceeds had been applied
on the first day of such Reference Period; and (D) pro forma effect shall be
given to asset sales, asset dispositions and asset acquisitions (including
giving pro forma effect to the application of proceeds of any asset disposition)
that have been made by any Person that has become a Restricted Subsidiary or has
been merged with or into the Company or any Restricted Subsidiary during such
Reference Period and that would have constituted Asset Sales, Asset Dispositions
or Asset Acquisitions had such transactions occurred when such Person was a
Restricted Subsidiary as if such asset dispositions or asset acquisitions were
Asset Sales, Asset Dispositions or Asset Acquisitions that occurred on the first
day of such Reference Period; provided that, to the extent that clause (C) or
(D) of this sentence requires that pro forma effect be given to an Asset Sale,
Asset Acquisition or Asset Disposition, such pro forma calculation shall be
based upon the four full fiscal quarters immediately preceding the Transaction
Date of the Person, or division or line of business of the Person, that is
acquired or disposed for which financial information is available; (E)
Indebtedness of a Restricted Subsidiary shall be excluded, in the same
proportion that, pursuant to any provision described in clause (iii) of the
definition of "Adjusted Consolidated Net Income" which is expected to remain in
effect, any of the net income of such Restricted Subsidiary is not permitted to
be paid to holders of Common Stock of such Restricted Subsidiary; and (F) the
aggregate amount of Indebtedness outstanding as of the end of the Four Quarter
Period will be deemed to include the average daily balance of Indebtedness
outstanding under any revolving credit facilities of the Company or its
Restricted Subsidiaries during the Four Quarter Period.

"Consolidated Net Worth" means, at any date of determination, stockholders'
equity as set forth on the most recently available quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Disqualified Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of the Company or any of its Restricted Subsidiaries, each item to
be determined in conformity with Mexican GAAP.

"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.

"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.

"Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; provided that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in "Limitation on Asset Sales" and
"Repurchase of Notes upon a Change of Control" covenants described below and
such Capital Stock specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Company's
repurchase of such Notes as are required to be repurchased pursuant to the
"Limitation on Asset Sales" and "Repurchase of Notes upon a Change of Control"
covenants described below.

"DTH Assets" means all assets, rights (contractual or otherwise), services
and properties, whether tangible or intangible, used or intended for use in
connection with a DTH Business, including without limitation DTH Units and
shares of capital stock of or other equity interests in Grupo Galaxy Mexicana,
S. de R.L. de C.V., or any of its subsidiaries or affiliates, as well as the
capital stock of any Person with Mexican trademark rights to "DIRECTV."

"DTH Business" means the business of (i) developing, operating, or
providing services relating to direct to home satellite systems for the
distribution of subscription programming services directly to homes and cable
systems in Mexico and other areas covered by the "footprint" of the satellites
utilized by the Company, and activities to accomplish the foregoing, including
the acquisition of the rights to exhibit subscription programming services and
channels in Mexico and such other areas or (ii) evaluating, participating or
pursuing any other activity or opportunity that is primarily related to those
identified above; provided that the determination of what constitutes a DTH
Business shall be made in good faith by the Board of Directors, which
determination shall be conclusive.

"DTH Unit" means one or more of the components used by subscribers to
receive program services in connection with the Company's DTH Business,
including satellite dishes, low noise blockers, integrated receivers/decoders,
Smart Cards, remote controls and related components.

"Euroclear" means Euroclear Bank S.A./N.V. or its successor as operator of
the Euroclear System.

"Existing Social Part Holders" means SKY DTH, S. de R.L. de C.V., News DTH
(Mexico) Investment, Ltd. and Liberty Mexico DTH, Inc.

"Fair market value" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy. Solely for
purposes of calculating fair market value under the "Limitation on Asset Sales"
covenant (including, without limitation, in respect of the determination of
whether a sale, transfer or other disposition of assets constitutes an "Asset
Sale" under clause (b) of the first proviso to the definition of "Asset Sales"),
with respect to amounts in excess of $15 million, fair market value shall be
determined, on the basis of the first sentence of this definition, in good faith
by the Board of Directors, whose determination shall be conclusive if evidenced
by a Board Resolution.

"Four Quarter Period" has the meaning specified in the definition of
Consolidated Leverage Ratio.

"Government Securities" means direct obligations of, obligations fully
guaranteed by, or participation in pools consisting solely of obligations of or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States of
America is pledged and which are not callable or redeemable at the option of the
issuer thereof.

"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing (whether pursuant to a guaranty, a fianza,
an aval or otherwise) any Indebtedness of any other Person and, without limiting
the generality of the foregoing, any obligation, direct or indirect, contingent
or otherwise, of such Person (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness of such other Person (whether
arising by virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise (but not including any obligations
arising solely by reason of such Person's status as a partner of a partnership,
as a shareholder of a limited liability company or as an equity owner of any
other entity) or (ii) entered into for purposes of assuring in any other manner
the obligee of such Indebtedness of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided that the
term "Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.

"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness,
including an "Incurrence" of Indebtedness by reason of a Person becoming a
Restricted Subsidiary;

provided that (i) neither the accrual of interest nor the accretion of original
issue discount shall be considered an Incurrence of Indebtedness and (ii) if the
Company or any Restricted Subsidiary shall enter into any agreement with respect
to Mexican Peso-denominated Indebtedness whereby the nominal principal amount of
such Indebtedness is periodically increased as a result of and in proportion to
the devaluation of the Mexican Peso against the U.S. Dollar or the rate of
inflation in Mexico during such period, then such increase in principal amount
shall be deemed not to be an "Incurrence" for purposes of the first paragraph of
part (a) of the "Limitation on Indebtedness" covenant; provided further,
however, that the Company may elect to treat all or any portion of revolving or
line of credit debt of the Company or a Subsidiary as being Incurred from and
after any date beginning the date the revolving or line of credit commitment is
extended to the Company or a Subsidiary, by furnishing notice thereof to the
Trustee, and any borrowings or reborrowings by the Company or a Subsidiary under
such commitment up to the amount of such commitment designated by the Company as
Incurred shall not be deemed to be new Incurrences of Indebtedness by the
Company or such Subsidiary.

"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto, but excluding obligations with
respect to letters of credit (including trade letters of credit) securing
obligations (other than obligations described in (i) or (ii) above or (v), (vi)
or (vii) below) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if drawn upon, to
the extent such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months after the
date of placing such property in service or taking delivery and title thereto or
the completion of such services, except (x) Trade Payables or (y) accrued
liabilities not relating to borrowed money arising in the ordinary course of
business which are not overdue or which are being contested in good faith, (v)
all obligations of such Person as lessee under Capitalized Leases, (vi) all
Indebtedness of other Persons secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person; provided that the
amount of such Indebtedness shall be the lesser of (A) the fair market value of
such asset at such date of determination and (B) the amount of such
Indebtedness, (vii) all Indebtedness of other Persons Guaranteed by such Person
to the extent such Indebtedness is Guaranteed by such Person and (viii) to the
extent not otherwise included in this definition, net liabilities under Currency
Agreements and Interest Rate Agreements. Notwithstanding the foregoing,
"Indebtedness" shall not include obligations of any Person as lessee under
transponder leases. The amount of Indebtedness of any Person at any date shall
be (without duplication) the outstanding balance at such date of all
unconditional obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the contingency giving
rise to the obligation (unless the underlying contingency has not occurred and
the occurrence of the underlying contingency is entirely within the control of
the Company or its Restricted Subsidiaries); provided (A) that the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the face amount of such Indebtedness less the unamortized portion of the
original issue discount of such Indebtedness at the time of its issuance as
determined in conformity with Mexican GAAP and (B) that Indebtedness shall not
include any liability for (i) federal, state, local or other taxes of Mexico,
the United States or any other jurisdiction, (ii) endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business or (iii) any indebtedness that has been defeased or satisfied
in accordance with the terms of the documents governing such indebtedness.

"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.

"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
bonds, notes, debentures or other similar instruments issued by, such Person and
shall include (i) the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary and (ii) the fair market value of the Capital Stock (or any other
Investment) held by the Company or any of its Restricted

Subsidiaries of (or in) any Person that has ceased to be a Restricted
Subsidiary, including without limitation, by reason of any transaction permitted
by clause (iii) of the "Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries" covenant. Notwithstanding the foregoing, any issuance
of Common Stock of the Company in exchange for Capital Stock, property or assets
of another Person shall be deemed not to be an Investment by the Company in such
other Person. For purposes of the definition of "Unrestricted Subsidiary" and
the "Limitation on Restricted Payments" covenant described below, (i)
"Investment" shall include the fair market value of the assets (net of
liabilities (other than liabilities to the Company or any of its Subsidiaries))
of any Restricted Subsidiary at the time that such Restricted Subsidiary is
designated an Unrestricted Subsidiary, (ii) the fair market value of the assets
(net of liabilities (other than liabilities to the Company or any of its
Subsidiaries)) of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary shall be considered a reduction
in outstanding Investments and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer. Notwithstanding the foregoing, the term "Investment" shall not
include: (i) accounts payable to suppliers, advances to customers (other than
Subsidiaries of the Company), accounts receivables and other commercially
reasonable extensions of trade credit, in each case that are, in conformity with
Mexican GAAP, recorded as accounts receivable or accounts payable, as the case
may be, and any loan, advance, subsidy, other extension of credit or payment to
any Person in connection with DTH Units, and (ii) payments made in respect of
prepaid expenses, negotiable instruments held for collection and lease,
performance deposits and other similar deposits.

"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind upon or with respect to any property (including, without
limitation, any conditional sale or other title retention agreement or lease in
the nature thereof or any agreement to give any security interest).

"Mexican GAAP" means generally accepted accounting principles in Mexico and
the accounting principles and policies of the Company and its Restricted
Subsidiaries, in each case as in effect as of the date of the Indenture. All
ratios and computations shall be computed in conformity with Mexican GAAP
applied on a consistent basis and using constant Peso calculations, except as
otherwise set forth in the second sentence of the definition of Indebtedness and
except that calculations made for purposes of determining compliance with the
terms of the covenants and with other provisions of the Indenture shall be made
without giving effect to the matters referred to in clause (ii) of the last
sentence of the definition of "Consolidated Interest Expense."

"Mexican Tax Distributions" means payments or distributions to social part
holders of the Company of the Company's Taxes (including any interest and
penalties thereon) to the extent any such payment or distribution is required by
law.

"Mexico" means the Estados Unidos Mexicanos (the United Mexican States) and
any branch of power, ministry, department, authority or statutory corporation or
other entity (including a trust), owned or controlled directly or indirectly by
the Estados Unidos Mexicanos or any of the foregoing or created by law as a
public entity.

"Moody's" means Moody's Investors Service, Inc. and its successors.

"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or cash equivalents, including payments
in respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale (or in order to obtain a necessary consent in
connection therewith), (iv) appropriate amounts to be provided by the Company or
any Restricted Subsidiary of the Company as a reserve against any liabilities
associated with such Asset Sale, including, without limitation, pension

and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as determined in conformity with Mexican
GAAP, (v) any consideration for an Asset Sale (which would otherwise constitute
Net Cash Proceeds) that is required to be held in escrow pending determination
of whether a purchase price adjustment will be made, but amounts under this
clause (v) shall become Net Cash Proceeds at such time and to the extent such
amounts are released to such Person, and (vi) a pro rata portion of the amount
of cash or cash equivalents received by any Restricted Subsidiary which is
attributable to minority interests in such Restricted Subsidiary that are held
by Persons other than the Company or its Restricted Subsidiaries and (b) with
respect to any issuance or sale of Capital Stock (other than any Capital Stock
issued in connection with the Social Part Holders Note Capitalization), the
proceeds of such issuance or sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company) and proceeds from the conversion of other property
received when converted to cash or cash equivalents, net of attorney's fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees incurred in connection with
such issuance or sale and net of taxes paid or payable as a result thereof.

"Offer to Purchase" means an offer by the Company to purchase Notes from
the Holders commenced by mailing a notice to the Trustee and each Holder that,
unless otherwise required by applicable law, shall state: (i) the covenant
pursuant to which the offer is being made and that all Notes validly tendered
will be accepted for payment on a pro rata basis; (ii) the purchase price and
the date of purchase (which shall be a Business Day no earlier than 30 days nor
later than 60 days from the date such notice is mailed) (the "Payment Date");
(iii) that any Note not tendered will continue to accrue interest pursuant to
its terms; (iv) that, unless the Company defaults in the payment of the purchase
price, any Note accepted for payment pursuant to the Offer to Purchase shall
cease to accrue interest on and after the Payment Date; (v) that Holders
electing to have a Note purchased pursuant to the Offer to Purchase will be
required to surrender the Note, together with the form entitled "Option of the
Holder to Elect Purchase" on the reverse side of the Note completed, to the
Paying Agent at the address specified in the notice prior to the close of
business on the Business Day immediately preceding the Payment Date; (vi) that
Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the third Business Day
immediately preceding the Payment Date, a telegram, facsimile transmission or
letter setting forth the name of such Holder, the principal amount of Notes
delivered for purchase and a statement that such Holder is withdrawing his
election to have such Notes purchased; and (vii) that Holders whose Notes are
being purchased only in part will be issued new Notes equal in principal amount
to the unpurchased portion of the Notes surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount of $10,000 for
Rule 144A Notes and $1,000 for Regulation S Notes and in both cases, in integral
multiples of $1,000 in excess thereof. On the Payment Date, the Company shall
(i) accept for payment on a pro rata basis Notes or portions thereof tendered
pursuant to an Offer to Purchase; (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Notes or portions thereof so
accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Notes
or portions thereof so accepted together with an Officers' Certificate
specifying the Notes or portions thereof accepted for payment by the Company.
The Paying Agent shall promptly mail to the Holders of Notes so accepted payment
in an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Note equal in principal amount to
any unpurchased portion of the Note surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount of $10,000 for
Rule 144A Notes and $1,000 for Regulation S Notes and in both cases, in integral
multiples of $1,000 in excess thereof. The Company will publicly announce the
results of an Offer to Purchase as soon as practicable after the Payment Date.
The Trustee shall act as the Paying Agent for an Offer to Purchase. The Company
will comply with Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable, in the event that the Company is required to repurchase Notes
pursuant to an Offer to Purchase.

"Outstanding" when used with respect to any Notes, means, as of the date of
determination, all such Notes theretofore authenticated and delivered under this
Indenture, except: (a) any such Note theretofore cancelled by the Trustee or the
Security Registrar or delivered to the Trustee or the Security Registrar for
cancellation; (b) any such Security for whose payment at the Maturity thereof
money in the necessary amount has been theretofore deposited pursuant hereto
(other than pursuant to the section described below under "Defeasance") with the
Trustee or any

Paying Agent (other than the Company) in trust or set aside and segregated in
trust by the Company (if the Company shall act as its own Paying Agent) for the
Holders of such Notes and any Coupons appertaining thereto; provided that, if
such Notes are to be redeemed, notice of such redemption has been duly given
pursuant to the Indenture or provision therefor satisfactory to the Trustee has
been made; (c) any such Note with respect to which the Company has effected
defeasance or covenant defeasance pursuant to the terms hereof, except to the
extent provided in the section described below under "Defeasance"; and (d) any
such mutilated, lost, destroyed or wrongfully taken Note that has become or is
about to become due and payable and the Company has paid for or in exchange for
or in lieu of which other Notes have been authenticated and delivered pursuant
to this Indenture, unless there shall have been presented to the Trustee proof
satisfactory to it that such Note is held by a bona fide purchaser in whose
hands such Note is a valid obligation of the Company; provided, however, that in
determining whether the Holders of the requisite principal amount of Outstanding
Notes have given any request, demand, authorization, direction, notice, consent
or waiver hereunder or are present at a meeting of Holders of Notes for quorum
purposes owned by the Company or any other obligor upon the Notes or any
Affiliate of the Company or such other obligor, shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the Trustee shall be
protected in making any such determination or relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only Notes which a
Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded. Notes so owned which shall have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee (A) the pledgee's right so to act with respect to such Notes and (B)
that the pledgee is not the Company or any other obligor upon the Notes or any
Coupons appertaining thereto or an Affiliate of the Company or such other
obligor.

"Permitted Investment" means (i) an Investment in the Company or a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, the Company
or a Restricted Subsidiary; provided that such Person's primary business is
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such Investment; (ii) Temporary Cash
Investments; (iii) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
in accordance with Mexican GAAP; (iv) Investments received in satisfaction of
judgments, bankruptcy, insolvency, work-outs or similar arrangements; (v) (A)
loans or advances to employees made in the ordinary course of business of the
Company or its Restricted Subsidiaries and that do not in the aggregate exceed
at any one time outstanding the greater of (I) U.S.$4 million and (II) 1% of
Consolidated EBITDA for the Four Quarter Period, (B) loans or advances that do
not in the aggregate exceed at any one time outstanding the greater of (I)
U.S.$4 million and (II) 1% of Consolidated EBITDA for the Four Quarter Period
and (C) other loans or advances to distributors, suppliers, content providers or
customers of the Company or any Restricted Subsidiary that do not in the
aggregate exceed at any one time outstanding the greater of (I) U.S.$6 million
and (II) 1.5% of Consolidated EBITDA for the Four Quarter Period; (vi) Interest
Rate Agreements (to the extent the notional principal amount thereof does not
exceed the principal amount of the Indebtedness of the Company and its
Restricted Subsidiaries with floating rates of interest) and Currency
Agreements, to the extent entered into for the purpose of protecting the Company
or its Restricted Subsidiaries against fluctuations in interest rates or
currency exchange rates, respectively; (vii) Investments received as a result of
Asset Sales which are permitted to be received in accordance with the
"Limitation on Asset Sales" covenant and (viii) Investments existing on the
Closing Date.

"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are either (a) delinquent for less than 90 days (provided
that the fair market value of the aggregate amount of the property and assets
subject to such Liens does not exceed U.S.$5 million) or (b) being contested in
good faith by appropriate legal proceedings promptly instituted and diligently
conducted and for which a reserve or other appropriate provision, if any, as
shall be required in conformity with Mexican GAAP shall have been made; (ii)
statutory and common law Liens of landlords and carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen or other similar Liens arising in
the ordinary course of business and with respect to amounts not yet delinquent
or being contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other appropriate
provision, if any, as shall be required in conformity with Mexican GAAP shall
have been made; (iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security and statutory obligations (including to secure
government contracts); (iv) Liens incurred or deposits made to secure (a)
letters of credit (to the extent such letters

of credit meet the criteria set forth in the definition of "Indebtedness"), the
performance of tenders, bids, leases, statutory or regulatory obligations,
bankers' acceptances, surety and appeal bonds, government contracts, performance
and return-of-money bonds and other obligations of a similar nature incurred in
the ordinary course of business (exclusive of obligations for the payment of
borrowed money) and any bank's unexercised right of set off with respect to
deposits made in the ordinary course and (b) indemnity obligations in respect of
the disposition of any business or assets of the Company or any Restricted
Subsidiary (provided that the property subject to such Lien does not have a fair
market value in excess of the cash or cash equivalent proceeds received by the
Company and its Restricted Subsidiaries in connection with such disposition);
(v) easements, rights-of-way, municipal and zoning ordinances and similar
charges, encumbrances, title defects or other irregularities that do not
materially interfere with the ordinary course of business of the Company or any
of its Restricted Subsidiaries; (vi) Liens (including extensions and renewals
thereof) upon real or personal property (including, without limitation,
equipment, inventory, facilities, programming, films, DTH Units and other DTH
Assets and, in each case, proceeds therefrom); provided that (a) such Lien is
created solely for the purpose of securing Indebtedness Incurred, in accordance
with the "Limitation on Indebtedness" covenant described below, (1) to finance
the cost (including the cost of design, development, improvement, production,
acquisition, manufacture, lease, distribution, subsidy, construction,
installation or integration) of the item of property or assets subject thereto
and such Lien is created prior to, at the time of or within 270 days after the
later of the manufacture, the acquisition, the completion of construction,
installation or integration or the commencement of full operation, or the lease,
distribution or subsidy, of such property or (2) to refinance any Indebtedness
previously so secured, (b) the principal amount of the Indebtedness secured by
such Lien does not exceed 100% of such cost (plus fees, expenses and similar
payments made in connection with the Incurrence of such Indebtedness) and (c)
any such Lien shall not extend to or cover any property or assets other than
such item of property or assets and any improvements on such item; (vii) leases
or subleases granted to others that do not materially interfere with the
ordinary course of business of the Company and its Restricted Subsidiaries,
taken as a whole; (viii) bailments and other possessory Liens relating to DTH
Units granted to customers, suppliers or distributors by the Company or any
Restricted Subsidiary; (ix) Liens encumbering property or assets under
construction arising from progress or partial payments by a customer of the
Company or its Restricted Subsidiaries relating to such property or assets; (x)
any interest or title of a lessor in the property subject to any Capitalized
Lease or operating lease; (xi) Liens arising from filing Uniform Commercial Code
or similar financing statements regarding leases; (xii) Liens on property of, or
on shares of Capital Stock or Indebtedness of, any Person existing at the time
such Person becomes, or becomes a part of, any Restricted Subsidiary (including,
without limitation, Liens to secure Acquired Indebtedness); provided that such
Liens do not extend to or cover any property or assets of the Company or any
Restricted Subsidiary other than the property or assets acquired; (xiii) Liens
in favor of the Company or any Restricted Subsidiary; (xiv) Liens arising out of
judgments or awards against the Company or any Restricted Subsidiary that do not
give rise to an Event of Default with respect to which the Company or such
Restricted Subsidiary is prosecuting an appeal or proceeding for review and the
Company or such Restricted Subsidiary is maintaining adequate reserves in
accordance with Mexican GAAP; (xv) Liens arising from the rendering of a final
judgment or order against the Company or any Restricted Subsidiary of the
Company that does not give rise to an Event of Default; (xvi) Liens securing
reimbursement obligations with respect to letters of credit that encumber
documents and other property relating to such letters of credit and the products
and proceeds thereof; (xvii) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in connection
with the importation of goods; (xviii) Liens encumbering customary initial
deposits and margin deposits, and other Liens that are either within the general
parameters customary in the industry and incurred in the ordinary course of
business, in each case, securing Indebtedness under Interest Rate Agreements and
Currency Agreements and forward contracts, options, future contracts, futures
options or similar agreements or arrangements designed solely to protect the
Company or any of its Restricted Subsidiaries from fluctuations in interest
rates, currencies or the price of commodities; (xix) Liens arising out of
conditional sale, title retention, consignment or similar arrangements for the
sale of goods entered into by the Company or any of its Restricted Subsidiaries
in the ordinary course of business; (xx) Liens on or sales of receivables; (xxi)
Liens in connection with the satisfaction and discharge or defeasance of
Indebtedness of the Company or a Restricted Subsidiary; (xxii) other Liens
incidental to the conduct of the Company's and its Restricted Subsidiaries'
business or the ownership of its property and assets not securing any
Indebtedness, and which do not in the aggregate materially detract from the
value of the Company's and its Restricted Subsidiaries' property or assets when
taken as a whole, or materially impair the use thereof in the operation of its
business; and (xxiii) Liens incurred to renew, extend, refinance or refund, in
whole or in part, Indebtedness or obligations secured by any Lien incurred under
clauses (i)-(xxii) above,

provided that (a) such Lien does not extend to any other property or assets, and
(b) the principal amount of Indebtedness (if any) so secured is not increased
except as otherwise permitted under clause (iii) of the second paragraph of part
(a) of the "Limitation on Indebtedness" covenant.

"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization, government or agency or political subdivision thereof or any other
entity.

"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participation or other equivalents (however designated, whether
voting or non voting) of such Person's preferred or preference equity, whether
now outstanding or issued after the Closing Date, including, without limitation,
all series and classes of such preferred stock or preference stock.

"Related Person" of any Person means any other Person directly or
indirectly owning (a) 10% or more of the outstanding Common Stock of such Person
or (b) 10% or more of the combined voting power of the Voting Stock of such
Person.

"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.

"S&P" means Standard & Poor's Ratings Group and its successors.

"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.

"Social Part Holders Agreement" means the Social Part Holders Agreement,
dated as of March 6, 1997, by and among Televisa, Galavision DTH, S. de R.L.,
Alejandro Sada, News Corporation, News DTH (Mexico) Investment Ltd, David Evans
and the Company.

"Social Part Holders Note Capitalization" means the cancellation by the
Existing Social Part Holders and their Affiliates of all of the debt plus
accrued interest then owed to such entities by Innova, Corporacion Novavision,
S. de R.L. de C.V. and their Affiliates (in the amount of approximately Ps. 4.0
billion as of June 30, 2003), and otherwise as contemplated in the prospectus
for the sale of the Notes.

"Start Date" means the first day of the first consecutive four quarter
period for which the amount calculated by deducting from Consolidated EBITDA of
the Company, the sum of (A) 175% of Consolidated Interest Expense and (B) all
capital expenditures made by the Company or its Restricted Subsidiaries, in each
case during such period, is positive.

"Stated Maturity" means, (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (ii) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.

"Subordinated Indebtedness" means Indebtedness of the Company as to which
the payment of principal of (and premium, if any) and interest and other payment
obligations in respect of such Indebtedness shall be subordinated to the prior
payment in full of the Notes to at least the following extent: (i) no payments
of principal of (or premium, if any) or interest on or otherwise due in respect
of such Indebtedness may be permitted for so long as any Default in the payment
of principal (or premium, if any) or interest on the Notes exists; (ii) in the
event that any other default that with the passing of time or the giving of
notice, or both, would constitute an Event of Default exists with respect to the
Notes, upon notice by holders of 25% or more in principal amount of the Notes to
the Trustee, the Trustee shall have the right to give notice to the Company and
the holders of such Indebtedness (or

trustees or agents therefor) of a payment blockage, and thereafter no payments
of principal of (or premium, if any) or interest on or otherwise due in respect
of such Indebtedness may be made for a period of 179 days from the date of such
notice or for the period until such default has been cured or waived or ceased
to exist and any acceleration of the Notes has been rescinded or annulled,
whichever period is shorter (which Indebtedness may provide that (A) no new
period of payment blockage may be commenced by a payment blockage notice unless
and until 360 days have elapsed since the effectiveness of the immediately prior
notice, (B) no nonpayment default that existed or was continuing on the date of
delivery of any payment blockage notice to such holders (or such agents or
trustees) shall be, or be made, the basis for a subsequent payment blockage
notice and (C) failure of the Company to make payment on such Indebtedness when
due or within any applicable grace period, whether or not on account of such
payment blockage provisions, shall constitute an event of default thereunder);
and (iii) such Indebtedness may not (x) provide for payments of principal of
such Indebtedness at the stated maturity thereof or by way of a sinking fund
applicable thereto or by way of any mandatory redemption, defeasance, retirement
or repurchase thereof by the Company (including any redemption, retirement or
repurchase which is contingent upon events or circumstances, but excluding any
retirement required by virtue of acceleration of such Indebtedness upon an event
of default thereunder), in each case prior to the final Stated Maturity of the
Notes or (y) permit redemption or other retirement (including pursuant to an
offer to purchase made by the Company) of such other Indebtedness at the option
of the holder thereof prior to the final Stated Maturity of the Notes, other
than a redemption or other retirement at the option of the holder of such
Indebtedness (including pursuant to an offer to purchase made by the Company)
which is conditioned upon a Change of Control of the Company pursuant to
provisions substantially similar to those described under "-- Repurchase of
Notes upon a Change of Control" (and which shall provide that such Indebtedness
will not be repurchased pursuant to such provisions prior to the Company's
repurchase of the Notes required to be repurchased by the Company pursuant to
the provisions described under "-- Repurchase of Notes upon a Change of
Control").

"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.

"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or obligations
fully and unconditionally guaranteed by the United States of America or any
agency thereof, (ii) time deposit accounts, certificates of deposit and money
market deposits maturing within 365 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of U.S.$50 million (or the foreign
currency equivalent thereof) and has outstanding debt which is rated "A" (or
such similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities
Act) or any money-market fund sponsored by a registered broker dealer or mutual
fund distributor, (iii) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (i) above
entered into with a bank meeting the qualifications described in clause (ii)
above, (iv) commercial paper, maturing not more than 365 days after the date of
acquisition, issued by a corporation (other than an Affiliate of the Company)
incorporated or organized and in existence under the laws of Mexico or any
jurisdiction thereof or the United States of America, any state thereof or the
District of Columbia or any foreign country recognized by the United States of
America with a rating at the time as of which any investment therein is made of
"P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P (or
equivalent ratings by their Mexican affiliates), (v) securities with maturities
of six months or less from the date of acquisition issued or fully and
unconditionally guaranteed by any state, commonwealth or territory of the United
States of America, or by any political subdivision or taxing authority thereof,
and rated at least "A" by S&P or Moody's, (vi) Certificados de la Tesoreria de
la Federacion (Cetes) or Bonos de Desarrollo del Gobierno Federal (Bondes)
issued by the Mexican government and maturing not more than 365 days after the
acquisition thereof, (vii) direct obligations of the Mexican government or
obligations fully and unconditionally guaranteed by the Mexican government and
(viii) certificates of deposit, bank promissory notes and bankers' acceptances
denominated in Pesos maturing not more than 365 days after the acquisition
thereof and issued or guaranteed by (a) any one of the five largest banks (based
on assets as of the immediately preceding December 31) organized under the laws
of Mexico and (b) one or more other banks organized under the laws of Mexico;
provided that the aggregate amount of certificates of deposit, bank promissory

notes and banker's acceptances issued or guaranteed by any one such bank
referred to in clause (b) shall not exceed U.S.$3 million at any one time) and,
in each case, which is not under intervention or controlled by the Fondo
Bancario de Proteccion al Ahorro.

"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of tangible or
intangible property or services.

"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.

"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; provided that (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the
Company or such Restricted Subsidiary (or both, if applicable) at the time of
such designation; (B) either (I) the Subsidiary to be so designated has total
assets of U.S.$1,000 or less or (II) if such Subsidiary has assets greater than
U.S.$1,000, such designation would be permitted under the "Limitation on
Restricted Payments" covenant described below; and (C) if applicable, the
Incurrence of Indebtedness and the Investment referred to in clause (A) of this
proviso would be permitted under the "Limitation on Indebtedness" and
"Limitation on Restricted Payments" covenants described below. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that immediately after giving effect to such designation
(x) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding
immediately after such designation would, if incurred at such time, have been
permitted to be incurred for all purposes of the Indenture and (y) no Default or
Event of Default shall have occurred and be continuing. Any such designation by
the Board of Directors shall be evidenced to the Trustee by promptly filing with
the Trustee a copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing provisions.

"Voting Stock" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.

"Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.

COVENANTS

The Indenture contains, among others, the following covenants.

Limitation on Indebtedness

(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness (other than the Notes and Indebtedness
existing on the Closing Date); provided that the Company and any Restricted
Subsidiary may Incur Indebtedness if, after giving effect to the Incurrence of
such Indebtedness and the receipt and application of the proceeds therefrom, the
Consolidated Leverage Ratio would be less than 4.75 to 1 with respect to any
fiscal quarter.

Notwithstanding the foregoing, the Company and any Restricted Subsidiary
(except as specified below) may Incur each and all of the following: (i)
Indebtedness outstanding at any time in an aggregate principal amount

(or, in the case of Indebtedness issued at a discount, an accreted amount
(determined in accordance with Mexican GAAP)) not to exceed U.S.$100 million;
(ii) Indebtedness (A) to the Company evidenced by an unsubordinated promissory
note or (B) to any of its Restricted Subsidiaries; provided that any event which
results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary
or any subsequent transfer of such Indebtedness (other than to the Company or
another Restricted Subsidiary) shall be deemed, in each case, to constitute an
Incurrence of such Indebtedness not permitted by this clause (ii); (iii)
Indebtedness Incurred in exchange for, or the net proceeds of which are used to
refinance or refund or as an extension of credit for or to satisfy or defease (a
"refinancing"), then outstanding Indebtedness, other than Indebtedness Incurred
under clause (i), (ii), (iv) or (vi) of this paragraph, and any refinancings
thereof in an amount not to exceed the amount so refinanced (plus premiums,
accrued interest, fees and expenses and other related payment obligations
Incurred in connection with such refinancing); provided that Indebtedness the
proceeds of which are used to refinance the Notes or Indebtedness that is pari
passu with, or subordinated in right of payment to, the Notes shall only be
permitted under this clause (iii) if (A) in case the Notes are refinanced in
part or the Indebtedness to be refinanced is pari passu with the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is outstanding, is expressly made pari
passu with, or subordinate in right of payment to, the remaining Notes, (B) in
case the Indebtedness to be refinanced is subordinated in right of payment to
the Notes, such new Indebtedness, by its terms or by the terms of any agreement
or instrument pursuant to which such new Indebtedness is issued or remains
outstanding, is expressly made subordinate in right of payment to the Notes at
least to the extent that the Indebtedness to be refinanced is subordinated to
the Notes and (C) except in respect of the Indebtedness Incurred under clause
(xi) below, such new Indebtedness, determined as of the date of Incurrence of
such new Indebtedness, does not mature prior to the Stated Maturity of the
Indebtedness to be refinanced, and the Average Life of such new Indebtedness is
at least equal to the remaining Average Life of the Indebtedness to be
refinanced; (iv) Indebtedness (A) in respect of performance, surety or appeal
bonds and reimbursement obligations provided in the ordinary course of business,
(B) under Currency Agreements and Interest Rate Agreements (to the extent that
the notional principal amount thereunder does not exceed the principal amount of
Indebtedness of the Company and its Restricted Subsidiaries with floating rates
of interest) entered into for the purpose of protecting the Company or any
Restricted Subsidiary from fluctuations in currency exchange rates or interest
rates, respectively; provided that such agreements do not increase the
Indebtedness of the obligor outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or interest rates or by reason
of fees, indemnities and compensation payable thereunder; or (C) arising from
agreements providing for indemnification, adjustment of purchase price or
similar obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted Subsidiary
of the Company (other than Guarantees of Indebtedness Incurred by any Person
acquiring all or any portion of such business, assets or Restricted Subsidiary
of the Company for the purpose of financing such acquisition), in a principal
amount not to exceed the gross proceeds actually received by the Company or any
Restricted Subsidiary in connection with such disposition; (v) Indebtedness, to
the extent the net proceeds thereof are promptly (A) used to purchase Notes
tendered in an Offer to Purchase made as a result of a Change in Control and to
pay fees, expenses, premiums and other payment obligations payable in connection
with such offer, or (B) deposited to defease the Notes as described below under
"Defeasance" and to pay fees, expenses, premiums and other payment obligations
related to such defeasance; (vi) Guarantees of the Notes and Guarantees of
Indebtedness of the Company by any Restricted Subsidiary provided the Guarantee
of such Indebtedness is permitted by and made in accordance with the "Limitation
on issuance of Guarantees by Restricted Subsidiaries" covenant described below;
(vii) Indebtedness Incurred to finance the cost (including the cost of design,
manufacture, development, improvement, production, acquisition, construction,
distribution, installation, integration, lease or subsidy) of equipment,
inventory, facilities, programming, films, DTH Units and other DTH Assets
acquired by the Company or a Restricted Subsidiary (if such design, manufacture,
development, improvement, production, acquisition, construction, distribution,
installation, integration, lease or subsidy occurred prior to the Closing Date,
such Indebtedness must be Incurred within six months of such design,
manufacture, development, improvement, production, acquisition, construction,
distribution, installation, integration, lease or subsidy); (viii) Indebtedness
of the Company or a Restricted Subsidiary not to exceed, at any one time
outstanding, two times the Net Cash Proceeds received by the Company after the
Closing Date from the issuance and sale of its Capital Stock (other than any
Capital Stock issued in connection with the Social Part Holders Note
Capitalization) or capital contributions in respect thereof (in each case other
than Disqualified Stock) to a Person that is not a Subsidiary of the Company to
the extent such Net Cash Proceeds have

not been used pursuant to clause (C)(2) of the first paragraph or clause (iii),
(iv) or (ix) of the second paragraph of the "Limitation on Restricted Payments"
covenant described below to make a Restricted Payment; provided that such
Indebtedness does not mature prior to the Stated Maturity of the Notes and has
an Average Life longer than the Notes; (ix) Subordinated Indebtedness owed by
the Company to any Existing Social Part Holder (or any Affiliate thereof) which
pays no interest in cash unless Consolidated EBITDA is for the four fiscal
quarters next preceding the payment of such interest greater than 200% of
Consolidated Interest Expense for the same four fiscal quarters; provided that
pro forma effect shall be given to the Incurrence of such Subordinated
Indebtedness as if it had been Incurred on the first day of such four quarter
period; (x) Indebtedness Incurred to finance, directly or indirectly, capital
expenditures of the Company and its Restricted Subsidiaries in an aggregate
principal amount not to exceed the greater of (A) U.S.$20 million and (B) 20% of
Consolidated EBITDA for the preceding fiscal year, in each fiscal year of the
Company; provided that the amount of Indebtedness that may be Incurred in any
fiscal year of the Company pursuant to this clause (x) shall be increased by the
amount of Indebtedness that could have been Incurred in prior fiscal years
pursuant to this clause (x) (including by reason of this proviso) but which was
not so Incurred; and (xi) Capitalized Lease Obligations not to exceed U.S.$10
million at any one time outstanding.

(b) Notwithstanding any other provision of this "Limitation on
Indebtedness" covenant, the maximum amount of Indebtedness that the Company or a
Restricted Subsidiary may Incur pursuant to this "Limitation on Indebtedness"
covenant shall not be deemed to be exceeded, with respect to any outstanding
Indebtedness due solely to the result of fluctuations in the exchange rates of
currencies.

(c) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, (1) Guarantees, Liens or obligations
with respect to letters of credit supporting Indebtedness otherwise included in
the determination of such particular amount shall not be included and (2) any
Liens granted pursuant to the equal and ratable provisions referred to in the
"Limitation on Liens" covenant described below shall not be treated as
Indebtedness. For purposes of determining compliance with this "Limitation on
Indebtedness" covenant, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses, the Company, in its sole discretion, shall classify such item of
Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses.

Limitation on Restricted Payments

The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any distribution
on or with respect to its Capital Stock (other than dividends or distributions
payable solely in social parts of its Capital Stock (other than Disqualified
Stock) or in options, warrants or other rights to acquire social parts of such
Capital Stock held by Persons other than the Company or any of its Restricted
Subsidiaries (and other than pro rata dividends or distributions on Common Stock
of Restricted Subsidiaries), (ii) purchase, redeem, retire or otherwise acquire
for value any social parts or shares of Capital Stock of (A) the Company or an
Unrestricted Subsidiary (including options, warrants or other rights to acquire
such social parts or shares of Capital Stock) held by any Person or (B) a
Restricted Subsidiary (including options, warrants or other rights to acquire
such social parts or shares of Capital Stock) held by any holder (or any
Affiliate of such holder) of 5% or more of the Capital Stock of the Company,
(iii) make any voluntary or optional principal payment, or voluntary or optional
redemption, repurchase, defeasance, or other acquisition or retirement for
value, of Indebtedness of the Company that is subordinated in right of payment
to the Notes, or (iv) make any Investment, other than a Permitted Investment, in
any Person (such payments or any other actions described in clauses (i) through
(iv) being collectively "Restricted Payments") if, at the time of, and after
giving effect to, the proposed Restricted Payment: (A) a Default or Event of
Default shall have occurred and be continuing, (B) except with respect to an
Investment, the Company could not Incur at least $1.00 of Indebtedness under the
first paragraph of the "Limitation on Indebtedness" covenant or (C) the
aggregate amount of all Restricted Payments made during any consecutive four
quarter period shall exceed the sum of (1) (x) for any consecutive four quarter
period prior to the Start Date, zero and (y) during the consecutive four quarter
period commencing with the Start Date and each subsequent consecutive four
quarter period thereafter, to the extent positive, 75% of the amount calculated
by subtracting from Consolidated EBITDA of the Company for such period the sum
of (I) 175% of Consolidated Interest Expense for such period and (II) capital
expenditures made by the Company or its Restricted Subsidiaries during such
period; provided that the amount included in this clause (C)(1)(y) shall be
increased by the amount of

Restricted Payments that could have been made in prior periods pursuant to this
clause (C)(1)(y) (including by reason of this proviso) but which were not so
made minus (2) in any such consecutive four quarter period commencing with the
Start Date, to the extent negative, Consolidated EBITDA of the Company during
such period plus (3) the aggregate Net Cash Proceeds received by the Company
after the Closing Date from the issuance and sale permitted by the Indenture of
its Capital Stock (other than Disqualified Stock) to a Person who is not a
Subsidiary of the Company (except to the extent such Net Cash Proceeds are used
to Incur Indebtedness pursuant to clause (viii) under the "Limitation on
Indebtedness" covenant) or from the issuance to a Person who is not a Subsidiary
of the Company of any options, warrants or other rights to acquire Capital Stock
of the Company (in each case, exclusive of any Disqualified Stock or any
options, warrants or other rights that are redeemable at the option of the
holder, or are required to be redeemed, prior to the Stated Maturity of the
Notes) plus (4) an amount equal to the aggregate net reduction in Investments
made after the Closing Date pursuant to this first paragraph of the "Limitation
on Restricted Payments" covenant in any Person resulting from payments of
interest on Indebtedness, dividends, repayments of loans or advances, or other
transfers of assets, in each case to the Company or any Restricted Subsidiary or
from the Net Cash Proceeds from the sale of any such Investment (except, in each
case, to the extent any such payment or proceeds are included in the calculation
of Adjusted Consolidated Net Income), or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the
definition of "Investments"), not to exceed, in each case, the amount of
Investments previously made by the Company or any Restricted Subsidiary in such
Person or Unrestricted Subsidiary.

The foregoing provision shall not be violated by reason of: (i) the payment
of any dividend within 60 days after the date of declaration thereof if, at said
date of declaration, such payment would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other acquisition or retirement
for value of Indebtedness that is subordinated in right of payment to the Notes
including premium, if any, and accrued and unpaid interest, with the proceeds
of, or in exchange for, Indebtedness Incurred under clause (iii) of the second
paragraph of part (a) of the "Limitation on Indebtedness" covenant; (iii) (A)
the repurchase, redemption or other acquisition of Capital Stock of the Company
(or options, warrants or other rights to acquire such Capital Stock) in exchange
for, or out of the proceeds of a substantially concurrent offering of, social
parts of Capital Stock (other than Disqualified Stock and any Capital Stock
issued in connection with the Social Part Holders Note Capitalization) of the
Company (or options, warrants or other rights to acquire such Capital Stock) or
(B) the repurchase, redemption or other acquisition of Disqualified Stock of the
Company (or options, warrants or other rights to acquire such Disqualified
Stock) in exchange for, or out of the proceeds of a substantially concurrent
offering of social parts of Disqualified Stock of the Company (or options,
warrants or other rights to acquire such Disqualified Stock); (iv) the making of
any principal payment or the repurchase, redemption, retirement, defeasance or
other acquisition for value of Indebtedness of the Company which is subordinated
in right of payment to the Notes in exchange for, or out of the proceeds of, a
substantially concurrent offering of, social parts of the Capital Stock of the
Company (other than Disqualified Stock); (v) the declaration or payment of
dividends on, or the making of any distribution on or with respect to, the
Common Stock of the Company or repurchases of Capital Stock of the Company, in
an amount each year not to exceed 6% of the Net Cash Proceeds received by the
Company from the issuance and sale, after the Closing Date, of Common Stock of
the Company (other than any Capital Stock issued in connection with the Social
Part Holders Note Capitalization) to a Person that is not a Subsidiary of the
Company or an Existing Social Part Holder; provided that sales of Common Stock
to an Existing Social Part Holder shall be excluded only to the extent that the
Existing Social Part Holder purchases Common Stock in excess of such Existing
Social Part Holder's proportionate ownership interest in the Company prior to
such sale; (vi) payments or distributions, to dissenting social part holders
pursuant to applicable law, pursuant to or in connection with a consolidation,
merger or transfer of assets that complies with the provisions of the Indenture
applicable to mergers, consolidations and transfers of all or substantially all
of the property and assets of the Company; (vii) the purchase, redemption,
acquisition, cancellation or other retirement for value of social parts of
Capital Stock of the Company to the extent necessary in the good faith judgment
of the Board of Directors of the Company, to prevent the loss or secure the
renewal or reinstatement of any license or franchise held by the Company or any
Restricted Subsidiary for any governmental agency; (viii) Investments in an
aggregate amount at any one time outstanding not to exceed U.S.$10 million per
fiscal year of the Company or its Restricted Subsidiaries; provided that the
amount of Investments that may be made in any fiscal year pursuant to this
clause (viii) shall be increased by (x) the amount of Investments that could
have been made in prior fiscal years pursuant to this clause (viii) (including
by reason of the proviso) but which were not so made and (y) an amount equal to
the net reduction in Investments made pursuant to this clause (viii) in any

Person resulting from payments of interest on Indebtedness, dividends,
repayments of loans or advances, or other transfers of assets, in each case to
the Company or any Restricted Subsidiary or from the Net Cash Proceeds from the
sale of any such Investment, or from redesignations of Unrestricted Subsidiaries
as Restricted Subsidiaries (valued in each case as provided in the definition of
"Investments"), not to exceed, in each case, the amount of Investments
previously made by the Company or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary pursuant to this clause (viii); (ix) Investments in any
Person the primary business of which is related, ancillary or complementary to
the business of the Company or its Restricted Subsidiaries on the date of such
Investments; provided that the amount of such Investments shall not exceed the
amount of Net Cash Proceeds received by the Company after the Closing Date from
the sale of its Capital Stock (other than Disqualified Stock and any Capital
Stock issued in connection with the Social Part Holders Note Capitalization) to
a Person who is not a Subsidiary of the Company, except to the extent such Net
Cash Proceeds were used to Incur Indebtedness pursuant to clause (viii) of the
"Limitation on Indebtedness" covenant or to make Restricted Payments pursuant to
clause (C)(2) of the first paragraph or clause (iii) or (iv) of this paragraph
of this "Limitation on Restricted Payments" covenant; (x) Investments of any
Person existing at the time such Person becomes a Restricted Subsidiary and not
made in connection with or in contemplation of such Person becoming a Restricted
Subsidiary; and (xi) Mexican Tax Distributions; provided that, except in the
case of clauses (i), (iii), (vi) and (xi), no Default or Event of Default shall
have occurred and be continuing or occur as a consequence of the actions or
payments set forth therein.

Any Restricted Payment made other than in cash shall be valued at fair
market value. Solely for purposes of calculating fair market value under the
preceding sentence, with respect to amounts in excess of U.S.$5 million, fair
market value shall be determined on the basis of the first sentence of the
definition of "fair market value" in good faith by the Board of Directors, whose
determination shall be conclusive if evidenced by a Board Resolution. The amount
of any Investment "outstanding" at any time shall be deemed to be equal to the
amount of such Investment on the date made, less the return of capital to the
Company and its Restricted Subsidiaries with respect to such Investment (up to
the amount of such Investment).

Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payments referred to in clause (ii), (x) or (xi)
thereof and an exchange of Capital Stock for Capital Stock or Indebtedness
referred to in clause (iii) or (iv) thereof), and the Net Cash Proceeds from any
issuance of Capital Stock referred to in clauses (iii), (iv) and (v), shall be
included in calculating whether the conditions of clause (C) of the first
paragraph of this "Limitation on Restricted Payments" covenant have been met
with respect to any subsequent Restricted Payments. In the event the proceeds of
an issuance of Capital Stock of the Company are used for the redemption,
repurchase or other acquisition of the Notes, or Indebtedness that is pari passu
with the Notes, then the Net Cash Proceeds of such issuance shall be included in
clause (C) of the first paragraph of this "Limitation on Restricted Payments"
covenant only to the extent such proceeds are not used for such redemption,
repurchase or other acquisition of Indebtedness. For purposes of determining
compliance with this "Limitation on Restricted Payments" covenant, in the event
that a Restricted Payment meets the criteria of more than one of the types of
Restricted Payments described in the clauses in the preceding paragraph, the
Company, in its sole discretion, shall classify such Restricted Payment and only
be required to include the amount and type of such Restricted Payment in one of
such clauses. Any Investment initially made pursuant to any of the clauses in
the preceding paragraph may at any time at the sole discretion of the Company be
treated as having been made pursuant to any other clause as long as the
outstanding amount of such Investment at the time of any reclassification could
be made pursuant to such other clause. If the Company makes a Restricted Payment
which, at the time of the making of such Restricted Payment, would in the good
faith determination of the Company be permitted under the Indenture, such
Restricted Payment shall be deemed to have been made in compliance with the
Indenture notwithstanding any subsequent adjustments made in good faith to the
Company financial statements affecting Adjusted Consolidated Net Income for any
period.

Limitation on dividends and other payment restrictions affecting Restricted
Subsidiaries

The Company will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Subsidiary owned by the
Company or any other Restricted Subsidiary, (ii) pay any Indebtedness

owed to the Company or any other Restricted Subsidiary, (iii) make loans or
advances to the Company or any other Restricted Subsidiary or (iv) transfer any
of its property or assets to the Company or any other Restricted Subsidiary.

The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in the Indenture or any other
agreements in effect on the Closing Date, and any extensions, refinancings,
renewals or replacements of such agreements or of an agreement pursuant to which
an encumbrance or restriction permitted under clause (iii) or (iv)(D) of this
paragraph exists; provided that the encumbrances and restrictions in any such
extensions, refinancings, renewals or replacements are no less favorable in any
material respect to the Holders than those encumbrances or restrictions that are
then in effect and that are being extended, refinanced, renewed or replaced;
(ii) existing under or by reason of applicable law; (iii) existing with respect
to any Person (including any Person that becomes a Restricted Subsidiary) or the
property or assets of such Person acquired by the Company or any Restricted
Subsidiary, existing at the time of such acquisition and not incurred in
contemplation thereof, which encumbrances or restrictions are not applicable to
any Person or the property or assets of any Person other than such Person or the
property or assets of such Person so acquired; (iv) in the case of clause (iv)
of the first paragraph of this "Limitation on dividends and other payment
restrictions affecting Restricted Subsidiaries" covenant, (A) that restrict in a
customary manner the subletting, assignment or transfer of any property or asset
that is a lease, license, conveyance or contract or similar property or asset,
(B) existing by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by the Indenture, (C) arising or
agreed to in the ordinary course of business, not relating to any Indebtedness,
and that do not, individually or in the aggregate, detract from the value of
property or assets of the Company or any Restricted Subsidiary in any manner
material to the Company or any Restricted Subsidiary or (D) restrictions
contained in any security agreement (including a Capitalized Lease) securing
Indebtedness of the Company or a Restricted Subsidiary otherwise permitted under
the Indenture, but only to the extent such restrictions restrict the transfer of
the property subject to such security agreement; (v) with respect to a
Restricted Subsidiary and imposed pursuant to an agreement that has been entered
into for the sale or disposition of all or substantially all of the Capital
Stock of, or property and assets of, such Restricted Subsidiary; (vi) pursuant
to applicable law or regulations; (vii) pursuant to the Indenture and the Notes;
or (viii) if, immediately after giving effect to such encumbrances or
restrictions, the Company could Incur at least U.S.$1.00 of additional
Indebtedness under the first paragraph of the "Limitation on Indebtedness"
covenant; provided that subsequent Investments in any such Restricted Subsidiary
are reasonably related to, and used in, the business of such Restricted
Subsidiary. Nothing contained in this "Limitation on dividend and other payment
restrictions affecting Restricted Subsidiaries" covenant shall prevent the
Company or any Restricted Subsidiary from (1) creating, incurring, assuming or
suffering to exist any Liens otherwise permitted in the "Limitation on Liens"
covenant or (2) restricting the sale or other disposition of property or assets
of the Company or any of its Restricted Subsidiaries that secure Indebtedness of
the Company or any of its Restricted Subsidiaries.

Limitation on the issuance and sale of Capital Stock of Restricted Subsidiaries

The Company will not sell, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell, any shares or social parts of Capital
Stock of a Restricted Subsidiary (including options, warrants or other rights to
purchase shares or social parts of such Capital Stock) except (i) to the Company
or a Wholly Owned Restricted Subsidiary; (ii) issuances of director's qualifying
shares or social parts or sales to foreign nationals of shares or social parts
of Capital Stock of foreign Restricted Subsidiaries, to the extent required by
applicable law; (iii) if, immediately after giving effect to such issuance or
sale, such Restricted Subsidiary would no longer constitute a Restricted
Subsidiary, provided any Investment in such Person remaining after giving effect
to such issuance or sale would have been permitted to be made under the
"Limitation on Restricted Payments" covenant, if made on the date of such
issuance or sale; (iv) if the proceeds from such issuance or sale are applied in
accordance with the "Limitation on Asset Sales" covenant; (v) in a transaction
in which, or in connection with which, the Company or a Restricted Subsidiary
acquires at the same time sufficient Capital Stock of such Restricted Subsidiary
to at least maintain the same percentage ownership interest it had prior to such
transaction; and (vi) Disqualified Stock of a Restricted Subsidiary issued in
exchange for, or upon conversion of, or the proceeds of the issuance of which
are used to exchange, convert, redeem, replace, refinance or refund social parts
of Disqualified Stock of such Restricted Subsidiary, provided that the amounts
and the timing of the redemption obligations of such Disqualified Stock shall

not exceed the amounts of, or provide for redemption obligations earlier than,
the redemption obligations of the Disqualified Stock being so exchanged,
converted, redeemed, replaced, refinanced or refunded.

Limitation on issuances of Guarantees by Restricted Subsidiaries

The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company which is pari passu
with or subordinate in right of payment to the Notes ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers supplemental indentures to the Indenture providing for a Guarantee
(a "Subsidiary Guarantee") of payment of the Notes by such Restricted Subsidiary
and (ii) such Restricted Subsidiary waives and will not in any manner whatsoever
claim or take the benefit or advantage of, any rights of reimbursement,
indemnity or subrogation or any other rights against the Company or any other
Restricted Subsidiary as a result of any payment by such Restricted Subsidiary
under its Subsidiary Guarantee; provided that this paragraph shall not be
applicable to any Guarantee of any Restricted Subsidiary that existed at the
time such Person became a Restricted Subsidiary and was not Incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary. If the Guaranteed Indebtedness is (A) pari passu with the Notes,
then the Guarantee of such Guaranteed Indebtedness shall be pari passu with, or
subordinated to, the Subsidiary Guarantee or (B) subordinated to the Notes, then
the Guarantee of such Guaranteed Indebtedness shall be subordinated to the
Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the Notes.

Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's and each
Restricted Subsidiary's Capital Stock in, or all or substantially all the assets
of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by the Indenture) or (ii) the release or discharge of the Guarantee
which resulted in the creation of such Subsidiary Guarantee, except a discharge
or release by or as a result of payment under such Guarantee.

Limitation on transactions with Social Part Holders and Affiliates

The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or assets,
or the rendering of any service) with any Affiliate or Related Person of the
Company or any Restricted Subsidiary, except upon fair and reasonable terms no
less favorable in any material respect to the Company or such Restricted
Subsidiary than could be obtained, at the time of such transaction or, if such
transaction is pursuant to a written agreement, at the time of the execution of
the agreement providing therefor, in a comparable arm's-length transaction with
a Person that is not an Affiliate or Related Person.

The foregoing limitation does not limit, and shall not apply to (i) a
transaction or series of related transactions (A) approved by a majority of the
disinterested members of the Board of Directors (or, in respect of transactions
with TechCo., SESLA, any of their subsidiaries or any respective successors,
approved by the Chief Executive Officer of the Company and at least two-thirds
of the Board of Directors) or (B) for which the Company or a Restricted
Subsidiary delivers to the Trustee a written opinion of a United States
nationally recognized investment banking or accounting firm (or their Mexican
affiliate) stating that the transaction is fair to the Company or such
Restricted Subsidiary from a financial point of view or (C) involving
consideration of less than U.S.$1 million; (ii) a transaction or series of
related transactions solely between the Company and any of its Subsidiaries or
controlled Affiliates (other than Subsidiaries or controlled Affiliates in which
any Related Person of the Company owns Capital Stock having more than 10% of the
economic value or voting power of all of such Subsidiary's or controlled
Affiliates' Capital Stock) or solely between Subsidiaries or controlled
Affiliates (other than Subsidiaries or controlled Affiliates in which any
Related Person of the Company owns Capital Stock having more than 10% of the
economic value or voting power of all of such Subsidiary's or controlled
Affiliates' Capital Stock); (iii) the payment of reasonable and customary
regular fees to directors of the Company or its Restricted Subsidiaries; (iv)
any payments or other transactions pursuant to any tax-sharing agreement between
the Company and any other Person with which the Company files a consolidated tax
return or with which the Company is part of a consolidated group for tax
purposes; (v) loans or advances to employees made in the ordinary course of
business of

the Company or its Restricted Subsidiaries and that do not in the aggregate
exceed at any one time outstanding the greater of (I) U.S.$4 million and (II) 1%
of Consolidated EBITDA for the Four Quarter Period; (vi) other transactions
pursuant to employee compensation arrangements approved by the Board of
Directors; (vii) any payments or transactions pursuant to agreements or other
arrangements in effect on the Closing Date; (viii) agreements and transactions
regarding programming pursuant to Article IV of the Social Part Holders
Agreement; (ix) any Investments by an Affiliate or a Related Person of the
Company in the Capital Stock (other than Disqualified Stock) of the Company or
any Restricted Subsidiary of the Company; (x) any sale or grant of advertising
time by the Company or a Restricted Subsidiary to any Affiliate, provided that
the advertising time is sold or granted to such Affiliate no more than 72 hours
prior to the time such advertising time is scheduled to be broadcast and such
advertising time was otherwise unsold at the time of such sale or grant; (xi)
the Social Part Holders Note Capitalization; or (xii) any Restricted Payments
not prohibited by the "Limitation on Restricted Payments" covenant.
Notwithstanding the foregoing, a transaction or series of related transactions
covered by the first paragraph of this "Limitation on transactions with Social
Part Holders and Affiliates" covenant and not covered by clauses (ii) through
(xii) of this paragraph, (I) the aggregate amount of which exceeds U.S.$20
million in value, but is less than $30 million in value, must be determined to
be fair by the Chief Executive Officer of the Company, who shall deliver to the
Trustee an officer's certificate certifying such conclusion, and (II) the
aggregate amount of which is $30 million or more must be approved in the manner
provided for in clause (i)(A) or (i)(B) above.

Limitation on Liens

The Company will not, and will not permit any Restricted Subsidiary to,
create, incur, assume or suffer to exist any Lien on any of its assets or
properties of any character, or any social parts of Capital Stock or
Indebtedness of any Restricted Subsidiary, without making effective provision
for all of the Notes and all other amounts due under the Indenture to be
directly secured equally and ratably with (or, if the obligation or liability to
be secured by such Lien is subordinated in right of payment to the Notes, prior
to) the obligation or liability secured by such Lien.

The foregoing limitation does not apply to (i) Liens existing on the
Closing Date; (ii) Liens granted after the Closing Date on any assets or Capital
Stock of the Company or its Restricted Subsidiaries created in favor of the
Holders; (iii) Liens with respect to the assets of a Restricted Subsidiary
granted by such Restricted Subsidiary to the Company or a Wholly Owned
Restricted Subsidiary to secure Indebtedness owing to the Company or such other
Restricted Subsidiary; (iv) Liens securing Indebtedness which is Incurred to
refinance secured Indebtedness which is permitted to be Incurred under clause
(iii) of the second paragraph of the "Limitation on Indebtedness" covenant,
provided that such Liens do not extend to or cover any property or assets of the
Company or any Restricted Subsidiary other than the property or assets securing
the Indebtedness being refinanced; (v) Permitted Liens; (vi) other Liens,
provided that the book value, determined at the time such Lien is granted (as
adjusted in accordance with Mexican GAAP), of the assets subject to such Lien
and all other Liens incurred pursuant to this clause (vi) does not in the
aggregate exceed (at the time such Lien is granted) the greater of (A) $60
million and (B) 15% of Adjusted Consolidated Net Tangible Assets; or (vii) Liens
on proceeds from assets which are subject to a Lien described in any of the
foregoing clauses (i) through (vi).

Limitation on sale-leaseback transactions

The Company will not, and will not permit any Restricted Subsidiary to,
enter into any sale-leaseback transaction involving any of its assets or
properties whether now owned or hereafter acquired, whereby the Company or a
Restricted Subsidiary sells or transfers such assets or properties and then or
thereafter leases such assets or properties or any part thereof or any other
assets or properties which the Company or such Restricted Subsidiary, as the
case may be, intends to use for substantially the same purpose or purposes as
the assets or properties sold or transferred.

The foregoing restriction does not apply to any sale-leaseback transaction
if (i) the lease is for a period, including renewal rights, of not in excess of
three years; (ii) the lease secures or relates to industrial revenue or
pollution control bonds; (iii) the transaction is solely between the Company and
any Wholly Owned Restricted Subsidiary or solely between Wholly Owned Restricted
Subsidiaries; or (iv) the Company or such Restricted Subsidiary, within twelve
months after the sale or transfer of any assets or properties is completed,
applies an

amount not less than the net proceeds received from such sale in accordance with
clause (A) or (B) of the first paragraph of the "Limitation on Asset Sales"
covenant described below.

Limitation on Asset Sales

The Company will not, and will not permit any Restricted Subsidiary to,
consummate any Asset Sale, unless (i) the consideration received by the Company
or such Restricted Subsidiary is at least substantially equal to the fair market
value of the assets sold or disposed of and (ii) at least 75% of the
consideration received consists of (1) cash or Temporary Cash Investments
(provided that the amount of unsubordinated Indebtedness of the Company or any
Indebtedness of any Restricted Subsidiary, with respect to which all creditors
release the Company and its Restricted Subsidiaries in connection with such
Asset Sale, shall be deemed to be cash for purposes of this clause (ii)(1)), (2)
DTH Assets or (3) to the extent that the Company would be permitted to Incur
U.S.$1.00 of additional Indebtedness under the first paragraph of the
"Limitation on Indebtedness" covenant after giving pro forma effect to such
Asset Sale, shares of publicly traded Voting Stock of any Person engaged in the
DTH Business. In the event and to the extent that the Net Cash Proceeds received
by the Company or any of its Restricted Subsidiaries from one or more Asset
Sales occurring on or after the Closing Date in any period of twelve consecutive
months exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of
the date closest to the commencement of such twelve-month period for which a
consolidated balance sheet of the Company and its subsidiaries have been filed
with the Commission or provided to the Trustee pursuant to the "Commission
reports and reports to Holders" covenant), then the Company shall or shall cause
the relevant Restricted Subsidiary to (i) within twelve months after the date
Net Cash Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible
Assets (A) apply an amount equal to such excess Net Cash Proceeds to permanently
repay unsubordinated Indebtedness of the Company or any Restricted Subsidiary,
in each case owing to a Person other than the Company or any of its Restricted
Subsidiaries or (B) invest an equal amount, or the amount not so applied
pursuant to clause (A) (or enter into a definitive agreement committing to so
invest within twelve months after the date of such agreement), in property or
assets (other than current assets not consisting of DTH Assets) of a nature or
type or that are used in a business (or in a company having property and assets
of a nature or type, or engaged in a business) similar or related, ancillary or
complimentary to the nature or type of the property and assets of, or the
business of, the Company and its Restricted Subsidiaries existing on the date of
such investment and (ii) apply (no later than the end of the twelve-month period
referred to in clause (i)) such excess Net Cash Proceeds (to the extent not
applied pursuant to clause (i)) as provided in the last paragraph of this
"Limitation on Asset Sales" covenant. The amount of such excess Net Cash
Proceeds required to be applied (or to be committed to be applied) during such
twelve-month period as set forth in clause (i) of the preceding sentence and not
applied as so required by the end of such period shall constitute "Excess
Proceeds."

Notwithstanding the foregoing, (a) to the extent that any or all of the Net
Cash Proceeds of any Asset Sale are prohibited or delayed by applicable local
law from being repatriated to Mexico, the portion of such Net Cash Proceeds so
affected will not be required to be applied pursuant to this "Limitation on
Asset Sales" covenant but may be retained for so long, but only for so long, as
the applicable local law will not permit repatriation to Mexico (the Company
agrees in the Indenture to promptly take all reasonable actions required by
applicable local law to permit such repatriation) and once such repatriation of
any such affected Net Cash Proceeds is permitted under the applicable local law,
such repatriation will be immediately effected and such repatriated Net Cash
Proceeds will be applied in the manner set forth in this "Limitation on Asset
Sales" covenant as if such Asset Sale had occurred on the date of repatriation;
and (b) to the extent that the Board of Directors has determined in good faith
that repatriation of any or all of the Net Cash Proceeds would have an adverse
tax consequence to the Company, the Net Cash Proceeds so affected may be
retained outside Mexico for so long as such adverse tax consequence would
continue.

If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
"Limitation on Asset Sales" covenant totals at least U.S.$10 million, the
Company must commence, not later than the fifteenth Business Day of such month,
and consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate principal amount of Notes equal to the Excess Proceeds on such date,
at a purchase price equal to 101% of the principal amount of the Notes plus
accrued interest (if any) to the Payment Date. To the extent such Offer to
Purchase is made and the full amount of Excess Proceeds that are the

subject of the offer are not used to repurchase Notes then the Company and its
Restricted Subsidiaries may use any remaining amount for general corporate
purposes.

Repurchase of Notes upon a Change of Control

The Company must commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all Notes then Outstanding, at
a purchase price equal to 101% of the principal amount of the Notes plus accrued
interest (if any) to the Payment Date. The Company is not required to make an
Offer to Purchase following a Change of Control if a third party makes an Offer
to Purchase that would be in compliance with the provisions described in this
section if it were made by the Company and such third party purchases (for the
consideration referred to in the immediately preceding sentence) the Notes
validly tendered and not withdrawn. Prior to the mailing of the notice to
Holders commencing such Offer to Purchase, but in any event within 30 days
following any Change of Control, the Company covenants to (i) repay in full all
indebtedness of the Company that would prohibit the repurchase of the Notes
pursuant to such Offer to Purchase or (ii) obtain any requisite consents under
instruments governing any such indebtedness of the Company to permit the
repurchase of the Notes. The Company shall first comply with the covenant in the
preceding sentence before it shall be required to repurchase Notes pursuant to
this "Repurchase of Notes upon a Change of Control" covenant.

There can be no assurance that the Company will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well as
may be contained in other securities of the Company which might be outstanding
at the time). The above covenant requiring the Company to repurchase the Notes
will, unless consents are obtained, require the Company to repay all
indebtedness then outstanding which by its terms would prohibit such Note
repurchase, either prior to or concurrently with such Note repurchase.

Commission reports and reports to Holders

Whether or not the Company is then required to file reports with the
Commission, for so long as any Notes are Outstanding, the Company shall file
with the Commission all such reports and other information as it would be
required to file with the Commission by Section 13(a) or 15(d) under the
Exchange Act if it were subject thereto, unless the Commission does not permit
such filings, in which case the Company shall provide such reports and other
information to the Trustee (within the same time periods that would be
applicable if the Company were required and permitted to file reports with the
Commission) and instruct the Trustee to mail such reports and other information
to Holders at their addresses set forth on the Security Register. The Company
shall supply the Trustee and each Holder or shall supply to the Trustee for
forwarding to each such Holder, without cost to such Holder, copies of such
reports and other information. Under the rules of the Luxembourg Stock Exchange,
these reports will be made available to the public at the office of the
Luxembourg Paying Agent.

EVENTS OF DEFAULT

The following events are defined as "Events of Default" in the Indenture:
(a) default in the payment of principal of (or premium, if any, on) any Notes,
when the same becomes due and payable at maturity, upon acceleration, redemption
or otherwise; (b) default in the payment of interest on any Notes, when the same
becomes due and payable, and such default continues for a period of 30 days; (c)
default in the performance or breach of the provisions of the Indenture
applicable to mergers, consolidations and transfers of all or substantially all
of the assets of the Company or the failure to make or consummate an Offer to
Purchase in accordance with the "Limitation on Asset Sales" or "Repurchase of
Notes upon a Change of Control" covenant; (d) the Company defaults in the
performance of or breaches any other covenant or agreement of the Company in the
Indenture or under the Notes, (other than a default specified in clause (a),
(b), or (c) above) and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of 25% or
more in aggregate principal amount of the Notes; (e) there occurs with respect
to any issue or issues of Indebtedness of the Company or any Significant
Subsidiary having an outstanding principal amount of U.S.$15 million or more in
the aggregate for all such issues of all such Persons, whether such Indebtedness
now exists or shall hereafter be created, (I) an event of default that has
caused the holder thereof to declare such Indebtedness to be due and payable
prior to its Stated Maturity and such

Indebtedness has not been discharged in full or such acceleration has not been
rescinded or annulled within 30 days of such acceleration and/or (II) the
failure to make a principal payment and such defaulted payment shall not have
been made, waived or extended within 30 days of such payment default; (f) any
final judgment or order (not covered by insurance) for the payment of money in
excess of U.S.$15 million in the aggregate for all such final judgments or
orders against all such Persons (treating any deductibles, self-insurance or
retention as not so covered) shall be rendered against the Company or any
Significant Subsidiary and shall not be paid or discharged, and there shall be
any period of 60 consecutive days following entry of the final judgment or order
that causes the aggregate amount for all such final judgments or orders
outstanding and not paid or discharged against all such Persons to exceed
U.S.$15 million during which a stay of enforcement of such final judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect; (g)
the failure by the Existing Social Part Holders and their Affiliates to conclude
the Social Part Holders Note Capitalization on or before the one-hundred and
twentieth day following the date of the initial issuance of the Notes; (h) a
court having jurisdiction in the premises enters a decree or order for (A)
relief in respect of the Company or any Significant Subsidiary in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, (B) appointment of a receiver, liquidator, assignee,
sindico, custodian, trustee, sequestrator or similar official of the Company or
any Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) the winding up or
liquidation of the affairs of the Company or any Significant Subsidiary and, in
each case, such decree or order shall remain unstayed and in effect for a period
of 60 consecutive days; or (i) the Company or any Significant Subsidiary (A)
commences a voluntary case under any applicable bankruptcy, suspension of
payments, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case under any
such law, (B) consents to the appointment of or taking possession by a receiver,
liquidator, assignee, sindico, custodian, trustee, sequestrator or similar
official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any Significant
Subsidiary or (C) effects any general assignment for the benefit of creditors.

If an Event of Default (other than an Event of Default specified in clause
(h) or (i) above that occurs with respect to the Company) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes then Outstanding, by written notice to
the Company (and to the Trustee if such notice is given by the Holders), may,
and the Trustee at the request of such Holders shall, declare the principal
amount of, premium, if any, and accrued interest on such Notes to be immediately
due and payable. Upon a declaration of acceleration, such principal amount,
premium, if any, and accrued interest shall be immediately due and payable. In
the event of a declaration of acceleration because an Event of Default set forth
in clause (e) above has occurred and is continuing, such declaration of
acceleration shall be automatically rescinded and annulled if the event of
default triggering such Event of Default pursuant to clause (e) shall be
remedied or cured by the Company or the relevant Significant Subsidiary or
waived by the holders of the relevant Indebtedness within 60 days after the
declaration of acceleration with respect thereto. If an Event of Default
specified in clause (h) or (i) above occurs with respect to the Company, the
principal amount of, premium, if any, and accrued interest on the Notes then
Outstanding shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder. The
Holders of at least a majority in principal amount at maturity of the
Outstanding Notes by written notice to the Company and to the Trustee, may waive
all past defaults and rescind and annul a declaration of acceleration and its
consequences if (i) all existing Events of Default, other than the nonpayment of
the principal of, premium, if any, and interest on the Notes that have become
due solely by such declaration of acceleration, have been cured or waived and
(ii) the rescission would not conflict with any judgment or decree of a court of
competent jurisdiction. For information as to the waiver of defaults, see "--
Modification and waiver."

The Holders of at least a majority in aggregate principal amount of the
Outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve such
Trustee in personal liability, or that such Trustee determines in good faith may
be prejudicial to the rights of Holders of Notes, not joining in the giving of
such direction and may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes. A Holder
may not pursue any remedy with respect to the Indenture or the Notes unless: (i)
the Holder gives the Trustee written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of

Outstanding Notes make a written request to such Trustee to pursue the remedy;
(iii) such Holder or Holders offer the Trustee indemnity satisfactory to such
Trustee against any costs, liability or expense; (iv) the Trustee does not
comply with the request within 60 days after receipt of the request and the
offer of indemnity; and (v) during such 60-day period, the Holders of a majority
in aggregate principal amount of the Outstanding Notes do not give the Trustee a
direction that is inconsistent with the request. However, such limitations do
not apply to the right of any Holder of a Note to receive payment of the
principal of, premium, if any, or interest on, such Note or to bring suit for
the enforcement of any such payment, on or after the due date expressed in the
Notes, which right shall not be impaired or affected without the consent of the
Holder.

The Indenture requires certain officers of the Company to certify, on or
before a date not more than 180 days after the end of each fiscal year, that a
review has been conducted of the activities of the Company and its Restricted
Subsidiaries and the Company's and its Restricted Subsidiaries' performance
under the Indenture and that the Company has fulfilled all obligations
thereunder, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default and the nature and status thereof. The
Company will also be obligated to notify the Trustee of any default or defaults
in the performance of any covenants or agreements under the Indenture.

CONSOLIDATION, MERGER AND SALE OF ASSETS

The Company will not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its property
and assets (as an entirety or substantially an entirety in one transaction or a
series of related transactions) to, any Person or permit any Person to merge
with or into the Company unless: (i) the Company shall be the continuing Person,
or the Person (if other than the Company) formed by such consolidation or into
which the Company is merged or that acquired or leased such property and assets
of the Company shall be a corporation organized and validly existing under the
laws of Mexico, the United States of America or any jurisdiction of either such
country and shall expressly assume, by supplemental indentures, executed and
delivered to the Trustee, all of the obligations of the Company on all of the
Notes and under the Indenture; (ii) immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing; (iii) immediately after giving effect to such transaction on a pro
forma basis, (A) the Company or any Person becoming the successor obligor of the
Notes shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction, (B)
the Consolidated Leverage Ratio of the Company, or any Person becoming the
successor obligor of the Notes, as the case may be, is no worse than 110% of the
Consolidated Leverage Ratio of the Company without giving effect to such
transaction or (C) the Company or any Person becoming the successor obligor of
the Notes could incur U.S.$1.00 of additional Indebtedness under the first
paragraph of the "Limitation on Indebtedness" covenant; and (iv) the Company
delivers to the Trustee an Officers' Certificate (attaching the arithmetic
computations to demonstrate compliance with clause (iii) and Opinion of Counsel,
in each case stating that such consolidation, merger or transfer and such
supplemental indenture complies with this provision and that all conditions
precedent provided for herein relating to such transaction have been complied
with; provided that one or more sales, conveyances, transfers, leases or other
dispositions of DTH Units shall not be considered a sale of substantially all of
the Company's property and assets; provided further that clause (iii) above does
not apply if, in the good faith determination of the Board of Directors of the
Company, whose determination shall be evidenced by a Board Resolution, the
principal purpose of such transaction is to change the state of incorporation of
the Company or jurisdiction within Mexico, to incorporate the Company under the
laws of a state of the United States or to transform the Company to a sociedad
de responsabilidad limitada, a sociedad anonima or a sociedad anonima de capital
variable; and provided further that any such transaction shall not have as one
of its purposes the evasion of the foregoing limitations.

An assumption by any Person of the Company's obligations under the Notes
and the Indenture might be deemed for United States federal income tax purposes
to be an exchange of the Notes for "new" Notes by the beneficial owners thereof,
and possibly resulting in recognition of gain or loss for such purposes and
possibly other adverse tax consequences to the beneficial owners. Beneficial
owners should consult their own tax advisors regarding the tax consequences of
such an assumption.

DEFEASANCE

Defeasance and Discharge. The Indenture provides that the Company will be
deemed to have paid and will be discharged from any and all obligations in
respect of the Notes on the 123rd day after the deposit referred to below, and
the provisions of the Indenture will no longer be in effect with respect to the
Notes (except for, among other matters, certain obligations to register the
transfer or exchange of the Notes, to replace stolen, lost or mutilated Notes,
to maintain paying agencies and to hold monies for payment in trust) if, among
other things, (A) the Company has deposited or caused to be deposited with the
Trustee, in trust, money and/or Government Securities that through the payment
of interest and principal in respect thereof in accordance with their terms will
provide money in an amount sufficient to pay the principal of, premium, if any,
and accrued interest on the Notes on the Stated Maturity of such payments in
accordance with the terms of the Indenture and the Notes, (B) the Company has
delivered to the Trustee (i) either (x) an Opinion of Counsel to the effect that
beneficial owners of the Notes will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of the Company's exercise of its option
under this "Defeasance" provision and will be subject to U.S. federal income tax
on the same amount and in the same manner and at the same times as would have
been the case if such deposit, defeasance and discharge had not occurred, which
Opinion of Counsel must be based upon (and accompanied by a copy of) a ruling of
the Internal Revenue Service to the same effect unless there has been a change
in applicable U.S. federal income tax law after the Closing Date such that a
ruling is no longer required or (y) a ruling directed to the Trustee received
from the Internal Revenue Service to the same effect as the aforementioned
Opinion of Counsel, (ii) either (x) an Opinion of Counsel to the effect that,
based upon Mexican tax law then in effect, beneficial owners of the Notes will
not recognize income, gain or loss for Mexican federal income tax (including
withholding tax) purposes as a result of the Company's exercise of its option
under this "Defeasance" provision and will be subject to Mexican Federal income
tax (including withholding tax) on the same amount and in the same manner and at
the same times as would have been the case if such deposit, defeasance and
discharge had not occurred, or (y) a ruling directed to the Trustee received
from the Mexican taxing authorities to the same effect as the aforementioned
Opinion of Counsel, and (iii) an Opinion of Counsel to the effect that the
creation of the defeasance trust does not violate the Investment Company Act of
1940, (C) immediately after giving effect to such deposit on a pro forma basis,
no Event of Default, or event that after the giving of notice or lapse of time
or both would become an Event of Default, shall have occurred and be continuing
(i) on the date of such deposit or (ii) during the period ending on the 123rd
day after the date of such deposit, and (D) if at such time the Notes are listed
on a national securities exchange, the Company has delivered to the Trustee an
Opinion of Counsel to the effect that the Notes will not be delisted as a result
of such deposit, defeasance and discharge.

Defeasance of certain covenants and certain Events of Default. The
Indenture further provides that the provisions of the Indenture will no longer
be in effect with respect to clauses (iii) and (iv) under "Consolidation, merger
and sale of assets" and all the covenants described herein under "Covenants,"
clauses (c) and (d) under "Events of Default" with respect to such clauses (iii)
and (iv) under "Consolidation, merger and sale of assets" and such covenants and
clauses (e) and (f) under "Events of Default" shall be deemed not to be Events
of Default, upon, among other things, the deposit with the Trustee, in trust, of
money and/or Government Securities that through the payment of interest and
principal in respect thereof in accordance with their terms will provide money
in an amount sufficient to pay the principal of, premium, if any, and accrued
interest on the Notes on the Stated Maturity of such payments in accordance with
the terms of the Indenture and the Notes, the satisfaction of the provisions
described in clauses (B)(iii), (C)(i) and (D) of the preceding paragraph and the
delivery by the Company to the Trustee of an Opinion of Counsel to the effect
that, among other things, the beneficial owners of the Notes will not recognize
income, gain or loss for U.S. federal income tax purposes or Mexican federal
income tax (including withholding tax) purposes as a result of such deposit and
defeasance of certain covenants and Events of Default and will be subject to
U.S. federal income tax and Mexican federal income tax (including withholding
tax) on the same amount and in the same manner and at the same times as would
have been the case if such deposit and defeasance had not occurred.

Defeasance and Certain Other Events of Default. In the event the Company
exercises its option to omit compliance with certain covenants and provisions of
the Indenture with respect to the Notes as described in the immediately
preceding paragraph and such Notes are declared due and payable because of the
occurrence of an Event of Default that remains applicable, the amount of money
and/or Government Securities on deposit with the Trustee will be sufficient to
pay amounts due on such Notes at the time of their Stated Maturity but may not
be

sufficient to pay amounts due on such Notes at the time of the acceleration
resulting from such Event of Default. However, the Company will remain liable
for such payments.

SATISFACTION AND DISCHARGE

The Indenture will cease to be of further effect (except as to certain
matters as expressly provided for in the Indenture) as to all Outstanding Notes,
when (i) either (a) all such Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid) have
been delivered to the Trustee for cancellation and the Company has paid all sums
payable by it thereunder or (b) all such Notes not theretofore delivered to the
Trustee for cancellation have become due and payable or will become due and
payable at their Stated Maturity within one year or will be called for
redemption within one year and the Company has irrevocably deposited or caused
to be deposited with the Trustee funds in an amount sufficient to pay and
discharge the entire Indebtedness on the Notes not theretofore delivered to the
Trustee for cancellation, for principal of, premium, if any, and interest to the
date of deposit (in the case of Notes which have become due and payable) or to
the date such Notes will become due and payable or to the date of redemption, as
the case may be (in the case of Notes which will become due and payable at their
Stated Maturity within one year or which will be called for redemption within
one year); (ii) the Company has paid all other sums payable under the Indenture
by the Company; and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating (and such statements shall be
true) that (A) all conditions precedent under the Indenture relating to the
satisfaction and discharge of the Indenture have been complied with and (B) such
satisfaction and discharge will not result in a breach or violation of, or
constitute a default under, the Indenture or any other material agreement or
instrument (which, in the case of the Opinion of Counsel, would be any other
material agreement or instrument known to such counsel after due inquiry) to
which the Company is a party or by which it is bound.

MODIFICATION AND WAIVER

Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Notes; provided, however, that no
such modification or amendment may, without the consent of each Holder affected
thereby, (i) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, (ii) reduce the principal amount of, or premium, if
any, or interest on, any Note, (iii) change the place or currency of payment of
principal of, or premium, if any, or interest on, any Note, (iv) impair the
right to institute suit for the enforcement of any payment on or after the
Stated Maturity (or, in the case of a redemption, on or after the Redemption
Date) of any Note, (v) reduce the above-stated percentage of Outstanding Notes
the consent of whose Holders is necessary to modify or amend the Indenture, (vi)
waive a default in the payment of principal of, premium, if any, or interest on
the Notes, or (vii) reduce the percentage or aggregate principal amount of
Outstanding Notes the consent of whose Holders is necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults.

The Indenture contains provisions permitting Innova and the Trustee,
without the consent of or notice to any Holder, to amend or supplement the
Indenture (i) to cure ambiguities, defects or inconsistencies in the Indenture
that do not adversely affect the Holders in any material respect, (ii) to comply
with "-- Consolidation, merger and sale of assets," (iii) to comply with the
Trust Indenture Act, (iv) to evidence and provide for a successor trustee, and
(v) to make any change that does not materially and adversely affect the rights
of any Holder, among other things.

ADDITIONAL AMOUNTS

Any payments made by the Company under or with respect to the Notes will be
made free and clear of and without withholding or deduction for or on account of
any present or future tax, duty, levy, impost, assessment or other governmental
charge imposed or levied by or on behalf of Mexico or of any subdivision thereof
or by an authority or agency therein or thereof having power to tax (hereinafter
"Taxes"), unless the Company is required to withhold or deduct Taxes by law or
by the interpretation or administration thereof. If the Company is so required
to withhold or deduct any amount for or on account of Taxes from any payment
made under or with respect to the Notes, the Company will pay such additional
amounts ("Additional Amounts") as may be necessary, so that the net

amount received by each Holder of Notes (including Additional Amounts) after
such withholding or deduction will not be less than the amount each Holder would
have received if such Taxes had not been withheld or deducted.

Notwithstanding the foregoing, no such Additional Amounts shall be payable
with respect to:

(a) any Taxes which are imposed on, or deducted or withheld from, payments
made to the Holder or beneficial owner of a Note by reason of the
existence of any connection between the Holder or beneficial owner of
the Note (or between a fiduciary, settlor, beneficiary, member or
shareholder of, or possessor of a power over, such Holder or
beneficial owner, if such Holder or beneficial owner is an estate,
trust, corporation or partnership) and Mexico (or any political
subdivision or territory or possession thereof or area subject to its
jurisdiction) (including, without limitation, such Holder or
beneficial owner (or such fiduciary, settlor, beneficiary, member,
shareholder or possessor) (i) being or having been a citizen or
resident thereof, (ii) maintaining or having maintained an office,
permanent establishment, fixed base or branch therein, or (iii) being
or having been present or engaged in trade or business therein),
except for a connection relating to or otherwise arising from the mere
ownership of, or receipt of payment under, such Note or the exercise
of rights under such Note or the Indenture (personally or through the
Trustee);

(b) any estate, inheritance, gift, sales, stamp, transfer or personal
property Tax;

(c) any Taxes that are imposed on, or withheld or deducted from, payments
made to the Holder or beneficial owner of a Note to the extent such
Taxes would not have been so imposed, deducted or withheld but for the
failure by such Holder or beneficial owner of such Note to comply with
any certification, identification, information, documentation or other
reporting requirement concerning the nationality, residence, identity
or connection with Mexico of the Holder or beneficial owner of such
Note if (i) such compliance is required or imposed by a statute,
treaty, regulation, rule, ruling or administrative practice in order
to make any claim for exemption from, or reduction in the rate of, the
imposition, withholding or deduction of any Taxes, and (ii) at least
60 days prior to the first payment date with respect to which the
Company shall apply this clause (c), the Company shall have notified
all the Holders of Notes, in writing, that such Holders or beneficial
owners of the Notes will be required to provide such information or
documentation;

(d) any Taxes imposed on, or withheld or deducted from, payments made to a
Holder or beneficial owner of a Note at a rate in excess of the 4.9%
rate of Tax in effect on the date hereof and uniformly applicable in
respect of payments made by the Company to all Holders or beneficial
owners eligible for the benefits of a treaty for the avoidance of
double taxation to which Mexico is a party without regard to the
particular circumstances of such Holders or beneficial owners;
provided that, upon any subsequent increase in the rate of Tax that
would be applicable to payments to all such Holders or beneficial
owners without regard to their particular circumstances, such
increased rate shall be substituted for the 4.9% rate for purposes of
this clause (d), but only to the extent that (i) such Holder or
beneficial owner has failed to provide on a timely basis, at the
reasonable request of the Company (subject to the conditions set forth
below), information, documentation or other evidence concerning
whether such Holder or beneficial owner is eligible for benefits under
a treaty for the avoidance of double taxation to which Mexico is a
party if necessary to determine the appropriate rate of deduction or
withholding of Taxes under such treaty or under any statute,
regulation, rule, ruling or administrative practice, and (ii) at least
60 days prior to the first payment date with respect to which the
Company shall make such reasonable request, the Company shall have
notified the Holders of the Notes, in writing, that such Holders or
beneficial owners of Notes will be required to provide such
information, documentation or other evidence;

(e) to or on behalf of a Holder of a Note in respect of Taxes that would
not have been imposed but for the presentation by such Holder for
payment on a date more than 30 days after the date on which such
payment became due and payable or the date on which payment thereof is
duly provided for

and notice thereof given to Holders, whichever occurs later, except to
the extent that the Holder of such Note would have been entitled to
Additional Amounts in respect of such Taxes on presenting such Note
for payment on any date during such 30-day period;

(f) any combination of (a), (b), (c), (d) or (e) above (the Taxes
described in clauses (a) through (f), for which no Additional Amounts
are payable, are hereinafter referred to as "Excluded Taxes").

Notwithstanding the foregoing, the limitations on the Company's obligation
to pay Additional Amounts set forth in clauses (c) and (d) above shall not apply
if (i) the provision of information, documentation or other evidence described
in such clauses (c) and (d) would be materially more onerous, in form, in
procedure or in the substance of information disclosed, to a Holder or
beneficial owner of a Note (taking into account any relevant differences between
U.S. and Mexican law, rules, regulations or administrative practice) than
comparable information or other reporting requirements imposed under U.S. tax
law, regulation and administrative practice (such as IRS Forms W-8, W-8BEN and
W-9) or (ii) Rule 3.25.15 issued by the Secretaria de Hacienda y Credito Publico
(Ministry of Finance and Public Credit) on March 31, 2003 or a substantially
similar successor of such rule is in effect, unless the provision of the
information, documentation or other evidence described in clauses (c) and (d) is
expressly required by statute, regulation, rule, ruling or administrative
practice in order to apply Rule 3.25.15 (or a substantially similar successor of
such rule), the Company cannot obtain such information, documentation or other
evidence on its own through reasonable diligence and the Company otherwise would
meet the requirements for application of Rule 3.25.15 (or such successor of such
rule). In addition, such clauses (c) and (d) shall not be construed to require
that a non-Mexican pension or retirement fund or a non-Mexican financial
institution or any other Holder register with the Ministry of Finance and Public
Credit for the purpose of establishing eligibility for an exemption from or
reduction of Mexican withholding tax or to require that a Holder or beneficial
owner certify or provide information concerning whether it is or is not a
tax-exempt pension or retirement fund.

The Company will, upon written request of any Holder, reimburse such Holder
for the amount of (i) any Taxes (other than Excluded Taxes) so levied or imposed
and paid by such Holder as a result of payments made under or with respect to
the Notes and (ii) any Taxes (other than Excluded Taxes) so levied or imposed
with respect to any reimbursement under the foregoing clause (i), but excluding
any such Taxes on such Holder's net income, so that the net amount received by
such Holder after such reimbursement will not be less than the net amount the
Holder would have received if Taxes on such reimbursement had not been imposed.

At least 30 days prior to each date on which any payment under or with
respect to the Notes is due and payable, if the Company will be obligated to pay
Additional Amounts with respect to such payment (other than Additional Amounts
payable on the Closing Date), the Company will deliver to the Trustee an
Officers' Certificate stating the fact that such Additional Amounts will be
payable and the amounts so payable and will set forth such other information
necessary to enable the Trustee to pay such Additional Amounts to Holders on the
payment date. Whenever either in the Indenture or in this prospectus there is
mentioned, in any context, the payment of principal (and premiums, if any),
Redemption Price, interest or any other amount payable under or with respect to
any Note, such mention shall be deemed to include mention of the payment of
Additional Amounts to the extent that, in such context, Additional Amounts are,
were or would be payable in respect thereof.

In the event that the Company has become or would become obligated to pay,
on the next date on which any amount would be payable under or with respect to
the Notes, any Additional Amount in excess of those attributable to a Mexican
withholding tax rate of 10%, as a result of certain changes affecting Mexican
withholding tax laws, the Company may redeem all, but not less than all, of the
Notes at any time at 100% of the principal amount, together with accrued
interest thereon, if any, to the redemption date. See "-- Optional redemption."

The Company will provide the Trustee with documentation evidencing the
payment of Mexican taxes in respect of which the Company has paid any Additional
Amounts. Copies of such documentation will be made available to the Holders or
the Paying Agent, as applicable, upon request therefor.

In addition, the Company will pay any stamp, issue, registration,
documentary or other similar taxes and other duties (including interest and
penalties) (i) payable in Mexico or the United States (or any political
subdivision

of either jurisdiction) in respect of the creation, issue and offering of the
Notes, and (ii) payable in Mexico (or any political subdivision thereof) in
respect of the subsequent redemption or retirement of the Notes (other than in
the case of any subsequent redemption or retirement, Excluded Taxes, except for
this purpose, the definition of Excluded Taxes will not include those defined in
clause (b) thereof).

CURRENCY INDEMNITY

U.S. Dollars are the sole currency of account and payment for all sums
payable by the Company under or in connection with the Notes, including damages.
Any amount received or recovered in a currency other than U.S. Dollars (whether
as a result of, or of the enforcement of, a judgment or order of a court of any
jurisdiction, in the winding-up or dissolution of the Company or otherwise) by
any Holder of a Note in respect of any sum expressed to be due to it from the
Company shall only constitute a discharge to the Company to the extent of the
U.S. Dollar amount which the recipient is able to purchase with the amount so
received or recovered in that other currency on the date of that receipt or
recovery (or, if it is not practicable to make that purchase on that date, on
the first date on which it is practicable to do so). If that U.S. Dollar amount
is less than the U.S. Dollar amount expressed to be due to the recipient under
any Note, the Company shall indemnify the recipient against any loss sustained
by it as a result. In any event, the Company shall indemnify the recipient
against the cost of making any such purchase. For the purposes of this
paragraph, it will be sufficient for the Holder of a Note to certify in a
satisfactory manner (indicating the sources of information used) that it would
have suffered a loss had an actual purchase of U.S. Dollars been made with the
amount so received in that other currency on the date of receipt or recovery
(or, if a purchase of U.S. Dollars on such date had not been practicable, on the
first date on which it would have been practicable, it being required that the
need for a change of date be certified in the manner mentioned above). These
indemnities constitute a separate and independent obligation from the Company's
other obligations, shall give rise to a separate and independent cause of
action, shall apply irrespective of any indulgence granted by any Holder of a
Note and shall continue in full force and effect despite any other judgment,
order, claim or proof for a liquidated amount in respect of any sum due under
any Note.

NO PERSONAL LIABILITY OF INCORPORATORS, SOCIAL PART HOLDERS, EQUITY HOLDERS,
OFFICERS, DIRECTORS, OR EMPLOYEES

The Indenture provides that no recourse for the payment of the principal
of, premium, if any, or interest on any of the Notes or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture, or in any of
the Notes or because of the creation of any Indebtedness represented thereby,
shall be had against any incorporator, social part holder, equity holder,
officer, director, employee or controlling person of the Company or of any
successor Person thereof. Each Holder, by accepting the Notes, waives and
releases all such liability.

CONCERNING THE TRUSTEE

The Indenture provides that, except during the continuance of a Default,
the Trustee will not be liable, except for the performance of such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred and
is continuing, the Trustee will use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.

The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights of
the Trustee, should the Trustee become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that if the
Trustee acquires any conflicting interest it must eliminate such conflict or
resign.

GOVERNING LAW AND SUBMISSION TO JURISDICTION

The Notes and the Indenture are and will be governed by the laws of the
State of New York. The Company will submit to the jurisdiction of the U.S.
federal and New York state courts located in the Borough of Manhattan, City and
State of New York for purposes of all legal actions and proceedings instituted
in connection with Notes and

the Indenture. The Company has appointed CT Corporation, 111 Eighth Avenue, New
York, New York 10011 as the Company's authorized agent upon which process may be
served in any such action.

BOOK-ENTRY; DELIVERY AND FORM

The new notes will be issued in fully-registered book-entry form without
interest coupons (the "Global Note") that will be deposited with, or on behalf
of, the depositary or its nominee.

Except in the limited circumstances described below under "Certificated
Notes," owners of beneficial interests in a Global Note will not be entitled to
receive physical delivery of Certificated Notes (as defined below).

The Global Notes. Ownership of beneficial interests in a Global Note will
be limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants. Ownership of beneficial interests in a
Global Note will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants).

Investors may hold their interests in a Global Note directly through DTC,
Clearstream, Luxembourg or Euroclear, if they are participants in such systems,
or indirectly through organizations that are participants in such system.
Clearstream, Luxembourg and Euroclear will hold interests in the Global Notes on
behalf of their participants through DTC.

So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest, except in accordance
with the applicable procedures of DTC, in addition to those provided for under
the Indenture and, if applicable, those of Euroclear and Clearstream,
Luxembourg.

Payments of the principal of, and interest on, a Global Note will be made
to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither the Company, the Trustee nor any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.

The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records of
DTC or its nominee. The Company also expects that payments by participants to
owners of beneficial interests in such Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in the names of nominees for such customers. Such payments will be the
responsibility of such participants.

Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. Transfers
between participants in Euroclear and Clearstream, Luxembourg will be effected
in the ordinary way in accordance with their respective rules and operating
procedures.

The Company expects that DTC will take any action permitted to be taken by
a holder of Notes (including the presentation of Notes for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in a Global Note is credited and only in respect of such portion
of the aggregate principal amount at maturity of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Notes, DTC will exchange the applicable Global
Note for Certificated Notes, which it will distribute to its participants.

The Company understands that:

o DTC is a limited-purpose trust company organized under the laws of the
State of New York,

o a "banking organization" within the meaning of New York Banking Law,

o a member of the Federal Reserve System,

o a "clearing corporation" within the meaning of the Uniform Commercial
Code, and

o a "Clearing Agency" registered pursuant to the provisions of Section
17A under the Exchange Act.

DTC was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates and certain other
organizations. Direct participants of the depositary include securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants"). The depositary is owned by a number of its direct
participants, including various investment banks and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the depositary's system is also available
to indirect participants, which includes securities brokers and dealers, banks
and trust companies that clear through or maintain a custodial relationship with
a direct participant, either directly or indirectly. The rules applicable to the
depositary and its participants are on file with the SEC.

Although DTC, Euroclear and Clearstream, Luxembourg are expected to follow
the foregoing procedures in order to facilitate transfers of interests in a
Global Note among participants of DTC, Euroclear and Clearstream, Luxembourg,
they are under no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by DTC, Euroclear or
Clearstream, Luxembourg or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.

CERTIFICATED NOTES

Notwithstanding any other provision in this section, no Global Note may be
exchanged, in whole or in part for Certificated Notes, and no transfer of a
Global Note in whole or in part may be registered, in the name of any Person,
other than DTC or a nominee thereof unless

(A) DTC has notified the Company that it is unwilling or unable to
continue as depositary for such Global Note and a successor depositary
is not appointed by the Company within 90 days; or

(B) DTC has ceased to be a clearing agency registered under the Exchange
Act, or

(D) the Company in its sole discretion determines that the Global Notes
(in whole not in part) should be exchanged for Certificated Notes and
delivers a written notice to such effect to the Trustee. Any Global
Note exchanged pursuant to Clause (A) or (B) above shall be so
exchanged in whole and not in part and any Global Note exchanged
pursuant to Clause (C) above may be exchanged in whole or from time to
time in part in the manner directed by DTC. In the event of the
occurrence of any of the events specified in this paragraph, the
Company will promptly make available to the Trustee a reasonable
supply of Certificated Notes in definitive, fully registered form,
without interest coupons.

TAXATION

The following is a general summary of the principal U.S. federal income and
Mexican federal tax consequences of the purchase, ownership and disposition of
the new notes and the exchange of old notes for new notes, but it does not
purport to be a comprehensive description of all the tax considerations that may
be relevant to a decision to purchase, own and dispose of the new notes or
exchange old notes for new notes. This summary does not describe any tax
consequences arising under the laws of any state, locality or taxing
jurisdiction other than the United States and Mexico.

This summary is for general information only and is based on the tax laws
of the United States and Mexico as in effect on the date of this prospectus, as
well as regulations, rulings and decisions of the United States and regulations
of Mexico available on or before that date and now in effect. All of the
foregoing are subject to change, possibly with retroactive effect.

YOU SHOULD CONSULT YOUR OWN TAX ADVISORS AS TO THE MEXICAN, U.S. OR OTHER
TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NEW NOTES AND
THE EXCHANGE OF OLD NOTES FOR NEW NOTES, INCLUDING THE PARTICULAR TAX
CONSEQUENCES TO THEM IN LIGHT OF THEIR PARTICULAR INVESTMENT CIRCUMSTANCES.

UNITED STATES/MEXICO TAX TREATY

A convention for the Avoidance of Double Taxation and a protocol to that
convention (collectively referred to herein as the "U.S.-Mexico treaty") are in
effect. However, as discussed below under "-- Mexican Taxation," as of the date
of this prospectus, the U.S.-Mexico treaty is not generally expected to have any
material effect on the Mexican income tax consequences described in this
prospectus. The United States and Mexico have also entered into an agreement
that covers the exchange of information with respect to tax matters.

Mexico has also entered into and is negotiating several other, tax treaties
with various countries that also, as of the date of this prospectus, are not
generally expected to have any material effect on the Mexican income tax
consequences described in this prospectus.

UNITED STATES FEDERAL INCOME TAXATION

This summary of the principal U.S. federal income tax consequences of the
purchase, ownership and disposition of the new notes and the exchange of old
notes for new notes is limited to purchasers of new notes and holders of old
notes that:

o are U.S. holders (as defined below); and

o will hold the old notes and the new notes as capital assets.

As used in this prospectus, a "U.S. holder" means a beneficial owner of old
notes or new notes who or that is, for U.S. federal income tax purposes:

o a citizen or individual resident of the United States;

o a corporation or partnership created or organized in or under the laws
of the United States, or any State thereof or the District of
Columbia;

o an estate the income of which is includible in its gross income for
U.S. federal income tax purposes without regard to its source; or

o a trust, in general, if it is subject to the primary supervision of a
court within the United States and the control of one or more U.S.
persons;

but excludes persons subject to special provisions of U.S. federal income tax
law, such as:

o tax-exempt organizations, financial institutions, insurance companies,
dealers or traders in securities, U.S. expatriates, persons subject to
the alternative minimum tax;

o persons having a "functional currency" other than the U.S. Dollar; and

o persons that will hold the old notes or new notes as part of a
straddle, hedging, integrated or conversion transaction.

Further, the discussion below does not address the effect of any U.S. state
or local tax law on a holder of the old notes or new notes. This discussion
assumes that each holder of the notes will comply with the certification
procedures described in "Description of the New Notes -- Additional Amounts" as
may be necessary to obtain a reduced rate of withholding under Mexican law. Each
holder of an old note considering an exchange of the old note for a new note
should consult a tax advisor as to the particular tax consequences to it of the
exchange and the ownership and disposition of the new note, including the
applicability and effect of any state, local or foreign tax laws.

Exchange of Notes. The exchange of the old notes for the new notes in the
exchange offer will not be a taxable exchange for U.S. federal income tax
purposes and, accordingly, for such purposes a U.S. holder will not recognize
any taxable gain or loss as a result of such exchange and will have the same tax
basis and holding period in the new notes as it had in the old notes immediately
before the exchange.

Interest and Additional Amounts. Interest on the new notes and Additional
Amounts paid in respect of Mexican withholding taxes imposed on interest
payments on the new notes (as described in "Description of the New Notes --
Additional Amounts") will be taxable to a U.S. holder as ordinary interest
income in accordance with the U.S. holder's method of tax accounting. The amount
of income taxable to a U.S. holder will include the amount of all Mexican taxes
that we withhold (as described below under "-- Mexican Taxation") from these
payments made on the new notes. Thus, a U.S. holder will have to report income
in an amount that is greater than the amount of cash it receives from these
payments on its new note.

However, a U.S. holder may, subject to certain limitations, be eligible to
claim the Mexican taxes withheld as a credit or deduction for purposes of
computing its U.S. federal income tax liability, even though the payment of
these taxes will be made by us. Interest and Additional Amounts paid on the new
notes will constitute income from without the United States for foreign tax
credit purposes. Such income generally will constitute "high withholding tax
interest" for foreign tax credit purposes, unless the Mexican withholding tax
rate applicable to the U.S. holder is imposed at a rate below 5% (such as during
any period in which the 4.9% Mexican withholding tax rate, as discussed in "--
Mexican Taxation," applies), in which case such income generally will constitute
foreign source "passive income" or, in the case of certain U.S. holders,
"financial services income." The rules relating to the calculation and timing of
foreign tax credits and, in the case of a U.S. holder that elects to deduct
foreign taxes, the availability of deductions, involves the application of
complex rules that depend upon a U.S. holder's particular circumstances. In
addition, under applicable guidance released by the U.S. Treasury department,
foreign tax credits will not be allowed for withholding taxes imposed on an
arrangement in which a U.S. holder's reasonably expected economic profit, after
non-U.S. taxes, is insubstantial compared to the value of the foreign tax
credits expected to be obtained as a result of the arrangement. The Internal
Revenue Service has identified such an arrangement as a "listed transaction" (as
defined below under "--Tax shelter disclosure regulations"). U.S. holders should
consult with their own tax advisors with regard to the availability of a foreign
tax credit or deduction and the application of the foreign tax credit rules to
their particular situations.

Contingent Payment Debt Regulations. In general, if a debt instrument is
subject to the U.S. Treasury regulations governing the treatment of "contingent
payment debt instruments" (the "contingent debt regulations"):

o a U.S. holder, including a U.S. holder using the cash method of tax
accounting, must accrue interest income as "original issue discount"
over the term of the debt instrument based upon a projected payment
schedule, subject to later adjustments, provided by the issuer; and

o any gain and, subject to certain limitations, loss, recognized by a
holder with respect to that instrument will be ordinary, rather than
capital, in nature.

The application of the contingent debt regulations to instruments such as
the new notes, which generally provide for interest payable at a fixed rate, but
also provide for Additional Amounts, is uncertain. If the contingent debt
regulations apply to the new notes, U.S. holders of the new notes would be
subject to the projected interest accruals rules and ordinary income and loss
treatment on dispositions as summarized above. We believe that the contingent
debt regulations were not intended to apply to instruments such as the new notes
and, subject to further clarification of the contingent debt regulations, we
intend to take the position that the new notes are not subject to these
regulations. It is conceivable, however, that the Internal Revenue Service could
take the position that Additional Amounts payable with respect to the new notes
constitute contingent payments to which the contingent debt regulations apply.
Under certain characterizations, a U.S. holder would have to treat the new notes
consistently with our treatment, unless the holder files a statement with its
timely filed U.S. federal income tax return for the taxable year that includes
the date of acquisition. Holders are urged to consult their tax advisors to
determine the possible application of the contingent debt regulations to the new
notes.

Market Discount and Bond Premium. If a U.S. holder purchases a new note (or
purchased the old note for which the new note was exchanged, as the case may be)
at a price that is less than its principal amount, the excess of the principal
amount over the U.S. holder's purchase price will be treated as "market
discount." However, the market discount will be considered to be zero if it is
less than 1/4 of 1% of the principal amount multiplied by the number of complete
years to maturity from the date the U.S. holder purchased the new note or old
note, as the case may be.

Under the market discount rules of the Internal Revenue Code, a U.S. holder
generally will be required to treat any principal payment on, or any gain
realized on the sale, exchange, retirement or other disposition of, a new note
as ordinary income (generally treated as interest income) to the extent of the
market discount which accrued but was not previously included in income. In
addition, the U.S. holder may be required to defer, until the maturity of the
new note or its earlier disposition in a taxable transaction, the deduction of
all or a portion of the interest expense on any indebtedness incurred or
continued to purchase or carry the new note (or the old note for which the new
note was exchanged, as the case may be). In general, market discount will be
considered to accrue ratably during the period from the date of the purchase of
the new note (or old note for which the new note was exchanged, as the case may
be) to the maturity date of the new note, unless the U.S. holder makes an
irrevocable election (on an instrument-by-instrument basis) to accrue market
discount under a constant yield method. A U.S. holder of a new note may elect to
include market discount in income currently as it accrues (under either a
ratable or constant yield method), in which case the rules described above
regarding the treatment as ordinary income of gain upon the disposition of the
new note and upon the receipt of certain payments and the deferral of interest
deductions will not apply. The election to include market discount in income
currently, once made, applies to all market discount obligations acquired on or
after the first day of the first taxable year to which the election applies, and
may not be revoked without the consent of the Internal Revenue Service.

If a U.S. holder purchases a new note (or purchased the old note for which
the new note was exchanged, as the case may be) for an amount in excess of the
amount payable at maturity of the new note, the U.S. holder will be considered
to have purchased the new note (or old note) with "bond premium" equal to the
excess of the U.S. holder's purchase price over the amount payable at maturity
(or on an earlier call date if it results in a smaller amortizable bond
premium). A U.S. holder of a new note may elect to amortize the premium using a
constant yield method over the remaining term of the new note (or until an
earlier call date, as applicable). The amortized amount of the premium for a
taxable year generally will be treated first as a reduction of interest on the
new note included in such taxable year to the extent thereof, then as a
deduction allowed in that taxable year to the extent of the U.S. holder's prior
interest inclusions on the new note, and finally as a carryforward allowable
against the U.S. holder's future interest inclusions on the new note. The
election, once made, is irrevocable without the consent of the Internal Revenue
Service and applies to all taxable bonds held during the taxable year for which
the election is made or subsequently acquired.

Dispositions. Except as discussed above, under "-- Exchange of Notes," upon
the sale, exchange, redemption, retirement

or other taxable disposition of a new note, a U.S. holder will recognize taxable
gain or loss in an amount equal to the difference, if any, between the amount
realized on the sale, exchange, redemption, retirement or other taxable
disposition and the U.S. holder's tax basis in the new note (or, in the case of
a new note acquired in exchange for an old note, the tax basis of such old note,
as discussed above under "-- Exchange of Notes"). A U.S. holder's tax basis in a
new note will generally be its cost for the new note, increased by the amount of
any market discount previously included in the U.S. holder's gross income, and
reduced by the amount of any amortizable bond premium applied to reduce, or
allowed as a deduction against, interest on the new note (unless a new note is
subject to the contingent debt regulations, in which case a U.S. holder's basis
in a new note would be increased by interest previously accrued on the new note
and decreased by the amount of any noncontingent payment and the projected
amount of any contingent payment previously made on the new note). Gain or loss
recognized by a U.S. holder on the sale, exchange, redemption, retirement or
other taxable disposition of a new note will generally be capital gain or loss,
except:

o with respect to amounts received upon a disposition attributable to
accrued but unpaid interest or accrued market discount not previously
included in income, which in either case will be taxable as ordinary
income; and

o if the notes are subject to the contingent debt regulations described
above.

The gain or loss recognized by a U.S. holder will be long-term capital gain
or loss if the new note has been held for more than one year at the time of the
disposition (taking into account, for this purpose, in the case of a new note
received in exchange for an old note in the exchange offer, the period of time
that the old note was held). The deductibility of capital losses is subject to
limitations. Capital gain recognized by a U.S. holder generally will be U.S.
source income, and any capital loss recognized by a U.S. holder generally will
be allocated to reduce income from U.S. sources. Any gain recognized by a
non-corporate U.S. holder on the sale, exchange, redemption, retirement or other
disposition of a note generally will be subject to a maximum tax rate of 15%,
which maximum tax rate will increase under current law to 20% for dispositions
occurring during taxable years beginning on or after January 1, 2009. U.S.
holders should consult their own tax advisors as to the foreign tax credit
implications of a disposition of the new notes.

Backup Withholding. In general, "backup withholding" may apply to payments
of principal and interest made on a new note, and to the proceeds of a
disposition of a new note before maturity within the United States, that are
made to a non-corporate holder if that holder fails to provide an accurate
taxpayer identification number or otherwise comply with applicable requirements
of the backup withholding rules. Backup withholding is not an additional tax and
may be credited against a holder's U.S. federal income tax liability.

Non-U.S. Holders. A beneficial owner of the new notes that is not, with
respect to the United States, a U.S. holder (a "non-U.S. holder"), generally
will not be subject to U.S. federal income or withholding tax on:

o interest and Additional Amounts received in respect of the new notes,
unless those payments are effectively connected with the conduct by
the non-U.S. holder of a trade or business in the United States; or

o gain realized on the sale, exchange, redemption or retirement of the
new notes, unless that gain is effectively connected with the conduct
by the non-U.S. holder of a trade or business in the United States or,
in the case of gain realized by an individual non-U.S. holder, the
non-U.S. holder is present in the United States for 183 days or more
in the taxable year of the disposition and certain other conditions
are met.

Tax shelter disclosure regulations. Recently issued U.S. Treasury
regulations directed at tax shelter activity require persons filing U.S. federal
income tax returns to disclose certain information if they participate in a
"reportable transaction." A transaction will be a "reportable transaction" if it
is described in any of several categories of transactions identified in a public
IRS pronouncement as a tax avoidance transaction (a "listed transaction"),
transactions that result in the incurrence of a loss or losses exceeding certain
thresholds, transactions that result in the existence of significant book-tax
differences, transactions that result in the taxpayer claiming a tax credit if
the asset giving rise to the tax credit is held by the taxpayer for 45 days or
less, and transactions that are

offered under conditions of confidentiality. Each holder of a note should
consult with their tax advisors concerning such possible disclosure obligations.

MEXICAN TAXATION

The following is a general summary of the principal consequences, under
Mexico's income tax law (Ley del Impuesto Sobre la Renta) and rules as currently
in effect, and under the U.S.-Mexico treaty, of the purchase, ownership and
disposition of the new notes and the exchange of old notes for new notes by a
foreign holder. As used in this prospectus, a "foreign holder" means a holder of
old notes or new notes that:

o is not a resident of Mexico for tax purposes;

o will not hold the old notes or the new notes or a beneficial interest
in the old notes or the new notes in connection with the conduct of a
trade or business through a permanent establishment in Mexico; and

o is not (a) an equity holder of Innova that owns, directly or
indirectly, individually or jointly with related parties, more than
10% of our voting stock; or (b) a corporation or other entity, 20% or
more of whose stock is owned, directly or indirectly, jointly or
individually, by persons related to us, that in either case is the
effective beneficiary, directly or indirectly, jointly or
individually, of 5% or more of the aggregate amount of any interest
payment on the new notes. For these purposes, persons will be related
if:

o one person holds an interest in the business of the other person and
both persons have common interests; or

o a third party has an interest in the business or assets of both
persons.

For purposes of Mexican taxation:

o an individual is treated as a resident of Mexico if the individual has
established his home in Mexico, unless the individual has resided in
another country for more than 183 days, whether consecutive or not,
during a single calendar year and can demonstrate that he has become a
resident of that other country for tax purposes;

o a legal entity is considered a resident of Mexico if it is
incorporated under Mexican law or if it maintains the main
administration of its head office or business or the effective
location of its management in Mexico; and

o a permanent establishment of a foreign person will be treated as a
resident of Mexico, and that permanent establishment will be required
to pay taxes in Mexico in accordance with applicable law for income
attributable to such permanent establishment.

Unless otherwise proven, a Mexican citizen is considered a Mexican resident
for tax purposes.

Each foreign holder should consult a tax advisor as to the particular
Mexican or other tax consequences to that foreign holder of purchasing, owning
and disposing of the new notes and the exchange of the old notes for new notes,
including the applicability and effect of any state, local or foreign tax laws.

This summary is based upon the Mexican tax laws as in effect on the date of
this prospectus, as well as judicial and administrative interpretation under
Mexican law available on or before such date. All of the information contained
in this section is subject to interpretation and to change, possibly with
retroactive effect, and could affect the continued validity of this summary.
This summary does not address the tax consequences of the ownership, purchase or
disposition of the notes offered hereby by foreign holders that do not fulfill
the requirements described

above. Further, this summary does not address all of the tax consequences that
may be applicable to foreign holders of the notes offered hereby and does not
purport to be a comprehensive description of all the tax considerations that may
be relevant to a decision by the foreign holder in respect of the ownership,
purchase or disposal of these notes.

Exchange of Notes. There will be no tax consequences under the Mexican
income tax law to a foreign holder exchanging an old note for a new note. Each
new note will be treated as having been issued at the time the old note
exchanged therefor was originally issued.

Interest and Principal. Payments of interest on the new notes (including
payments of principal in excess of the issue price of the notes, which under the
Mexican tax law are deemed to be interest) made by us to a foreign holder will
be subject to a Mexican withholding tax assessed at a rate of 4.9% if all of the
following requirements are met:

o the new notes, as expected, are placed outside of Mexico through banks
or brokerage houses, in a country with which Mexico has entered into a
treaty for the avoidance of double taxation and such treaty is in
effect (which is the case of Luxembourg);

o the new notes, as expected, are registered in the Special Section of
the Mexican National Registry of Securities, and copies of the
approval of that registration are provided to the Mexican Ministry of
Finance and Public Credit;

o we timely file with the Mexican Ministry of Finance and Public Credit,
after completion of the transaction described in this prospectus,
certain information relating to the issuance of the new notes and this
prospectus; and

o we timely file with the Mexican Ministry of Finance and Public Credit,
on a quarterly basis, information representing that neither (i) equity
holders of Innova that own, directly or indirectly, individually or
jointly with related parties, more than 10% of our voting stock nor
(ii) entities 20% or more of whose stock is owned directly or
indirectly, individually or jointly, by parties related to us, are
directly or indirectly, individually or jointly, the effective
beneficiary of more than 5% of the aggregate amount of such interest
payment, and we maintain records, that evidence compliance with this
requirement.

The information requirements described above expire on March 31, 2004. We cannot
assure you that such requirements will be extended or that substantially similar
requirements will be published by the Ministry of Finance and Public Credit
following any such expiration.

We expect that all of the foregoing requirements will be met and,
accordingly, we expect to withhold Mexican tax from interest payments on the new
notes made to foreign holders at the 4.9% rate in accordance with the Mexican
income tax law. In the event that any of the foregoing requirements are not met,
under the Mexican income tax law, payments of interest on the new notes made by
us to a foreign holder will be subject to a Mexican withholding tax assessed at
a rate of 10%.

As of the date of this prospectus, neither the U.S.-Mexico treaty nor any
other tax treaty entered into by Mexico is expected generally to have any
material effect on the Mexican income tax consequences described in this
prospectus, because, as discussed above, it is expected that the 4.9% rate will
apply in the future and, therefore, that we will continue to be entitled to
withhold taxes in connection with interest payments under the new notes at the
4.9% rate.

Foreign holders residing in the United States should nonetheless be aware
that under the U.S.-Mexico treaty, the Mexican withholding tax rate applicable
to interest payments made to U.S. holders which are eligible for benefits under
the U.S.-Mexico treaty will be limited to either:

o 15% generally; or

o 4.9% in the event that the new notes are considered to be "regularly
and substantially traded on a recognized securities market" or "loans
granted by banks including investment banks and savings banks and
insurance companies" within the meaning of the U.S.-Mexico treaty.

Other foreign holders should consult their tax advisors regarding whether
they reside in a country that has entered into a treaty for avoidance of double
taxation with Mexico and, if so, the conditions and requirements for obtaining
benefits under that treaty. According to Mexican income tax law, in order for a
foreign holder to be entitled to the benefits under the treaties entered into by
Mexico, it is necessary for the foreign holder to meet the procedural
requirements established in the law.

Foreign holders or beneficial owners of the new notes may be requested,
subject to specified exceptions and limitations, to provide certain information
or documentation necessary to enable us to apply the appropriate Mexican
withholding tax rate applicable to such foreign holders or beneficial owners. In
the event that the specified information or documentation concerning the foreign
holder or beneficial owner, if requested, is not provided prior to the payment
of any interest to that foreign holder or beneficial owner, we may withhold
Mexican tax from that interest payment to that foreign holder or beneficial
owner at the maximum applicable rate, but our obligation to pay Additional
Amounts relating to those withholding taxes will be limited as described under
"Description of the New Notes -- Certain Covenants --Additional Amounts."

Under the Mexican income tax law, payments of interest made by us with
respect to the new notes to non-Mexican pension or retirement funds will be
exempt from Mexican withholding taxes, provided that the fund:

o is duly organized under the laws of its country of origin;

o is the effective beneficiary of such interest;

o is exempt from income tax in that country; and

o is registered with the Mexican Ministry of Finance and Public Credit
for that purpose.

We have agreed, subject to specified exceptions and limitations, to pay
Additional Amounts relating to the above-mentioned Mexican withholding to
foreign holders of the notes. See "Description of the New Notes --Additional
Amounts."

Under the Mexican income tax law and applicable rules, a foreign holder
will not be subject to any Mexican withholding or similar taxes on payments of
principal on the new notes made by us.

Dispositions. Capital gains resulting from the sale or other disposition of
the new notes by a foreign holder will not be subject to Mexican income or other
similar taxes. However, the purchase of the notes by a foreign holder below par
value may be subject to Mexican taxes.

Other Taxes. A foreign holder will not be liable for Mexican estate, gift,
inheritance or similar taxes with respect to its holding of the new notes, nor
will it be liable for Mexican stamp, registration or similar taxes.

PLAN OF DISTRIBUTION

The following requirements apply only to broker-dealers. If you are not a
broker-dealer as defined in Section 3(a)(4) and Section 3(a)(5) of the Exchange
Act, these requirements do not affect you.

Each broker-dealer that receives new notes for its own account under the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of the new notes. If you acquired the old notes as a result of
market-making or other trading activities, you may use this prospectus, as we
may amend or supplement it from time to time, in connection with the resales of
new notes received in exchange for such old notes. We have agreed that, for a
period of 90 days after the expiration date, we will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale.

We will not receive any proceeds from any sale of new notes by
broker-dealers or any other holder of new notes. Broker-dealers who receive new
notes for their own accounts under the exchange offer may sell such new notes
from time to time in one or more transactions in the following ways:

o in the over-the-counter market, in negotiated transactions;

o through the writing of options on the new notes;

o a combination of the methods of resale mentioned above;

o at market prices prevailing at the time of resale; or

o at prices related to the prevailing market prices or at negotiated
prices.

Any resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any of these broker-dealers and/or the purchasers of any such new notes. If
you are a broker-dealer and you resell new notes that you received for your own
account in the exchange offer, or you participate in the distribution of these
new notes, you may be deemed an "underwriter" within the meaning of the
Securities Act. Any profit on your resale of new notes and any commissions or
concessions you receive may be deemed underwriting compensation under the
Securities Act. However, you will not be deemed to admit that you are an
"underwriter" merely by delivery of a prospectus.

The new notes will constitute a new issue of securities with no established
trading market. We do not intend to list the new notes on any national
securities exchange or to seek approval for quotation through any automated
quotation system, except that application will be made to list the new notes on
the Luxembourg Stock Exchange. Placement agents of the old notes have advised us
that, following completion of this exchange offer, they intend to make a market
in the new notes. However, they are not obligated to do so, and any
market-making activities with respect to the new notes may be discontinued at
any time without notice. Accordingly, we can give no assurances that an active
public or other market will develop for the new notes or that the trading market
for the new notes will be liquid to any degree. If a trading market does not
develop or is not maintained, holders of the new notes may experience difficulty
in reselling the new notes or may be unable to sell them at all. If a market for
the new notes develops, any such market may cease to continue at any time. In
addition, if a market for the new notes develops, the market prices of the new
notes may be volatile. Factors such as:

o fluctuations in our earnings and cash flow;

o the difference between our actual results and results expected by
investors and analysts; and

o Mexican and U.S. currency and economic developments

could cause the market prices of the new notes to fluctuate substantially.

For a period of 90 days after the expiration date, we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer who requests these documents in the letter of
transmittal. We have agreed to pay all expenses incident to the exchange offer,
including the reasonable expenses of one counsel for the holders of the old
notes, other than commissions or concessions of any brokers or dealers. In
addition, we will indemnify the holders of the old notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.

GENERAL INFORMATION

CLEARING SYSTEMS

The new notes have been accepted for clearance through Euroclear and
Clearstream Banking. In addition, the new notes have been accepted for trading
in book-entry form by DTC. The ISIN number is US45767DAE94, the CUSIP # is
45767DAE9, and the Common Code number is 018513749.

LISTING

We will apply to list the new notes on the Luxembourg Stock Exchange. In
connection with the application to list the notes on the Luxembourg Stock
Exchange, a legal notice relating to the issuance of the notes and a copy of the
bylaws (estatutos sociales) of Innova will be deposited prior to the listing
with the Trade and Companies Register (Registre de Commerce et des Societes) in
Luxembourg where such documents may be examined or copies obtained. Copies of
the estatutos sociales of Innova in English, the indenture, as may be amended or
supplemented from time to time, any registration rights agreement, any published
annual audited consolidated financial statements and quarterly unaudited
consolidated financial statements of Innova will be available at the principal
office of Innova, at the offices of the trustee, the Luxembourg Listing Agent
and at the addresses of the paying agents set forth on the back cover of this
prospectus. Innova does not make publicly available annual or quarterly
non-consolidated financial statements. Innova will maintain a paying and
transfer agent in Luxembourg for so long as any notes or any exchange notes are
listed on the Luxembourg Stock Exchange.

AUTHORIZATION

We have obtained all necessary consents, approvals and authorizations in
connection with the issuance and performance of the notes. The issuance of the
notes was authorized by a resolution of the shareholders of Innova passed on
July 2, 2003.

NO MATERIAL ADVERSE CHANGE

Except as disclosed in this prospectus, there has been no material adverse
change in the financial position or prospects of Innova and its subsidiaries
taken as a whole since June 30, 2003.

LITIGATION

Except as disclosed in our annual report on Form 20-F in "Item 10.
Additional information -- Legal proceedings," Innova is not involved in any
legal or arbitration proceedings (including any such proceedings which are
pending or threatened) relating to claims or amounts which may have or have had
during the twelve months prior to the date of this prospectus a material adverse
effect on our financial position and our subsidiaries taken as a whole.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus and the documents incorporated by reference into this
prospectus contain forward-looking statements. These forward-looking statements
reflect our views with respect to future events and financial performance. We
may from time to time make forward-looking statements in our periodic reports
and annual reports to the SEC on Form 6-K and Form 20-F, respectively, in our
future annual reports to members or shareholders, in our offering circulars and
prospectuses, in our press releases and other written materials, and in oral
statements made by our officers, directors or employees to analysts,
institutional investors, representatives of the media and others. Examples of
these forward-looking statements include:

o statements concerning our ability to increase subscribers, our cash
requirements, financing sources, cost-containment efforts, advertising
rates and revenues, DTH satellite and capital expenditures, potential
audience size;

o statements concerning the construction, launch, performance and
operation of broadcast satellites, renewal of concessions upon their
expiration and other regulatory approvals;

o projections of operating revenues, net income (loss), dividends,
capital structure or other financial items relating to us, our owners,
or our competitors;

o the impact that recently issued U.S. GAAP and Mexican GAAP
pronouncements will have on our operating revenues, net income (loss),
dividends, capital structure or other financial items;

o statements of our plans to develop customer interactive systems;

o statements about our new subscriber management system, including our
expectation of its operational date;

o statements of our or our owners' plans, objectives or goals, including
those relating to anticipated acquisitions, trends, competition,
regulation and rates;

o statements about our future economic performance or that of Mexico or
other countries that affect the Mexican economy and consumer
purchasing power in Mexico; and

o statements of assumptions underlying these statements.

Words such as "believe," "anticipate," "plan," "expect," "intend,"
"target," "estimate," "project," "predict," "forecast," "guideline," "should"
and similar expressions are intended to identify forward-looking statements but
are not the exclusive means of identifying such statements.

Forward-looking statements involve inherent risks and uncertainties. We
caution you that a number of important factors could cause actual results to
differ materially from the plans, objectives, expectations, estimates and
intentions expressed in such forward-looking statements. These factors include
economic and political conditions and government policies in Mexico or
elsewhere, inflation rates, exchange rates, regulatory developments, customer
demand and competition. We caution you that the foregoing list of factors is not
exclusive and that other risks and uncertainties may cause actual results to
differ materially from those in forward-looking statements.

Forward-looking statements speak only as of the date they are made, and we
do not undertake any obligation to update them in light of new information or
future developments.

LEGAL MATTERS

Certain legal matters relating to the validity of the notes will be passed
upon for us by Mijares, Angoitia, Cortes y Fuentes, S.C. under Mexican law and
by Fried, Frank, Harris, Shriver & Jacobson LLP under U.S. law. With respect to
matters of Mexican law, Fried, Frank, Harris, Shriver & Jacobson LLP may rely
upon the opinion of Mijares, Angoitia, Cortes y Fuentes, S.C.

Alfonso de Angoitia Noriega and Juan Sebastian Mijares Ortega, currently on
leave from Mijares, Angoitia, Cortes y Fuentes, S.C., serve as members of our
Board. Mr. de Angoitia is also a member of our Executive Committee and the
Executive Vice President-Chief Financial Officer of our 60% owner, Televisa. Mr.
Mijares is the Alternate Secretary of our Board and the Vice President-General
Counsel of Televisa. Neither Alfonso de Angoitia Noriega nor Juan Mijares Ortega
currently receive any form of compensation from, or participate in any way in
the profits of, Mijares, Angoitia, Cortes y Fuentes, S.C. We believe that the
fees we paid for these services were comparable to those that we would have paid
another law firm for similar services.

EXPERTS

The financial statements of Innova as of December 31, 2001 and 2002, and
for the three years ended December 31, 2000, 2001 and 2002 included in this
prospectus, which are included in the our annual report on the Form 20-F, have
been incorporated herein by reference in reliance on the report of
PricewaterhouseCoopers, S.C., independent public accountants, given the
authority of such firm as experts in auditing and accounting.

INNOVA, S. DE R.L. DE C.V. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
----

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS FOR THE SIX MONTHS
ENDED JUNE 30, 2002 AND 2003...........................................................................F-2

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS FOR THE SIX MONTHS
ENDED JUNE 30, 2002 AND 2003...........................................................................F-3

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2003........................................................F-4

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
SIX MONTHS ENDED JUNE 30, 2002 AND 2003................................................................F-5

F-1

INNOVA, S. DE R. L. DE C. V. AND SUBSIDIARIES
---------------------------------------------

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of Mexican Pesos in
purchasing power as of June 30, 2003)

June 30,
-------------------------------
Assets 2003 2002
- ------ ---- ----

CURRENT ASSETS:
Cash and cash equivalents................................................... Ps. 426,393 Ps. 285,861
Trade accounts receivable, net (Note 3)..................................... 156,211 182,756
Value added tax credit and other............................................ 1,719 21,111
Spare parts................................................................. 13,707 8,043
Prepaid expenses and other.................................................. 90,664 91,627
-------------- -------------
Total current assets........................................................ 688,694 589,398

Property and equipment, net (Note 4)........................................ 1,420,480 1,756,625
Satellite transponders, net (Note 5)........................................ 1,208,498 1,269,593
Other non-current assets.................................................... 85,204 153,736
-------------- -------------
Total assets................................................................ Ps. 3,402,876 Ps. 3,769,352
============== =============

Liabilities and Stockholders' Deficit
- -------------------------------------
CURRENT LIABILITIES:
Trade accounts payable and accruals......................................... Ps. 440,134 Ps. 412,545
Satellite transponders obligation (Note 5).................................. 55,784 49,887
Due to affiliated companies and other related parties....................... 368,020 272,248
Accrued interest............................................................ 126,298 125,136
Accrued taxes............................................................... 138,514 135,439
Deferred income............................................................. 131,075 112,984
-------------- -------------
Total current liabilities 1,259,825 1,108,239

NON-CURRENT LIABILITIES:
Senior notes (Note 6)....................................................... 3,914,249 3,887,732
Stockholders' loans (Note 7)................................................ 3,234,737 3,212,811
Satellite transponders obligation (Note 5).................................. 1,336,752 1,378,776
Accrued interest............................................................ 837,459 519,004
Other liabilities........................................................... 1,501 752
-------------- -------------
Total liabilities........................................................... 10,584,523 10,107,315
-------------- -------------
Commitments and contingencies (Note 8)...................................... - -

STOCKHOLDERS' DEFICIT:
Contributed capital:
Capital stock (Note 9)...................................................... 1,936,265 1,936,265
-------------- -------------
Earned capital:
Accumulated losses (Note 12)................................................ (8,893,848) (7,098,315)
Loss for the period......................................................... (206,379) (1,103,420)
Deficit from restatement.................................................... (17,685) (72,492)
-------------- -------------
(9,117,912) (8,274,227)
-------------- -------------
Total stockholders' deficit................................................. (7,181,647) (6,337,962)
-------------- -------------

Total liabilities and stockholders' deficit................................. Ps. 3,402,876 Ps. 3,769,352
============== =============

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

F-2

INNOVA, S. DE R. L. DE C. V. AND SUBSIDIARIES
---------------------------------------------

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS
---------------------------------------------------

(Expressed in thousands of Mexican Pesos in
purchasing power as of June 30, 2003)

For the six months
ended June 30,
--------------------------------
2003 2002
---- ----

Net sales............................................................... Ps. 1,824,343 Ps. 1,755,260

Operating expenses:
Cost of sales........................................................... 570,531 553,515
Administrative expenses................................................. 56,436 58,106
Selling expenses........................................................ 429,431 459,018
Other operating expenses................................................ 210,150 247,130
-------------- ---------------

Total operating expenses................................................ 1,266,548 1,317,769

Depreciation and amortization........................................... 394,786 492,652
-------------- ---------------

Operating profit (loss)................................................. 163,009 (55,161)
-------------- ---------------
Integral results of financing:
Interest expense........................................................ (522,310) (478,000)
Interest income......................................................... 10,052 4,629
Foreign exchange gains (losses), net.................................... 13,137 (721,162)
Gain from monetary position............................................. 106,116 200,486
-------------- ---------------

Total integral results of financing..................................... (393,005) (994,047)

Other expenses - Net.................................................... (2,236) (2,880)

Transponder services - Solidaridad 2 (Note 10).......................... - (14,769)

Restructuring charges (Note 11)......................................... (1,740) (3,205)
-------------- ---------------
Loss before taxes....................................................... (233,972) (1,070,062)

Provision for income and assets taxes (Note 13)......................... 27,593 (33,358)
-------------- ---------------
Net loss................................................................ (Ps. 206,379) (Ps. 1,103,420)
============== ===============

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

F-3

INNOVA, S. DE R. L. DE C. V. AND SUBSIDIARIES
---------------------------------------------

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
----------------------------------------------------------------------------

(Expressed in thousands of Mexican Pesos in
purchasing power as of June 30, 2003)

Six months ended
June 30,
------------------------------
Operating activities: 2003 2002
- -------------------- ---- ----

Net loss...................................................................... Ps.(206,379) Ps.(1,103,420)
Adjustments to reconcile net loss to
resources (used in) provided by operating activities:
Depreciation and amortization................................................. 394,785 492,652
Maintenance reserve........................................................... 3,050 3,874
----------- -------------
191,456 (606,894)
----------- -------------
Changes in operating assets and liabilities:
- -------------------------------------------
Trade accounts receivable..................................................... (27,331) (48,308)
Value added tax credit and other.............................................. 42,018 7,831
Spare parts................................................................... (531) 502
Prepaid expenses and other.................................................... 81,202 (38,460)
Other non-current assets 15,718 21,980
- ------------------------ ------- ------
Trade accounts payable and accruals........................................... 149,144 43,296
Due to affiliated companies and other related parties......................... (70,666) 64,522
Accrued interest.............................................................. 145,177 174,807
Deferred income............................................................... 21,531 3,242
Asset tax..................................................................... (46,177) 38,022
Other liabilities............................................................. 226 15
----------- -------------

Resources provided by (used in) operating activities.......................... 501,768 (361,425)
----------- -------------
Financing activities:
- --------------------
Stockholders' loans........................................................... (47,447) 459,226
Senior notes.................................................................. (57,417) 205,156
Satellite transponders obligation............................................. (46,388) 53,716
----------- -------------

Resources (used in) provided by financing activities.......................... (151,252) 718,098
----------- -------------

Investing activities:
- --------------------
Investment in property and equipment.......................................... (193,993) (138,527)

Resources used in investing activities........................................ (193,993) (138,527)
----------- -------------

Cash and cash equivalents:
Increase for the period....................................................... 156,523 240,126
At the beginning of the period................................................ 269,870 45,735
----------- -------------

At the end of the period...................................................... 426,393 285,861
=========== =============

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

F-4

INNOVA, S. DE R.L. DE C.V. AND SUBSIDIARIES
-------------------------------------------

NOTES TO THE UNAUDITED CONDENSED
--------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
-----------------------------------------------
(Expressed in thousands of Mexican Pesos in purchasing power as of
June 30, 2003)

NOTE 1 - BASIS OF PRESENTATION:
- ------------------------------

The interim financial statements of Innova, S. de R. L. de C. V. and its
consolidated subsidiaries (collectively, the "Group"), as of June 30, 2003 and
2002, and for the six months ended June 30, 2003 and 2002 are unaudited. In the
opinion of the management of the Group, all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of the
consolidated financial statements have been included therein. The results of
interim periods are not necessarily indicative of results for the entire year.

For purposes of these interim consolidated financial statements, certain
information and disclosures, normally included in financial statements prepared
in accordance with generally accepted accounting principles, have been condensed
or omitted. These unaudited statements should be read in conjunction with the
Group's consolidated and audited financial statements and notes thereto for the
years ended December 31, 2002, 2001 and 2000 (the "audited annual financial
statements").

NOTE 2 - EFFECTS OF INFLATION ON THE FINANCIAL STATEMENTS:
- ---------------------------------------------------------

The interim financial statements of the Group have been prepared in accordance
with Bulletin B-10, as described in the audited financial statements. The
consolidated financial statements for the six months ended June 30, 2002, have
been restated to Mexican Pesos in purchasing power as of June 30, 2003 by using
a restatement factor derived from the National Consumer Price Index ("NCPI"),
which was 1.0414.

The NCPI at the following dates was:

June 30, 2003 104.154
June 30, 2002 100.012

NOTE 3 - TRADE ACCOUNTS RECEIVABLE, NET:
- ---------------------------------------

Trade accounts receivable, net includes the receivables from DTH services
provided to subscribers, from the rental of IRD's and from the sale of
advertising. Balances as of June 30, consist of:

2003 2002
---- ----

Trade accounts receivable................................................. Ps. 226,986 Ps. 276,556
Allowance for doubtful accounts........................................... (70,775) (93,800)
----------- -----------
Ps. 156,211 Ps. 182,756
=========== ===========

F-5

NOTE 4 - PROPERTY AND EQUIPMENT, NET:
- ------------------------------------

Property and equipment, net as of June 30, consists of:

2003 2002
---- ----

Integrated receiver/decoders............................................ Ps. 2,568,312 Ps. 2,615,122
Transmission equipment.................................................. 336,790 410,330
Antennas, LNBs and accessories.......................................... 672,281 466,770
Computer equipment...................................................... 309,539 264,980
Furniture............................................................... 19,498 19,151
Transportation equipment................................................ 19,995 20,879
Buildings............................................................... 2,061 2,061
------------- -------------

3,928,476 3,799,293
Accumulated depreciation................................................ (2,653,094) (2,169,790)
------------- -------------

1,275,382 1,629,503
Land.................................................................... 8,850 8,850
Equipment in progress................................................... 136,248 118,272
------------- -------------
Ps. 1,420,480 Ps. 1,756,625
============= =============

Depreciation expense for the six months ended June 30, 2003 and 2002 was
Ps.340,995 and Ps.393,543, respectively.

NOTE 5 - SATELLITE TRANSPONDERS:
- -------------------------------

The balance of the satellite transponders as of June 30, is as follows:

2003 2002
---- ----

Satellite transponders........................................... Ps. 1,489,929 1,446,371
Accumulated depreciation......................................... (281,431) (176,778)
-------------- -------------
Ps. 1,208,498 Ps. 1,269,593
============== =============

Amortization of satellite transponders for the six months ended June 30, 2003
and 2002 was Ps.49,664 and Ps.48,212, respectively.

The capital lease obligation is reflected on the consolidated balance sheet as
of June 30, as follows:

June 30,
------------------------------
2003 2002
---- ----

Current portion......................................................... Ps. 55,784 Ps. 49,887
Long-term portion....................................................... 1,336,752 1,378,776
------------- -------------
Ps. 1,392,536 Ps. 1,428,663
============= =============

Interest expense recognized during the six months ended June 30, 2003 and 2002
was Ps.82,547 and Ps.78,861, respectively.

F-6

The obligations of the Group under the PAS-9 agreement are proportionately
guaranteed by the Group's stockholders in relation to their respective ownership
interests.

NOTE 6 - SENIOR NOTES:
- ---------------------

In 1997, the Group concluded an offering of senior debt securities, priced to
yield gross proceeds of U.S.$375 million, which mature in April 2007 ("Senior
Notes"). The Senior Notes bear interest at a rate of 12 7/8% and are redeemable
at the option of the Group, in whole or in part, at any time on or after April
1, 2002, initially at 106.4375% of their principal amount, plus accrued
interest, declining ratably to 100% of their principal amount, plus accrued
interest, on or after April 1, 2004. Interest on the Senior Notes is payable
semi-annually on April 1 and October 1 of each year, commencing October 1, 1997.
The Senior Notes, which are uncollateralized, unsubordinated indebtedness of the
Group, contain certain covenants which, among other things, restrict the ability
of the Company and certain subsidiaries to incur or guarantee additional
indebtedness, make certain dividend, investment or other restricted payments,
issue or sell stock of certain subsidiaries, enter into certain transactions
with stockholders or affiliates, create liens, engage in sale-leaseback
transactions, sell assets (except IRDs), or with respect to the Group,
consolidate, merge, or sell all or substantially all of its assets. The
indenture agreement required the Group to purchase and pledge as security for
the benefit of the holders of the Senior Notes a portfolio of U.S. Government
Securities for a three-year period which ended in March 2000.

NOTE 7 - STOCKHOLDERS' LOANS:
- ----------------------------

Each stockholder loan, plus accrued interest, is payable in full ten years from
the date of issuance. The maturity date of any individual loan may be
accelerated or otherwise modified including by means of providing for periodic
payments of interest or principle upon joint agreement of the stockholders and
the Group. Each loan will bear interest at an annual rate of 9%. Interest paid
to foreign companies will be net of the 15% withholding tax.

The Company expects that its stockholders will provide, if necessary, up to an
aggregate amount of U.S.$25 million to meet the Group's cash requirements during
2003.

NOTE 8 - COMMITMENTS AND CONTINGENCIES:
- --------------------------------------

a. In 1996, the Group signed an agreement with an affiliate of News
Corporation to acquire and implement a conditional access system. This
system includes Smart Cards which decode satellite signals and control
access by subscribers. In 1999, the Group acquired a subscriber management
system (SMS) designed specifically for DTH services. Under these
arrangements, the Group estimates that the 2003 commitment will approximate
U.S.$11 million for royalties, licenses and maintenance of the foregoing
systems. The Group incurred expenses of U.S.$3.1 million and U.S.$3.2
million during the six month period ended June 30, 2003 and 2002,
respectively.

The Group has entered into agreements with Televisa and an affiliate of
Televisa to provide uplink and downlink, playout and compression services
at the Mexico City station. The annual commitments are estimated to be
approximately U.S.$4.3 million per year. The Group incurred expenses of
U.S.$1.9 million for the six month period ended June 30, 2003 and U.S.$1.8
million for the six month period ended June 30, 2002.

The Group entered into several contracts with programming providers,
establishing that the amounts payable to the programmers will be based on
the number of subscribers. These charges totaled Ps.358.2 million and
Ps.347.2 million for the six month periods ended June 30, 2003 and 2002,
respectively.

b. Since January 1, 2002, a 10% excise tax was imposed on the collected
revenues from the Group's pay television services. In February 2002, the
Group filed a petition for constitutional relief against the Legislative
Decree, which contains the amendments to the Law regarding the excise tax.

A ruling was issued on July 10, 2002 granting the Group an injunction and
the protection of Federal Justice. The ruling is to the effect that the
Group is not considered to be subject to the tax and is therefore exempt
from the

F-7

10% rate on the value of telecommunications operations. To date, the Court
has not yet issued the tax authorities a document attesting to compliance
with the judgment.

c. The Group entered into two related agreements with CSG Software, Inc.
(CSG), on June 12, 2002 under which CSG will provide: a) A non-exclusive,
perpetual license for the use of the software "Kenan" to provide billing
and order management to licensed subscribers, besides installation and
implementation of the system, training and support services and, b)
consulting services.

Under the Software License and Service Agreement, the Group must pay
U.S.$3.4 million to CSG for a license capacity of up to 1,125,000
subscribers. However, the Group can purchase additional capacity according
to the subscriber base growth at an additional cost per every 100,000
subscribers. Technical support in Mexico will be available for the first 24
months following the date on which live production of the system begins,
the annual cost for these services will be U.S.$585,600. It is possible in
accordance with the agreement to use the Kenan system from other DTH
platform in case of merger, acquisition or combination of platforms. On
December 27, 2002 the Group agreed to remove some applications of the Kenan
software, reducing the total license fees in U.S.$500,000. The Group
expects that the new SMS will be placed in service in late November 2003.

d. On June 2002, the Group executed an agreement with TV Azteca to begin
paying them for the rights to rebroadcast their over-the-air Channels 7 and
13. It has also committed to purchase up to U.S.$10.6 million in
advertising from TV Azteca over three years and received rights to
broadcast certain soccer matches and an option for exclusive broadcast
rights after 2004. Prior to May 1, 2002, the Group was permitted to
rebroadcast these channels at no cost.

NOTE 9 - CAPITAL STOCK:
- ----------------------

The capital stock as of June 30, 2003 and 2002, is represented by three
partnership interests of unequal value, distributed as follows:

Partnership interest Subseries Amount
-------------------- --------- ------

1 A-1 Ps. 1,161,759
1 B-1 580,880
1 B-2 193,626

Series "A" is composed of a partnership interest initially representing 60% of
the total capital stock. The Series "A" partnership interest may be subscribed
to only by persons of Mexican nationality.

Series "B" is composed of a partnership interest initially representing 40% of
the total capital stock. The Series "B" partnership interest is unrestricted as
to ownership and therefore, may be acquired by Mexican investors and foreign
natural and legal persons or by persons, companies or entities that are included
in Article 2, Section III of the Foreign Investments Law.

NOTE 10 - TRANSPONDERS SERVICES:
- -------------------------------

The Group recognized a nonrecurring charge relating to the redundant use of the
transponders on the Solidaridad 2 satellite once the PAS-9 satellite became
operational. The process of migrating customers from Solidaridad 2 to PAS-9
started in November 2000 and finally ended in March 2002. On December 19, 2001,
the Group signed an agreement with SATMEX for the use of eight transponders on
the Solidaridad Satellite from January 1, 2002 to

F-8

March 31, 2002. The payments for the use of Solidaridad 2 in the first quarter
of 2002 amounting to Ps.14,769, were recorded as a nonrecurring charge.

NOTE 11 - RESTRUCTURING CHARGES:
- -------------------------------

The restructuring charges in 2003 and 2002 consisted of severance costs in
connection with employee terminations.

NOTE 12 - ACCUMULATED LOSSES:
- ----------------------------

Under Mexican Corporate Law, interested third parties can request the
dissolution of the Group if accumulated losses exceed two-thirds of capital
stock. At June 30, 2003, the Group's accumulated losses exceeded its capital
stock. Although the Group believes it is unlikely such action will occur, the
Group, obtained from Televisa and News Corporation, a commitment to provide
financial support to the Group for a period of one year from December 31, 2002,
in proportion to their respective ownership interests, if required, to avoid
such action.

The recoverability of the Group's investment in DTH infrastructure and product
development is dependent upon future events, including, but not limited to, the
stability of the Mexican economic environment, obtaining adequate financing for
the Group's development program, the continued operation of satellites owned by
third parties, the competitive and market environment for pay television
services in Mexico, and the achievement of a level of operating revenues that is
sufficient to support the Group's cost structure.

NOTE 13 - PROVISION FOR INCOME TAX ("IT") AND ASSETS TAX ("AT"):
- ---------------------------------------------------------------

Under Mexican Tax Law, the Company and its subsidiaries, on an individual basis,
must pay the higher of the income tax or the assets tax as determined annually.
The assets tax is equal to 1.8% of a company's assets less certain liabilities.
The Company and most of its subsidiaries were exempt from the assets tax from
their formation in 1996 through December 31, 1999.

In order to avoid incurring penalties or interest, the Group paid Ps.45.7
million in monthly payments during 2002, Ps.43.7 million in March 2002,
corresponding to the assets tax due for fiscal year 2001 and Ps.7.6 million for
the months of January and February 2003.

On March 19, 2003, the court issued a favorable ruling allowing to the Group to
deduct foreign debt in calculating the assets tax. On July 22, 2003 the Group
has recovered the payments mentioned above.

At December 31, 2002, the Group set up an asset tax provision estimate of
Ps.76,447. In light of the fact that a favorable ruling was obtaining prior to
making said annual tax payment, the Group conducted a new calculation, including
debts abroad, with a resulting annual tax below that provisioned. The Ps.27,593
excess in the reserve was reversed in the second quarter of 2003, and recorded
as a favorable effect in the income statement in the provision for income tax
and asset tax.

NOTE 14 - RECENT ACCOUNTING PRONOUNCEMENTS:
- ------------------------------------------

In March 2003, the MIPA issued Bulletin C-15, "Impairment and Disposition of
Long-Lived Assets." Bulletin C-15 requires (i) the recognition and measurement
of the impairment of long-lived assets to held and used, including goodwill, and
(ii) the measurement of long-lived assets to be disposed of by sale. Bulletin
C-15 is effective for periods beginning on January 1, 2004, with early adoption
recommended. We are currently evaluating the impact of this Bulletin on our
results of operations and financial position. However, we do not believe that
the adoption of this Bulletin will have a material impact on our results of
operations and financial position.

F-9

NOTE 15 - SUBSEQUENT EVENTS:
- ---------------------------

On September 12, 2003, the Group concluded an offering of 9.375% Senior Notes of
U.S.$300 million, which mature in September 2013. These Senior Notes bear a
interest at rate of 9.375%. The net proceeds of the offering were used to
redeem, on October 20, 2003, U.S.$287 million in aggregate principal amount of
the Group's 12 7/8% Senior Notes due 2007, and to pay a redemption premium, fees
and expenses related to the transaction.

This resulted in the Group's debt comprising of U.S.$88 million 12 7/8% Senior
Notes due 2007 and U.S.$300 million of the 9.375% Senior Notes due 2013.

On September 9, 2003, the Group capitalized all its shareholder loans and
accrued interest thereon, which amounted to approximately U.S.$390.9 million.

The capitalization of the shareholder loans did not change the ownership
percentages of the Group's three shareholders, Televisa, News Corp and Liberty
Media, who continue to indirectly own 60%, 30% and 10% of the Group's
outstanding membership interest respectively.

NOTE 16 - DIFFERENCES BETWEEN MEXICAN GAAP AND U.S. GAAP:
- --------------------------------------------------------

The Group's interim consolidated financial statements are prepared in accordance
with Mexican GAAP, which differs in certain significant respects from U.S. GAAP.

The reconciliation to U.S. GAAP includes a reconciling item for the effect of
applying the option provided by the Modified Fifth Amendment to Bulletin B-10
for the restatement of equipment of non-Mexican origin because, as described
below, this provision of inflation accounting under Mexican GAAP does not meet
the consistent currency requirement of Regulation S-X of the SEC.

The reconciliation to U.S. GAAP does not include the reversal of the other
adjustments to the financial statements for the effects of inflation required
under Mexican GAAP Bulletin B-10, because the application of Bulletin B-10
represents a comprehensive measure of the effects of price level changes in the
inflationary Mexican economy and, as such, is considered a more meaningful
presentation than historical, cost-based financial reporting for both Mexican
and U.S. accounting purposes.

The principal differences between Mexican GAAP and U.S. GAAP that affect net
loss and total stockholders' deficit are described below:

Solidaridad 2 and satellite reorientation costs
- -----------------------------------------------

Under Mexican GAAP, the Group recognized a non-recurring loss of Ps.436,150
during the year ended December 31, 2000 for the redundant use of the
transponders on the Solidaridad 2 satellite once the PAS-9 satellite became
operational and for the increased costs to reorientate customer's antennas to
PAS-9 in a short period of time.

Under U.S. GAAP, the Group continued to use the Solidaridad 2 satellite to
provide services to its customers through the termination of the Solidaridad 2
agreement. Accordingly, the monthly payments cannot be recognized as a one time
loss, and the Group must continue using the straight-line method in accounting
for the agreement. The Group discontinued the use of Solidaridad 2 satellite on
March 31, 2002. The satellite reorientation costs are expensed as incurred as a
part of operating expenses.

F-10

Maintenance reserve
- -------------------

Under Mexican GAAP, it is acceptable to accrue for certain expenses which
management believes will be incurred in subsequent periods. Under U.S. GAAP,
these costs are expensed as incurred.

Restatement of property and equipment
- -------------------------------------

Effective January 1, 1997, the Group adopted the Fifth Amendment to Bulletin
B-10, which eliminated the use of replacement costs for the restatement of
property and equipment and instead, included an option of using the Specific
Index for the restatement of equipment of non-Mexican origin. The Group has
elected to apply the Specific Index option for determining the restated balances
of equipment of non-Mexican origin under Mexican GAAP. For U.S. GAAP purposes,
the use of an index that contemplates currency exchange movements is not in
accordance with the historical cost concept nor does it present financial
information in a constant currency.

Restructuring charges
- ---------------------

In 2002 the Group provided for restructuring costs related to expected employee
terminations. Under Mexican GAAP, these costs are recorded as other expenses.
For U.S. GAAP purposes, these costs have been expensed as incurred and
classified in operating expenses.

Revenue recognition
- -------------------

Under Mexican GAAP, initial non-refundable subscription fees are recognized upon
activation of the new subscriber's DTH services. Under U.S. GAAP, initial
non-refundable subscription fees are recognized over the period that a new
subscriber is expected to remain a customer (2003 and 2002 estimated to be 3
years). Customer acquisition costs directly attributable to the income are
recognized over the same period under U.S. GAAP. Those customer acquisition
costs in excess of the initial non-refundable subscription fee revenues are
expensed as incurred.

Initial non-refundable subscription fees for the six month period ended June 30,
2003 amounted to Ps.67.3 million (Ps.84.5 million in the six month period ended
June 30, 2002). Under U.S. GAAP, deferred initial non-refundable subscription
fee revenues of approximately Ps.210.1 million were recorded as of June 30, 2003
(Ps.190.0 million as of June 30, 2002). In addition, customer acquisition costs,
which are expensed immediately under Mexican GAAP, have been deferred to match
and equal initial non-refundable subscription revenues; therefore at June 30,
2003, deferred costs under U.S. GAAP also amounted to Ps.210.1 million (Ps.190.0
million as of June 30, 2002). Initial non-refundable subscription revenues
(which are matched by customer acquisition costs) that have been recognized
during the six month period ended June 30, 2003 amount to Ps.59.0 million
(Ps.32.1 million in the six month period ended June 30, 2002).

Summary
- -------

Net loss for the six month period ended June 30, 2003 and 2002, adjusted to take
into account the principal differences between Mexican GAAP and U.S. GAAP, as
they relate to the Group, are as follows:

2003 2002
---- ----

Net loss as reported under Mexican GAAP................................. Ps.(206,379) Ps.(1,103,420)
Satellite reorientation costs........................................... - (36,997)
Maintenance reserve..................................................... 3,050 3,874
Restatement of property and equipment.................................. 1,036 2,241
Restructuring charge.................................................... - (4,766)
----------- -------------
Net loss in accordance with U.S. GAAP................................... Ps.(202,293) Ps.(1,139,068)
=========== =============

F-11

Stockholders' deficit as of June 30, 2003 and 2002, adjusted to take into
account the principal differences between Mexican GAAP and U.S. GAAP, as they
relate to the Group, are as follows:

2003 2002
---- ----

Total stockholders' deficit under Mexican GAAP.......................... Ps.(7,181,647) Ps.(6,337,962)
U.S. GAAP adjustments:
Maintenance reserve..................................................... 15,017 8,812
Restatement of property and equipment................................... 30,207 77,856
------------- -------------

Total U.S. GAAP adjustments............................................. 45,224 86,688
------------- -------------

Total stockholders' deficit under U.S. GAAP............................. Ps.(7,136,423) Ps.(6,251,294)
============= =============

A summary of the Group's statement of changes in stockholders' deficit with
balances determined under U.S. GAAP is as follows:

Balance at December 31, 2001....................................................... Ps.(5,112,211)
Supplementary liability for labor obligations...................................... (15)
Net loss for the six month period ended June 30, 2002.............................. (1,139,068)
-------------

Balance at June 30, 2002........................................................... (6,251,294)
Supplementary liability for labor obligations...................................... (121)
Net loss for the six month period ended December 31, 2002.......................... (682,582)
-------------

Balance at December 31, 2002....................................................... (6,933,997)
Supplementary liability for labor obligations...................................... (133)
Net loss for the six month period ended June 30, 2003.............................. (202,293)
-------------

Balance at June 30, 2003........................................................... Ps.(7,136,423)
=============

F-12

A summary of the Group's stockholders' deficit after the U.S. GAAP adjustments
described above, as of June 30, is as follows:

2003 2002
---- ----

Capital stock............................................................. Ps. 1,936,265 Ps. 1,936,265
Accumulated losses........................................................ (9,084,399) (8,199,524)
Other comprehensive income:
Excess from restatement...................................... 11,980 11,980
Supplementary liability for labor obligations................ (269) (15)
------------- -------------

Total stockholders' deficit under U.S. GAAP............................... Ps.(7,136,423) Ps.(6,251,294)
============= =============

Included below are unaudited condensed consolidated financial statements of the
Group as of June 30, 2003 and 2002 and for the six month period ended June 30,
2003 and 2002, after giving effect to the U.S. GAAP adjustments.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
- -----------------------------------------------

(Expressed in thousands of Mexican Pesos in purchasing power as of June 30,
2003)

June 30,
-------------------------------
2003 2002
---- ----

ASSETS
Current assets:
Cash and cash equivalents................................................. Ps. 426,393 Ps. 285,861
Trade accounts receivables, net........................................... 156,211 182,756
Prepaid expenses and other................................................ 90,664 91,627
Other current assets...................................................... 15,426 29,154
Deferred costs, net....................................................... 119,134 81,197
------------- -------------

Total current assets...................................................... 807,828 670,595

Property and equipment, net............................................... 1,481,724 1,817,770
Satellite transponders, net............................................... 1,177,461 1,270,292
Other non current assets.................................................. 85,204 153,736
Deferred costs, net....................................................... 91,014 108,783
------------- -------------

Total assets.............................................................. Ps. 3,643,231 Ps. 4,021,176
============= =============

F-13

June 30,
---------------------------------
2003 2002
---- ----

LIABILITIES
Current liabilities:
Trade accounts payable and accruals....................................... Ps. 425,117 Ps. 387,721
Satellite transponders obligation......................................... 55,784 49,887
Due to affiliated companies and other related parties..................... 368,020 272,248
Other current liabilities................................................. 515,021 454,756
-------------- --------------

Total current liabilities................................................. 1,363,942 1,164,612

Non-current liabilities:
Senior notes.............................................................. 3,914,249 3,887,732
Stockholder's loans....................................................... 3,234,737 3,212,811
Satellite transponders obligation......................................... 1,336,752 1,378,776
Other non-current liabilities............................................. 929,974 628,539
-------------- --------------

Total liabilities......................................................... 10,779,654 10,272,470
-------------- --------------

Commitments and contingencies............................................ - -
Stockholders' deficit.................................................... (7,136,423) (6,251,294)
-------------- --------------

Total liabilities and stockholders' deficit.............................. Ps. 3,643,231 Ps. 4,021,176
============== ==============

F-14

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF (LOSS) INCOME
-----------------------------------------------------------
(Expressed in thousands of Mexican Pesos in purchasing power as of
June 30, 2003)

For the six months
ended June 30,
----------------------------------
2003 2002
---- ----

Revenues from programming services.......................................... Ps. 1,050,867 Ps. 1,039,451
Revenues from rental of IRDs................................................ 458,276 396,024
Other revenues.............................................................. 262,565 251,755
-------------- ---------------

Net revenues................................................................ 1,771,708 1,687,230

Operating expenses:
Cost of sales - programming services........................................ 358,767 350,478
Cost of sales - other....................................................... 159,129 135,007
Administrative expenses..................................................... 56,436 58,106
Selling expenses............................................................ 429,431 459,018
Other operating expenses.................................................... 211,373 305,873
Depreciation and amortization............................................... 393,453 490,411
-------------- ---------------

Total operating expenses.................................................... 1,608,589 1,798,893
-------------- ---------------

Operating profit (loss)..................................................... 163,119 (111,663)

Integral results of financing............................................... 393,005 994,047
-------------- ---------------

Loss before tax............................................................. (229,886) (1,105,710)

Provision for income and assets taxes....................................... 27,593 (33,358)
-------------- ---------------

Net loss.................................................................... (Ps. 202,293) (Ps. 1,139,068)
============== ===============

Cash Flows
- ----------

Mexican GAAP Bulletin B-12, specifies the appropriate presentation of the
statements of changes in financial position. Under Bulletin B-12, the sources
and uses of resources are determined based upon differences between beginning
and ending financial statement balances in constant Pesos. Under U.S. GAAP, a
statement of cash flows is required, which presents only cash movements and
excludes non-cash items.

F-15

Presented below are unaudited statements of cash flow for the years ended June
30, 2003 and 2002, prepared after considering the impact of U.S. GAAP
adjustments. The unaudited cash flow statements present nominal cash flows
during the period, adjusted to June 30, 2003, purchasing power.

2003 2002
---- ----

Operating activities:
Net loss.................................................................... Ps. (202,293) Ps. (1,139,068)
Adjustments to reconcile net (loss) to cash flows (used in)
operating activities:
Gain from monetary position................................................. (106,116) (200,486)
Unrealized exchange (gains) losses......................................... (23,036) 645,809
Allowance for doubtful accounts............................................. 44,339 61,133
Depreciation and amortization............................................... 393,453 490,411

Changes in operating assets and liabilities:
Assets...................................................................... 49,530 (193,466)
Liabilities................................................................. 224,702 445,601
------------ --------------

Cash flows provided by operating activities................................ 380,579 109,934
------------ --------------

Financing activities:.......................................................
Stockholders' loans......................................................... - 293,293
Satellite transponders obligation........................................... (25,598) (22,178)
------------ --------------

Cash flows (used in) provided by financing activities....................... (25,598) 271,115
------------ --------------

Investing activities:
Investment in property and equipment........................................ (193,993) (138,527)
------------ --------------

Cash flows (used in) investing activities................................... (193,993) (138,527)
------------ --------------

Effects of inflation........................................................ (4,452) (2,390)
------------ --------------

Increase in cash and cash equivalents....................................... 156,536 240,132

Cash and cash equivalents, beginning of period.............................. 269,857 45,729
------------ --------------

Cash and cash equivalents, end of period.................................... Ps. 426,393 Ps. 285,861
============ ==============

F-16

2003 2002
---- ----

Interest and taxes paid:
Interest paid............................................................... Ps. 350,223 Ps. 316,780
Income and asset taxes paid................................................. - 68,606

Non-cash Investing and Financing Activities
- -------------------------------------------

Capital lease obligation of U.S.$133.9 million (Ps.1,432.6 million) was incurred
when the Group entered into agreements with PanAmSat for the use of 12 KU-band
transponders on the PAS-9 satellite in September 2000.

Recently Issued Accounting Pronouncements
- -----------------------------------------

In April 2003 the FASB issued Statement No. 149 ("FAS 149"), "Amendment of FAS
No. 133 on Derivative Instruments and Hedging Activities." The Statement amends
and clarifies accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities
under FAS 133. In particular, it (1) clarifies under what circumstances a
contract with an initial net investment meets the characteristics of a
derivative as discussed in FAS 133, (2) clarifies when a derivative contains a
financing component, (3) amends the definition of an underlying to conform it to
the language used in FIN No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others" ("FIN 45") and (4) amends certain other existing pronouncements.

FAS 149 is effective for contracts entered into or modified after June 30, 2003,
except as stated below and for hedging relationships designated after June 30,
2003.

The provisions of FAS 149 that relate to FAS 133 Implementation Issues that have
been effective for fiscal quarters that began prior to June 15, 2003, should
continue to be applied in accordance with their respective effective dates. In
addition, certain provisions relating to forward purchases or sales of
when-issued securities or other securities that do not yet exist, should be
applied to existing contracts as well as new contracts entered into after June
30, 2003. FAS 149 should be applied prospectively.

The Group does not expect that the adoption of this Statement will have a
material impact on its results of operations and financial position.

In May 2003 the FASB issued Statement of Financial Accounting Standards No. 150
("FAS 150"), "Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity." FAS 150 modifies the accounting for certain
financial instruments that, under previous guidance, issuers could account for
as equity. The Statement requires that those instruments be classified as
liabilities in statements of financial position.

FAS 150 affects an issuer's accounting for three types of freestanding financial
instruments, namely:

o Mandatorily redeemable shares, which the issuing company is obligated
to buy back in exchange for cash or other assets.

o Financial instruments, other than outstanding shares, that do or may
require the issuer to buy back some of its equity shares in exchange
for cash or other assets.

o Unconditional obligations that can be settled with equity shares, the
monetary value of which is fixed, tied solely or predominantly to a
variable such as a market index, or varies inversely with the value of
the issuer's equity shares.

FAS 150 does not apply to features embedded in financial instruments that are
not derivatives in their entirety.

In addition to its requirements for the classification and measurement of
financial instruments within its scope, FAS 150 also requires disclosures about
alternative ways of settling such instruments and the capital structure of
entities, all of whose shares are mandatorily redeemable.

F-17

FAS 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003.

The Company is currently evaluating the impact that the adoption of this
Statement will have on its results of operations and financial position.

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

2. The equity investors lack one or more of the following essential
characteristics of a controlling financial interest:

a. The direct or indirect ability to make decisions about the
entity's activities through voting rights or similar rights.

b. The obligation to absorb the expected losses of the entity if
they occur, which makes it possible for the entity to finance its
activities.

c. The right to receive the expected residual returns of the entity
if they occur, which is the compensation for the risk of
absorbing the expected losses.

This Interpretation applies immediately to variable interest entities created
after January 31, 2003, and to variable interest entities in which an enterprise
obtains an interest after that date. It applies in the first fiscal year or
interim period beginning after June 15, 2003, to variable interest entities in
which an enterprise holds a variable interest that it acquired before February
1, 2003. On October 10, 2003, the FASB issued FASB Staff Position 46-6, which
defers the effective date for applying the provisions of FIN 46 to interim or
annual periods ending after December 15, 2003. The Interpretation applies to
public enterprises as of the beginning of the applicable interim or annual
period.

F-18

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

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

-------------------------
FORM 20-F

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

[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the fiscal year ended December 31, 2002

[ ] 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 333-7484

INNOVA, S. de R.L. de C.V.

(Exact name of Registrant as specified in its charter)

N/A
(Translation of Registrant's name into English)

UNITED MEXICAN STATES
(Jurisdiction of incorporation or organization)

INSURGENTES SUR 694, PISO 8
COLONIA DEL VALLE
03100 MEXICO, D.F.
MEXICO
(Address of principal executive offices)

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

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

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: None

The number of outstanding shares of each of the issuer's classes of capital
or common stock as of December 31, 2002 was:

One Series A-1 Social Part, One Series B-1 Social Part, and One Series B-2
Social Part

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 which financial statement item the registrant has elected
to follow. Item 17 [ ] Item 18 [X]

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

A-1

TABLE OF CONTENTS

PAGE
----

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS........................................ A-5

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE...................................................... A-5

ITEM 3. KEY INFORMATION.............................................................................. A-5

Selected Financial Data............................................................... A-5
Risk Factors.......................................................................... A-8

ITEM 4. INFORMATION ON THE COMPANY................................................................... A-20

History and Development of the Company................................................ A-20
Business Overview..................................................................... A-23
Organizational Structure.............................................................. A-42
Property, Plant and Equipment......................................................... A-43

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS................................................. A-43

Operating Results..................................................................... A-49
Liquidity and Capital Resources....................................................... A-56
Contractual Obligations and Commercial Commitments.................................... A-58
Research and Development, Patents and Licenses, etc................................... A-58
Trend Information..................................................................... A-59

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES................................................... A-61

Directors and Senior Management....................................................... A-61
Compensation.......................................................................... A-64
Board Practices....................................................................... A-64
Employees............................................................................. A-65
Share Ownership....................................................................... A-65

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS............................................ A-65

Major Shareholders.................................................................... A-65
Related Party Transactions............................................................ A-65

ITEM 8. FINANCIAL INFORMATION........................................................................ A-66

Item 9. The OFFER AND LISTING........................................................................ A-68

ITEM 10. ADDITIONAL INFORMATION...................................................................... A-68

Bylaws................................................................................ A-69
Material Contracts.................................................................... A-69
Exchange Controls..................................................................... A-74
Taxation.............................................................................. A-80
Documents on Display.................................................................. A-80

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.................................. A-80

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES...................................... A-82

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES............................................. A-82

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS.................................... A-82

ITEM 15. CONTROLS AND PROCEDURES..................................................................... A-83

A-2

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT........................................................... A-83

ITEM 16B. CODE OF ETHICS............................................................................. A-83

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES..................................................... A-83

PART III

ITEM 17. FINANCIAL STATEMENTS........................................................................ A-83

ITEM 18. FINANCIAL STATEMENTS........................................................................ A-83

ITEM 19. EXHIBITS.................................................................................... A-83

A-3

The terms "we", "us", "our" and "Innova" are used in this annual report
to refer to Innova, S. de R.L. de C.V and its consolidated subsidiaries. We
maintain our books and records in pesos and present our financial statements in
conformity with generally accepted accounting principles in Mexico, or Mexican
GAAP. Mexican GAAP differ in some significant respects from generally accepted
accounting principles in the United States, or U.S. GAAP, and generally accepted
accounting principles adopted in other countries. Under Mexican GAAP, we must
account for the effects of inflation. Accordingly, we have restated all data in
our consolidated financial statements and the notes thereto, as well as our
selected financial information, in constant pesos in purchasing power as of
December 31, 2002, unless otherwise indicated. See Note 3 to our consolidated
financial statements.

We use the Mexican Interbank free market exchange rate, commonly known
as the Interbank Rate, as reported by Banco Nacional de Mexico, S.A., to prepare
our financial statements. Unless otherwise indicated, references to "Ps." or
"pesos" in this annual report are to Mexican pesos and references to "U.S.
dollars," "US$" or "$," are to United States dollars. As of December 31, 2002,
the Interbank Rate was Ps. 10.464 per US$1.00. We use the Interbank Rate as of
December 31, 2002 to translate pesos into U.S. dollars in this report, unless
otherwise indicated. See "Item 3: Key Information--Exchange Rate Information"
for information regarding the rates of exchange between the peso and the U.S.
dollar for specified periods. You should not construe the exchange rate
translations in this report as representations that the peso amounts represent
actual dollar amounts or that they could be converted into U.S. dollars at the
rate indicated or at any other rate.

A-4

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

SELECTED FINANCIAL DATA

The following table presents selected consolidated financial data for
Innova and its subsidiaries. You should read this information in conjunction
with our audited consolidated financial statements and the notes to those
financial statements. Our financial statements have been prepared in accordance
with Mexican GAAP, which differ in some significant respects from U.S. GAAP and
generally accepted accounting principles adopted in other countries. Note 21 to
our financial statements describes the principal differences between Mexican
GAAP and U.S. GAAP as they relate to Innova and reconciles net loss and total
stockholders' deficit to U.S. GAAP.

AS OF AND FOR THE YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------------
1998 1999 2000 2001 2002
------------- ------------- ------------- -------------- -------------
(IN THOUSANDS OF MEXICAN PESOS IN
PURCHASING POWER AS OF DECEMBER 31, 2002)

STATEMENT OF OPERATIONS DATA:
Net sales ................................ Ps. 975,450 Ps. 1,818,748 Ps. 2,560,159 Ps. 3,266,037 Ps. 3,432,872
Depreciation and amortization ............ (484,592) (686,129) (844,580) (948,335) (925,078)
Operating (loss) profit .................. (1,515,875) (1,152,571) (1,075,591) (278,925) 9,021
Total integral results of financing (1)... (757,800) 140,295 (352,022) (70,661) (1,647,800)
Other (expenses) income, net ............. (8,024) 11,702 -- -- (22,126)
Transponder services - Solidaridad 2
and repointing costs (2) .............. -- -- (430,916) -- (25,933)
Restructuring charges (3) ................ -- -- -- (13,576) (6,495)
Loss before provisions for taxes ......... (2,281,699) (1,000,574) (1,858,529) (363,162) (1,693,333)
Provisions for taxes (4) ................. (7) (36) (130) (46,283) (75,530)
Net loss ................................. (2,281,707) (1,000,610) (1,858,659) (409,445) (1,768,863)

Net sales (U.S. GAAP) (5) ................ Ps. 995,820 Ps. 1,871,574 Ps. 2,559,502 Ps. 3,140,996 Ps. 3,315,976
Operating (loss) (U.S. GAAP) (5) ......... (2,823,320) (992,734) (1,050,993) (791,319) (76,471)
Net (loss) income (U.S. GAAP) (5) ........ (3,218,113) 205,678 (1,408,456) (930,659) (1,799,801)

OTHER DATA:
Capital expenditures ..................... Ps. 803,245 Ps. 621,420 Ps. 686,130 Ps. 802,722 Ps. 317,512

BALANCE SHEET DATA:
Property and equipment, net (6) .......... Ps. 1,874,772 Ps. 1,912,071 Ps. 1,908,759 Ps. 1,952,176 Ps. 1,544,905
Satellite transponders, net (7) .......... -- -- 1,400,722 1,215,450 1,240,997
Total other non-current assets ........... 999,185 560,236 348,739 217,865 104,928
Total assets ............................. 4,061,656 3,288,200 3,949,773 3,774,327 3,441,543
Total assets (U.S. GAAP) ................. 4,492,453 3,231,926 4,018,517 4,099,139 3,679,766
Net liabilities .......................... 2,394,805 2,877,900 4,763,418 5,301,180 6,905,899
Net liabilities (U.S. GAAP) (5) .......... 3,482,449 2,711,814 4,120,190 5,050,833 6,850,753
Due to affiliated companies and
related parties (8) ................... 300,520 243,283 244,129 349,626 433,420
Senior notes (9) ......................... 5,001,751 4,281,409 3,976,797 3,637,930 3,924,000
Owners' loans (10) ....................... 333,505 760,378 1,565,268 2,720,201 3,242,793
Satellite transponders obligation (7) .... -- -- 1,472,221 1,358,277 1,421,655
Stockholders' deficit .................... (2,394,805) (2,877,900) (4,763,224) (5,301,180) (6,905,899)
Capital stock ............................ 1,348,201 1,913,116 1,913,116 1,913,116 1,913,116
Stockholders' deficit (U.S. GAAP) (5) .... (3,482,449) (2,711,814) (4,120,190) (5,050,833) (6,850,753)

A-5

(1) Includes interest expense, interest income, foreign exchange gains and
(losses), net gain from monetary position and other net. Note 3 to our
consolidated financial statements.

(2) See Note 15 to our consolidated financial statements.

(3) See Note 16 to our consolidated financial statements.

(4) See Note 18 to our consolidated financial statements.

(5) The principal differences between Mexican GAAP and U.S. GAAP as they
relate to us consist of differences in the capitalization and
amortization of pre-operating expenses, the provision for costs
associated with re-pointing our subscriber's antennas from the
Solidaridad 2 satellite to the PAS-9 satellite, the provision for the
redundant use of Solidaridad Satellite, the reversal of certain other
accruals, the capitalization of financing costs, the restatement of
property and equipment, and the recognition of revenue. See Note 21 to
our consolidated financial statements.

(6) See Note 5 to our consolidated financial statements.

(7) Beginning in 2000, we accounted for the agreement for the use of 12
transponders on the PAS-9 satellite as a capital lease, recognizing a
satellite transponder asset and corresponding liability equal to the
net present value of the monthly payments over the lease term. The
satellite transponder asset is depreciated on a straight-line-basis
over the lease term. Part of the monthly payments are recognized in our
income statements as interest expense and part as a reduction of the
satellite obligation. Our income statement also recognizes on a monthly
basis the amortization of the net present value of our satellite
transponder asset. Our other satellite transponder agreements have been
accounted for as operating leases. See Note 6 to our consolidated
financial statements.

(8) See Note 9 to our consolidated financial statements.

(9) See Note 10 to our consolidated financial statements.

(10) See Note 11 to our consolidated financial statements.

EXCHANGE RATE INFORMATION

Since November 1991, Mexico has had a free market for foreign exchange, and
since December 1994, the Mexican government has allowed the Peso to float freely
against the U.S. Dollar. The Peso declined sharply in December 1994 and
continued to fall under conditions of high volatility in 1995. In 1996, the Peso
fell more slowly and was less volatile. Relative stability characterized the
foreign exchange markets during the first three quarters of 1997. The fall of
the Hang Seng Index of the Hong Kong Stock Exchange on October 24, 1997 marked
the beginning of a period of increased volatility in the foreign exchange
markets with the Peso falling over 10% in just a few days. During 1998, the
foreign exchange markets experienced volatility as a result of the financial
crises in Asia and Russia and the financial turmoil in countries such as Brazil
and Venezuela. More recently, the economic and financial crises in Argentina and
Venezuela have resulted in volatility in the foreign exchange markets, have
caused instability in the Latin American financial markets and could continue to
have a negative impact on the value of the Peso. See "-- Risk Factors -- Risk
Factors Related to Mexico -- Developments in Other Emerging Markets Countries or
the United States May Affect Us and the Prices for Our Securities." We cannot
assure you that the Mexican government will maintain its current policies with
regard to the Peso or that the Peso will not further depreciate or appreciate
significantly in the future.

A-6

The following table sets forth, for the periods indicated, the high, low,
average and period end free market exchange rate for the purchase of U.S.
Dollars, expressed in nominal Pesos per U.S. Dollar. All amounts are stated in
Pesos per U.S. Dollar. As of June 25, 2003, the free market exchange rate for
the purchase of U.S. Dollars as reported by the Board of Governors of the
Federal Reserve Bank was Ps.10.48 per U.S. Dollar.

EXCHANGE RATE(1)
----------------
HIGH LOW AVERAGE(2) PERIOD END
---- --- ---------- ----------

YEAR ENDED DECEMBER 31,
1998................................... 10.63 8.04 9.24 9.90
1999................................... 10.60 9.24 9.56 9.48
2000................................... 10.09 9.18 9.47 9.62
2001................................... 9.97 8.95 9.33 9.16
2002................................... 10.43 9.00 9.75 10.43
MONTH ENDED
December 31, 2002...................... 10.43 10.10 10.23 10.43
January 31, 2003....................... 10.98 10.32 10.62 10.90
February 28, 2003...................... 11.06 10.77 10.95 11.03
March 31, 2003......................... 11.24 10.66 10.91 10.78
April 30, 2003......................... 10.77 10.31 10.59 10.31
May 31, 2003........................... 10.42 10.11 10.25 10.34
June 25, 2003.......................... 10.74 10.24 10.51 10.48

(1) The free market exchange rate is the Noon Buying Rate for Pesos reported by
the Board of Governors of the Federal Reserve Bank.

(2) Annual average rates reflect the average of month-end rates. Monthly
average rates reflect the average of daily rates.

The Mexican economy has suffered balance of payment deficits and shortages
in foreign exchange reserves. While the Mexican government does not currently
restrict the ability of Mexican or foreign persons or entities to convert Pesos
to U.S. Dollars, we cannot assure you that the Mexican government will not
institute restrictive exchange control policies in the future, as has occurred
from time to time in the past. To the extent that the Mexican government
institutes restrictive exchange control policies in the future, our ability to
transfer or to convert Pesos into U.S. Dollars and other currencies for the
purpose of making timely payments of interest and principal of indebtedness, as
well as obtaining foreign programming and other goods, would be adversely
affected. See "-- Risk Factors -- Risk Factors Related to Mexico -- Currency
Fluctuations or the Devaluation and Depreciation of the Peso Could Limit the
Ability of Us and Others to Convert Pesos into U.S. Dollars or Other Currencies
and/or Adversely Affect Our Financial Condition."

DIVIDENDS

We have not declared or paid any dividends. Under our Social Part Holders
Agreement and bylaws, dividends may be paid in pesos or U.S. dollars as
determined by our equity holders. The dollar value of any dividends would be
affected by the exchange rate if paid in pesos. The indenture governing our 12
7/8 % senior notes due 2007, or senior notes, restricts our ability to declare
dividends under certain conditions.

A-7

RISK FACTORS

The following is a discussion of risks associated with our company and an
investment in our securities. Some of the risks of investing in our securities
are general risks associated with doing business in Mexico. Other risks are
specific to our business. The discussion below contains information about the
Mexican government and the Mexican economy obtained from official statements of
the Mexican government as well as other public sources. We have not
independently verified this information. Any of the following risks, if they
actually occur, could materially and adversely affect our business, financial
condition or results of operations, or the price of our securities.

RISK FACTORS RELATED TO MEXICO

ECONOMIC AND POLITICAL DEVELOPMENTS IN MEXICO MAY ADVERSELY AFFECT OUR BUSINESS.

Substantially all of our revenues are denominated in Mexican pesos and are
generated in Mexico. Our management and many of our assets are located in
Mexico. As a result, our business, financial condition, and results of
operations may be affected by the general condition of the Mexican economy, the
devaluation of the Mexican peso as compared to the U.S. dollar, Mexican
inflation, interest rates, regulation, taxation, social instability and other
political, social and economic developments in or affecting Mexico.

MEXICO HAS EXPERIENCED ADVERSE ECONOMIC CONDITIONS

Mexico has experienced a prolonged period of slow economic growth since
2001, primarily as a result of the downturn in the U.S. economy. In 2000,
Mexico's gross domestic product, or GDP, increased 6.6%. According to Mexican
government estimates, GDP decreased 0.3% in 2001 and increased 0.9% and 2.3% in
2002 and the three month period ended March 31, 2003, respectively. Inflation in
2000, 2001, 2002 and the three month period ended March 31, 2003 was 9.0%, 4.4%,
5.7% and 1.3%, respectively. Nonetheless, at approximately 4.7% per annum (as
measured from May 2002 to May 2003), Mexico's current level of inflation remains
higher than the annual inflation rates of its main trading partners. GDP growth
fell short of Mexican government estimates in 2002 due primarily to the slowdown
in the growth of the U.S. economy, the reduction of investments, the increase in
unemployment and a decrease in exports as a result of the 13.9% depreciation of
the Peso as compared to the U.S. Dollar. According to Mexican government
estimates, GDP in Mexico is expected to grow by approximately 2.25%, while
inflation is expected to be less than 4.0%, in 2003. We cannot assure you that
these estimates will prove to be accurate. During the first quarter of 2003, the
Mexican economy continued to slow, in large part, as a result of the continued
weakness of the U.S. economy, the uncertainty generated by the continued
hostilities in the Middle East and the related potential impacts on oil prices
and consumer confidence, uncertainty caused by the continuing threat of large
scale international terrorist attacks and a decrease in consumption as a result
of the recent depreciation of the Mexican Peso as compared to the U.S. Dollar.
We believe that the economic slowdown has negatively affected and could continue
to negatively affect our revenues.

If the Mexican economy falls into a recession or if other economic events
such as increased inflation and interest rates or deflation occur, our business,
financial condition and results of operations may be adversely affected for the
following reasons:

- demand for DTH satellite services, pay-per-view programming and
other services may decrease;

- demand for advertising may decrease both because consumers may
reduce expenditures for our advertisers' products and because
advertisers may reduce advertising expenditures;

- to the extent inflation exceeds our price increases, our prices
and revenues will be adversely affected in "real" terms; and

- if the rate of Mexican inflation exceeds the rate of devaluation
of the Peso against the U.S. Dollar, our U.S. Dollar-denominated
sales, if any, would decrease in relative terms when stated in
constant Pesos.

A-8

CURRENCY FLUCTUATIONS OR THE DEVALUATION AND DEPRECIATION OF THE PESO COULD
LIMIT THE ABILITY OF US AND OTHERS TO CONVERT PESOS INTO U.S. DOLLARS OR OTHER
CURRENCIES AND/OR ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION OR RESULTS
OF OPERATIONS

Most of our indebtedness and a significant amount of our costs are U.S.
Dollar-denominated, while our revenues are primarily Peso-denominated. As a
result, decreases in the value of the Peso against the U.S. Dollar could cause
us to incur foreign exchange losses, which would reduce our net income.

Severe devaluation or depreciation of the Peso may also result in
governmental intervention, as has resulted in Argentina, or disruption of
international foreign exchange markets. This may limit our ability to transfer
or convert Pesos into U.S. Dollars and other currencies for the purpose of
making timely payments of interest and principal on our indebtedness and
adversely affect our ability to pay our satellite and other dollar-denominated
costs, obtain foreign programming and other imported goods. While the Mexican
government does not currently restrict, and for many years has not restricted,
the right or ability of Mexican or foreign persons or entities to convert Pesos
into U.S. Dollars or to transfer other currencies outside of Mexico, the Mexican
government could institute restrictive exchange control policies in the future.
Devaluation or depreciation of the Peso against the U.S. Dollar may also
adversely affect U.S. Dollar prices for our securities.

HIGH INTEREST RATES IN MEXICO COULD INCREASE OUR FINANCING COSTS

Mexico historically has had, and may continue to have, high real and
nominal interest rates. The interest rates on 28-day Mexican government treasury
securities averaged 15.2%, 11.3%, 7.1% and 8.8% for 2000, 2001, 2002 and the
three month period ended March 31, 2003. Accordingly, if we need to incur
Peso-denominated debt in the future, it will likely be at high interest rates.

POLITICAL EVENTS IN MEXICO COULD AFFECT MEXICAN ECONOMIC POLICY AND OUR
BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In the Mexican national elections held on July 2, 2000, Vicente Fox of the
opposition party, the Partido Accion Nacional, or the National Action Party, won
the presidency. His victory ended more than 70 years of presidential rule by the
Partido Revolucionario Institucional, or the Institutional Revolutionary Party.
Neither the Institutional Revolutionary Party nor the National Action Party
succeeded in securing a majority in the Chamber of Deputies or the Senate, the
two houses of the Mexican Congress. Although members of the National Action
Party have governed several states and municipalities, the National Action Party
had not previously governed on a federal level. President Fox has encountered
strong opposition to a number of his proposed reforms in both the Chamber of
Deputies and the Senate, where opposition forces have frequently joined to block
his initiatives. This legislative deadlock could slow down the progress of
reforms in Mexico. In addition, new legislative elections will be held in July
2003, which may further hinder President Fox's ability to implement his
initiatives. The effects on the social and political situation in Mexico, as
well as currency instability in Mexico, could adversely affect the Mexican
economy, which in turn could have a material adverse effect on our business,
financial condition and results of operations, as well as market conditions and
prices for our securities.

DEVELOPMENTS IN OTHER EMERGING MARKET COUNTRIES OR THE UNITED STATES MAY AFFECT
US AND THE PRICES FOR OUR SECURITIES

In the past, economic crises in Asia, Russia, Brazil and other areas and
slowdowns in the U.S. economy adversely affected the Mexican economy, and thus,
future economic developments in other emerging markets such as Argentina and
Venezuela , as well as recessions in the United States, could adversely affect
the Mexican economy in future periods. The market value of securities of Mexican
companies, the economic and political situation in Mexico and our financial
condition and results of operations are, to varying degrees, affected by
economic and market conditions in other emerging market countries and in the
U.S. Although economic conditions in other emerging market countries and the
U.S. may differ significantly from economic conditions in Mexico, investors'
reactions to developments in any of these other countries may have an adverse
effect on Mexico, the market value or trading price of securities of Mexican
issuers, including ours, or our business.

In particular, Argentina's insolvency and default on its public debt, which
deepened the existing financial, economic and political crises in that country,
could adversely affect Mexico, the market value of our securities or

A-9

our business. The former Argentine President, Eduardo Duhalde, took office on
January 6, 2002 in the midst of significant political unrest after a series of
interim presidents and administrations took office following the resignation of
President Fernando de la Rua in December 2001. On May 15, 2003, a new President,
Nestor Kirchner, took office in Argentina and is expected to retain the same
economy minister and continue the fiscal and monetary policies initiated by
former President Duhalde The devaluation of the Argentine peso may have a
material adverse effect on Argentina and presents risks that the Argentine
financial system may collapse and that substantial inflation may occur. The
rapid and radical nature of changes in the Argentine social, political, economic
and legal environment have continued to create significant uncertainty. To the
extent that the new Argentine government is unsuccessful in preventing further
economic decline via this and other measures, this crisis may adversely affect
the market value and trading price of our securities.

In addition, on April 12, 2002, following a week of strikes, demonstrations
and riots, Venezuelan President Hugo Chavez was forced to resign from office by
Venezuela's military commanders in an attempted coup d'etat. Although Mr. Chavez
was restored to power on April 14, 2002, the political and economic future of
Venezuela remains uncertain. More recently, a nationwide general strike that
occurred between December 2002 and January 2003 caused a significant reduction
in oil production in Venezuela, and has had a material adverse effect on
Venezuela's oil-dependent economy. In response to the general strike and in an
effort to shore up the economy and control inflation, in February 2003
Venezuelan authorities imposed foreign exchange and price controls on specified
products. We cannot predict what effect, if any, these events will have on the
economies of other emerging market countries, Mexico, the price of our
securities or our business.

In late October 1997, prices of both Mexican debt securities and Mexican
equity securities dropped substantially, precipitated by a sharp drop in Asian
securities markets. Similarly, in the second half of 1998 and in early 1999,
prices of Mexican securities were adversely affected by the economic crises in
Russia and Brazil. The price of our securities has also historically been
adversely affected by increases in interest rates in the United States and
elsewhere.

THE SEPTEMBER 11, 2001 TERRORIST ATTACKS ON THE UNITED STATES, AND MORE RECENTLY
THE UNITED STATES INVASION OF IRAQ, HAVE NEGATIVELY AFFECTED INDUSTRY AND
ECONOMIC CONDITIONS GLOBALLY, AND THESE CONDITIONS HAVE HAD, AND MAY CONTINUE TO
HAVE, A NEGATIVE EFFECT ON OUR BUSINESS

Our net sales are affected by numerous factors, including changes in
viewing preferences, programming costs and consumers' purchasing power.
Historically, these factors correlate with the general condition of the economy
and thus, are subject to the risks that arise from adverse changes in domestic
and global economic conditions, as well as fluctuations in consumer confidence
and spending, which may decline as a result of numerous factors outside of our
control, such as terrorist attacks and acts of war. The terrorist attacks on
September 11, 2001 depressed economic activity in the U.S. and globally,
including the Mexican economy. Since those attacks, there have been terrorist
attacks abroad and ongoing threats of future terrorist attacks in the United
States and abroad. In response to these terrorist attacks and threats, the
United States has instituted several anti-terrorism measures, most notably, the
formation of the Office of Homeland Security, a declaration of war against
terrorism and the invasion of Iraq. Although it is not possible at this time to
determine the long-term effect of these terrorist threats and attacks and the
consequent response by the United States, there can be no assurance that there
will not be other attacks or threats in the United States or abroad that will
lead to a further economic contraction in the United States or any other major
markets. In the short term, however, terrorist activity against the United
States and the consequent response by the United States has contributed to the
uncertainty of the stability of the United States economy as well as global
capital markets. It is not certain how long these economic conditions will
continue. If terrorist attacks continue or worsen, if the weak economic
conditions in the U.S. continue or worsen, or if a global recession
materializes, our business, financial condition and results of operations may be
materially and adversely affected.

DIFFERENCES BETWEEN MEXICAN GAAP AND U.S. GAAP MAY HAVE AN IMPACT ON THE
PRESENTATION OF OUR FINANCIAL INFORMATION

Our annual audited consolidated financial statements are prepared in
accordance with Mexican GAAP, which differ in some significant respects from
U.S. GAAP. We are required, however, to file an annual report on Form 20-F
containing financial statements reconciled to U.S. GAAP, although this filing
only contains year-end financial statements reconciled to U.S. GAAP for certain
fiscal years. See Note 21 to our consolidated financial statements.

A-10

RISK FACTORS RELATED TO OUR BUSINESS

WE MAY NEVER GENERATE REVENUE SUFFICIENT TO COVER OUR COSTS AND SERVICE OUR DEBT

We have experienced substantial net losses and substantial negative cash
flow from operations and we expect to continue to experience substantial net
losses and substantial negative cash flow for at least the next several years
while we develop and expand our DTH service and increase our subscriber base. We
may encounter difficulties breaking even, particularly in light of the intense
competition we face in the pay television industry in Mexico and our substantial
level of debt. We cannot assure you that increases in our subscriber base will
result in profitability or positive cash flow in future years.

OUR SIGNIFICANT DEBT LEVELS LIMIT OUR ABILITY TO FUND OUR OPERATIONS, AFFECT OUR
PROFITABILITY AND COULD LEAD TO DIFFICULTIES IN OBTAINING NEW SOURCES OF
FINANCING REQUIRED TO CONTINUE OPERATIONS

As of December 31, 2002, we had indebtedness of approximately US$750.1
million (not including normal operational liabilities), consisting of the US$375
million represented by our senior notes, long-term loans of US$309.9 million
provided by Innova's owners and the interest on these loans in the amount of
US$65.2 million. We anticipate incurring substantial net losses and substantial
negative cash flow for at least the next several years as we service our
indebtedness and fund continuing operations, including the monthly US$1.7
million we must pay to PanAmSat Corporation, or PanAmSat, for satellite signal
reception and retransmission services. We therefore may require additional
financing in the future and cannot assure you that any such financing will be
available at all or on terms acceptable to us. For much of the past four years,
we have depended on financing from our owners, and they are not obligated to
continue lending to us. In addition, the indenture governing our senior notes
restricts our ability to incur additional indebtedness for borrowed money, thus
making us more vulnerable in the event of a substantial downturn in general
economic conditions in Mexico. Moreover, our ability to satisfy our obligations
depends upon our future performance, which is subject to economic conditions in
Mexico and to financial, business and other factors, including factors beyond
our control, such as the willingness of our owners to contribute or support any
additional capital to finance cash flow deficiencies. For a discussion of the
amounts invested and loaned by our owners, see "Item 5: Operating and Financial
Review and Prospects--Liquidity and Capital Resources."

THE IMPOSITION OF A 10% EXCISE TAX ON REVENUES FROM PAY TELEVISION SERVICES HAS
ADVERSELY AFFECTED AND COULD CONTINUE TO ADVERSELY AFFECT OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

At the end of December 2001, the Mexican Congress passed a series of tax
reforms. As a result of these tax reforms, subject to certain exceptions,
revenues from our pay television services are now subject to a 10% excise tax.
In February 2002, Cablevision, Innova, Skytel and a number of other companies in
the telecommunications and pay television industries filed amparo injunctive
proceedings challenging the constitutionality of this excise tax. Nonetheless,
we implemented rate increases on January 1, 2002 and took other actions
including lay-offs and reduction of capital expenditures and expenses in an
effort to mitigate, in part, the impact of this tax on our results of operations
and financial condition. We obtained a favorable ruling in this proceeding
regarding our 2002 liability for this tax, but this ruling does not entitle us
to recover any amounts paid for this tax in 2002, and we cannot assure you that
we will be able to recover any portion of the approximately US$18 million paid
for this excise tax during 2002.

In December 2002 the Congress again acted to make this special tax
effective during fiscal year 2003, by adding or modifying some provisions
included in the original text of the law. The Congress does not need to ratify
this special tax every year, but modifications to the law could be made. In
response, we have filed a new amparo proceeding challenging the
constitutionality of the tax. We cannot assure you that we will obtain a
favorable resolution in these proceedings or that we will be able to recover the
amounts that have been or will be paid for this tax. See "Item 4: Information on
the Company -- Business Overview --Mexican Regulation of DTH
Services--Telecommunications Tax."

We believe that the imposition of this tax and the resultant rate increases
could negatively affected our results of operations and financial condition as
well as our ability to attract and retain subscribers in 2002. So far this year,
we have not increased prices in response to the tax, but we will continue to
evaluate the impact of this tax on our results of operations and financial
condition and we will consider measures, including rate increases to mitigate
the impact of this tax. If, as a result of the imposition of the tax, we further
increase the rates we charge our customers, such rate increases could adversely
affect consumer demand for our services, which could result in loss of
subscribers and a decrease in revenues, and could adversely impact our ability
to attract new subscribers.

A-11

WE MAY NOT BE SUCCESSFUL IN EXPANDING OR MAINTAINING OUR SUBSCRIBER BASE WHICH
WE MUST DO TO SERVICE OUR DEBT AND ACHIEVE PROFITABILITY

Our ability to generate subscription revenue depends in particular, upon
subscribers' acceptance of our programming and consumer confidence and
purchasing power. Acceptance of our programming will, in turn, depend on the
availability of programming at a competitive cost, the popularity of such
programming, and our ability to reach our targeted market through successful
advertising campaigns.

We lost broadcast rights to the World Cup soccer games in 2002 to DIRECTV
Latin America, a shareholder of our DTH competitor, and we believe this
negatively affected our ability to attract and retain subscribers. On March 18,
2003, DIRECTV filed a voluntary petition for reorganization under Chapter 11 and
subsequently rejected its contract for the pay-TV exclusive rights to broadcast
for the 2006 FIFA World Cup soccer tournament to certain Latin American
countries. We cannot predict what effect this will have on our ability to
attract new subscribers or retain existing subscribers.

Other factors beyond our control will affect the success of this operating
strategy and are impossible for us to predict due, in part, to the limited
history of DTH services in Mexico. The market for DTH services will continue to
be affected by the recession and comparatively weak recovery and by general
economic conditions in Mexico, as well as competition, new technology and
government taxation and regulation. Consequently, we believe there is a
significant degree of uncertainty about the DTH business in Mexico including the
size of the Mexican market for DTH television services, the sensitivity of
potential subscribers to changes in the price of installation and subscription
fees, the evolution of the competitive environment and government regulation.
For additional discussion of our competitive environment, see "--We face
competition in the pay television market in Mexico that we expect will
intensify" and "Item 4: Information on the Company--Business
Overview--Competition."

We cannot assure you that we will successfully expand or maintain our
subscriber base or that it will generate sufficient revenues, when taken
together with other sources of financing, to service our indebtedness, including
our senior notes, and to fund our operations and achieve profitability.

WE MAY NOT SUCCESSFULLY MANAGE THE GROWTH OF OUR BUSINESS

As our business continues to develop and expand, we will need to further
enhance operational and financial systems, and will likely require additional
employees and management, operational, financial and other resources. Though we
believe we have operated appropriately for over six years, we cannot assure you
that we will successfully enhance and maintain such operational and financial
systems or successfully obtain, integrate and utilize the required employees and
management, operational and financial resources to manage a developing and
expanding business in our dynamic and challenging industry. If we fail to
implement such systems successfully and use our resources effectively our
results of operations and financial condition could be adversely affected.

OUR ABILITY TO PROVIDE BILLING AND ORDER MANAGEMENT TO OUR SUBSCRIBERS DEPENDS
ON THE FUNCTIONALITY AND FLEXIBILITY OF OUR SUBSCRIBER MANAGEMENT SYSTEM, WHICH
IS CURRENTLY BEING REPLACED WITH A NEW SYSTEM FROM A NEW SUPPLIER

We are currently implementing a new Subscriber Management System, or SMS, to
support the growth of our subscriber base. We believe that the subscriber
management system is an essential tool for providing pay television services
because it provides us with marketing, customer service and administrative
operations support. We expect the new SMS will be placed in service and become
operational in late August 2003. If we fail to implement and utilize the new SMS
successfully, our results of operations and financial condition could be
adversely affected. See "Item 4. Information on the Company--History and
Development of the Company--Capital Expenditures;" "--Subscriber Management
System;" and "Item 10: Additional Information--Material Contracts--New
Subscriber Management System Contract."

A-12

WE FACE INTENSE COMPETITION IN THE PAY TELEVISION MARKET IN MEXICO

The pay television industry in Mexico has been, and we expect it to remain,
highly competitive. We believe competition in the pay television business is
primarily based upon the quality of programming, customer service, enhanced TV
features, value-added services, distribution networks, advertising and
promotion, and price. We presently compete with, or expect to compete with,
among others:

- DIRECTV Mexico, another DTH service in Mexico;

- more than 400 cable systems, including Cablevision, the largest
cable system in Mexico (which is majority owned and controlled by
Grupo Televisa S.A., or Televisa an indirect majority owner of
Innova);

- multi-channel, multi-point distribution systems, known as MMDS;

- national broadcast networks, including the four networks owned and
operated by Televisa, and regional and local broadcast stations;

- unauthorized and pirated C-band and Ku-band television signals
obtained by Mexican viewers on the gray market;

- unauthorized and pirated cable television signals; and

- radio, movie theaters, video rental stores, internet and other
entertainment and leisure activities generally.

Consolidation in the pay television industry, and the possible merger of
Mexico's second and third largest cable operators could further intensify
competitive pressures. Some of our competitors are, and entities resulting from
any mergers may be, better capitalized than we are or have greater operational
resources than we do. See "Item 4: Information on the Company--Business
Overview--Competition." As the pay television market in Mexico develops, we
expect to face competition from an increasing number of sources, including
emerging technologies that provide new services to pay television customers and
require us to make significant capital expenditures in new technologies.

While we believe our programming package is competitive overall, our
subscribers must make an up-front investment to initiate our service and obtain,
install and activate the necessary equipment, and this up-front investment is
not required in all of our competitors' systems. While we believe our current
prices combined with the quality of our service, are attractive to subscribers,
we cannot assure you that we will continue to attract and maintain a substantial
number of subscribers. Intense competition and general economic factors have
driven us to lower our subscription fee several times and to offer special
promotions on several occasions.

ONE OF OUR OWNERS, NEWS CORPORATION, MAY ACQUIRE SIGNIFICANT INTERESTS IN
DIRECTV, OUR DTH COMPETITOR IN MEXICO, AND PANAMSAT, OUR SOLE SATELLITE
PROVIDER, AND WE CANNOT PREDICT WHAT EFFECT THIS WILL HAVE ON US

On March 18, 2003, DIRECTV Latin America, LLC, or DLA, announced that it
had filed a voluntary petition for bankruptcy protection, under chapter 11 of
the U.S. Bankruptcy Code, in the U.S. Bankruptcy Court in Wilmington, Delaware.
DLA cited its debt burden and high fixed costs and listed liabilities of US$1.6
billion as of the end of 2002. DLA also reported a loss of 54,000 net
subscribers in the first quarter of 2003 or 7% of its subscriber base. DLA is a
competitor of ours which provides DTH programming and services in Mexico through
an affiliated Mexican operating company, DIRECTV Mexico. According to its 2002
annual report, Hughes Electronics Corporation, or Hughes, owns approximately 75%
of DLA and holds an indirect interest in DIRECTV Mexico. On April 9, 2003, News
Corporation announced that it reached a definitive agreement with General Motors
Corporation and Hughes in which News Corporation would acquire General Motors'
19.9% stake in Hughes and a further 14.1% of Hughes from public shareholders and
General Motors' pension and other benefit plans, for a total of 34% of Hughes.
If the agreement is consummated, a subsidiary of News Corporation will transfer
its ownership interest in

A-13

Hughes' common stock to Fox Entertainment Group, Inc., an 80.6% owned News
Corporation subsidiary. The businesses contained in Hughes include a leading
U.S. satellite broadcaster DIRECTV, which has more than 11 million subscribers;
an 81% equity holding in satellite operator PanAmSat; and Hughes Network
Systems, a provider of broadband satellite network solutions.

We cannot predict what impact either the DLA bankruptcy or, if consummated,
News Corporation's acquisition of an interest in Hughes, will have on the
competitive environment for DTH in Mexico or on our business, financial
condition or results of operations. See "Item 4: Information on the Company --
Business Overview -- Competition."

Increased competition could result in a loss of subscribers or pricing
pressure, which may adversely affect our business, financial condition or
results of operations.

OUR ABILITY TO ATTRACT SUBSCRIBERS DEPENDS ON THE AVAILABILITY OF DESIRABLE
PROGRAMMING FROM THIRD PARTY PROGRAMMERS

We compete in part on the quality of our programming. Our ability to
attract and retain subscribers depends on our continued ability to obtain
desirable programming, particularly Spanish-language programming from Televisa
and others, soccer and special events, and to offer that programming to
customers at competitive prices. We obtain, and anticipate that we will continue
to obtain, significant programming on an exclusive DTH basis from Televisa and
News Corporation, each an indirect owner of the Company. DIRECTV has petitioned
the Mexican government to require Televisa to allow its programming material to
be transmitted through DIRECTV's DTH service in Mexico. If the Mexican
government requires Televisa to permit our DTH competitors to broadcast
Televisa's programming, over which we currently have exclusive DTH rights, we
may lose customers.

We also depend on agreements with third parties to provide us with other
high quality programming for mass audiences. We directly negotiate with
programming providers including with our owners and other affiliates. We have
entered into definitive agreements with many programming providers, while other
providers supply programming under letters of intent, invoices or other less
formal arrangements. We have no reason to believe that any of our programming
agreements will be canceled or will not be renewed upon expiration, however, if
these arrangements are canceled or not renewed, we would have to seek
programming material from other sources. In early 2002 Television Azteca, S.A.
de C.V., or TV Azteca, demanded that we (and other pay television service
providers) pay a fee to carry its over-the-air channels. In June 2002, we
reached an agreement with TV Azteca to carry channels 7 and 13 for a period of
three years for a fee. Obtaining over-the-air programming from third party
providers could increase our costs. We cannot assure you that third-party
program services that appeal to our subscribers will be available to us on
acceptable terms, or, if available, that such program services will be
acceptable to our subscribers. See "Item 4: Information on the Company--Business
Overview--Programming and Services."

WE DEPEND ON OUR PRINCIPAL SUPPLIERS FOR KEY EQUIPMENT

Expansion of our Ku-band DTH service depends, in part, on our obtaining
adequate supplies of components, tailored for Ku-band transmissions from a
limited number of third parties. If our principal suppliers fail to provide
needed components on a timely basis, we may not be able to replace those
suppliers without delay or additional expense which we cannot assure you we will
be able to do. See "Item 4: Information on the Company--Business Overview
- --Operations--Integrated Receiver/Decoder System."

A-14

WE DEPEND ON THE AVAILABILITY OF SATELLITE TRANSPONDER SERVICES FROM PANAMSAT

We currently receive DTH signal reception and retransmission services
solely from PanAmSat's PAS-9 satellite. We no longer use Satelites Mexicanos,
S.A. de C.V.'s, or SatMex's, Solidaridad 2 satellite for any retransmission of
our services. Our agreement with PanAmSat allows us to use the PAS-9 satellite's
services for the next 12 years or the date PAS-9 is taken out of service,
whichever happens first. The estimated remaining useful life of the PAS-9
satellite is projected to be approximately 14 to 16 years but PAS-9 could fail
before then. Further updates to the lifetime estimate may become available when
additional data is collected to characterize the satellite's actual on-orbit
performance.

Given the orbital location and footprint of the PAS-9 satellite, however,
it is possible that some of our current and potential subscribers located in
parts of Mexico might not receive a high quality signal. Following the
termination of broadcasts from Solidaridad 2, we lost the ability to send
signals to approximately 13,000 subscribers despite efforts to re-orient all
subscribers' antennas to PAS-9 prior to the shutdown. See "Item 4: Information
on the Company--Business Overview--Operations--Satellites."

Communications satellites such as PAS-9 use highly complex technology and
operate in the harsh environment of space. In general, these satellites are
subject to significant operational risks that may prevent or impair proper
commercial operations, including satellite manufacturing defects, power and
electrical failures, computer and controls failures, incorrect orbital
placement, and destruction and damage from collisions with orbital debris and
objects, interstellar radiation and other causes. Historically, approximately
15% of all commercial geosynchronous satellite launches have resulted in a total
or constructive total loss due to launch failure, failure to achieve proper
orbit or failure to operate upon reaching orbit. Future disruption of PAS-9 or
the transmissions from PAS-9 would prevent us from being able to operate our
business and would have a material adverse effect on our operations. We do not
carry insurance that would specifically cover any of our losses due to an
interruption in service from PAS-9, nor are we aware of any insurance that
PanAmSat carries on PAS-9 that would cover us for such loss. We do not currently
have any arrangement for alternate service from other satellites should we
experience an interruption of service on PAS-9, nor do we have plans to
re-orient our subscribers' antennas to alternate satellites in the event of an
interruption of service from PAS-9.

We cannot assure you that we would be able to obtain transponder services
from an alternate satellite or provider at a commercially viable cost, if we
lose the ability to receive signals from PAS-9. Furthermore, our ability to
transmit programming after the PAS-9 satellite is no longer available and to
broadcast additional channels depends on our ability to obtain rights to utilize
transponders on other newer satellites.

SERVICE INTERRUPTIONS ARISING FROM NATURAL DISASTERS, TECHNICAL PROBLEMS,
TERRORIST ACTIVITIES OR WAR, MAY CAUSE CUSTOMER CANCELLATIONS OR OTHERWISE HARM
OUR BUSINESS

Currently, most of our business and technical operations are centrally
located or concentrated in a few geographical areas. The occurrence of natural
disasters, technical problems, terrorist activities or war could result in the
loss of customers which would adversely affect our business, revenue and results
of operations. We do not currently have a disaster recovery plan to mitigate the
effects of such an occurrence on our business. We continue to review and
evaluate the steps we might take, including creating a disaster recovery plan to
prepare to respond to natural disasters, technical emergencies, terrorist
attacks and war.

THE OPERATION OF OUR BUSINESS MAY BE TERMINATED OR INTERRUPTED IF THE MEXICAN
GOVERNMENT DOES NOT RENEW OR REVOKES OUR CONCESSIONS

The operation of satellite broadcasting systems is subject to substantial
regulation by the Secretaria de Comunicaciones y Transportes, or SCT. The SCT
has granted us two concessions to operate satellite broadcasting systems using
Mexican satellite until 2026 and a concession to broadcast using services from
PAS-9 until 2020. Currently, we only depend on the latter. The concessions can
be renewed with the SCT's approval and can be revoked prior to the end of their
terms if we do not comply with their terms and conditions. In addition, the
Mexican government has the right to expropriate the concessions for reasons of
public need or interest. We cannot assure you that the SCT will renew the
concessions on expiration or not expropriate or revoke them prior to expiration.
The SCT's rules may change in response to industry developments, new technology
and political considerations. Without our concessions, we would not be able to
deliver our services or operate our business. See

A-15

"Item 4: Information on the Company--Business Overview --Mexican Regulation of
DTH Services-Our Concessions."

WE COULD LOSE SUBSCRIBERS AND REVENUE IF OTHERS ARE ABLE TO STEAL OUR SIGNALS

We use encryption technology to prevent signal theft or `piracy.' Piracy in
the C-band DTH, cable television and Latin American and European DTH industries
has been widely reported. We are aware of reports of signal theft in Mexico
although we cannot accurately measure the amount of the theft. We use Smart Card
technology in our Ku-band receivers so we can change the conditional access
system in the event of a security breach. During 2001, we exchanged our
subscribers' Smart Cards as a routine security measure to reduce the risk of
piracy. We expect to continue to exchange subscribers' Smart Cards every three
to four years or when we have strong evidence of signal theft. We expect the
protections in our conditional access system, subscriber management system, and
the Smart Card technology to adequately prevent unauthorized access to
programming. In late 2002 we initiated several actions against piracy of our
signals in Mexico, with the support of Mexican government agencies. We cannot
assure you that the encryption technology we use will effectively prevent
security breaches and signal piracy, or that our efforts against pirates will be
successful. If our encryption technology is materially compromised in a manner
that we fail to correct promptly, our revenues could decrease and our ability to
contract for programming could be adversely affected.

In addition, we believe that the pirating of cable television signals in
several cities and small towns across Mexico presents a major challenge to the
pay-TV market in Mexico. Although we cannot estimate the number of households
that receive cable television via pirated signals in Mexico, we believe the
number is significant. The pirating of pay-TV signals of all types reduces the
number of potential subscribers available to us and, if unchecked, could affect
our ability to attract and retain subscribers.

CHANGES IN TECHNOLOGY COULD RENDER OUR SERVICE OBSOLETE OR INCREASE OUR COSTS

Historically, pay television services industry as a whole has been, and
will likely continue to be, subject to rapid and significant changes in
technology such as digital compression technology or high definition video.

Digital compression technology allows transmission of multiple channels on
the same frequency, and could allow the industry to field lower cost delivery
systems. We use digital compression technology in our Ku-band DTH business.
Other transmission media, including cable and MMDS, are also developing this
technology. If our competitors deploy lower cost, digitally-compressed systems,
we may not be able to provide the same volume of programming at a competitive
price and could lose subscriber revenue. New asynchronous digital subscriber
line, or ADSL, technology is being used to provide high-speed internet access
and could be used in the future for broadband transmissions.

These and other technological changes could impact us and we may need to
expend substantial financial resources to develop and implement new competitive
technologies. In addition, we may, from time to time, explore alternative
technologies to deliver our programming and alternative methods to allow our
subscribers to receive signals from multiple satellites.

WE HAVE SIGNIFICANT TRANSACTIONS WITH OUR OWNERS WHO ARE INVOLVED IN RELATED
BUSINESSES WHICH CREATES THE POTENTIAL FOR CONFLICTS OF INTEREST

Innova currently engages in, and expects from time to time to engage in,
transactions with Televisa, News Corporation, Liberty Media International Inc.,
or Liberty Media (each an indirect owner of Innova), and their subsidiaries and
other affiliates. These transactions present potential conflicts of interest.
Currently:

- We obtain significant programming content from our owners and
their programming affiliates. Televisa and News Corporation offer
us all of their existing program services (i.e., channels) and
must offer us their future program services pursuant to our Social
Part Holders Agreement. We have the exclusive DTH broadcast rights
to Televisa and News Corporation's programming channels in Mexico,
subject to certain, preexisting, third party agreements. Televisa,
News Corporation and their programming affiliates, however,
provide and will continue to provide programming to other, non-DTH
pay television businesses, such as cable and MMDS operators, which
compete with us.

A-16

- We obtain our conditional access and subscriber management systems
and most components of our broadcast system from NDS Group plc, a
British public company and News Corporation subsidiary.

- We obtain play-out and uplink functions and related services from
DTH TechCo Partners, or DTH TechCo., a joint venture in which each
of Televisa, News Corporation and Globo Comunicacoes e
Participacoes Ltda., or Globopar, indirectly holds a 30% interest
and Liberty Media indirectly holds a 10% interest. In addition, we
obtain from Televisa similar services relating to locally-sourced
programming.

The programming and systems we obtain from affiliates are critical to our
business. If some or all of our contracts with these parties were terminated, we
cannot assure you that we could obtain comparable programming and services from
unaffiliated third parties on similar terms. Disputes concerning these contracts
could have a material adverse effect on our business.

We currently receive satellite transmission and distribution services
exclusively from 12 Ku-band transponders on the PAS-9 satellite owned and
operated by PanAmSat, which is 81% owned by Hughes. If News Corporation acquires
34% of Hughes, then News Corporation would indirectly own a significant interest
in PanAmSat, our sole satellite services provider.

In addition, as described above, we expect to continue to enter into many
transactions with our affiliates, which may create the potential for conflicts
of interest. We have not established specific procedures applicable to
transactions with affiliates to guard against conflicts of interest.

IF OUR AFFILIATE DTH TECHCO IS UNABLE TO OBTAIN FUNDING, IT MAY NOT BE ABLE TO
PROVIDE A NECESSARY SERVICE FOR OUR OPERATIONS, WHICH COULD ADVERSELY AFFECT OUR
BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We depend on DTH TechCo for uplink, downlink and related services relating
to all of our programming other than local programming, as to which uplink and
downlink services are provided by Televisa. DTH TechCo also provides these
services to Sky Multi-Country Partners, or MCOP (a U.S. partnership in which
Televisa, News Corporation and Globopar each indirectly holds a 30% interest,
while Liberty Media indirectly holds a 10% interest), and Sky Brasil Servicos
Ltda., or Sky Brasil (a DTH service owned indirectly by Globopar, News
Corporation and Liberty Media). DTH TechCo depends on payments from us, MCOP and
Sky Brasil to fund its operations. In October 2002, Globopar announced that it
would reevaluate its capital structure due to significant devaluation of the
Real, deteriorating economic conditions in Brazil and significant reduction in
credit available to Brazilian companies. Globopar and certain of its
subsidiaries are rescheduling their financial debt obligations and currently
reviewing their business plans together with holders of Globopar's bank debt and
bonds. As a result of Globopar's financial condition, since September 2002,
Globopar has ceased providing financial support to DTH TechCo and MCOP, and
MCOP, in turn, has ceased making payments to DTH TechCo, which payments, we
believe, previously accounted for over 50% of DTH TechCo's revenue. As a result,
Televisa, News Corporation and Liberty Media have begun funding DTH TechCo's
operating cash shortfall through loans and we understand that they currently
intend to continue doing so. However, our owners are not obligated to provide
funding to DTH TechCo and we cannot assure you that continued funding will be
available. If (i) Globopar fails to make its contributions to DTH TechCo and
MCOP, (ii) MCOP fails to make required payments to DTH TechCo or (iii) Sky
Brasil fails to continue making its required payments to DTH TechCo, and if DTH
TechCo's owners fail to make up the shortfall, then DTH TechCo would be unable
to provide services to us. We have not currently identified possible replacement
services providers and, if DTH TechCo were unable to provide services to us, we
would be unable to provide a substantial portion of our programming services to
our customers, which would materially and adversely affect our business.

OUR EQUITY HOLDERS HAVE, OR MAY ACQUIRE, INTERESTS IN BUSINESSES WHICH COMPETE
WITH US FOR CUSTOMERS AND BUSINESS OPPORTUNITIES

Televisa, indirectly, owns approximately 60% of Innova's total voting
power, subject to certain provisions of our bylaws and the Social Part Holders
Agreement. For more information on these provisions, see "Item 7: Major
Shareholders and Related Party Transactions--Major Shareholders."

Televisa has agreed not to engage in the DTH business in Mexico except
through Innova. However, Televisa competes with Innova for customers in the
Mexican pay television market since it controls and owns a majority

A-17

interest in Cablevision, the operator of Mexico's largest cable television
system. See "Item 4: Information on the Company--Business
Overview--Competition--Cable Television and MMDS." Innova intends to compete in
all markets it serves regardless of whether Televisa, or an entity in which
Televisa has an interest, competes in those markets. However, Cablevision could
attract potential or existing subscribers from us given its significantly
greater capital and operational resources and familiarity with our business
strategy and customer information as a result of Televisa's majority interest.
Televisa could also commit greater resources to Cablevision or its other
subsidiaries and affiliates than to Innova, giving those competitors a financial
advantage.

News Corporation, through its subsidiaries, indirectly holds approximately
30% of Innova's total voting power, subject to certain provisions of our bylaws
and the Social Part Holders Agreement. News Corporation has also agreed not to
engage in the DTH business in Mexico except through Innova. On April 9, 2003,
News Corporation announced that it reached a definitive agreement with General
Motors Corporation and Hughes in which News Corporation would acquire General
Motors' 19.9% stake in Hughes and a further 14.1% of Hughes from public
shareholders and General Motors' pension and other benefit plans, for a total of
34% of Hughes. For a description of this proposed transaction and some possible
implications of the transaction, if it is consummated, see "--We Face Intense
Competition in the Pay Television Market in Mexico;" "--One of Our Owners, News
Corporation, May Acquire Significant Interests in DIRECTV, Our DTH Competitor in
Mexico, and PanAmSat, Our Sole Satellite Provider, and We Cannot Predict What
Effect This Will Have On Us" and "Item 4: Information on the Company -- Business
Overview -- Competition."

We cannot predict what impact either the DLA bankruptcy or, if consummated,
News Corporation's acquisition of an interest in Hughes, will have on the pay
television market in Mexico.

CERTAIN PARTIES COULD FORCE US TO DISSOLVE THE BUSINESS

According to our bylaws, we must be dissolved and placed in liquidation if
a person deemed an "interested party" so requests upon the occurrence of any of
the following events:

- if all but one of our members withdraws;

- if our term of corporate existence expires and it is not extended;

- if we cannot continue to fulfill our corporate purpose;

- by resolution taken at a members' meeting; or

- the loss of two-thirds of our capital, unless the capital is
increased by the required amount.

Our Mexican legal counsel, Mijares, Angoitia, Cortes y Fuentes, S.C., has
advised us that, although there is no court precedent, it believes that Mexican
courts would restrict the recognition of "interested parties" to: (a) the
members of Innova, some of whom currently compete with us or may compete with us
in the future, and (b) our creditors that provide evidence of their interest in
dissolving Innova and liquidating our assets. We cannot assure you that a court
would permit dissolution only upon request from the parties mentioned above or
that upon occurrence of the events described above another party would not seek
to dissolve us.

U.S. INVESTORS MAY RECEIVE LESS CORPORATE AND FINANCIAL DISCLOSURE FROM US THAN
U.S. PUBLIC COMPANIES

A principal objective of the securities laws of the United States, Mexico
and other countries is to promote full and fair disclosure of all material
corporate information. As a foreign private issuer, we are generally not
required to provide as much publicly available information as is regularly
published by or about U.S. companies that have securities listed in the United
States.

IT MAY BE DIFFICULT TO ENFORCE CIVIL LIABILITIES AGAINST US OR OUR DIRECTORS,
EXECUTIVE OFFICERS AND CONTROLLING PERSONS

A-18

them or us in U.S. courts judgments predicated upon the civil liability
provisions of the federal securities laws of the United States. We have been
advised by our Mexican counsel, Mijares, Angoitia, Cortes y Fuentes, S.C., that
there is doubt as to the enforceability, in original actions in Mexican courts,
of liabilities predicated solely on U.S. federal securities laws and as to the
enforceability in Mexican courts of judgments of U.S. courts obtained in actions
predicated upon the civil liability provisions of the U.S. federal securities
laws.

FORWARD-LOOKING STATEMENTS

This annual report and the documents incorporated by reference into this
annual report contain forward-looking statements. These forward-looking
statements reflect our views with respect to future events and financial
performance. We may from time to time make forward-looking statements in our
periodic reports to the U.S. Securities and Exchange Commission, or SEC, on Form
6-K, in our future annual reports to members or shareholders, in our offering
circulars and prospectuses, in our press releases and other written materials,
and in oral statements made by our officers, directors or employees to analysts,
institutional investors, representatives of the media and others. Examples of
these forward-looking statements include:

- statements concerning our ability to increase subscribers, our
cash requirements, financing sources, cost-containment efforts,
advertising rates and revenues, DTH satellite and capital
expenditures, potential audience size;

- statements concerning the construction, launch, performance and
operation of broadcast satellites, renewal of concessions upon
their expiration and other regulatory approvals;

- projections of operating revenues, net income (loss), dividends,
capital structure or other financial items relating to us, our
owners, or our competitors;

- the impact that recently issued U.S. GAAP and Mexican GAAP
pronouncements will have on our operating revenues, net income
(loss), dividends, capital structure or other financial items;

- statements of our plans to develop customer interactive systems;

- statements about our new subscriber management system, including
our expectation of its operational date;

- statements of our or our owners' plans, objectives or goals,
including those relating to anticipated trends, competition,
regulation and rates;

- statements about our future economic performance or that of Mexico
or other countries that affect the Mexican economy and consumer
purchasing power in Mexico; and

- statements of assumptions underlying these statements.

Forward-looking statements involve inherent risks and uncertainties. We
caution you that a number of important factors could cause actual results to
differ materially from the plans, objectives, expectations, estimates and
intentions expressed in such forward-looking statements. These factors, some of
which are discussed under "--Risk Factors", include economic and political
conditions and government policies in Mexico or elsewhere, inflation rates,
exchange rates, regulatory developments, customer demand and competition. We
caution you that the foregoing list of factors is not exclusive and that other
risks and uncertainties may cause actual results to differ materially from those
in forward-looking statements.

Forward-looking statements speak only as of the date they are made, and we
do not undertake any obligation to update them in light of new information or
future developments.

A-19

ITEM 4. INFORMATION ON THE COMPANY

HISTORY AND DEVELOPMENT OF THE COMPANY

Innova, S. de R.L. de C.V. is a Mexican limited liability company with
variable capital or sociedad de responsabilidad limitada de capital variable
Innova was formed on July 25, 1996 as a Mexican limited liability company or
sociedad de responsabilidad limitada and converted to a limited liability
company with variable capital on July 2, 1998 under Mexico's Ley General de
Sociedades Mercantiles (General Law of Mercantile Organizations). The company
was registered with the Public Registry of Commerce in Mexico City under the
commercial File (folio mercantile) No. 213223. Under the terms of our estatutos
sociales, or bylaws, our corporate existence continues for 99 years through 2095
unless terminated earlier. Our principal address is Insurgentes Sur 694, Piso 8,
Colonia del Valle, 03100 Mexico D.F. in the United Mexican States. Our telephone
number at that address is (52-55)-5448-4000. The trustee for our senior notes is
The Bank of New York, 101 Barclay Street, New York, NY 10286, and can be
contacted by requesting the Corporate Trust Department at (212) 815-3290.

We provide digital Ku-band direct-to-home or DTH broadcast satellite pay
television services in Mexico under the name "Sky." DTH satellite systems use
medium or high-powered satellites to deliver signals to satellite antennas
installed at homes, hotels and apartment buildings. In contrast to the
locally-transmitted signals of multi-channel, multi-point distribution systems,
known as MMDS, a DTH satellite footprint can cover large land areas. DTH
satellite transmission can also reach land areas with either weak cable
infrastructure or no cable television access, such as the mountainous, rural
areas of Mexico. We believe that DTH satellite service is one of the most
cost-effective ways to distribute programming. We launched our DTH service on
December 15, 1996 and as of March 31, 2003 we were broadcasting up to 168
digital channels (107 video, 29 pay per view and 32 audio) to approximately
779,700 subscribers, including approximately 41,400 non-residential subscribers.
See "Item 5: Operating and Financial Review and Prospects -- Operating Results
- -- Overview;" and "--Trend Information."

Innova was formed as a result of strategic alliances between four entities:
Televisa, News Corporation, Liberty Media and Globopar, the largest television
broadcaster and media group in Brazil. Innova is one of several Sky DTH
platforms created by the partners and is a joint venture indirectly owned by
Televisa, News Corporation and Liberty Media. The other Sky DTH platforms
provide service to Brazil and other regions in Latin America while additional
joint ventures provide specific support services to the Sky DTH platforms. Sky
Brasil Servicos Ltda., or Sky Brasil, a DTH service owned indirectly by
Globopar, News Corporation and Liberty Media, launched its digital Ku-band DTH
service in Brazil in November 1996. Prior to 2003, it was known as Net Sat
Servicos Ltda. In October 1997, the four partners formed Sky Multi-Country
Partners, or MCOP, a U.S. partnership in which Televisa, News Corporation and
Globopar each indirectly holds a 30% interest while Liberty Media indirectly
holds a 10% interest. MCOP invests in, and supplies programming and other
services to the Sky DTH platforms in Latin America outside of Mexico and Brazil,
including Sky Colombia and Sky Chile.

Each of the four partners also holds indirect interests, individually, in
the same proportion as their interests in MCOP, in two service entities: (i) Sky
Latin America Partners, or ServiceCo, a U.S. partnership formed to provide
certain business and management services; and (ii) DTH TechCo Partners, or
TechCo, a U.S. partnership formed to provide certain technical services from a
main uplink facility in Miami Lakes, Florida and a redundancy site in Port St.
Lucie, Florida. See "Item 3: Key Information--Risk Factors--Risk Factors Related
to Our Business--We Have Significant Transactions With Our Owners Who Are
Involved in Related Businesses Which Creates the Potential for Conflicts of
Interest" and "--If Our Affiliate DTH TechCo is Unable to Obtain Funding, It May
Not Be Able to Provide a Necessary Service for our Operations, Which Could
Adversely Affect Our Business, Financial Condition and Results of Operations."

Between December 1998 and March 2003, Innova's three owners contributed
US$49.0 million in equity and loaned a total of US$309.9 million to us and our
subsidiary, Novavision, in proportion to their equity interests in Innova. Prior
to these contributions and loans, Televisa and News Corporation contributed
US$50 million in capital and debt forgiveness to us. In April 1998, we received
an additional aggregate amount of US$50 million in equity from our sponsors. For
a more detailed discussion of these transactions, see "Item 7: Major
Shareholders and Related Party Transactions." We also completed an offering for
US$375 million of our 12 7/8% senior notes, or senior notes, in exchange for our
privately placed 12 7/8% senior notes both of which were issued in 1997. We used
the net proceeds from the offering of our senior notes primarily to finance
start-up operations. For a more detailed discussion of this transaction, see,
"Item 5: Operating and Financial Review and Prospects--Liquidity and Capital
Resources."

A-20

STRONG SPONSORSHIP

Innova is owned indirectly by Televisa (60%), News Corporation (30%) and
Liberty Media (10%). We believe that the experience, expertise and resources of
our owners in the entertainment and media industries increases our access to
programming, technology and distribution services and helps us compete in the
Mexican Ku-band DTH satellite pay television market.

Televisa is the largest television broadcaster in Mexico. We believe that
Televisa produces and owns the largest library of Spanish-language television
programming in the world. Televisa owns and operates four television networks in
Mexico including Televisa's flagship Channel 2 network known as "The Channel of
the Stars." Channel 2 is the leading television network in Mexico and the
leading Spanish-language television network in the world in terms of the
potential worldwide audience that can receive its signal. In addition to its
Mexican television production and broadcasting activities, Televisa has
interests in international television programming distribution, publishing,
radio production and broadcasting, cable television, internet services,
professional sports promotion, nationwide paging, feature film production and
distribution, special events promotion and dubbing.

News Corporation is a diversified international media and entertainment
company which operates in a number of industry segments including filmed
entertainment television cable network programming, magazines and inserts,
newspaper and book publishing . The activities of News Corporation are conducted
principally in the United States, the United Kingdom, Italy, Asia, Australia and
the Pacific Basin.

Liberty Media owns and operates broadband cable television and telephony
distribution networks and provides diversified programming services in Europe,
Latin America and Asia. Liberty Media is a wholly owned subsidiary of Liberty
Media Corporation. Until August 10, 2001, Liberty Media Corporation was a wholly
owned indirect subsidiary of AT&T Corporation. On August 10, 2001 AT&T
Corporation spun-off Liberty Media Corporation, which is now an independent,
publicly-traded company.

CAPITAL EXPENDITURES

The table below sets forth our capital expenditures for the years ended
December 31, 2000, 2001 and 2002 and for the five months ended May 31, 2003. See
"Item 5: Operating and Financial Review and Prospects--Liquidity and Capital
Resources."

FOR THE YEAR ENDED DECEMBER 31 FOR THE FIVE
------------------------------ MONTHS ENDED
2000 2001 2002 MAY 31, 2003
---- ---- ---- ------------
(IN THOUSANDS OF U.S. DOLLARS)

SkyKits..................... $ 55,210 $ 59,135 $37,803 $16,051

New Subscriber
Management System......... _ _ $ 7,078 $ 3,703

Transmission, Computer
and Other Equipment....... $ 7,308 $ 12,175 $ 4,850 $ 945

The principal items included under capital expenditures during 2000, 2001
and 2002 and capital expenditures through May 31, 2003 were Integrated
Receiver/Decoder systems, or IRDs, transmission equipment, computers and
software and, more recently, our new subscriber management system, or SMS. These
capital expenditures are directly related to the growth of the DTH platform and
an increasing number of subscribers.

In 2000, 2001 and 2002, we relied on a combination of operating revenues
and borrowings to fund our capital expenditures, acquisitions and investments.
We expect to fund our capital expenditures for the rest of 2003 through a
combination of cash from operations and, if needed, loans from our owners. The
amount of such borrowings in 2003, if any, will depend upon the timing of
revenues and expenditures. In that connection, our owners have

A-21

informally committed to lend us up to an aggregate of US$25.0 million during
2003 in proportion to each partner's respective equity interests in Innova. See
"Item 7: Major Shareholders and Related Party Transactions." We currently intend
to finance any significant investments or acquisitions through a combination of
available cash from operations and long-term debt from our owners.

We are currently implementing a new Subscriber Management System, or SMS,
to support the growth of our subscriber base. We believe this new SMS will allow
us to provide more effective management and billing services to our subscribers.
Among other things, we believe the new SMS will:

- give us greater flexibility to control different variables that
are part of our service than our current SMS,

- improve our ability to respond to our subscribers' account
management needs and aid them in reporting on their service,

- provide greater billing flexibility,

- improve overall system efficiency; and

- offer more options for marketing our services.

This project includes the purchase of software, licenses, hardware,
implementation and advisory services and related personnel costs. As an initial
step, on June 12, 2002, we entered into two related agreements with CSG
Software, Inc., or CSG, through our subsidiary, Novavision. Under these
agreements CSG provides us: (a) a non-exclusive, perpetual license for the use
of the software "Kenan" to provide billing and order management to licensed
subscribers, (b) installation and implementation of the system within the
framework of our business, (c) training and support services, and (d) consulting
services. We are working with Siebel Systems, Inc. to develop and support
certain software applications and advisory services and with NDS Group plc (a
British public company and New Corporation subsidiary), or NDS, to complete the
requirements of the new system.

We are now using a subscriber management system called Provider II that we
obtained from NDS. NDS will continue to support Provider II until we complete
the switch-over to the new SMS. We expect the new SMS to be operational and
placed in service in late August 2003. See "Item 3: Key Information--Risk
Factors--Risk Factors Related to Our Business-- Our Ability to Provide Billing
and Order Management to Our Subscribers Depends on the Functionality and
Flexibility of Our Subscriber Management System, Which is Currently Being
Replaced with a New System from a New Supplier;" "Item 4: Information on the
Company--Business Overview--Capital Expenditures;" "--Subscriber Management
System;" and "Item 10: Additional Information-Material Contracts-New Subscriber
Management System Contract."

We have made significant investments in hardware and software to manage
growth of our DTH platform and to enhance customer service. These include our
current and new subscriber management systems, a customer relations management
system and an integrated voice response system. We believe that our principal
capital investments will continue to be IRDs, antennas and LNBs, transmission
equipment and the hardware and software required to manage the growth of our DTH
platform.

Antennas and low noise blocks, or LNBs were not part of capital
expenditures before October 1, 2000 because prior to that date, our master
wholesalers purchased that equipment to resell directly to subscribers. Because
we now retain ownership of these assets, they are recorded in our property,
plant and equipment and amortized over a period of three years. Prior to this
change, we sold the LNBs, antennas and accessories to master wholesalers and
included the costs of these items in cost of sales upon our sale of the
equipment to our distributors. In general, we own IRDs and rent them to
subscribers for a monthly IRD rental fee.

A-22

BUSINESS OVERVIEW

TELEVISION MARKET IN MEXICO

We believe that Mexico is the second largest television market in Latin
America after Brazil with approximately 19.6 million television households as of
December 31, 2002. The television industry in Mexico has expanded from broadcast
television to pay television, including cable, MMDS, and DTH satellite services.
Watching television is a significant leisure activity in Mexico. The average
television household in Mexico watches more than seven hours of television
daily, according to figures from the IBOPE, the Instituto Brasilero de Opinion
Publica y Estadistica.

We estimate that, as of December 31, 2002, 3.6 million households in
Mexico, excluding households receiving unauthorized Ku-band and C-band services,
received pay television services. These households represented approximately
18.4% of the Mexican television market as of that date. In addition, we estimate
that approximately 2.4 million of these 3.6 million households subscribe to
cable television, while approximately 0.2 million households subscribe to MMDS,
and approximately 1.0 million households subscribe to DTH. In the past we had
estimated that there were some 1.0 million households that received C-band DTH
satellite signals on the gray market, however we believe this number may be
decreasing due to technological advances that make receiving and decoding
unauthorized DTH signals more costly and difficult. Additional households
receive unauthorized, gray market Ku-band DTH satellite signals from the United
States, while still others receive pirated DTH signals from within Mexico. We
believe that piracy of cable television signals, in cities and small towns
across Mexico, presents a major challenge to the pay-TV market in Mexico. We
cannot estimate the number of households that receive pirated cable television
signals in Mexico, but we believe the number is significant.

We believe that our potential subscriber base principally consists of
households with an annual household income of at least Ps. 202,945 and
commercial establishments such as hotels, restaurants and bars. We estimate
that, as of December 31, 2002, Mexico had approximately 4.5 to 5.0 million
households with annual income of at least Ps. 202,945, representing
approximately 23% to 25.5% of the country's total television households. Of
these households, we believe that 3.5 million to 4.0 million could receive DTH
service.

BROADCAST TELEVISION INDUSTRY OVERVIEW

The television industry in Mexico began in the early 1950s when the Mexican
Government granted licenses for the operation of three television channels in
Mexico City. The first three channels, Channels 2, 4 and 5, were all indirectly
owned by Televisa. The Mexican Government has since granted licenses for six
additional channels in Mexico City and numerous other licenses for channels
elsewhere in Mexico. The metropolitan area of Mexico City has a population of
approximately 23.0 million people, representing nearly 22% of Mexico's total
population. As a result, the television stations broadcasting in Mexico City
have historically dominated the industry and have acted as anchors for stations
located outside of Mexico City by providing these stations with all or a portion
of their programming.

Currently, there are nine commercial television stations operating in
Mexico City (besides channel 52 from MVS, the leading MMDS operator in Mexico,
and private channels 28 and 34) and approximately 462 other television stations
elsewhere in Mexico. Most stations outside Mexico City re-transmit programming
originating on one of the Mexico City stations. Televisa owns and operates four
television stations in Mexico City, Channels 2, 4, 5, and 9, which collectively
are affiliated with 221 other repeater stations and 32 local stations outside of
Mexico City. In addition, Televisa operates an English-language television
station on the Mexico-California border. Televisa's channels are also carried on
87 "complementary" stations, which facilitate the transmission of signals
throughout Televisa's concession areas. The Mexican Government currently
operates two stations in Mexico City, Channel 11 (with 5 repeaters) and Channel
22, and repeater stations outside Mexico City. Television Azteca owns VHF
Channels 7 and 13 in Mexico City, which are affiliated with 87 and 89 stations,
respectively, outside of Mexico City. TV Azteca and Televisora del Valle de
Mexico, or Televisora, which operates CNI Channel 40 are partners in an
arrangement where, until recently, TV Azteca rendered promotion, broadcast and
commercialization services for channel 40. Recently, however, due to several
conflicts and litigation between TV Azteca and Televisora, CNI Channel 40 has
been operating as an independent television station pending final resolution of
the litigation. There are 19 independent stations outside of Mexico City, which
are unaffiliated.

PAY TELEVISION INDUSTRY OVERVIEW

CABLE TELEVISION

Cable television offers multiple channels of entertainment, news and
informational programming to subscribers who pay a monthly fee based upon the
package of channels they receive. Cable subscribers in Mexico generally pay

A-23

a monthly subscription fee equal to Ps. 245 for a basic package (calculated as a
weighted average) and as much as Ps. 579 for premium and digital packages. These
prices do not take into account promotions cable operators may offer from time
to time. According to Mexico's cable television trade organization, Camara
Nacional de la Industria de Television por Cable or CANITEC, there were
approximately 414 cable networks operating in Mexico as of December 31, 2002.
Under Mexican law, all licenses to provide cable television services in a
specific service area are non-exclusive licenses.

More than 53 groups operate cable systems in Mexico. Cablevision, Mexico's
largest cable system operator, holds a franchise for Mexico City and the
surrounding areas and had over 412,000 household subscribers as of December 31,
2002. Televisa owns 51% of Cablevision following an offering that took place in
April 2002. Currently, Cablevision is the only major cable television operator
that also offers high speed Internet access through cable modems in Mexico City.
Cablevision is also the only provider of digital cable television services in
Mexico. Cablevision offers basic and premium packages to its subscribers, as
well as a news channels package and adult oriented channels that are available
"a la carte."

Megacable is the second largest cable operator in Mexico with approximately
317,000 subscribers as of December 31, 2002. It serves the Pacific coast,
Jalisco, Puebla and the Veracruz area. It is followed by Grupo Cablemas with
approximately 299,000 household subscribers as of December 31, 2002 located in
several regions in the country, including Veracruz, the Yucatan, Campeche and
Chiapas peninsular region, central Mexico, Tijuana, Mexicali, Chihuahua, Juarez,
Baja California and other cities on the United States-Mexico border. Press
reports indicated during 2002 that Grupo Cablemas and Megacable were negotiating
a potential merger of the two groups, but these negotiations were suspended.
However, if negotiations are revived and a merger is successfully completed and
approved by regulatory authorities, the new group would become the largest cable
operator in Mexico, as measured by the number of subscribers and geographic
coverage. It could become our largest competitor and, as a result, we believe
competition would intensify if the merged group invests significant capital to
upgrade infrastructure and enhance programming content.

We believe that rural areas provide a market for our DTH satellite
services. Many rural areas of Mexico either have a weak cable infrastructure or
cannot be accessed by cable television. The mountainous Mexican landscape
impedes cable wiring of the country. Due to the competitive business
environment, cable providers find the significant cost of upgrading existing or
establishing new cable infrastructure to be economically infeasible in many
cases.

We estimate that the metropolitan Mexico City area alone contains
approximately 25% of the households with television sets in the country. We
estimate that approximately 9.0% of households with a television set in the
metropolitan Mexico City area already receive cable television from Cablevision.
While recent, comparable data for all of Mexico is not available, we believe
that the percentage of homes that own television sets and receive cable service
is generally higher in metropolitan Mexico City than in other areas of Mexico
(excluding the U.S.-Mexican border). We have based our estimates on information
obtained from the directory published by CANITEC.

MMDS OR WIRELESS CABLE

MMDS, commonly called wireless cable, uses a microwave transmission system,
operating from a head-end, similar to the head-end of a cable system. The
head-end receives programming, generally via a satellite antenna. Microwave
transmitters then send this programming, via an antenna located on a tower or on
top of a building, to a small, receiving antenna at a subscriber's premises. At
the subscriber's location, microwave signals are converted to frequencies that
pass through a conventional coaxial cable into a decoder located near a
television. Sometimes signals are sent directly from the antenna converter to
the television set. MMDS requires a clear line-of-sight because microwave
signals will not pass through obstructions, unless mechanisms are used to
retransmit signals around obstructions such as hills and tall buildings.

MMDS offers cost advantages over traditional hard-wire cable technology
because it does not require the construction and maintenance of a fiber or
coaxial cable network. MMDS is being used in other emerging pay television
markets where cable does not have a strong established position. Subscription
services introduced MMDS technology in Mexico in 1989, initially targeting the
largest urban areas of the country. Generally, MMDS subscribers receive, upon
payment of an installation fee, an antenna and decoder and must thereafter pay a
monthly programming fee for any programming package or "a la carte" channels
they select. The principal advantage of MMDS systems is their accessibility in
portions of metropolitan areas where cable for television services has not yet

A-24

been installed. However, the frequency band allocated to MMDS transmission
accommodates a maximum of approximately 32 analog television channels.

We estimate that, of the approximately 19.6 million television households
in Mexico as of December 31, 2002, less than 260,000 of them subscribed to MMDS.
At least thirteen companies currently operate MMDS systems in Mexico. MVS
Multivision, S.A. de C.V., or Multivision, is the leading MMDS operator in
Mexico and provides MMDS services in the Mexico City area and 22 other cities
across the country. MMDS systems do not rebroadcast the main over-the-air
channels.

DIRECT-TO-HOME OR DTH

DTH systems use medium or high-power satellites to deliver signals to
satellite antennas at homes, hotels, restaurants and apartment buildings and
other locations. In contrast to MMDS signals, which are locally transmitted, a
DTH satellite footprint can cover large land areas. DTH systems in Mexico have
the following advantages:

- the capital investment, although initially high for the satellite
and uplink segment of a DTH system, is fixed and does not increase
with the number of subscribers receiving satellite transmissions;

- the licenses granted by the Mexican Government cover the entire
country; and

- the capital costs for the ground segment of a DTH system, the
reception equipment, are directly related to, and limited by, the
number of service subscribers.

The disadvantages of DTH systems in Mexico as compared to other forms of
television delivery presently include:

- the limited ability to tailor programming packages to the
interests of different geographic markets, such as providing local
news;

- the fact that signal reception is subject to line-of-sight
requirements, though generally less stringent than those typical
of MMDS systems;

- intermittent interference from atmospheric conditions and
terrestrially generated radio frequency noise; and

- the possibility that the Mexican regulatory environment may change
in an adverse manner in response to industry developments, new
technology or political considerations.

Gray Market C-Band and Ku-band DTH. The Mexican Government does not
authorize services utilizing C-band DTH technology. However, we believe there
were some 1.0 million households receiving C-band DTH signals on the gray market
although this number may be decreasing due to technological advances that make
it more difficult and costly to receive unauthorized DTH signals. We cannot
estimate the number of channels that C-band DTH customers receive. Some
households also receive unauthorized Ku-band DTH signals from the United States
on the gray market, while still others receive pirated DTH signals from within
Mexico. We cannot estimate the number of these households.

Ku-Band DTH. Ku-band DTH satellite pay television services became available
for the first time in Mexico in late 1996. The Ku-band DTH service's higher
power allows subscribers to receive programming with low cost antennas as small
as 60 centimeters to 1.2 meters in diameter. Our subscribers receive
transmissions from the more powerful Ku-band PAS-9 which requires antennas no
larger than 80-centimeters in diameter. This small antenna size compares
favorably with the 1.8 to 5.0 meter antennas typically used for C-band
reception. We believe that Ku-band DTH technology currently provides the most
cost efficient, national, point-to-multi-point transmission of video, audio, and
data services. Our Ku-band service uses digital compression technology that in
comparison to analog technology provides increased channel capacity per
transponder and improved audio and video quality. Our digital compression
technology currently permits the broadcast of up to 10 to 12 video channels of
programming per Ku-band transponder. Nine of our 12 transponders use this
technology. We have invested in compression technology that allows us to
increase the number of channels and services we offer without increasing
satellite costs.

A-25

This compression technology allows us to increase our capacity to up to 15 to 18
video channels per transponder, but currently we only have this technology for
three of our 12 transponders. Technological developments have also enabled us to
start offering a variety of auxiliary services, including the "Sky Interactive"
services introduced in late 2000.

PROGRAMMING AND SERVICES

RATES AND FEES

In general, we currently charge our residential subscribers:

- a one-time fee for subscription, installation and activation equal
to approximately Ps. 1,099 (discounted to Ps. 99 if the subscriber
agrees to pay monthly programming fees via automatic charge to a
credit card);

- a monthly programming fee ranging from Ps. 174 to Ps. 611,
depending on the programming package the subscriber chooses and
whether the subscriber pays within 12 days of the billing date;

- a monthly rental fee of Ps. 138 (Ps. 125 if the subscriber pays
within 12 days of the billing date) for rental of the IRD, LNB,
Smart Card, remote control and related components; and

- an annual membership fee of Ps. 268.

We also offer promotions intended to attract subscribers from other pay TV
systems, for free subscription, installation or activation.

These rates and fees do not generally apply to our non-residential, or
commercial, subscribers, whose rate packages and arrangements are negotiated on
a case-by-case basis. Our commercial subscribers consist primarily of hotels
(where each room capable of receiving our service is counted as a separate
subscriber), restaurants and bars. While we negotiate rates with our commercial
subscribers on a case-by-case basis, these rates are substantially lower than
our residential rates. As a result, our commercial subscribers have a
substantially lower average revenue as compared to residential subscribers and
we believe that the revenue we receive from commercial subscribers is immaterial
to our results of operations.

PROGRAMMING PACKAGES

On October 14, 2002, we re-launched our programming packages by reducing
the number of packages offered to five (from 14), simplifying choices to the
subscriber. As part of this strategy, we distributed 20 channels that were
previously available as "a la carte" channels among the five packages. We now
offer only six adult-oriented channels on an "a la carte" basis. The
descriptions of our rate packages set forth below do not apply to our commercial
subscribers.

As of May 31, 2003, we offered subscribers the choice of five programming
packages: Sky Basic (60 video channels, 32 audio channels and 29 pay-per-view);
Sky Fun (78 video channels, 32 audio channels and 29 pay-per-view); Sky Movie
City (91 video channels, 32 audio channels and 29 pay-per-view); Sky HBO
(similar to Sky Movie City but with different movie channels including a total
of 91 video channels, 32 audio channels and 29 pay-per-view) and Sky Universe
(107 video channels, 32 audio channels and 29 pay-per-view).

A-26

The current prices for residential subscribers for our five programming
packages are as follows:

MONTHLY PRICE WITH NUMBER OF
PROGRAMMING PROMPT PAYMENT VIDEO
PROGRAMMING PACKAGE PRICE(1) DISCOUNT(2) CHANNELS(3)
- ------------------- -------- ----------- -----------

Sky Basic........................... Ps. 251.00 Ps. 174.00 60
Sky Fun............................. Ps. 301.00 Ps. 264.00 78
Sky Movie City...................... Ps. 421.00 Ps. 374.00 91
Sky HBO............................. Ps. 471.00 Ps. 424.00 91
Sky Universe........................ Ps. 611.00 Ps. 564.00 107

- ----------------------------
(1) Not including the monthly IRD rental fee described above, but including
value-added tax and tax on telecommunication services.

(2) If payment is made within 12 days of the billing date a subscriber receives
a discount on his or her monthly subscription. We instituted this policy in
October 2000 after raising our monthly subscriptions by about 8%.

(3) Each package includes 32 audio channels

From time to time, we offer special promotions targeted at particular local
areas in response to local competitive conditions.

PAY-PER-VIEW AND SPECIAL EVENTS

We launched our pay-per-view services in 1997 and currently offer 29
pay-per-view channels. We devote 24 of these channels to family entertainment
and movies and five channels to adult entertainment. We set aside five extra
channels exclusively for special events, known as Sky Events, which include
boxing matches, concerts, sports and movies. We provide some Sky Events at no
additional cost while we sell others on a pay-per-view basis.

SKY INTERACTIVE

Sky Interactive allows subscribers to watch different content on the same
channel and to select the content they prefer to display on the full screen. As
part of our regular service we offer four channels with interactive features:
Interactive News, Interactive Financial News, Interactive Sports and Interactive
Kids. Some events are broadcasted using these features to show camera angles for
auto races, reality shows and certain soccer matches, as well as to watch
instant replays of sporting events. We expect further technology will be
developed and become available to allow us to offer customers the use of an HTML
or Java browser to run certain applications to enhance the viewer's experience.
We believe this technology may also enable us to offer more value-added services
in the future, such as T-commerce (television-commerce), games and information
services, including news.

PROGRAMMING ACQUISITION

We currently negotiate directly for programming with international
suppliers from the United States, Europe and Latin America and have the option
to negotiate through an affiliate that also services the other SKY platforms. We
have entered into definitive agreements with many programming providers, while
other providers supply programming under letters of intent, invoices or other
less formal arrangements. Our suppliers include, but are not limited to: DMS
Media Services LLC (which offers Warner, Sony, E! entertainment, A&E Mundo, the
History Channel, AXN, Fox Kids, HBO and Cinemax), LAPTV (Movie City and
Cinecanal), Turner Broadcasting System Latin America, Inc. (TNT, CNN and Cartoon
Network), Discovery Networks, Fox Latin America Channels Inc. (National
Geographic, Canal Fox, Fox Sports, Fox News and Speed), Pramer (Film & Arts,
Gourmet, Private Gold, Private Blue, Magic Kids, Europa Europa and
Cosmopolitan), MTV Networks (MTV and Nickelodeon), Claxon (Playboy, Locomotion,
Fashion TV and Infinito) and Bloomberg LP. We regularly negotiate new agreements
with our programming suppliers. We also have arrangements with the following
studios to show films on an as needed basis: Dreamworks, Warner Bros.
International, 20th Century Fox, Universal Studios International, Walt Disney

A-27

Pictures, MGM, Paramount Pictures, CPT Holdings Inc (Sony), PWI Films, Inc.,
Baywood Enterprises, Nuvision and Independent Studios.

Televisa and News Corporation provide us with significant programming
content, some of which we distribute on an exclusive DTH basis in Mexico. We
have the exclusive right to distribute, via DTH in Mexico, all program services
or channels over which Televisa and News Corporation have control, subject in
each case to certain pre-existing third party agreements. Televisa and News
Corporation guarantee our access to the same program services or channels made
available to cable and MMDS systems in Mexico. We may access these services and
channels at a price not to exceed that extended to cable or MMDS systems.
Televisa's right to grant us an exclusive license was recently challenged by
DIRECTV. See "Item 3 - Key Information Risk Factors - Risk Factors Related to
Our Business-Our Ability to Attract Subscribers Depends on the Availability of
Desirable Programming from Third Party Programmers."

Televisa also provides us with a variety of signals that include domestic
and foreign programs. Among these programs are: musical programs, situation
comedies, stand-up comedy shows, game shows, children's programs, talk and
variety shows, movies, sports, special cultural events and musicals. We have
exclusive DTH broadcast rights in Mexico to Canal Fox, which is one of the
leading general entertainment pay television channels in Mexico and Latin
America, along with Fox News, a 24-hour news channel in English and Fox Sports
Argentina.

We have agreed to reserve a portion of our available video channels for
program services owned by our sponsors. Televisa has the right to require us to
carry its program services on 10% of the total number of available video
channels. In addition, News Corporation has the right to require us to carry its
program services on 6 2/3% of the total available channels. Liberty Media has
the right to require us to carry its program services on 4% of the available
channels.

In June 2002, we entered into an agreement with TV Azteca to begin paying
them for the rights to rebroadcast their over-the-air Channels 7 and 13. We have
also committed to purchase up to US$10.6 million in advertising from TV Azteca
over the three years from the date of the agreement and have received rights to
broadcast certain soccer matches. Prior to May 1, 2002, we were permitted to
rebroadcast these channels at no cost. For more information, see "Item 3 - Key
Information Risk Factors - Risk Factors Related to Our Business--Our Ability to
Attract Subscribers Depends on the Availability of Desirable Programming from
Third Party Programmers" and "Item 5: Operating and Financial Review and
Prospects--Trend Information."

During 2002 we entered into an agreement with Televisa to contribute funds
for the production of, and to obtain the exclusive pay-TV transmission rights
to, the reality shows Big Brother VIP and Operacion Triunfo, which were produced
by Endemol Mexico, S.A. de C.V. See "Item 7: Major Shareholders and Related
Party Transactions-Related Party Transactions- Programming Arrangements with
Related Parties." We have no other current plans to develop or produce our own
programming, except for Mosaic, the promotional channel featuring our
programming services.

DISTRIBUTION, SALES AND MARKETING

In October 2000, we formed our own sales force in order to complement our
existing distribution network, increase market penetration in Mexico's main
cities, improve the quality of our subscriber base and reduce the acquisition
cost of new subscribers. We have established direct sales forces in Mexico City
in 2000; in Guadalajara, Monterrey, Puebla, Tijuana, Culiacan and Leon in 2001;
in Queretaro, Merida, Acapulco, Hermosillo and La Paz in 2002; and Torreon in
2003, in order to strengthen our market penetration and direct distribution
network in those cities as well.

As of May 31, 2003 we sold and distributed our services through a network
of 12 wholesalers and 14 direct sales offices that control over 3,600 points of
sale. These locations include leading malls, department stores, popular
retailers, supermarkets and consumer electronics outlets. We offer commissions
to our wholesalers, who, in turn, pay commissions to their retailers and
distributors. Our direct sales force employees are also paid by commission, in
addition to their salary and benefits. We also have control over some direct
distributors, who receive commissions but are not employees.

We believe our subscription fee and programming prices are competitive with
those offered by other pay television platforms. Our entry-level product is the
Sky Kit, which includes a satellite antenna, low noise block or

A-28

LNB, as well as installation and activation, the right to rent an IRD, and to
use a Smart Card, remote control and related components. From the second quarter
of 1997 through September 30, 2000, we sold Sky Kits exclusively through our
wholesale distribution network. Since October 1, 2000, however, we have retained
ownership over the antenna and LNB and the subscriber initiation fee now covers
installation and activation. We rent the IRD and Smart Card to our subscribers,
and provide them with the remote control and related components free of charge.
Our first 130,000 subscribers received their IRDs, Smart Card, and remote
controls on a bailment basis. However, since February 23, 1998, substantially
all of our subscribers (residential and commercial) rent their IRDs under an
indefinite term rental plan. We chose to retain ownership of the Sky Kit
equipment, including the antenna, Smart Card and LNB, rather than selling them
to our distributors, in order to facilitate repossession of the equipment if a
subscriber terminates service or defaults on its obligations. This change has
had no material impact on the revenues we receive from our distribution network.

We focus on promoting our superior programming content, customer service
and system quality, rather than the number of channels we offer. Our programming
includes Spanish-language over-the-air channels, exclusive soccer games, special
events, reality shows and other sports and entertainment programming. Our
marketing strategy includes advertising through national and regional
television, radio, newspapers, magazines, billboards, direct mail, internet,
movie and airport advertising, sponsorship of special events (such as boxing
matches, golf and soccer tournaments) and promotional activities at restaurants,
bars, cultural and other social events. For a more detailed discussion of our
program offerings and packages, see "--Programming and Services," below.

Intense competition and general market conditions have driven us to lower
our monthly subscription fee and to offer special discounts and promotions on
several occasions. In the last three years, we have maintained a special
promotion aimed at children known as Sky Kids using remote controls designed
especially for children. We also have targeted soccer fans by offering certain
pay-TV exclusive soccer matches. In 2002 we broadcasted 40 of the soccer matches
for which Televisa had the exclusive broadcast rights, as well as 22 of the
soccer matches for which TV Azteca had exclusive broadcast rights. We reward
long-term subscribers with a loyalty program known as Sky Value offered without
cost which includes prizes, trips, programming and special events, such as
concerts and sporting events.

We monitor our nationwide installation service through a centralized
operations office. This enables us to monitor the quality of service being
provided to our customers. After obtaining the Sky Kit equipment, the installer
or the subscriber contacts our call center to activate the Ku-band DTH service.
Activation typically occurs within minutes of the call.

We provide customer service to our subscribers through our own, specialized
telephone call center, staffed by approximately 760 people who answer general
questions and provide basic information as well as personalized service to solve
more complex customer problems. Some of our customer service personnel also
carry out subscriber retention and collection activities over the phone.

In June 2001, we purchased from Merkatel, our former call center service
provider, the equipment Merkatel used to provide call center services to us,
including computers, telephones, furniture, and fixtures along with other
software, training materials and significant transition support for a total of
Ps. 24.2 million plus value-added tax, or VAT. We also hired the telephone
operators involved in operating the call center. Merkatel is a wholly owned
subsidiary of Televisa and provided call center services to us from our
inception through June 30, 2001. Starting July 1, 2001, the call center
functions have been provided in-house. We have improved the efficiency of the
call center operations using our infrastructure in our existing customer service
center, including our interactive voice response, predictive dialer and customer
relationship management systems.

We engage a third party to publish and distribute SKY VIEW, our monthly
magazine detailing all of the channels and program listings available on SKY.
SKY VIEW includes weekend programming, a guide to movies, general interest
articles about actors, actresses, entertainment, sports, life style, culture,
games, quizzes and general information about SKY packages, enhanced TV features
and promotions. SKY VIEW is one of the most important magazines in Mexico, as
measured by the number of published copies with a monthly production of
approximately 300,000 units. Since January 2001, we have used our own
advertising sales force, supported by Grupo Medios, to sell advertising in the
SKY VIEW magazine. We offer a variety of advertising sales packages and volume
discounts to match customers' needs.

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We sell advertising on our broadcasts to corporate and other clients and
advertising agencies. We use both our own advertising sales force and the
services of a wholly owned subsidiary of Televisa to promote and sell
advertising time.

OPERATIONS

Our digital video, audio and data signals are encoded, processed,
compressed, encrypted, multiplexed (i.e., combined with other channels),
modulated (i.e., applied to the designated carrier frequencies for transmission
to the satellite) and transmitted through our Ku-band DTH service, from uplink
facilities in Mexico and the United States. Geosynchronous satellite
transponders receive, convert and amplify the signals and retransmit them to the
earth in a manner that allows individual subscribers to receive and be billed
for the particular program services to which they have subscribed.

UPLINK FACILITIES AND PLAY-OUT FACILITIES

We use play-out equipment to prepare the programming material for
compression and subsequent transmission to the satellite. The play-out equipment
digitizes the programming for channels provided by third party programmers,
inserts commercial or promotional material where appropriate, monitors the
quality of the picture and sound, and delivers the material to the compression
and multiplexing system. In the case of channels originating from taped
material, the play-out equipment also compiles the various programming segments
and inserts commercial and promotional material where necessary. For near
video-on-demand movies, the play-out equipment stores movies and plays them out
as appropriate to provide the desired frequency of service.

We use uplink and play-out facilities in Mexico City, Mexico and in Miami
Lakes, Florida and Port St. Lucie, Florida. We own the uplink and play-out
equipment located in Mexico City, which is housed in facilities owned by
Televisa. Televisa operates the equipment to provide us with uplink services. In
addition, TechCo provides us with uplink services at its facilities in Florida.
All of the uplink facilities we use have full emergency power generation
equipment to allow uplinks to continue operations without any disruption of
service in the event of a power failure. We also use the TechCo facilities to
handle programming delivered from outside Latin America.

SATELLITES

We currently receive satellite signal reception and retransmission services
from 12 Ku-band transponders on PanAmSat's PAS-9 satellite under an agreement
executed with PanAmSat on February 8, 1999. PAS-9 was launched on July 28, 2000
and became operational on September 8, 2000.

The term of the PAS-9 agreement ends on the earlier of: (a) September, 2015
or (b) the date PAS-9 is taken out of service. We pay a monthly service fee of
US$1.7 million for service from all 12 transponders. Televisa, News Corporation
and Liberty Media have guaranteed our payments to PanAmSat in proportion to
their respective beneficial interests in us. PAS-9 was manufactured by Hughes
and is operated by PanAmSat Corporation, which is 81% owned by Hughes. On April
9, 2003 News Corporation announced that it reached a definitive agreement to
acquire a 34% interest in Hughes. Hughes holds an indirect interest in PanAmSat
and DIRECTV Mexico, our DTH competitor. We do not yet know the possible
implications of this event for our satellite operations. The remaining useful
life of PAS-9 is expected to be approximately 14 to 16 years.

PAS-9 is located at 58.0(degree) West longitude, and we believe its
footprint covers virtually all of Mexico's television households as well as
other areas in the Caribbean basin and portions of the United States and Central
America. However, we believe that in a few instances some of our potential
subscriber base may experience some signal degradation as a result of their
particular location and PAS-9's orbital location. Each transponder is capable of
handling analog channels or multiple digital channels. Service from PAS-9 is not
subject to pre-emption except in limited instances with respect to spare
transponder capacity. We do not currently have contingency arrangements in case
we lose satellite service from PAS-9, nor are we insured against such an event.
See "Item 3. Key Information--Risk Factors--Risk Factors Related to Our
Business--We Depend on the Availability of Satellite Transponder Services from
PanAmSat."

We had previously entered into an agreement with SatMex on April 1, 1999 to
allow us to use 12 Ku-Band transponders on Solidaridad 2 for signal reception
and retransmission. The agreement expired on December 31, 2001 but was extended
to March 31, 2002 to avoid interrupting service to those subscribers whose
antennas had not

A-30

been re-pointed to the new satellite, PAS-9. Extending the service agreement
enabled us to re-point the antennas of approximately 30,000 additional
subscribers to the new PAS-9 satellite without interrupting their service. We
paid SatMex a monthly service fee of US$1.752 million for satellite signal
reception and retransmission service from 12 transponders on Solidaridad 2
through December 31, 2001, and a flat fee of US$1.5 million for the use of up to
eight transponders from January 1, 2002 through April 3, 2002. The process of
migrating customers from Solidaridad 2 to PAS-9 started in November 2000 and
ended in March 2002. The shutdown of this process and the termination service
from the Solidaridad 2 satellite caused us to lose approximately 13,000
subscribers. Re-pointing costs were approximately US$35 million.

We had also previously agreed to use services from 12 transponders on
PanAmSat's PAS-5 satellite for service fees of at least US$1.5 million per
transponder per year plus additional fees based on average gross subscriber
revenues. PAS-5 was launched in August 1997 and became operational in October
1997. However, signals from the transponders on PAS-5 experienced terrestrial
interference in Mexico and the PAS-5 satellite batteries failed. As a result, we
never used the services on PAS-5 and we terminated the PAS-5 agreement and
replaced it with the PAS-9 agreement. We made total payments of US$23.4 million
for the availability of PAS-5, but we received a credit against the first
US$11.7 million of service fees otherwise payable under the PAS-9 agreement. We
do not owe any further payments for PAS-5.

Our DTH concessions granted by the Mexican Government currently authorize
us to offer DTH services using Mexican satellites, including current and future
satellites operated by SatMex, as well as PanAmSat's PAS-9, which is considered
a foreign satellite under Mexican law. For a more detailed discussion of our
concessions, see "--Mexican Regulation of DTH Services--Concessions; Revocation;
Expropriation."

INTEGRATED RECEIVER/DECODER SYSTEM

Depending on a subscriber's location within the country, a subscriber may
use a 60-centimeter, 75-centimeter, or 80-centimeter satellite receiver antenna
to receive our signal. Our subscribers currently pay the same initial fee for
installation and activation, regardless of the size of the satellite receiver
antenna they require.

The IRD we currently rent to subscribers provides the interface between the
reception equipment and the subscriber's video and audio equipment. In addition,
connection to external data processing or data storage equipment is enabled via
the provision of a serial data output port in the IRD. An internal modem in the
IRD allows the on-line report-back or call-back of the subscriber's impulse
pay-per-view records to the subscriber management system.

Authorizing information for subscription programming and the access control
algorithm are stored on a microchip imbedded in a credit card-size Smart Card.
The Smart Card, which can be updated or replaced periodically, provides a simple
and effective method to authorize and de-authorize subscription programming. A
Smart Card enables the IRD to descramble the program only when the subscriber is
entitled to view the program. If the Smart Card assigned to a particular IRD is
authorized for a particular channel, the data is decrypted and passed on for
audio and video decompression. After decompression, the digital audio and
digital video signals are reconstructed into analog format for display on a
standard television set. During the fourth quarter of 2001 we completed the
process of replacing our subscribers' Smart Cards as a regular security measure
intended to reduce the risk of piracy.

The IRDs have been designed to be easy to use. Subscribers can quickly and
easily access desired programming, using a remote control device via an
on-screen electronic program guide. Our subscribers have access to a channel
guide, five promotional mosaic channels and an icon-driven menu system. Our
customers also have access to their account statement on-screen.

In 2002, we purchased IRDs from two manufacturers: (1) Pace Microtechnology
plc, a U.K. manufacturer which assembles IRDs for the Mexican market in Puebla,
Mexico; and (2) Motorola, Inc which operates a manufacturing plant in Sonora,
Mexico. At least two other suppliers, affiliates of Philips Consumer Electronics
Corporation N,V. and Thomson Commercial Electronics, also manufacture IRD
equipment that is compatible with our system.

During 2002 and 2003, we continued to purchase the set-top box type "World
Box2", from Motorola to provide our Sky Interactive service. The box and service
allow subscribers to choose camera angles for soccer matches,

A-31

watch instant replays and obtain statistics about favorite teams and players. We
expect further technology will be developed and become available to allow us to
offer customers the use of an HTML or Java browser to run applications to
enhance the viewer's experience. We believe this technology may also enable us
to offer more value-added services in the future, such as T-commerce
(television-commerce), games and information services including news, weather,
and events.

We rent the IRD, and provide the remote control and Smart Card, to
subscribers but retain title over them to help facilitate repossession of the
equipment if a subscriber terminates service or defaults on its obligations.

BROADCAST AND CONDITIONAL ACCESS SYSTEMS

Digital technology permits the compression and transmission of digital
signals to facilitate multiple channel transmission through the bandwidth used
by a single channel, giving broadcasters the ability to offer significantly more
channels than analog systems. NDS Group plc, or NDS, a majority owned subsidiary
of News Corporation, previously provided the necessary equipment to digitize,
compress, encrypt and multiplex the signals transmitted to the satellite by
Innova's uplink facilities. Digitized signals are compressed using the MPEG-2
standard, encrypted and multiplexed into a Digital Video Broadcasting transport
stream of the DVB standard and modulated for transmission to the satellite
transponders we use. Currently, these technologies are provided by Tandberg
Television, a third party Norwegian company, which provides open solutions for
the digital broadcasting of audio, data and video, and has operations in Asia,
Australia, Europe and the USA.

NDS provides our conditional access system, including the Smart Cards
necessary to decode the signal at the subscriber's home, and certain other
security services related to the Smart Card. NDS provides conditional access
services to other DTH providers including British Sky Broadcasting plc in the
United Kingdom, DIRECTV in the United States, Sky Italia Sp.A.(previously,
STREAM) in Italy, MATAV in Israel and STAR in Asia. The basic purpose of the
conditional access system is to ensure that each program can be viewed only by
those subscribers who have paid for that program. Accordingly, the conditional
access system is central to the security network that prevents unauthorized
viewing of programming. Our Ku-band receiver employs Smart Card technology,
making it possible to change and enhance the conditional access algorithm in the
event of a security breach. We believe that our ability to take electronic
countermeasures and to replace the Smart Cards when necessary provides an
effective means to combat sustained piracy.

We and NDS are parties to a System Implementation and License Agreement
dated September 20, 1996, pursuant to which NDS designed, developed and
implemented our conditional access and broadcast systems. In exchange, we
purchased certain equipment, and license the proprietary information and rights
necessary to operate NDS's conditional access and broadcast systems. From time
to time we may explore alternative technologies for delivering our programming.

During 2001, we replaced all the Smart Cards that were used by our
subscribers with new ones that include new technology and enhanced security as a
part of our continuous efforts to improve security against piracy. This measure
cost approximately Ps. 33 million.

SUBSCRIBER MANAGEMENT SYSTEM

We currently provide subscriber management, billing and remittance services
for our own subscribers. Once a subscriber orders programming from us, we
transmit an authorization code to the subscriber's IRD and Smart Card,
permitting the subscriber to receive programming within moments of placing the
order. The subscriber management system runs the billing process for monthly
charges over-the-air via the IRD in most cases. We accept bill payment by cash
or check through a bank deposit or by credit or debit card.

We believe that our subscriber management system, or SMS, is essential to
providing pay television services because it provides us with marketing,
customer service and administrative operations support. These elements include:
billing and collection of subscription fees; handling service difficulties and
other inquiries; handling disconnection, alteration, reconnection and relocation
of services; and marketing of additional services. The subscriber management
system also maintains records for each receiver and Smart Card, to maintain
security and prevent piracy. In the past, we have used an SMS that we obtained
from NDS under a Subscriber Management System Implementation and License
Agreement, dated October 29, 1996. Under that agreement, NDS designed, developed
and implemented our current subscriber management system. We entered into a
second License

A-32

Agreement with NDS, dated August 3, 1998, for the design, development and
implementation of our current SMS called Provider II

- give us greater flexibility to control different variables that
are part of our service than does our current SMS,

- improve our ability to respond to our subscribers' account
management needs and aid them in reporting on their service,

- provide greater billing flexibility,

- improve overall system efficiency, and

- offer options for marketing our services.

This project includes the purchase of software, licenses, hardware,
implementation and advisory services as well as the incurring of personnel
costs. As an initial step, on June 12, 2002, we entered into two related
agreements with CSG through our operating subsidiary, Corporacion Novavision, S.
de R.L. de C.V., or Novavision. Under these agreements CSG provides us: (a) a
non-exclusive, perpetual license for the use of the software "Kenan" to provide
billing and order management to licensed subscribers, (b) installation and
implementation of the system within the framework of our business, (c) training
and support services and, (d) consulting services. CSG is an enterprise with
more than 20 years of customer care and billing expertise, providing its
services in more than 265 companies in more than 40 countries. We also requested
the development and support of certain software applications and advisory
services from Siebel and NDS to complete the requirements of the new system.

NDS will continue to support Provider II until we complete the switch-over
to the new SMS. Once the new SMS implemented by CSG is placed in service, our
current agreements with NDS related to maintenance of Provider II will be
terminated. We expect the new SMS will be operational and placed in service in
late August 2003. See "Item 3: Key Information--Risk Factors--Risk Factors
Related to Our Business-- Our Ability to Provide Billing and Order Management to
Our Subscribers Depends on the Functionality and Flexibility of Our Subscriber
Management System, Which is Currently Being Replaced with a New System from a
New Supplier;" "Item 4: Information on the Company--Business Overview--Capital
Expenditures;" "--Subscriber Management System;" and "Item 10: Additional
Information-Material Contracts-New Subscriber Management System Contract."

TRADEMARKS

The Sky trademarks are trademarks of British Sky Broadcasting Limited, in
which News Corporation has an approximate 35.4% interest, and are licensed to us
on a perpetual, exclusive basis, for a nominal fee, pursuant to an agreement
between a subsidiary of News Corporation and us. There are numerous trademarks
in the process of being registered in Mexico, some of which involve the Sky
name, which are used in the ordinary course of business but are not material to
our results of operations.

COMPETITION

GENERAL

Our business competes with providers of pay television services using
cable, MMDS, and Ku-band DTH transmission technologies. We also compete with
gray market and pirated DTH signals from the United States and from within
Mexico. We believe that competition is primarily based upon programming,
customer service, distribution network, advertising and promotion and price. We
cannot assure you that, based on its potential size, the Mexican pay television
industry will be able to sustain a number of competing pay television providers.
We also

A-33

compete with national broadcast networks and regional and local broadcast
stations, movie theaters, video rental stores, radio stations, and other
entertainment and leisure activities generally.

We believe we successfully compete by offering superior programming
content, including a number of exclusive channels with proven market appeal, and
high-quality service based on optimal technology throughout Mexico. We also
believe that we have a number of competitive advantages. We currently broadcast
168 digital channels (107 video, 32 audio and 29 pay-per-view), including
Channel 2, the most popular broadcast channel in Mexico, which in the past has
not been available in all areas outside of Mexico City. We also offer local
programming as well as several specialized channels targeted to particular
communities, including RAI (Italian), TV5 (French), DeutscheWelle (German),
Galicia TV (Spanish), and NHK (Japanese).

Our digital Ku-band DTH satellite technology offers larger coverage,
greater channel selection, and enhanced video and audio quality as compared to
existing terrestrial broadcast, cable, and MMDS television services. We believe
that our competitors' existing and potential alternative technologies will not
materially adversely affect the viability or competitiveness of our service
package in the foreseeable future. For example, new ADSL technology is being
used to provide high-speed internet access and could be used in the future for
broadband transmissions, but this technology is currently more expensive than
other alternatives and we do not believe that providers have shown significant
interest in it, other than for internet services. However, these and other
technological changes could impact us, and, depending on the technological
developments, we may need to expend substantial financial resources to develop
and implement new competitive technologies.

Our service is supported by an extensive distribution network, a
comprehensive marketing campaign and a well-trained customer service group. We
believe that the collective experience and expertise of Televisa, News
Corporation and Liberty Media in the media and entertainment industries helps us
to compete successfully in the Ku-band DTH market and increases our access to
programming, technology and distribution services. Televisa's extensive network
of open over-the-air television, pay television, radio stations, and
publications provides us with significant cross-promotional opportunities.

CABLE TELEVISION AND MMDS

We expect to continue to encounter a number of challenges in competing with
cable television providers. For example:

- cable television providers benefit from their established position
in the domestic consumer marketplace;

- cable subscribers generally face lower up-front costs than DTH
subscribers, who must pay initial start-up fees, including
installation of relevant equipment and activation of service;

- households that subscribe to our programming may pay higher
monthly charges than they would pay for cable service because of
the greater number of channels and greater variety of programming
offered; and

- several cable operators, including Cablevision, have already, or
are in the process of upgrading, their plant and facilities to the
digital technology that will allow them to offer digital set-top
boxes with new value-added services, including Internet access.

We believe our programming content has proven market appeal, in comparison
to our competitors. We distinguish our service from other existing pay
television operators in Mexico by offering more channel capacity than
conventional over-the-air television, cable, or MMDS, and providing exclusive
programming and specially-produced channels. Televisa grants us four
over-the-air broadcast channels as part of the exclusive Mexican DTH program
rights described above. These channels are among the most popular television
channels in Mexico. We are the only DTH service offering all the over-the-air
broadcast signals from Mexico City, as well as signals from the State of Mexico,
Guadalajara, Mexicali, Monterrey, Puebla and Tijuana.

While we do not compete directly with over-the-air broadcast channels for
pay TV subscribers, we do emphasize our exclusive DTH rights to broadcast some
of Televisa's over-the-air channels and their programming. These channels do
compete in terms of programming with other over-the-air channels, such as those
broadcast by

A-34

TV Azteca. The group of private investors that controls TV Azteca, led by Mr.
Ricardo Salinas Pliego, also owns several media outlets: a local television
station in Chihuahua; a movie distribution business, including a chain of movie
theatres, a movie studio, a record company, an Internet shopping site, a
high-speed Internet access company, a cellular phone company, chain stores, a
financial services company and a TV network focused on the Hispanic audience in
the United States, which currently reaches 53% of the Hispanic audience
according to press reports. TV Azteca also has an ownership interest in an El
Salvadorian television station, and a music company, and it owns a Mexican
soccer team. Prior to 2002, we were able to re-broadcast TV Azteca's
over-the-air channels free of charge. In June 2002 we concluded a series of
agreements with TV Azteca giving us the right to re-broadcast channels 7 and 13
for a period of three years with an option for DTH-exclusive rights after 2004,
as well as access to certain soccer matches for which TV Azteca has broadcast
rights. If we do not renew this agreement, TV Azteca and its related interests
could provide this programming to others on an exclusive basis and it would then
be unavailable to us. While viewers in Mexico City have access to a number of
free-over-the-air channels, viewers in certain rural areas of Mexico have
limited access to free over-the-air channels and reduced picture quality.

Televisa holds a controlling, majority interest in Cablevision, Mexico's
largest cable system, which competes directly with us for customers in the pay
television market in the Mexico City area. Cablevision offers a basic package
with 49 channels consisting of nine television channels broadcast in Mexico
City, 40 additional basic channels, four digital premium packages and 23
pay-per-view channels. Some of these channels compete directly with channels we
carry and our pay-per-view channels. For a more detailed discussion of the
impact of this relationship, see "Item 3: Key Information--Risk Factors--Risk
Factors Related to Our Business--Our Equity Holders Have, or May Acquire,
Interests in Which Compete with Us for Customers and Business Opportunities."
Furthermore Cablevision is a major cable television operator and high speed
Internet access provider (through cable modem) in Mexico City, as well as the
only provider of digital cable television services and television-based Internet
access services in Mexico. Its network consists principally of fiber optic and
coaxial cable and it is expanding and upgrading its existing cable network into
a broadband bi-directional network. Cablevision plans to deliver a broad range
of services including enhanced television and other interactive programming
services, near-video-on-demand services, video-on-demand services, e-commerce
applications and IP telephony services. Cablevision is currently rolling out
digital set top boxes to its subscriber base, allowing it to offer new pay
television, digital and interactive products and services, including video
navigators, electronic programming guides and television-based Internet access.

Megacable is the second largest cable operator in Mexico with approximately
317,000 subscribers as of December 31, 2002. It serves the Pacific coast,
Jalisco, Puebla and the Veracruz area. It is followed by Grupo Cablemas with
approximately 299,000 household subscribers as of December 31, 2002 located in
several regions in the country, including Veracruz, the Yucatan, Campeche and
Chiapas peninsular region, central Mexico, Tijuana, Mexicali, Chihuahua, Juarez,
Baja California and other cities on the United States-Mexico border. Press
reports indicated during 2002 that Grupo Cablemas and Megacable were negotiating
a potential merger of the two groups, but these negotiations were suspended.
However, if negotiations are successfully completed and approved by regulatory
authorities, the new group would become the largest cable operator in Mexico, as
measured by the number of subscribers and geographic coverage. This group could
become our largest competitor and, as a result, we believe that competition
would intensify if the merged group invests significant amounts to upgrade
infrastructure and enhance programming content.

Multivision, a MMDS operator in Mexico City, offers services in 22 other
cities such as Guadalajara, Monterrey, Leon, Merida, Villahermosa, Tijuana and
the main cities in the Pacific Coast. Multivision's customers currently can
receive up to 23 channels, but they do not have pay-per-view channels and they
do not broadcast conventional "over-the-air" channels. During 2002, Multivision
re-launched its programming packages, offering now only two packages, "MASTV"
and the premium package, including 15 or 23 channels respectively. Multivision's
subscribers currently pay an average initial one-time installation charge equal
to Ps. 299.0 and a monthly fee of Ps. 75 for 15 channels of its "MASTV"
programming package or Ps. 285.0 for 23 channels in the premium package, which
includes 8 channels of movies (Cinecanal, Movie City, Cinemax and HBO).
Conventional over-the-air channels are not broadcast through the MMDS system. We
believe that our programming content has proven market appeal in comparison to
our MMDS competitors. We distinguish our service from MMDS by offering nation
wide services, more channel capacity and providing exclusive programming and
specially produced channels. See "Item 3: Key Information--Risk Factors--Risk
Factors Related to Our Business--We Face Intense Competition in the Pay
Television Market in Mexico."

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C-BAND DTH

Pay television services utilizing C-band DTH technology are not authorized
by the Mexican Government in Mexico. Accordingly, while there is a C-band market
in Mexico, there are no official statistics regarding the size of this market.
However, we have estimated in the past that there were some 1.0 million
households that received C-band DTH signals on the gray market. However, we
believe Ku-band DTH services will decrease the size of any C-band market in the
long term.

KU-BAND DTH

Currently, only we and DIRECTV Mexico, the digital Ku-band DTH service
controlled, operated and managed by Grupo Galaxy Mexicana, S. de R.L. de C.V.
("Galaxy"), operate DTH satellite services in Mexico. Galaxy launched DIRECTV
Mexico in November 1996. Galaxy was originally a joint venture between Hughes
Communications, Inc. and three Latin American media companies, Venevision, owned
by the Organizacion Cisneros, Televisao Abril and Multivision. In 1999, Hughes
and Venevision bought Televisao Abril's stake in Galaxy. DIRECTV offered 133
channels (75 video, 32 audio, and 26 pay-per-view channels) as of May 31, 2003.
According to Hughes's 2002 annual report, DIRECTV Latin America, L.L.C., or DLA,
is owned by Hughes (approximately 75%), Darlene Investments L.L.C., an affiliate
of the Cisneros Group subsidiary (21%) and the Clarin Group of Argentina (under
4%). DLA provides DTH television and radio services in Mexico and has operations
in other countries in Latin America including Brazil, Argentina, Venezuela,
Chile, Colombia, Ecuador, Guatemala, Puerto Rico and Trinidad and Tobago. See
"Item 3: Key Information--Risk Factors--Risk Factors Related to Our Business--We
Face Intense Competition in the Pay Television Market in Mexico."

On March 18, 2003, DLA announced that it had filed a voluntary petition for
bankruptcy protection, under Chapter 11 of the U.S. Bankruptcy Code, in the U.S.
Bankruptcy Court in Wilmington, Delaware. DLA cited its debt burden and high
fixed costs and listed liabilities of US$1.6 billion as of the end of 2002. DLA
also reported a loss of 54,000 net subscribers in the first quarter of 2003 or
7% of its subscriber base. DLA is a competitor of ours that provides DTH
programming and services in Mexico through an affiliated Mexican operating
company, DIRECTV Mexico. According to its 2002 annual report, Hughes Electronics
Corporation, or Hughes, owns approximately 75% of DLA and also owns a
significant interest in the operating company DIRECTV Mexico. On April 9, 2003,
News Corporation announced that it reached a definitive agreement with General
Motors Corporation and Hughes in which a subsidiary of News Corporation would
acquire General Motors' 19.9% stake in Hughes and a further 14.1% of Hughes from
public shareholders and General Motors' pension and other benefit plans, for a
total of 34% of Hughes. If the agreement is consummated, a subsidiary of News
Corporation's will transfer its 34% ownership interest in Hughes' common stock
to Fox Entertainment Group, Inc., an 80.6% owned News Corporation subsidiary.
The businesses contained in Hughes include a leading U.S. satellite broadcaster
DIRECTV, which has more than 11 million subscribers; an 81% equity holding in
satellite operator PanAmSat; and Hughes Network Systems, a provider of broadband
satellite network solutions.

This agreement is subject to a number of conditions including the
receipt of required regulatory approvals in the United States and elsewhere, and
no assurance can be given that this acquisition will be consummated, or, if
consummated, that it will occur on the terms announced on April 9, 2003.
Additionally, our Social Part Holders Agreement provides that neither Televisa
nor News Corporation may directly or indirectly operate or acquire an interest
in any business that operates a DTH satellite system in Mexico (subject to
certain limited exceptions). If News Corporation were to consummate the proposed
acquisition of an interest in Hughes while Hughes continued to own an interest
in DIRECTV, News Corporation would become an indirect owner of DIRECTV Mexico,
our DTH competitor. Accordingly, under our Social Part Holders Agreement any
such acquisition of an indirect interest in the Mexican operations of DLA would
require the consent of us and Televisa. We cannot predict what impact either the
DLA bankruptcy or, if consummated, News Corporation's acquisition of an interest
in Hughes, will have on the competitive environment for pay television in
Mexico. See "Item 3: Key Information--Risk Factors--Risk Factors Related to Our
Business--We face Intense Competition in the Pay Television Market in Mexico,"
and "--We Have Significant Transactions With Our Owners Who Are Involved in
Related Businesses Which Creates the Potential for Conflicts of Interest,"
"--One of Our Owners, News Corporation, May Acquire Significant Interests in
DIRECTV, Our DTH Competitor in Mexico, and PanAmSat, Our Sole Satellite
Provider, and We Cannot Predict What Effect This Will Have On Us" and "--Our
Equity Holders Have, or May Acquire, Interests in Other Pay Television
Operations in Mexico Which Compete with Us for Customers and Business
Opportunities."

We believe that our programming content has proven market appeal, in
comparison to our competitors. Galaxy is our sole operating Ku-band DTH
competitor at this time. We distinguish our service from the DIRECTV service

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offered by Galaxy by offering more channel capacity and providing exclusive
programming and specially produced channels. Televisa grants us four
over-the-air broadcast channels as part of the exclusive Mexican DTH program
rights. These channels are among the most popular television channels in Mexico.
We are the only DTH service offering all the over-the-air broadcast signals from
Mexico City, as well as signals from the State of Mexico, Guadalajara, Mexicali,
Monterrey, Puebla and Tijuana. Galaxy also has some exclusive DTH offerings.

On April 21, 2003 a U.S. Bankruptcy Judge authorized DLA to reject its
agreement for exclusive rights, in several Latin American countries including
Mexico, to broadcast the 2006 FIFA World Cup soccer tournament. As a result, we
believe the programming disadvantage we faced in 2002, when DIRECTV Latin
America had the exclusive rights to the World Cup tournament, may be reduced. We
cannot predict what impact DLA's rejection of the FIFA world cup contract will
have on our ability to obtain the rights to broadcast the World Cup soccer
tournament in the future should we decide to pursue these rights.

While Grupo Acir and PCTV have also received licenses to offer DTH services
in Mexico, and the Mexican Government may grant additional licenses for DTH
satellite operations in Mexico, our management is not aware of any group
preparing to launch DTH services in Mexico in competition with Sky and DIRECTV.

We also compete with unauthorized Ku-band DTH signals from the United
States. In addition, we may face increased competition for DTH subscribers in
Mexico from U.S. DTH satellite providers authorized to provide service under a
treaty and protocol. The Agreement Between the United States and Mexico
Concerning the Transmission and Reception of Signals from Satellites for the
Provision of Satellite Services to Users in the United States and Mexico, signed
on April 28, 1996, created a framework that enables entities utilizing
U.S.-licensed satellite facilities to provide services in Mexico, and entities
utilizing Mexican-licensed satellites to provide services in the United States.
On November 8, 1996, pursuant to the U.S.-Mexico Satellite Agreement and the
North American Free Trade Agreement, the Protocol Concerning the Transmission
and Reception of Signals from Satellites for the Provision of Direct-To-Home
Satellite Services in the United States and Mexico was executed to facilitate
the provision of cross-border, direct-to-home satellite services. In the DTH
Protocol, the United States and Mexico each agreed to permit satellites licensed
by the other nation to be used to provide encrypted video or video/audio signals
for direct reception by subscribers to, from, and within its own territories,
subject to certain conditions.

MEXICAN REGULATION OF DTH SERVICES

CONCESSIONS; REVOCATION; EXPROPRIATION

In June 1995, a federal telecommunications law was enacted in Mexico (Ley
Federal de Telecomunicaciones), which regulates the telecommunications industry,
including concessions and permits granted in connection with the installation,
operation and exploitation of public and private telecommunications networks. In
order to install, operate or exploit a DTH broadcast satellite pay television
service in Mexico for which subscriber fees are charged (which is considered for
purposes of Mexican law a public telecommunications network), an applicant must
be an individual or entity deemed to be of Mexican nationality and must obtain a
concession from the SCT. Applications are submitted to the SCT, and after a
formal review process, a concession is granted to the applicant with an initial
term of up to 30 years, which may be renewed for terms of up to the length of
the initial term. Concessions are not exclusive and the SCT may grant other
concessions to third parties in the same geographical area or for the same type
of services. Any party rendering telecommunication services without a concession
from the SCT forfeits to the Mexican government all the goods, facilities and
equipment it may have used in providing such services.

A concession may be revoked prior to its stated term in certain
circumstances, such as:

- failure to use the concession within 180 days after it was granted
unless permitted by the SCT based on a justifiable cause;

- failure to comply with the obligations or conditions specified in
the concession:

- unlawful assignment, transfer or encumbrance of the concession,
any rights thereunder or assets used for the exploitation of the
concession;

- failure to pay to the Mexican Government the required fees;

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- interruption of service or operation of the general means of
communication without authorization from the SCT, or interruption
thereof without justifiable cause;

- change of the concessionaire's Mexican nationality; or

- performance of acts preventing other concessionaires or those with
permission from the SCT from doing business.

In addition, the Mexican Government has the right to expropriate the
concession for reasons of public need or interest. In such a case, compensation
must be paid to the concessionaire in an amount equal to the amount determined
by designated appraisers. Although the North American Free Trade Agreement, or
NAFTA, includes rules that aim to add certainty to the expropriation process and
specify that compensation shall be equivalent to the fair market value
immediately prior to the expropriation, NAFTA rules may not generally apply to
the expropriation of our concessions.

CONSIDERATION PAYABLE TO SCT

The Mexican statute does not mandate the payment of fees as consideration
for the granting of a concession. However, the SCT has the discretion to require
the concessionaire to pay fees to the SCT as part of a concession as specified
in our concessions. Such fees may be calculated based upon certain of the
concessionaire's revenues. See "--Our Concessions."

RATES; CROSS-SUBSIDIES

Under Mexican law, DTH concessionaires may freely set customer rates, but
are required to file such rates in advance with the Telecommunications Registry
maintained by the SCT. The statute prohibits concessionaires from discriminating
when setting rates. The concessionaires may not cross-subsidize their services
directly or through a subsidiary or affiliate. The SCT may impose upon a
concessionaire having substantial market power specific obligations related to
rates, quality of service and information.

FOREIGN OWNERSHIP

Under Mexican law, non-Mexican investors may currently own up to 49% of the
outstanding equity of DTH system concessionaires. Foreign investors may increase
their economic participation in the equity of a concessionaire through neutral
investment mechanisms under the Foreign Investment Law (e.g., non-voting
equity), provided that Mexican investors maintain control of the operation.

TEMPORARY SEIZURE; PREEMPTIVE RIGHT OF GOVERNMENT TO PURCHASE ASSETS

Under Mexican and other applicable laws, the Mexican Government may
temporarily seize all assets related to a concession in the event of a natural
disaster, war, significant public disturbance or threats to internal peace and
for other reasons related to preserving public order or for economic reasons.
Under Mexican law, the Mexican Government is obligated, except in the event of
war, to compensate the owner of such assets in the case of such temporary
seizure for damages at their actual value. If there is no agreement upon the
amount of the compensation, damages will be appraised by non-related experts
appointed by the parties; in the case of loss of profit, the net income of the
preceding year will be the basis for such calculation. Upon termination of a
concession, the Mexican Government has the preemptive right to acquire the
assets of a DTH concessionaire.

MONITORING AND INFORMATION

The SCT monitors compliance with Mexican law and other applicable
legislation through periodic inspections. Concessionaires must file annual and
quarterly reports with the SCT which include financial statements, and provide
any other information required by the SCT.

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SUPERVISION OF OPERATIONS

Concessionaires, as a part of their agreement with the government and as
established in the relevant concession, are required to:

- develop training programs for their personnel;

- enter into contracts with their subscribers and file the forms of
such contracts with the SCT;

- obtain SCT approval of their billing systems;

- observe the intellectual property rights of the programming
providers;

- execute research and development activities in Mexico in
coordination with the Mexican Institute of Communications or other
institutions dedicated to the research and development of
technology; and

- appoint a person responsible for the technical operation of the
network who has the appropriate administrative powers to represent
the concessionaire before the SCT with respect to the network's
technical operation.

In addition, concessionaires must comply with certain SCT guidelines with
respect to their operations, including billing, service calls and emergency
plans for service failure.

RESTRICTIONS ON ADVERTISING

Mexican law also regulates the type and content of advertising which may be
broadcast on television. Under the DTH protocol with the U.S.,
non-discriminatory restrictions on programming and advertising content can be
established. Under new rules enacted in February 2000, a concessionaire has the
exclusive responsibility to ensure that the commercial advertising it broadcasts
complies with any applicable regulations. See "--Pay TV and Audio Services
Rules."

PROGRAMMING

Under Mexican law, television programming is not subject to judicial or
administrative censorship, except that programming is subject to various
regulations, including prohibitions on foul language and programming, which is
against good manners and customs, or is against the national security or against
public order. Under rules enacted in February 2000, a concessionaire has the
exclusive responsibility to ensure that the programming it broadcasts complies
with any applicable regulations. See "--Pay TV and Audio Services Rules."

SUBSCRIPTION AND SALE OF STOCK

According to our concession, we must file with the SCT, no later than April
30 of each year, a list of their ten principal shareholders and their
corresponding ownership percentages. In the event of any proposed new issuance
of stock or sale of stock or interests in a transaction or series of
transactions representing 10% or more of Innova's equity:

- we must notify the SCT of the planned issuance or sale, including
information relating to the purchasers;

- the SCT shall have a period of 90 calendar days from the date it
is notified to object to the transaction in writing and state the
reasons for the objection; and

- if the transaction has not been objected to by the SCT within such
period, the transaction shall be deemed approved.

In the event that the party interested in purchasing our shares or
interests is a corporation, the notice must include information with respect to
the purchaser's shareholders who hold 10% or more of the purchaser's equity.

A-39

PROTECTION OF RIGHTS

Under Mexican law, including the Federal Criminal Code and the Federal
Copyright law, certain prison sentences and fines may be imposed on any person
who violates intellectual or industrial property rights or copyright. Such
violations may include the manufacture, import, sale, or lease of any device or
system, or any activity that involves decoding a program carrier encrypted
satellite signal without the permission of the lawful distributor of such
signal.

TELECOMMUNICATIONS TAX

At the end of December 2001, the Mexican Congress passed a series of tax
reforms. As a result of these tax reforms, subject to certain exceptions,
revenues from our pay television services are now subject to a 10% excise tax.
The new tax became effective beginning on January 1, 2002. This new tax is in
addition to a 15% VAT, paid by subscribers, and the 3.5% fee we pay to the
Ministry of Communications and Transportation for our concessions.

In February 2002, Cablevision, Innova, Skytel and a number of other
companies in the telecommunications and pay television industries filed amparo
injunctive proceedings challenging the constitutionality of this excise tax.
Nonetheless, we implemented rate increases on January 1, 2002 and took other
actions including lay-offs and reduction of capital expenditures and expenses in
an effort to mitigate, in part, the impact of this tax on our results of
operations and financial condition. We obtained a favorable ruling in this
proceeding regarding our 2002 liability for this tax, but this ruling does not
entitle us to recover any amounts paid for this tax in 2002, and we cannot
assure you that we will be able to recover any portion of the approximately
US$18 million paid for this excise tax during 2002.

In December 2002 the Congress again acted to make this special tax
effective during fiscal year 2003, by adding or modifying some concepts included
in the original text of the law. In response, we have filed a new amparo
proceeding challenging the constitutionality of the tax. Our action challenges
the tax on grounds similar to those we raised last year and we plan to follow a
similar strategy as last year. We cannot assure you that we will obtain a
favorable resolution in these proceedings or that we will be able to recover the
amounts that have been or will be paid for this tax. So far this year, we have
not increased prices in response to the tax, but we will continue to evaluate
the impact of this tax on our results of operations and financial condition and
we will consider measures, including rate increases, that we might implement to
mitigate the impact of the continued imposition of this tax. If, as a result of
the imposition of the tax, we further increase the rates we charge our customers
such rate increases could adversely affect consumer demand for our services,
which could result in a loss of subscribers and a decrease in revenues, and
could adversely impact our ability to attract new subscribers.

OTHER FEES

We are required by the Mexican Federal Rights of the Author Law to pay a
percentage of our programming revenues to the Sociedad General de Escritores de
Mexico (SOGEM) and the Sociedad de Autores y Compositores de Musica (SACM),
non-profit organizations that support and protect Mexican writers and artists.
We currently pay the standard rate of 1.15% of programming revenues. In
addition, under Mexican law, we are required to pay to the Mexican Government a
fee of Ps. 5,195 each time that government agents inspect Innova's facilities.

PAY TV AND AUDIO SERVICES RULES

In February 2000, rules applicable to pay television and audio services
were enacted in Mexico (Reglamento del Servicio de Television y Audio
Restringidos). These rules imposed new requirements, such as the
concessionaires' obligations to:

- classify their programs according to their content and the
specifications of the Internal Affairs Ministry (Secretaria de
Gobernacion);

- create a database with subscriber information, including name,
address, services equipment serial numbers and specific passwords
selected in order to obtain pay-per-view, or PPV;

- comply with Mexican regulations regarding the content of
programming and commercial advertising; and

A-40

- encrypt and promote restricted audience programs (i.e. adult
programming) as premium channels or events.

OUR CONCESSIONS

We have received two concessions authorizing the installation, operation,
and exploitation of our telecommunications and broadcast network. The
concessions deal with domestic and foreign source satellite signals,
respectively. Our first concession to install, operate and exploit a public
telecommunications network providing DTH services was granted on May 24, 1996,
to our subsidiary, Corporacion de Radio y Television del Norte de Mexico, S. de
R.L. de C.V., and expires in 2026. This concession authorizes the operation of a
DTH system using Mexican satellites, including Solidaridad 2. The concession
covers satellite television services, which consist of broadcasting video and
related audio codified signals by satellite and the direct receipt of these
signals at the domiciles of subscribers through terminal equipment that allows
access to the signals.

We obtained the second concession from the SCT on November 27, 2000 in
order to use services over Mexican territory from PAS-9 which Mexican law
considers a foreign satellite. The SCT granted the concession to our subsidiary,
Corporacion de Radio y Television del Norte de Mexico, and it expires in 2020.
The concession covers satellite DTH television services, consisting of broadcast
video and related audio codified signals by satellite and the direct receipt of
these signals at the domiciles of subscribers through terminal equipment that
allows access to the signals. If we eventually desire to use PAS-9 for other
services, we must request an additional authorization from the SCT for those
purposes.

Under both concessions, we and our foreign indirect owners, News and
Liberty Media, have agreed not to invoke or accept the diplomatic intervention
of any foreign country under penalty of forfeiting to the Mexican government all
the goods and rights we may have acquired for the installation, operation and
exploitation of our telecommunications public network and use of foreign
satellite services.

Under our first concession, we were obliged to pay the Mexican Government a
percentage of our revenues and fees, on a monthly basis. We were required to pay
1.5% and 2.5% of programming revenues and maintenance fees paid by subscribers
in 1997 and 1998 respectively. In 1999 and through to November 27, 2000 we paid
3.5% of our programming revenues and fees under our first concession. From
November 27, 2000, when our second concession was granted, and going forward, we
will continue to pay 3.5% of our programming revenues and fees as a combined
payment for both concessions for the term of the concessions.

Under both concessions, we will be able to broadcast up to six minutes of
commercial advertising per transmission hour on any channel as long as at least
20% of the channel's programming is domestically produced and our agreements
with our programming providers allow us to do so.

We were required to post a bond with an approved bonding institution in the
amount of Ps. 1.5 million for the benefit of the Mexican Treasury of the
Federation (Tesoreria de la Federacion) to secure the payment of any monetary
sanctions imposed by the SCT in the event of any revocation of the first
concession. Under the new concession, we replaced the bond we posted under the
original concession with a Ps. 6.3 million bond posted with an approved bonding
institution to secure the payment of any monetary sanctions imposed by the SCT
in the event of any revocation of either concession. The amount of the bond is
adjusted annually for inflation in accordance with the Mexican national consumer
price index.

We are obliged to obtain authorization in advance to utilize those signals
that are transmitted from a country other than Mexico or the United States of
America. We must also prevent our subscribers from receiving signals from
countries where Mexican satellite services are not permitted, if the SCT so
requests.

To use foreign satellite signals in Mexico, a concessionaire must be an
entity organized and existing under Mexican law, must hold a concession, and
there must be a reciprocity agreement between Mexico and the relevant country.
Under the satellite agreement and DTH protocol currently in force, if, during
our new concession, the SCT identifies a "lack of reciprocation" between Mexico
and the United States' satellites services practices, the SCT may terminate our
second concession by declaration. The SCT may find a lack of reciprocity:

- if the US government denies "most favored nation" treatment to
Mexican satellite services in the United States satellite market;

A-41

- if either the agreement or protocol mentioned above is partially
restricted, suspended or terminated; or

- for any other reason that undermines the principle of reciprocity
in the SCT's judgment.

Under the second concession, we must provide our DTH broadcast satellite
pay television services by November 2003 to at least those areas of Mexico where
40% of the total population lives, according to the last available census
information. We must make the necessary investments to fulfill this obligation;
otherwise the second concession could be revoked by the SCT. As of December 31,
2002 more than 50% of our subscriber base resided in States that together have
approximately the 58% of total population, and therefore we believe we are
currently providing our DTH broadcast satellite pay television services in
accordance with our obligations.

ORGANIZATIONAL STRUCTURE

Innova, S. de R.L. de C.V., is a joint venture indirectly owned by
Televisa, News Corporation and Liberty Media, through their respective
investment vehicles, SKY DTH, S. de R.L. de C.V. (formerly Galavision DTH, S. de
R.L. de C.V.), News DTH (Mexico) Investment Ltd., and Liberty Mexico DTH, Inc.

On March 5, 2002 Galavision DTH, S. de R.L. de C.V. spun-off part of its
assets, liabilities and equity, including its participation on Innova, S. de
R.L. de C.V., into the new company SKY DTH, S. de R.L. de C.V., which is a
wholly owned subsidiary of Televisa and is registered with the Public Registry
of Commerce in Mexico City under the commercial File (folio mercantile) No.
290987.

Televisa is the leading television broadcaster in Mexico that we believe
produces and owns the largest library of Spanish-language television programming
in the world. News Corporation is a diversified international media and
entertainment company with operations in a number of industry segments,
including filmed entertainment, television, cable network programming, magazines
and inserts, newspapers and book publishing. The activities of News Corporation
are conducted principally in the United States, the United Kingdom, Italy, Asia,
Australia, and the Pacific Basin. Liberty Media owns and operates broadband
cable television and telephony distribution networks and provides diversified
programming services in Europe, Latin America and Asia. Liberty Media is a
wholly owned subsidiary of Liberty Media Corporation. Prior to August 10, 2001,
Liberty Media Corporation was a wholly owned indirect subsidiary of AT&T Corp.
On August 10, 2001, AT&T Corp. spun-off Liberty Media Corporation, which is now
an independent, publicly-traded company.

We have five wholly owned subsidiaries: Corporacion de Radio y Television
del Norte de Mexico, S. de R.L. de C.V., Corporacion Novavision, S. de R.L. de
C.V., Corporacion Novaimagen, S. de R.L. de C.V. , Servicios Novasat, S. de R.L.
de C.V. and Servicios Corporativos de Telefonia, S. de R.L. de C.V. The latter
was formed in July 2001 to house the call center operations we acquired from
Merkatel. We own all of the voting interests in these subsidiaries, and each is
incorporated in Mexico. We are a holding company and almost all of our
operations occur in, and almost all of our assets are held by, our subsidiaries.

A-42

GROUP STRUCTURE OF INNOVA

[GROUP STRUCTURE OF INNOVA CHART]

PROPERTY, PLANT AND EQUIPMENT

Our properties consist primarily of office and call center facilities
located in Mexico City, uplink facilities located in Mexico City, our DTH
concessions and certain rights to use satellite transponder capacity.

We lease our principal corporate office space in Mexico City from an
unaffiliated third party where our call center is also located. In addition to
corporate activities, we conduct several technical activities at our principal
corporate office, including downlink monitoring, "black box" recording and
subscription management. We also lease from an unaffiliated third party
additional space from which our programming and scheduling operations are
conducted. We lease all of these properties through wholly owned subsidiaries.
These properties consist of approximately 180,000 square feet in the aggregate
and are located throughout Mexico.

In June 2001, we purchased from Merkatel, our former call center service
provider, the equipment Merkatel used to provide call center services to Innova,
including computers, telephones, furniture and fixtures. We also hired the
telephone operators involved in operating the call center. Merkatel is a wholly
owned subsidiary of Televisa and provided call center services to Innova from
its inception through June 30, 2001. Since July 1, 2001, the call center
functions have been provided in-house in a facility adjacent to our principal
corporate offices.

We believe that the facilities we use in Mexico City and the United States
are currently adequate for our technical activities.

We currently use transponder capacity on the PAS-9 satellite. For a
description of our agreements with respect to transponder capacity, see "Item 4:
Information on the Company--Business Overview--Operations--Satellites."

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion in conjunction with our audited
financial statements and the accompanying notes, which appear elsewhere in this
annual report. This discussion is qualified in its entirety by reference to our
financial statements. The following discussion includes certain forward-looking
statements. See "Item 3: Key Information-Risk Factors--Forward-Looking
Statements" for a discussion of important factors which could cause our actual
results to differ materially from the forward-looking statements contained in
this discussion. Unless otherwise stated, all amounts denominated in Mexican
pesos and U.S. dollars have been rounded to the nearest one hundred thousand
Mexican pesos or U.S. dollars.

A-43

PREPARATION OF FINANCIAL STATEMENTS

Our financial statements have been prepared in accordance with Mexican
GAAP, which differ in some significant respects from U.S. GAAP and generally
accepted accounting principles adopted in other countries. Note 21 to our
financial statements describes the principal differences between Mexican GAAP
and U.S. GAAP as they relate to us and reconciles net loss and total
stockholders' deficit to U.S. GAAP.

CRITICAL ACCOUNTING POLICIES

We have identified certain key accounting policies and estimates on which
our consolidated financial condition and results of operations are dependent.
The application of these key accounting policies often involves complex
considerations and assumptions and the making of subjective judgments or
decisions on the part of our management. In the opinion of our management, our
most critical accounting policies under both Mexican GAAP and U.S. GAAP are
those related to the allowance for doubtful accounts receivable, the carrying
value and valuation of long-lived assets, the recognition of certain reserves
and accruals under Mexican GAAP, and deferred income taxes. For a description of
our principal accounting policies, see Notes 2, 3 and 21 to our consolidated
financial statements.

ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE

During 2002, we recorded additional allowances for doubtful accounts to
reflect the increased risk of uncollectibility resulting from:

- cancellations due to the increase in our prices as a result of 10%
consumer tax on telecommunication services effective January 1,
2002;

- cancellations by subscribers who did not have their satellite
antenna re-pointed to the PAS-9 satellite; and

- the general deterioration in economic conditions in Mexico.

In order to mitigate the risk of uncollectibility, we perform credit checks
on all customers, bill one month in advance and have implemented a "blocking"
system for late paying customers.

CARRYING VALUE AND VALUATION OF LONG-LIVED ASSETS

We have recognized on our balance sheet certain long-lived assets including
our satellite transponder asset, which was recognized in 2000. These long-lived
assets are evaluated for impairment when events and circumstances indicate that
the asset's carrying value may not be recoverable. We recognize impairment
losses to the extent we believe that the carrying value exceeds the anticipated
estimated future net cash flows generated by the asset. Different assumptions
regarding such cash flows could materially affect our analysis of
recoverability. Further, as discussed in Risk Factors and elsewhere, currently
and in the past we have not generated positive cash flows from operations and we
depend on funding from our stockholders. If we do not receive such funding, or
if our assumptions regarding future positive cash flows are not correct, we may
need to recognize significant impairment losses and accelerated depreciation of
the carrying value of these assets.

During the years ended December 31, 2002 and 2000, we recorded an
impairment loss on certain transmission equipment and other equipment not in use
of Ps. 30.8 million (which was included in the "Transponder services-

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Solidaridad 2 and reorientation cost" line item) and Ps.11.5 million (included
in the "Depreciation and amortization" line item), respectively. No impairment
was recorded during 2001.

As of April 2002, we stopped utilizing the service of the Solidaridad 2
satellite, continuing only with the service of the PAS-9 satellite. At that
date, transmission equipment with a book value of Ps. 38.3 million were
associated with Solidaridad 2 and we decided to recognize an impairment charge
amounting to Ps.30.8 million for the equipment that could not be utilized by the
PAS-9 satellite, and to create a spare-part inventory for the remaining Ps. 7.6
million transmission equipment that could be utilized by the PAS-9 satellite.
This impairment loss, together with the payments for the use of Solidaridad 2 in
the first quarter of 2002 amounting to Ps.14.1 million was reflected as a
nonrecurring charge of Ps.25.9 million in 2002. The charge was partially offset
by the reversal of unutilized provisions recorded in 2000 amounting to Ps.19.0
million. See Notes 5 and 15 to our consolidated financial statements.

RESERVES FOR TRANSPONDER SERVICES FROM SOLIDARIDAD AND SATELLITE ANTENNA
REORIENTATION AND SMART CARD REPLACEMENT

In 2000, we recognized a reserve of Ps. 430.9 million representing the
estimated costs to be incurred in future periods related to the migration of
subscribers from the Solidaridad 2 satellite to the PAS-9 satellite. We
estimated that we would incur costs relating to the migration including: the
redundant satellite lease payments being made for the use of Solidaridad 2 and
costs related to reorienting subscribers' satellite antennas to accept the feed
from PAS-9. In making these estimates, we used internal and external analyses
taking into consideration the expected timing of the reorientation, and the
number and location of subscribers involved. In 2001, we realized that the
expected timing of the completion of the reorientation would be extended into
March 2002 but this change in timing did not significantly affect the amount
previously estimated. At March 2002, the reorientation was completed and as of
December 31, 2002, we have no remaining reserve related to this project.

In addition, in 2000 we recognized a reserve of Ps. 32.6 million for the
estimated costs to be incurred to replace our customer's smart cards. The smart
card replacement was substantially completed in 2001 and we have no remaining
reserve related to this project.

DEFERRED INCOME TAXES

Under both Mexican and U.S. GAAP, we are required to record deferred income
tax assets and liabilities by using enacted tax rates in order to give effect to
temporary differences between the book and tax basis of assets and liabilities.
If enacted tax rates change, we adjust the deferred tax assets and liabilities,
through the provision for income taxes in the period of change, to reflect the
enacted tax rate expected to be in effect when the deferred tax items reverse.
We also record a valuation allowance to reduce our deferred tax assets to the
amount that is more likely than not to be realized. While we have considered
future taxable income and tax planning strategies in assessing the need for the
valuation allowance, if we were to determine that we would be able to realize
our deferred tax assets in the future in excess of the net recorded amount, an
adjustment to the deferred tax asset would increase income in the period such
determination was made. Should we determine that we would not be able to realize
all or part of our net deferred tax asset in the future, an adjustment to the
deferred tax asset would be charged to income in the period such determination
was made.

EFFECTS OF INFLATION, CURRENCY EXCHANGE FLUCTUATIONS AND TRANSLATION EFFECTS

The following table sets forth, for the periods indicated:

- the percentage that the peso devalued or appreciated against the
U.S. dollar;

- the Mexican inflation rate;

- the U.S. inflation rate; and

- the percentage change in Mexican GDP compared to the prior period.

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YEAR ENDED DECEMBER 31,
----------------------------------------
1999 2000 2001 2002
---- ---- ---- ----

(Appreciation) devaluation of the Mexican peso as compared to
the U.S. dollar(1)........................................ (3.9)% 1.2% (4.6)% 13.9%
Mexican inflation rate(2)...................................... 12.3 9.0 4.4 5.7
U.S. inflation rate(3)......................................... 2.7 3.4 1.6 2.5
Increase (decrease) in Mexican GDP(4).......................... 3.8 6.9 (0.3) 0.9

- -------------
(1) Based on changes in the Interbank Rates, as reported by Banamex, as of the
end of each period, which were as follows: Ps.9.88 as of December 31,
1998; Ps.9.50 as of December 31, 1999; Ps.9.62 per U.S. dollar as of
December 31, 2000; Ps.9.18 per U.S. dollar as of December 31, 2001; and
Ps.10.46 per U.S. dollar as of December 31, 2002.

(2) Based on changes in the NCPI from the previous period, as reported by the
Mexican Central Bank, which were as follows: 76.195 in 1998; 85.581 in
1999; 93.248 in 2000; 97.354 in 2001; and 102.904 in 2002.

(3) As reported by the Federal Reserve Bank of New York.

(4) As reported by the Instituto Nacional de Estadistica, Geografia e
Informatica, or INEGI, and, in the case of GDP information for 2001 and
2002, as estimated by INEGI.

Mexican GAAP requires that our financial statements recognize the effects
of inflation. Financial data for all periods presented in our financial
statements and this annual report have been restated in constant pesos in
purchasing power as of December 31, 2002 in accordance with the third amendment
to Bulletin B-10. Accordingly, the comparative increases set forth below are
adjusted for the general effects of inflation to permit period to period
comparison. See Note 3 to our financial statements.

In 2000, inflation in Mexico was 9.0%. In nominal terms, the peso
depreciated against the U.S. dollar by 1.2% in 2000. In 2001 and 2002, the rate
of inflation in Mexico was 4.4% and 5.7%, respectively, and the peso appreciated
4.6% in 2001 against the U.S. dollar in nominal terms while it depreciated 13.9%
against the U.S. dollar in 2002. The rate of inflation in Mexico has declined
substantially during the last few years as compared to historical rates.
Nonetheless, at approximately 4.7% per annum (as measured from May 2002 to May
2003), Mexico's current level of inflation remains higher than the annual
inflation rates of its main trading partners. See "Item 3: Key Information--Risk
Factors--Risk Factors Related to Mexico--Mexico Has Experienced Adverse Economic
Conditions."

Inflation has led to high interest rates, devaluations of the peso, and
during the 1980s, substantial government control over exchange rates and prices.
If Mexico were to experience high levels of inflation, our revenues and
financial condition could be impacted by the resultant decreases in effective
purchasing power among current and potential subscribers and the prospect of a
currency devaluation that could make it more difficult for us to repay our U.S.
dollar denominated debt and obligations as discussed below. A robust U.S.
economy, rising oil prices, the tight monetary policy established by Mexico's
central bank, Banco de Mexico, and fiscal discipline each contributed to
economic growth and currency stability in Mexico in 2000. But, economic growth
slowed precipitously in 2001 due in part to the recession in the United States,
which continued during 2002.

Under Mexican GAAP, through December 31, 2002, U.S. dollar-denominated
sales, costs and expenses are translated into pesos at the exchange rate in
effect when the operations are recognized and are subsequently restated in
constant pesos using the Mexican national consumer price index. If the
devaluation of the peso against the dollar is greater than inflation in Mexico
during a period, U.S. dollar-denominated sales, costs and expenses increase in
relative terms when compared to prior periods. Conversely, if inflation exceeds
the devaluation rate during a period, U.S. dollar-denominated sales, costs and
expenses decrease in relative terms when compared to prior periods. In 2001, we
had favorable effects due to peso appreciation and low inflation as compared to
previous years. In 2002, the translation effect and devaluation increased our
cost of sales in comparison to previous years.

Adverse economic conditions in Mexico, as well as social instability or
other adverse social, political or economic developments in or affecting Mexico,
would generally have an adverse effect on the Mexican economy and consumer
purchasing power, thereby potentially decreasing our revenues while increasing
our nominal peso-denominated costs and expenses. See "Item 3: Key
Information--Risk Factors--Risk Factors Related to Our Business--Mexico Has
Experienced Adverse Economic Conditions."

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U.S. DOLLAR DENOMINATED OBLIGATIONS, COSTS AND EXPENSES

Any devaluation of the peso will likely adversely affect our liquidity and
results of operations by increasing the peso equivalent of U.S.
dollar-denominated operating costs and expenses.

We have incurred and expect to continue to incur more than 70% of our
obligations payable in U.S. dollars, while our revenues will be generated
primarily in Mexican pesos. Therefore, we are subject to currency exchange rate
risk. In addition to our obligations with respect to our senior notes, our
dollar-denominated obligations will also continue to include satellite signal
reception and retransmission fees, programming commitments and equipment costs.
We did not have any U.S. dollar-denominated revenues from 1998 through 2002
other than interest income on certain restricted investments, while our U.S.
dollar-denominated operating costs and expenses were significant and are
expected to continue to exceed U.S. dollar-denominated revenues, if any. During
2000, 2001 and 2002, approximately 41.7%, 42.5% and 48.5% of our total operating
expenses, not considering interest expense of Ps. 742.6 million, Ps. 903.9
million and Ps. 983.1 million respectively, were U.S. dollar-denominated.

In 2000, 2001 and 2002, we did not engage in any hedging or other
transactions to manage the risks associated with foreign currency or interest
rate fluctuations. Because we do not currently engage in hedging activity,
shifts in currency exchange rates could decrease the value of our revenues
relative to our costs, resulting in a material adverse effect on our financial
position. See "Item 3: Key Information--Risk Factors--Risk Factors Related to
Mexico--Currency Fluctuations or the Devaluation or Depreciation of the Peso
Could Limit the Ability of Us and Others to Convert Pesos into U.S. Dollars or
Other Currencies and/or Adversely Affect Our Financial Condition." We may
consider entering into transactions to hedge the risk of exchange rate
fluctuations if we are able to obtain hedging arrangements on commercially
satisfactory terms.

NEW ACCOUNTING PRONOUNCEMENTS

In December 2001, the MIPA issued Bulletin C-9, "Liability, Provisions,
Contingent Assets and Liabilities, and Commitments." Bulletin C-9 provides
guidance for the valuation, presentation and disclosure of liabilities and
provisions (other than income taxes, employee benefit plans, financial
instruments to be valued on a fair value basis and asset allowances), including
contingent assets and liabilities, as well as disclosure guidelines for
commitments incurred by an entity as a part of its operations. Bulletin C-9 is
effective as of January 1, 2003, with earlier adoption permitted.

In January 2002, the MIPA issued Bulletin C-8, "Intangible Assets", which
defines intangible assets as costs incurred and rights or privileges acquired
that will generate a future economic benefit. Bulletin C-8 provides a definition
of research and development costs requiring that only development costs can be
deferred to a future period. Furthermore, Bulletin C-8 states that pre-operating
costs should be expensed as a period cost, unless they can be classified as
development costs. Bulletin C-8 requires that intangible assets with indefinite
useful lives should be tested for impairment annually rather than amortized.
Intangible assets with finite useful lives should be amortized over their useful
lives. The provisions of Bulletin C-8 became effective as of January 1, 2003.

We are currently evaluating the impact of these Bulletins on our results of
operation and financial position. However, we do not believe that the adoption
of these Bulletins will have a material impact on our results of operation and
financial position.

RECENTLY ISSUED U.S. GAAP PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 143, "Accounting for Asset
Retirement Obligation" ("SFAS 143"). SFAS 143 establishes accounting standards
for recognition and measurement of a liability at fair value for an asset
retirement obligation and an addition to the associated asset retirement cost.
The accretion of interest expense each period is subsequently recorded as an
expense and added to the liability. We are required to adopt SFAS 143 effective
January 1, 2003.

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We do not expect that the adoption of FAS 143 will have a material impact on our
results of operation and financial position.

In April 2002, the FASB issued Statements of Accounting Standards No. 145,
"Rescission of SFAS Nos. 4, 44 and 64, Amendment of SFAS 13, and Technical
Corrections as of April 2002" ("SFAS 145"). SFAS 145 rescinds SFAS No. 4,
"Reporting Gains and Losses from Extinguishment of Debt," SFAS No. 44,
"Accounting for Intangible Assets of Motor Carriers", and SFAS 64,
"Extinguishments of Debt made to satisfy Sinking-Fund requirements". As a
result, gains and losses from extinguishment of debt will no longer be
classified as extraordinary items unless they meet the criteria of unusual or
infrequent as described in Accounting Principles Boards Opinion 30, "Reporting
the Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions". In addition, SFAS 145 amends SFAS 13, "Accounting for Leases", to
eliminate an inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions. SFAS 145
also amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability under
changed conditions. SFAS 145 is effective for fiscal years beginning after May
15, 2002. We do not believe that the adoption of FAS 145 will have a material
impact on our results of operation and financial position.

In June 2002, the FASB issued Statement of Accounting Standards No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS 146").
This Statement addresses financial accounting and reporting for costs associated
with exit or disposal activities and nullifies Emerging Issues Task Force Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exist an Activity (including Certain Costs Incurred in a
Restructuring)" ("EITF 94-3"). SFAS 146 eliminates the definition and
requirements for recognition of exit costs in EITF 94-3. SFAS 146 requires that
a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. Under EITF 94-3, a liability for an
exit cost as defined in EITF 94-3 was recognized at the date of an entity's
commitment to an exit plan. SFAS 146 also concludes that an entity's commitment
to a plan, by itself, does not create a present obligation to others that meets
the definition of a liability. SFAS 146 also establishes that fair value is the
objective for initial measurement of the liability. SFAS 146 is effective for
exist or disposal activities initiated after December 31, 2002. We are currently
evaluating the impact that the adoption of SFAS 146 will have on our
consolidated financial statements. However, we do not believe that the adoption
of FAS 146 will have a material impact on our results of operation and financial
position.

In April 2003 the Financial Accounting Standards Board (FASB) issued
Statement No. 149 ("SFAS 149"), Amendment of SFAS No. 133 on Derivative
Instruments and Hedging Activities. The Statement amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under SFAS 133. In
particular, it (1) clarifies under what circumstances a contract with an initial
net investment meets the characteristic of a derivative as discussed in SFAS
133, (2) clarifies when a derivative contains a financing component, (3) amends
the definition of an underlying to conform it to the language used in FIN 45 and
(4) amends certain other existing pronouncements.

SFAS No. 149 is effective for contracts entered into or modified after June
30, 2003, except as stated below and for hedging relationships designated after
June 30, 2003.

The provisions of SFAS 149 that relate to SFAS 133 Implementation Issues
that have been effective for fiscal quarters that began prior to June 15, 2003,
should continue to be applied in accordance with their respective effective
dates. In addition, certain provisions relating to forward purchases or sales of
when-issued securities or other securities that do not yet exist, should be
applied to existing contracts as well as new contracts entered into after June
30, 2003. SFAS 149 should be applied prospectively. We do not expect that the
adoption of this Statement will have a material impact on our results of
operations and financial position.

SFAS 150 affects an issuer's accounting for three types of freestanding
financial instruments, namely:

A-48

- Mandatorily redeemable shares, which the issuing company is
obligated to buy back in exchange for cash or other assets.

- Financial instruments, other than outstanding shares, that do or
may require the issuer to buy back some of its equity shares in
exchange for cash or other assets.

- Unconditional obligations that can be settled with equity shares,
the monetary value of which is fixed, tied solely or predominantly
to a variable such as a market index, or varies inversely with the
value of the issuer's equity shares.

SFAS 150 does not apply to features embedded in financial instruments that
are not derivatives in their entirety.

RESULTS OF OPERATIONS

OVERVIEW

We operate a digital Ku-band DTH satellite pay television service in
Mexico. The company was formed on July 25, 1996 and we launched our digital
Ku-band DTH service on December 15, 1996. From our inception to the launch of
DTH services, we were engaged principally in development and start-up
activities.

Since our inception, we have sustained substantial net losses and
substantial negative cash flow. These losses are due primarily to start-up costs
we incurred to develop our DTH service, satellite transponder commitments,
expenses of increasing our subscriber base and financing costs. While we began
receiving revenues from subscriptions in 1997, our operating costs, expenses and
financing costs incurred exceeded these revenues during each of our six full
years of operations. We expect to continue to experience net losses and negative
cash flow for the next several years while we develop and expand our DTH
service. See "Item 3: Key Information--Risk Factors--Risk Factors Related to Our
Business--We May Never Generate Revenue Sufficient to Cover Our Costs". Since
our inception, we have relied substantially upon proceeds from our senior notes
and loans and capital contributions by Televisa, News Corporation and Liberty
Media to fund our operations. Our expansion plans will continue to require
substantial capital expenditures and investments, and we cannot assure you that
our business will generate net profits or positive cash flow. See "--Liquidity
and Capital Resources."

During the years ended December 31, 2002, 2001 and 2000 we concentrated on
managing and expanding our subscriber base and its quality, further developing
the infrastructure and points of sale for distribution of our DTH service and
acquiring quality programming. In 2002, we increased our subscriber base 2.0%
from over 692,000 subscribers as of December 31, 2001 to approximately 705,900
subscribers as of December 31, 2002, even while facing several adverse
situations such as the new 10% tax on telecommunication services, the repointing
of antennas process, the lack of rights to transmit the World Cup soccer
tournament in June 2002 and the economic recession.

In 2001, we increased our subscriber base 17.2% from over 590,300
subscribers as of December 31, 2000 to approximately 692,000 subscribers as of
December 31, 2001. In 2000, we increased our subscriber base approximately 44%
from over 410,000 subscribers as of December 31, 1999. The above subscriber base
figures do not include commercial subscribers, which are included as part of our
subscriber base beginning only in the first quarter of 2003, as explained below.

We believe four elements continue to drive the strong growth in our
subscriber base:

- our superior programming content;

A-49

- our extensive distribution network and direct sales force;

- our competitive pricing policy; and

- our enhanced TV features.

Our programming includes Televisa's four over-the-air channels, which we
offer on a DTH exclusive basis and certain pay-TV exclusive soccer games and
special events. Our distribution network includes an in-house sales force and 12
external, third-party master wholesalers, incorporating more than 3,600 points
of sale. In addition to our basic programming costs, we incurred further costs
during 2001 and 2002 in order to feature a number of free special events for
subscribers to introduce them to Sky's new product offerings as well as high
profile sporting events and reality shows.

In our six full years of operations, we have derived most of our revenues
from DTH programming fees, subscription fees, installation fees, rental fees and
membership fees all paid by our subscribers. We are renting IRDs to our
subscribers, and starting in October 2000 we began retaining title to the
antennas and LNBs, and providing them to our subscribers to use as part of their
subscriptions. Until we began retaining title to this equipment in October 2000,
the various fees were equivalent to our Sky Kit sales. IRD rental fees,
subscription fees, membership fees along with advertising sales revenue,
accounted for approximately 36%, 29% and 30% of our revenues in the years ended
December 31, 2002, 2001 and 2000, respectively. Programming fees, channel fees,
pay-per-view fees, and special events fees accounted for approximately 67%, 70%
and 68% of our revenue in the years ended December 31, 2002, 2001 and 2000,
respectively. All of our revenues are generated in Mexico, principally from
consumers. Our DTH revenues are principally a function of the number of
subscribers, the mix of programming packages selected by the subscribers and the
rates charged.

Our principal operating costs and expenses originate from:

- programming costs,

- subscriber management (including call center costs),

- the costs of providing, replacing and refurbishing equipment for
subscribers,

- transmission and related functions, including uplink and downlink
services, and

- marketing and administration.

Programming represents our largest cost at the present time. Subscriber
management expenditures include our costs to operate our subscriber management
system and conditional access system, both of which are largely dependent on DTH
subscriber levels. Transmission and related costs, including technical costs,
are largely dependent upon the number of transponders serving Innova. See
"Item 4: Information on the Company--Business Overview--Operations--Satellites."

Our capital expenditures include the purchase of technical equipment,
software and systems and IRDs. Our operating costs and capital expenditures from
inception through fiscal year 2002 were financed by capital contributions and
loans made by Televisa, News Corporation and Liberty Media, the proceeds of our
senior notes and lately partially by our own generated cash flow. See "-
Liquidity and Capital Resources."

NET SALES

Our recurring revenues consist of fees paid by subscribers to receive one
of our programming packages and pay-per-view services. Net sales for the year
ended December 31, 2002 were Ps. 3,432.9 million, an increase of Ps. 166.9
million as compared with the year ended December 31, 2001. This increase was due
primarily to the increase in the number of subscribers in 2002.

We have experienced a continued upward trend in the number of subscribers
each year since our inception, which generally increases our net sales. Our
subscriber growth slowed during 2002, however, due primarily to:

A-50

- the slowdown of the Mexican economy and consequent loss of
consumer purchasing power;

- cancellations due to the increase in our prices as a result of the
10% tax on telecommunications services effective January 2002;

- cancellations by subscribers who did not have their satellite
antenna re-pointed to the PAS-9 satellite; and

- the lack of rights to broadcast the FIFA World Cup soccer
tournament in June 2002.

Nevertheless, our subscriber base experienced a 2% growth during 2002, as
compared to 17.2% in 2001 and 44.2% in 2000. As of December 31, 2002, we had
approximately 705,900 gross active residential subscribers as compared to
approximately 692,000 at the end of fiscal year 2001, approximately 590,300 at
December 31, 2000 and over 410,000 at December 31, 1999.

In prior years, under Mexican GAAP, concession fees paid to the Mexican
Government and to the actors and artists guild were recorded as a reduction in
net sales. From January 1, 2002, these fees have been recorded in cost of sales,
consistent with the accounting treatment under U.S. GAAP. Revenues under Mexican
GAAP for the years ended December 31, 2001 and 2000 have been reclassified to
conform with the presentation in the current year.

Effective in the third quarter of 2002, in light of recent accounting
guidance issued internationally as well as the increased acceptance by our
subscribers of our prompt payment discount policy, we elected to reclassify the
presentation of customer discounts in our consolidated statements of income. As
a result of this reclassification, we now reflect such discount as a reduction
of net sales. Previously, these discounts were recorded as financial expenses.
Consequently, all prior comparative periods have been reclassified to conform
with the current period's presentation.

We recorded Ps. 3,432.9 million in net sales for the year ended December
31, 2002; Ps. 3,266.0 million for the year ended December 31, 2001 and Ps.
2,560.2 million for the year ended December 31, 2000. The 5.1% increase in net
sales in 2002 and 27.6% increase in net sales in 2001 as compared to the
respective prior year was the result of growth in our subscriber base and price
increases.

Effective January 15, 2002, we increased the prices of our programming
packages, the IRD rental fee and other related services by approximately 12.5%
on a weighted-average basis primarily to minimize the negative impact of the new
10% tax on telecommunication services. So far in 2003 we have not increased
prices for our services. For more information regarding the new
telecommunications tax, see "Item 4: Information on the Company--Overview of
Business--Mexican Regulation of DTH Services--Telecommunications Tax."

OPERATING EXPENSES

From the Company's inception through December 31, 2001, the Company
classified certain expenses directly related to operations such as the costs of
the call center and personnel who repair and refurbish IRDs' within the "Selling
and Administration" expense line. As of January 1, 2002, the Company began
classifying all these expenses within the "other operating expenses" line item
along with those expenses previously classified within this line item, including
the costs of repairs, refurbishment of IRD's and maintenance. As a result of
this new classification, the Selling and Administrative expenses line items
reflect only expenses related to those functions. In order to facilitate a
meaningful comparison of 2002 with the prior years, we have reclassified the
presentation of those expenses for the prior years as well. There is no impact
on "Total Expenses" as a result of this new expense classification.

COST OF SALES

From our inception through September 30, 2000, cost of sales had included
all direct and indirect costs of transmitting our DTH service to subscribers.
These costs principally included payments for satellite signal reception and
retransmission service fees, fees/royalties paid to acquire programming, certain
portions of sales commissions, fees paid to the Ministry of Communications and
Transportation, payments to acquire Sky Kit components, fees paid to uplink,
downlink and retransmit our signal to subscribers, and subscriber management
fees. As of October 1,

A-51

2000, we began accounting for satellite transmission fees and the costs of Sky
Kits differently as a result of operational changes.

Cost of sales for the year ended December 31, 2002 was Ps. 1,062.8 million,
a decrease of Ps. 160.1 million or 13.1% as compared with the year ended
December 31, 2001 primarily due to fewer new subscriber activations in 2002 as
compared with 2001 and resulting from our inclusion as part of our cost of sales
the activation commissions that we pay to our sales network and master
distributors. The cost of sales for the year ended December 31, 2001 was Ps.
1,222.9 million, a decrease of Ps. 135.7 million or 10.0% as compared to the
cost of sales of Ps. 1,358.6 million for the year ended December 31, 2000, due
primarily to transponder services costs that were recorded as part of cost of
sales for nine months in 2000, while such costs were not recorded in 2001.

As previously described, we used both PAS-9 and Solidaridad 2 to transmit
our signals simultaneously between September 2000 and March 31, 2002. During
that period, the use of Solidaridad 2 was redundant. In the fourth quarter of
2000, we recorded within the Ps. 430.9 million non-recurring non operating
charge, the estimated redundancy costs of using Solidaridad 2 for the period
from October 1, 2000 through December 31, 2001 (which was the date that we
estimated that we would cease using this satellite). In 2002, we extended the
use of Solidaridad 2 through March 31, 2002 and the additional Ps.14.1 million
in rent payments was offset against the remaining unused reserve established in
2000 and also presented in non-recurring non operating charges.

The PAS-9 arrangement has been recorded as a capital lease and
consequently, the amortization of the lease asset is presented within the
"depreciation and amortization" line item in the statement of operations.

For the use of the PAS-9 satellite during the years ended December 31,
2002, 2001 and 2000 we recognized total satellite costs of Ps. 257.8 million, of
which Ps. 98.0 million was recognized as depreciation expense and Ps. 159.8
million as interest expense; Ps. 252.4 million, of which Ps. 88.9 million was
recognized as depreciation expense and Ps. 163.5 million as interest expense;
and Ps. 84.0 million, of which Ps. 31.8 million was recognized as depreciation
expense and Ps. 52.2 million as interest expense, respectively.

For the use of the Solidaridad 2 satellite during the year ended December
31, 2000 we recognized total satellite costs of Ps. 205.4 million in cost of
sales. In addition, in the year ended December 31, 2000 we recognized an
extraordinary loss of Ps. 333.5 million for the redundant use of the Solidaridad
2 satellite corresponding to the remaining payments under the lease agreement
through December 31, 2001.

For the years ended December 31, 2002, 2001 and 2000, we incurred a total
of Ps. 657.3 million, Ps. 650.3 million and Ps. 517.4 million in programming
fees, respectively, representing an increase of Ps. 7.0 million or 1.1% from
2001 to 2002, and Ps. 132.9 million or 25.7% from 2000 to 2001. These increases
resulted primarily from the growth in the number of our subscribers. Most of our
programming agreements require us to pay a fee based upon the number of
subscribers receiving the programming service. As our subscriber base increases,
we experience an overall increase in our programming fees, but, in some cases,
benefit from volume based discount rates. Programming fees are expected to
increase in 2003, albeit at a slower rate, as the number of subscribers and
audience levels increase and we receive the benefit of larger volume based
discounts.

We receive uplink and downlink services from TechCo at its Florida
facilities and from Televisa at its Mexico City facility. In 2002, we expensed
approximately Ps. 120.6 million for these costs as compared to approximately Ps.
128.4 million for the year ended December 31, 2001 and Ps. 135.3 million for the
year ended December 31, 2000. Under the terms of the agreement between Innova
and TechCo, we will pay TechCo. Ps. 99.4 million (approximately US$9.5 million)
per year for uplink and downlink services over the ten-year life of the
agreement. We have also entered into an agreement with Televisa for the
provision of uplink and downlink, play out and compression services relating to
locally-sourced programming, at its Mexico City facility. We estimate that our
future annual commitments under these arrangements with Televisa will be Ps.
45.0 million (approximately US$4.3 million ) per year. We negotiate these fees
with Televisa on at least an annual basis and we believe that the fees we paid
for these services are comparable to what we would have paid an unaffiliated
third party for similar services.

From inception through September 30, 2000, we sold our entry level product,
the Sky Kit, through our distribution network. The Sky Kit includes a satellite
antenna and a low noise block, as well as installation and activation, the right
to rent an IRD, and use a Smart Card, remote control and related components. We
formerly recorded these costs as part of the cost of sales upon the sale to our
distributors. As of October 1, 2000, however, we now retain ownership of all of
the Sky Kit equipment, including the antenna, Smart Card and low noise block, in

A-52

order to more easily remove the equipment when a subscriber cancels the service
or we cancel the service for lack of payment. Because we now retain ownership of
these assets, we record them in property, plant and equipment and amortize them
over three years. For the year ended December 31, 2000, the cost of the Sky Kit
equipment (antennas, low noise blocks, accessories and related equipment),
including installation and warehouse costs, totaled Ps. 189.1 million.

As described above, since January 1, 2002, concession fees paid to the
Mexican Government and to the actors and artists guild are recorded in cost of
sales. Our payment of 3.5% of programming revenues and subscriber maintenance
fees each year to the Mexican government under the terms of our concessions, is
included in our cost of sales. This payment will continue through the remainder
of our concessions. See "Item 4: Information on the Company--Business
Overview--Mexican Regulation of DTH Services--Our Concessions."

ADMINISTRATIVE EXPENSES

Administrative expenses include all costs associated with our finance and
administrative functions. These costs include labor, salaries and benefits,
insurance, and professional fees. In the year ended December 31, 2002, our
administrative expenses decreased Ps. 29.9 million or 19.7% to Ps. 121.5 million
from Ps. 151.4 million for the year ended December 31, 2001. Administrative
expenses increased Ps. 33.2 million or 28.1% to Ps. 151.4 million for the year
ended December 31, 2001 from Ps. 118.2 million for the year ended December 31,
2000. These variances were due to the direct and indirect costs of hiring more
personnel to service a greater number of subscribers during 2001 and reductions
in costs as a result of other expense reductions during 2002.

SELLING EXPENSES

Selling expenses consist of direct and indirect personnel costs for our
sales force, commissions and bonuses we pay to distributors and independent
sales agents, advertising and marketing costs, bad debt expenses and expenses
associated with promotional materials. In the year ended December 31, 2002, our
selling expenses increased Ps. 14.0 million or 1.7% to Ps. 832.8 million from
Ps. 818.8 million for the year ended December 31, 2001. This increase was
principally due to (i) more special events offered to subscribers at no cost,
(ii) higher promotional costs resulting from discounts given to subscribers,
increased commissions we paid and internal costs relating to subscribers paying
by credit card, and (iii) an increase in collections' commissions paid to banks.

In the year ended December 31, 2001, our selling expenses increased Ps.
41.3 million or 5.3% to Ps. 818.8 million from Ps. 777.5 million for the year
ended December 31, 2000. This increase was due to three factors: additional free
special events offered to subscribers including certain exclusive sporting
matches; an increase in commissions paid to our distribution network in order to
maintain the wholesaler's margin reduced by lower subscription fees; and an
increase in the reserve for costs, such as the write-off of accounts receivable
and equipment of those subscribers whose antennas could not be re-pointed to the
PAS-9 satellite during the first quarter of 2002. The reserve for charges
incurred in connection with subscribers cancelled as a result of repointing
amounted to approximately Ps. 21.1 million and our total allowance for doubtful
accounts rose from Ps. 14.8 million to Ps. 84.8 million for the year ended
December 31, 2001 as compared to the prior year.

OTHER OPERATING EXPENSES

Other operating expenses include direct and indirect customer service
costs, as call center and repair service personnel, equipment maintenance and
repairs and IRD refurbishment costs. In the years ended December 31, 2002, 2001
and 2000, we recorded Ps. 481.8 million, Ps. 403.6 million and Ps. 536.8
million, respectively, in operating expenses. The increase of Ps. 78.6 million
or 19.4% in 2002 was mainly due to higher recovery and repair of IRDs, technical
equipment maintenance and the irrecoverable IRDs provision in connection with
those subscribers cancelled as a result of the termination of the repointing
process in the first quarter of 2002. Other operating expenses were
substantially reduced in 2001 as compared with 2000 by Ps. 133.2 or 24.8%, since
the costs of the substitution of smart cards were expensed in fiscal year 2000.

We expect other operating expenses, including maintenance and repair of
equipment such as IRDs, to continue to increase as a result of increases in the
number of our subscribers and as a result of our increased successes in
recovering and repairing IRDs which, in some instances, enables us to avoid
purchasing new IRDs at higher costs.

A-53

DEPRECIATION AND AMORTIZATION

Depreciation and amortization includes depreciation of property and
equipment and amortization of intangible assets and pre-operating expenses. We
recorded Ps. 925.1 million in depreciation and amortization for the year ended
December 31, 2002, as compared to Ps. 948.3 million for the year ended December
31, 2001 and Ps. 844.6 million for the year ended December 31, 2000. The
decrease of Ps. 23.2 million from 2001 to 2002 was mainly due to the full
depreciation of our pre-operating expense amortization in November of 2001, thus
reducing the amount of total amortization during 2002. The increase of Ps. 103.7
million from 2000 to 2001 reflects the depreciation and amortization of
additional investments in property and equipment, mainly IRDs, that we purchased
for rental to subscribers and the impact of the capitalization of the fees for
services from the PAS-9 satellite as required under both Mexican and U.S. GAAP.

In October 2000, we began providing antennas, LNBs, Smart Cards and remote
controls to our customers to use free of charge whereas prior to October 2000,
we sold those items to our wholesalers, who in turn provided them to
subscribers. Because we will now retain title to this equipment, we capitalize
and amortize it over three years. As a result, the overall amounts we amortize
will continue to rise over the next few years as we cumulatively amortize more
antennas, LNBs and accessories. Those amounts will also increase as the number
of our subscribers increases. However, the increases in amortization are largely
offset by decreases in our cost of sales now that the purchases of these items
are no longer recorded as cost of sales.

INTEGRAL RESULT OF FINANCING

The integral result of financing can have a significant impact on the
financial statements of a company in periods of high inflation. Mexican GAAP
requires companies to present all financial effects of operating and financing
the business under inflationary conditions in their income statements. Integral
result of financing primarily includes:

- interest earned on cash and temporary investments, interest paid
on borrowed funds and interest earned and paid on accounts of
affiliated companies;

- foreign exchange gains or losses associated with monetary assets
and liabilities denominated in foreign currencies; and

- net gains or losses resulting from holding monetary assets and
liabilities exposed to inflation.

Our foreign currency-denominated assets and liabilities affect our foreign
exchange position. We record a foreign exchange gain or loss if the exchange
rate of the peso rises or falls compared to the other currencies in which our
monetary assets or liabilities are denominated. On the other hand, if we have
monetary liabilities that exceed our monetary assets during period of inflation,
we will generate a monetary gain.

We reported a negative integral result of financing of Ps. 1,647.8 million,
Ps. 70.7 million and Ps. 352.0 million for the years ended December 31, 2002,
2001 and 2000, respectively. The increase in cost in 2002 mainly resulted from a
foreign exchange loss of Ps. 1,174.4 million for the year, due to the 13.9%
devaluation of the peso versus the US dollar during 2002. The decrease in the
integral cost of financing in 2001 as compared to 2000, is due to the 4.6%
appreciation of the Mexican peso versus the U.S. dollar which resulted in an
exchange gain of Ps. 371.0 million. This exchange gain in 2001 was offset
primarily because of the increase in interest expense due to additional loans
received from our owners and the interest expense related to the PAS-9 satellite
that was expensed from September 2000 on. We generated monetary gains for the
years ended December 31, 2002, 2001 and 2000, of Ps. 498.6 million, Ps. 442.4
million and Ps. 522.2 million, respectively. The increase in the gain from
monetary position for 2002 as compared to 2001 was due to an increase in the net
monetary liabilities in peso terms which more than offset the decrease in the
Mexican inflation rate. The decrease in the gain from monetary position for 2001
as compared to 2000 was due to the decrease in net monetary liabilities in peso
terms and a decrease in Mexican inflation.

A-54

PROVISION FOR TAXES

Provision for taxes includes reserves for corporate income tax, asset tax,
deferred income tax and employees' statutory profit sharing. We have not been
required to make any provision for income taxes due to operating losses and we
do not expect to make such provisions until we earn profits that exceed our
offsetting tax loss carry-forwards. As of December 31, 2002, we had total tax
loss carry-forwards of Ps. 7,217.5 million that we may, under certain
circumstances, carry forward over ten years from the period they were generated.
See Note 18 to our financial statements.

The corporate income tax rate in Mexico was 35% in 2002, and is expected to
decrease 1% each year in each of the following three years. From January 1, 2002
on, Mexican entities may no longer defer 5% of their corporate income tax on
reinvested earnings.

Also, from January 1, 2002 on, dividends, either in cash or in any other
form, are not subject to Mexican withholding tax.

We are also subject to an asset tax on the book value of certain assets.
However, any income tax payments can be credited against asset tax payments. In
2000, 2001 and 2002 the asset tax rate was 1.8%. Under Mexican law, taxpayers
cannot deduct from their asset tax basis debt contracted with nonresident
companies or financial intermediaries. We challenged these provisions of
Mexico's asset tax law but at the same time, and in order to avoid penalties and
interest payments in the event we could lose the appeal, we paid approximately
Ps. 43.2 million nominal (including interest) of tax on assets for the year
ended December 31, 2001 in March of 2002; approximately Ps. 45.2 million nominal
in monthly payments during the year ended December 31, 2002; and approximately
Ps. 7.5 million nominal for the months of January and February 2003.

On March 19, 2003, the court issued a resolution in our favor. Because the
declaratory judgment was favorable to us, to the extent that the Asset Tax Law
is not amended, we will be able to deduct debts payable to nonresidents from the
asset tax basis. We are analyzing the alternatives open to us to recover the
amount of Ps.88.4 million (plus interest and inflation effects) of payments made
for the tax years 2001 and 2002. However, we cannot assure you that we will be
successful in recovering this amount. The Ps. 7.5 million that was paid for the
months of January and February of 2003, has already been recovered or credited
to us.

We were exempt from the asset tax in 1999, and only a minimal amount was
due in 2000. For more information on this proceeding, see "Item 10: Additional
Information-Legal Proceedings."

U.S. GAAP RECONCILIATION

Our consolidated financial statements are prepared in accordance with
Mexican GAAP, which differs in certain significant respects from U.S. GAAP.

Net (loss) under U.S. GAAP for the years ended December 31, 2002, 2001
and 2000 was (Ps. 1,799.8 million), (Ps. 930.7 million) and (Ps.1,408.5
million), respectively. Stockholders' deficit under U.S. GAAP as of December 31,
2002 and 2001 was (Ps. 6,850.8 million) and (Ps. 5,050.8 million), respectively.
Differences between Mexican GAAP and U.S. GAAP for the years ended December 31,
2002, 2001 and 2000 include, but are not limited to: adjustments for the
capitalization and amortization of pre-operating expenses; the provision for
costs associated with re-pointing our subscribers' antennas from Solidaridad 2
to PAS-9, reversal of the accrual for the redundant use of Solidaridad 2 and the
reversal of certain other accruals recorded under Mexican GAAP. Our most
significant differences between Mexican GAAP and U.S. GAAP are summarized below.
For a detailed discussion of the principal differences between Mexican GAAP and
U.S. GAAP as they relate to us for each of the years in the three year period
ended December 31, 2002, see Note 21 to our consolidated financial statements.

A-55

Under U.S. GAAP, cash flows provided by (used in) operating activities
were Ps. 305.7 million, (Ps. 538.6 million) and (Ps. 734.5 million) as compared
to resources provided by (used in) operating activities of (Ps. 333.1 million),
Ps. 96.8 million and (Ps. 393.9 million) under Mexican GAAP for the years ended
December 31, 2002, 2001 and 2000, respectively. The differences in determining
resources provided by (used in) operating activities under Mexican GAAP and cash
flow provided by (used in) operating activities under U.S. GAAP, as it relates
to us, is primarily due to the requirement to exclude non-cash items in
presenting cash flows under U.S. GAAP, whereas, the statement of changes in
financial position under Mexican GAAP is determined based upon differences
between beginning and ending financial statement balances in constant pesos.
Among other differences, for U.S. GAAP purposes, we have excluded from operating
cash flows gains from monetary position of Ps. 498.6 million, Ps. 432.2 million
and Ps. 495.8 million for the years ended December 31, 2002, 2001 and 2000,
respectively, and unrealized foreign currency gains and (losses) of (Ps. 1,022.9
million), Ps. 303.1 million and (Ps. 84.4 million), respectively.

Cash flows provided by financing activities under U.S. GAAP were Ps.
263.6 million, Ps. 1,258.4 million and Ps. 859.0 million as compared to
resources provided by financing activities of Ps. 872.0 million, Ps. 702.2
million and Ps. 2,249.9 million under Mexican GAAP for the years ended December
31, 2002, 2001 and 2000, respectively. U.S. GAAP financing activities primarily
represent actual cash inflows and outflows from our receipt of cash. Under
Mexican GAAP, resources provided by financing activities reflect changes in the
balance sheet accounts, which include gains or losses from foreign currency
fluctuations and gains from monetary position. In addition, the proceeds from
the sale of restricted investments in 2000 were classified as financing
activities under Mexican GAAP but as investing activities under US GAAP.

Cash flows (used in) investing activities under U.S. GAAP were (Ps.
337.1 million), (Ps. 719.9 million) and (Ps. 366.3 million) as compared to
resources (used in) investing activities of (Ps. 317.5 million), (Ps. 802.7
million) and (Ps. 2,118.7 million) under Mexican GAAP for the years ended
December 31, 2002, 2001 and 2000, respectively. The difference in 2000 is
primarily related to the satellite transponder obligation liability of (Ps.
1,432.5 million) recognized as a resource from investing activity under Mexican
GAAP, but is considered a non-cash investing activity under U.S. GAAP. In
addition, as noted above, in 2000 we recognized the cash inflow of Ps. 277.2
million from the sale of restricted investments as an investing activity under
U.S. GAAP but as a financing activity under Mexican GAAP.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception, we have been funded principally with capital
contributions and loans from our owners as well as the proceeds from our senior
notes. We have experienced, and expect to continue experiencing during the next
few years, negative cash flow in our operations and to require continued access
to financing sources. The roll-out and expansion of our Ku-band DTH pay
television service has required substantial amounts of capital from inception
through December 31, 2002 for:

- satellite transponder capacity;

- uplink and downlink services;

- the construction of additional transmission facilities and related
equipment and acquisition of call center and subscriber management
assets;

- the acquisition of Sky Kit components and the installation of the
equipment at subscribers' locations;

- the acquisition of assets from Grupo Medcom, S.A. de C.V.,
Imbursa, S.A. de C.V., Sociedad de Inversion de Capitales and
Alejandro Palma; and

- the funding of other operating losses and working capital
requirements.

In 2002, we used our capital, received primarily from our owners, for the
funding of operating losses and other working capital requirements, including
satellite transponder service costs, for payment of interest to bondholders and
for the acquisition of Sky Kit components.

A-56

We hold our cash and cash equivalent assets in both pesos and U.S. dollars.
For the years ended December 31, 2002, 200, and 2000, resources provided by
(used in) operating activities amounted to (Ps. 333.1 million), Ps. 96.8 million
and (Ps. 393.9 million), respectively. The substantial increase in 2001 as
compared to 2000 and 2002 was primarily due to our operating results. At the
same time, net resources provided by financing activities totaled Ps. 872.0
million, Ps. 702.2 million and Ps. 2,249.9 million, respectively, for the years
ended December 31, 2002, 2001 and 2000, consisting primarily of funds provided
by our owners as capital increases and loans. The amount for 2000 includes Ps.
1,472.2 million due to the recording of the satellite transponder obligation.

Resources used in investing activities represented Ps. 317.5 million for
the year ended December 31, 2002, as compared to Ps. 802.7 million for the year
ended December 31, 2001 and Ps. 2,118.7 million from the year ended December 31,
2000. The variance from 2000 to 2001 was principally due to the recording of our
PAS-9 satellite arrangement as a capital lease in 2000. See "Contractual
Obligations and Commercial Commitments" table below.

We incurred total capital expenditures of approximately Ps. 317.5 million,
Ps. 802.7 million and Ps. 686.1 million in fiscal years 2002, 2001 and 2000,
respectively, which included transmission equipment, IRDs, computers, motor
vehicles, low noise blocks and antennas. In 2001, we acquired approximately Ps.
13.7 million in call center equipment from Merkatel (which was part of a Ps.
24.2 million (plus VAT) transaction that also included substantial training
materials and transitional support). The amount of our capital expenditures in
the long term will depend on numerous factors beyond our control or ability to
predict, including the availability of financing, nature of future expansion and
acquisition opportunities, economic conditions, subscriber demand, competition
and regulatory developments.

The capital expenditures described above do not include acquisitions, which
we could make to expand our business and/or to enter into complementary
businesses. In the future, we may consider acquisitions of, investments in, or
joint ventures with, other companies.

In 2000, 2001 and 2002 we continued to rely principally on capital
contributions and loans from Televisa, News Corporation, Liberty Media and their
affiliates to fund our operating costs. From our inception through March 31,
2003, our owners have contributed an aggregate of US$458.9 million to us,
including US$149.0 million in the form of equity and US$309.9 million in the
form of long-term loans, with the last loan made in March 2002.

In the past three years, our owners have made amounts in loans and equity
available to us, depending on our monthly funding requirements for capital
expenditures and operations. Our owners increased our equity capital by US$49.0
million in 1999 pro-rata, based on their respective equity interests in the
Company. Our owners also loaned us and, in one instance, our subsidiary
Novavision, a total of US$41.6 million in 1999. The owners lent us another
US$81.0 million in 2000, US$132.8 million in 2001 and US$29.5 million in 2002.
On July 22, 2002, we entered into a credit agreement with our owners to
memorialize the terms of certain of the loans described above. This credit
agreement also requires us to execute promissory notes to evidence the loans we
received from our owners from 2000 to 2002 as well as to evidence any new loans
we obtain from our owners. The loans each bear a fixed interest rate of 9% per
annum and are payable at maturity, including any applicable withholding taxes,
and mature ten years from the date of disbursement. We may be required to make
periodic payments of interest or principal on these loans if we jointly agree
with our owners to modify or accelerate their maturity dates. In addition, the
indenture governing our senior notes restricts the amount of indebtedness we can
incur and in some instances restricts how we can use the amounts we receive in
loans from our owners. For further discussion of our indebtedness to our owners,
see "Item 7: Major Shareholders and Related Party Transactions-Related Party
Transactions-Loans and Capital Contributions from Our Owners."

A-57

may be further limited by the terms of any future financing arrangements.
Failure to obtain future financing could delay or prevent our development and
expansion plans, impair our ability to meet our debt service requirements
(including our obligations with respect to the senior notes) or other
obligations (such as transponder service commitments), and have a material
adverse effect on our business. See "Item 3: Key Information-Risk Factors--Risk
Factors Related to Our Business--Our Significant Debt Levels Limit Our Ability
to Fund Our Operations and Could Lead to Difficulties in Obtaining New Sources
of Financing Required to Continue Operations."

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

PAYMENTS DUE BY PERIOD
(IN THOUSANDS)

LESS THAN 12-36 36-60 AFTER 60
TOTAL 12 MONTHS MONTHS MONTHS MONTHS
----- --------- ------ ------ ------

2004- 2006- BEYOND
2003 2005 2007 2007

LONG-TERM LOANS
Senior Exchange Notes(1) ............. $375,000 - - $375,000 -
Stockholders loans(2) ................ $309,900 - - - $309,900

OTHER LONG-TERM OBLIGATIONS
Capital lease - satellite
transponder(3) ..................... $258,800 $ 20,400 $ 40,800 $ 40,800 $156,800
Advertising agreement with
Televisa(4) ........................ $ 11,500 $ 11,500 - - -
Advertising agreement with TV
Azteca(5) .......................... $ 7,900 $ 3,700 $ 4,200 - -
Software and License agreement
with CSG (New SMS)(6) .............. $ 6,949 $ 2,058 $ 1,147 $ 1,021 $ 2,723
Soccer games exclusive rights
from Televisa(7) ................... $ 3,000 $ 3,000 - - -
Reality shows BigBrother2 and
BigBrother VIP2 from Televisa(7) ... $ 2,100 $ 2,100 - - -
Rights to rebroadcast TV
Azteca channels(5) ................. $ 600 $ 300 $ 300 - -
Other liabilities .................... - - - - -
--------------------------------------------------------
TOTAL CONTRACTUAL OBLIGATIONS ........... $975,749 $ 43,058 $ 46,447 $416,821 $469,423
--------------------------------------------------------

(1) In April 1997, Innova issued U.S. Dollar denominated senior unsecured fixed
rate notes in an aggregate principal amount of US$375 million, with
semi-annual interest payable at a rate of 12 7/8% per annum. See "Item 5.
Operating and Financial Review and Prospects -- Liquidity and Capital
Resources."

(2) In 1998, 1999, 2000, 2001 and 2002 we received funding from our
stockholders as long-term loans of US$25.0 million, US$41.6 million,
US$81.0 million, US$132.8 million and US$29.5 million respectively. These
loans accrue interest at a fixed rate of 9% per annum (plus any applicable
withholding taxes) and mature in 10 years from the date on which the funds
were received. See "Item 5. Operating and Financial Review and Prospects --
Liquidity and Capital Resources."

A-58

(3) In February 1999, Innova entered into a U.S. Dollar denominated agreement
with PanAmSat for the use of 12 transponders on the PAS-9 satellite. The
term of the agreement is for the expected economic useful life of the
satellite, which was approximately 15 years at launch. Accordingly, under
generally accepted accounting principles the agreement is accounted for as
a capital lease, and we recognized on our balance sheet a satellite
transponder asset and a corresponding liability equal to the net present
value of the monthly payments of US$1.7 million over the 15 year term of
the agreement. See "Item 5. Operating and Financial Review and Prospects --
Results of Operations -- Cost of Sales."

(4) See "Item 7. Major Shareholders and Related Party Transactions -- Related
Party Transactions -- Ongoing Service Arrangements with Other Related
Parties -- Advertising."

(5) See "-Trend Information" below for more details.

(6) Includes license fees and technical support services. See "Item 10:
Additional Information-- Material Contracts-- New Subscriber Management
System Contract."

(7) See "Item 7. Major Shareholders and Related Party Transactions-- Related
Party Transactions-- Programming Arrangements with Related Parties."

AMOUNT OF COMMITMENTS EXPIRING BY PERIOD
(IN THOUSANDS)

LESS THAN 12-36 36-60 AFTER 60
TOTAL 12 MONTHS MONTHS MONTHS MONTHS
----- --------- ------ ------ ------

2003 2004- 2006- SUBSEQUENT
2005 2007 TO 2007

Systems agreement with NDS(1)................. $11,000 $11,000 - - -
Consulting services agreement with CSG(2)..... $ 3,865 $ 3,865 - - -
-------------------------------------------------------------
$14,865 $14,865 - - -
-------------------------------------------------------------

(1) See "Item 7. Major Shareholders and Related Party Transactions -- Related
Party Transactions -- Ongoing Service Arrangements with Other Related
Parties -- Systems Agreement between Innova and NDS."

(2) See "Item 10: Additional Information-- Material Contracts-- New Subscriber
Management System Contract."

RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

We do not have any significant internal research and development programs.
We generally purchase any new technologies used to upgrade our services from our
suppliers.

TREND INFORMATION

During the first quarter of 2003, we continued to grow our subscriber
base. As of March 31, 2003, we had approximately 779,700 subscribers, an
increase of 7.3% as compared with approximately 726,700 subscribers as of March
31, 2002. These subscriber numbers include approximately 41,400 commercial
subscribers as of March 31, 2003 and approximately 25,400 commercial subscribers
as of March 31, 2002. Our commercial subscribers generate substantially less
revenue per subscriber than our residential subscribers. We believe the increase
in subscriber activations is due to the quality of our programming content and
our promotional programs.

We believe the main factor causing subscriber cancellations during the
first quarter of 2003, as with the last quarter of 2002, was the continuing
weakness in the Mexican economy. Nevertheless, we experienced a decrease in the
rate of subscriber cancellations as compared to the last four quarters. We
believe the main events causing subscriber cancellations during 2002 were the
new 10% tax on telecommunication services, the process of repointing of
antennas, the lack of rights to transmit the World Cup in June 2002 and the
economic recession.

A-59

On June 2002 we executed an agreement with TV Azteca for the rights to
rebroadcast their over-the-air Channels 7 and 13 (including the right to delay
the broadcast of channel 13 on other DTH systems for up to 2 hours) for a
monthly fee of US$25,000 through the end of 2004. We also committed to purchase
up to US$10.6 million in advertising from them over three years in addition to
the Ps. 120.0 million in advertising we are paying to Televisa in 2003.
Additionally, we have the option to purchase from TV Azteca the right to
broadcast certain soccer matches for the soccer seasons 2002 through 2004 at a
price to be determined before initiation of each season and a non-exclusive
right to broadcast such matches on a delayed basis.

We challenged certain provisions of Mexico's asset tax law that
prohibit us from deducting loans from non-Mexican sources from our asset tax
basis and in order to avoid penalties and interest payments in the event we
could lose the appeal, we paid approximately Ps. 43.2 million nominal (including
interest) of tax on assets for the year ended December 31, 2001 in March of
2002; approximately Ps. 45.2 million nominal in monthly payments during the year
ended December 31, 2002; and approximately Ps. 7.5 million nominal for the
months of January and February 2003. On March 19, 2003, the court issued a
resolution in our favor. Since the declaratory judgment was favorable to us, to
the extent that the Asset Tax Law is not amended, we will be able to deduct
debts payable to nonresidents from the asset tax basis. We are analyzing the
alternatives available to us to recover the amount of Ps.88.4 million (plus
interest and inflation effects) of payments made for the tax years 2001 and
2002; however, we can not assure you that we will successfully recover this
amount. Amounts paid for the months of January and February of 2003, have
already been recovered or credited to us. See "Item 10: Additional
Information--Taxation--Mexican Taxation" and "Item 5: Operating and Financial
Review and Prospects--Results of Operations - Provision for Taxes".

On March 18, 2003, DIRECTV Latin America, LLC, or DLA, announced that it
had filed a voluntary petition for bankruptcy protection, under Chapter 11 of
the U.S. Bankruptcy Code, in the U.S. Bankruptcy Court in Wilmington, Delaware.
DLA cited its debt burden and high fixed costs and listed liabilities of US$1.6
billion as of the end of 2002. DLA also reported a loss of 54,000 net
subscribers in the first quarter of 2003 or 7% of its subscriber base. DLA is a
competitor of ours that provides DTH programming and services in Mexico through
an affiliated Mexican operating company, DIRECTV Mexico. According to its 2002
annual report, Hughes Electronics Corporation, or Hughes, owns approximately 75%
of DLA and holds significant indirect interest in DIRECTV Mexico. On April 9,
2003, News Corporation announced that it reached a definitive agreement with
General Motors Corporation and Hughes in which a subsidiary of News Corporation
would acquire General Motors' 19.9% stake in Hughes and a further 14.1% of
Hughes from public shareholders and General Motors' pension and other benefit
plans, for a total of 34% of Hughes. If the agreement is consummated a
subsidiary of News Corporation will transfer its 34% ownership interest in
Hughes' common stock to Fox Entertainment Group, Inc., an 80.6% owned News
Corporation subsidiary. The businesses contained in Hughes include a leading
U.S. satellite broadcaster DIRECTV, which has more than 11 million subscribers;
an 81% equity holding in satellite operator PanAmSat; and Hughes Network
Systems, a provider of broadband satellite network solutions.

This agreement is subject to a number of conditions including the receipt
of required regulatory approvals in the United States and elsewhere, and no
assurance can be given that this acquisition will be consummated, or, if
consummated, that it will occur on the terms announced on April 9, 2003.
Additionally, our Social Part Holders Agreement provides that neither Televisa
nor News Corporation may directly or indirectly operate or acquire an interest
in any business that operates a DTH satellite system in Mexico (subject to
certain limited exceptions). If News Corporation were to consummate the proposed
acquisition of an interest in Hughes while Hughes continued to own an interest
in DIRECTV, News Corporation would become an indirect owner of DIRECTV Mexico,
our DTH competitor. Accordingly, under our Social Part Holders Agreement any
such acquisition of an indirect interest in the Mexican operations of DLA would
require the consent of us and Televisa. We cannot predict what impact either the
DLA bankruptcy or, if consummated, News Corporation's acquisition of an interest
in Hughes, will have on the competitive environment for DTH in Mexico. See "Item
3: Key Information--Risk Factors--Risk Factors Related to Our Business--We face
Intense Competition in the Pay Television Market in Mexico," and "--We Have
Significant Transactions With Our Owners Who Are Involved in Related Businesses
Which Creates the Potential for Conflicts of Interest," "--One of Our Owners,
News Corporation, May Acquire Significant Interests in DIRECTV, Our DTH
Competitor in Mexico, and PanAmSat, Our Sole Satellite Provider, and We Cannot
Predict What Effect This Will Have On Us" and "--Our Equity Holders Have, or May
Acquire, Interests in Other Pay Television Operations in Mexico Which Compete
with Us for Customers and Business Opportunities," and "Item 4: Information on
the Company--Business Overview--Competition."

In October 2002, Globopar announced that it will reevaluate its capital
structure due to significant devaluation of the Real, deteriorating economic
conditions in Brazil and significant reduction in credit available to Brazilian

A-60

companies. Globopar and certain of its subsidiaries are rescheduling their
financial debt obligations and currently reviewing its business plans together
with certain holders of Globopar's bank debt and bonds. As a result of
Globopar's financial condition, since September 2002, Globopar has ceased
providing financial support to DTH TechCo and MCOP, and MCOP, in turn, has
ceased making payments to DTH TechCo, which payments, we believe, previously
accounted for over 50% of DTH TechCo's revenue. Televisa, News Corporation and
Liberty Media have begun funding DTH TechCo's operating cash shortfall through
loans and we understand that they currently intend to continue doing so.
However, our owners are not obligated to provide funding to DTH TechCo and we
cannot assure you that continued funding will be available. If, as a result of
its financial condition and restructuring, Globopar fails to make its
contributions to DTH TechCo, and its other owners, including Televisa, do not
make up the shortfall, then DTH TechCo's ability to provide service to us, and
our ability to provide services to our customers could be compromised. See "Item
3: Key Information--Risk Factors--Risk Factors Related to Our Business-- If Our
Affiliate DTH TechCo is Unable to Obtain Funding, It May Not Be Able to Provide
a Necessary Service for our Operations, Which Could Adversely Affect Our
Business, Financial Condition and Results of Operations."

On April 21, 2003 a U.S. Bankruptcy Judge authorized DLA to reject its
agreement for the exclusive rights, in several Latin America countries including
Mexico, to broadcast the 2006 FIFA World Cup soccer tournament. As a result, we
believe the programming disadvantage we faced in 2002, when DIRECTV Latin
America had the exclusive Latin American rights to broadcast the World Cup
soccer tournament, may be reduced. We cannot predict what effect this will have
on our ability to attract new subscribers or retain existing subscribers. See
"Item 3: Key Information--Risk Factors--Risk Factors Related to Our Business--We
face Intense Competition in the Pay Television Market in Mexico," and "--We May
Not Be Successful in Expanding or Maintaining Our Subscriber Base."

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

DIRECTORS AND SENIOR MANAGEMENT

DIRECTORS

The management of our business is vested in our Board of Directors. Under
our bylaws, our Board of Directors currently consists of ten directors (and up
to ten alternate directors), including six directors (and up to six alternate
directors) selected by Televisa and four directors (and up to four alternate
directors) selected by News Corporation. Our Directors serve until they are
replaced.

The following table sets forth the names of our current directors and their
alternates, their dates of birth, their principal occupation, their business
experience, including other directorships, and their years of service as
directors or alternate directors.

FIRST
NAME AND DATE OF BIRTH PRINCIPAL OCCUPATION BUSINESS EXPERIENCE ELECTED
- ----------------------------- ---------------------------- ---------------------------- ---------

DIRECTORS APPOINTED BY TELEVISA:

Emilio Azcarraga Jean Chairman of the Board, Member of the Boards of 1996
(02/21/68) President and Chief Executive Telefonos de Mexico, S.A. de
Officer and President of the C.V. and Banco Nacional de
Executive Committee of Grupo Mexico, S.A. and Vice
Televisa Chairman of the Board of
Univision

Alexandre Moreira Penna Vice President of Corporate Former Managing Director of 2002
da Silva Finance of Grupo Televisa JPMorgan Chase
(12/25/54)

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FIRST
NAME AND DATE OF BIRTH PRINCIPAL OCCUPATION BUSINESS EXPERIENCE ELECTED
- ----------------------------- ---------------------------- ---------------------------- ---------

Alfonso de Angoitia Noriega Executive Vice President and Alternate Member of the Board 1998
(01/17/62) Chief Financial Officer and of Univision and Partner,
Member of the Executive Mijares, Angoitia, Cortes y
Committee of Grupo Televisa Fuentes, S.C. (1994 - 1999)

Jose Antonio Baston Patino Corporate Vice President of Former Vice President of 2000
(04/13/68) Television and Member of the Operations of Grupo Televisa,
Executive Committee of Grupo former General Director of
Televisa Programming of Grupo Televisa
and former Member of the
Board of Univision

Juan Sebastian Mijares Ortega Secretary of the Board, Partner, Mijares, Angoitia, 2000
(10/04/59) Secretary of the Executive Cortes y Fuentes, S.C. (1994
Committee and Vice President-- -2000), Member and Secretary
Legal and General Counsel of of the Board of Bank of
Grupo Televisa Tokyo-Mitsubishi Bank-Mexico
and Member of the Boards of
Afore Banamex, S.A. de C.V.
and Union de
Telecomunicaciones de
Iberoamerica, A.C.

Pablo Abel Vazquez Oria Chief Executive Officer of Former Chief Executive 2002
(06/29/67) Innova Officer of Cablevision,
former General Manager of
national subsidiaries of
Televisa and former General
Manager of AhorraSi, S.A. de
C.V.

DIRECTORS APPOINTED BY NEWS CORPORATION:

Paul Haggerty Executive Vice President - Former Executive Vice 1999
(11/03/59) Finance of News Corporation President and Chief Financial
Officer of Fox Television
(1997-2001).

Lawrence Jacobs Executive Vice President and Senior Vice President and 2002
(05/04/55) Deputy General Counsel of News Deputy General Counsel of
Corporation News Corporation

Romulo Pontual Executive Vice President, Former Executive Vice 2000
(12/13/59) Television Platforms of News President, News Technology
Corporation; Vice Chairman of (1999-2002), Senior Vice
the Board of Directors of Innova President (1998-1999) and
Vice President of Space
Technology (1996-1998) of
News Corporation

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FIRST
NAME AND DATE OF BIRTH PRINCIPAL OCCUPATION BUSINESS EXPERIENCE ELECTED
- ----------------------------- ---------------------------- ---------------------------- ---------

Jacopo Bracco Vice President , Television Former Vice President, 2002
(3/12/68) Platforms of News Corporation Satellite Distribution and
Business Development for Fox
Entertainment Group
(2001-2002), previously
Director (1999-2001)

ALTERNATE DIRECTORS APPOINTED BY TELEVISA:

Rafael Carabias Principe Vice President of Former Member of the Boards 2000
(11/13/44) Administration of Grupo of Promecap, S.C., Grupo
Televisa Financiero del Sureste, S.A.
and former Director of
Corporate Finance of
Scotiabank Inverlat, S.A.

Jose Antonio Lara del Vice President-- Tax of Grupo Former Tax Director of Grupo 2002
Olmo Televisa Televisa and former Associate
(09/02/70) of Chevez, Ruiz, Zamarripa y
Cia, S.C.

Jorge Lutteroth Echegoyen Controller and Vice President Former Senior Partner of 2000
(01/24/53) of Grupo Televisa Coopers & Lybrand Despacho
Roberto Casas Alatriste, S.C.

Salvi Folch Viadero Vice President of Financial Former Chief Executive 2002
(08/16/67) Planning of Grupo Televisa Officer and Chief Financial
Officer of Comercio MAS, S.A.
de C.V. and former Vice
Chairman of Banking
Supervision of the National
Banking and Securities
Commission

Maria Azucena Dominguez Legal Corporate Director of Former Legal Corporate 2000
Cobian Televisa Corporacion Director of Innova
(07/30/57)

Joaquin Balcarcel Santa Cruz Director-- Legal Department of Former associate at Martinez, 2000
(01/04/69) Grupo Televisa Algaba, Estrella, De Haro y
Galvan-Duque, S.C.

ALTERNATE DIRECTORS APPOINTED BY NEWS CORPORATION:

Michael Doodan Executive Vice President of 1997
(6/26/46) Legal and Business Affairs of
Twentieth Century Fox Film
Corporation

Emilio Carrillo Gamboa Senior Partner at Bufete 1997
(10/16/37) Carrillo Gamboa, S.C.

Paula Wardynski Vice President-Treasurer of 1998
(3/23/58) News America Incorporated

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SENIOR MANAGEMENT

Under our bylaws, our Chief Executive Officer and Chief Financial
Officer are appointed by Televisa, subject to the approval of News Corporation,
and may be removed by mutual agreement of Televisa and News Corporation without
cause or by either of them with reasonable cause. The Chief Executive Officer
has broad responsibility for the day-to-day operations of Innova. The Chief
Financial Officer or the Executive Director of Finance and Administration has
responsibility for all budgetary, financial and cash management duties.

The following table sets forth the names of our executive officers, their
dates of birth, their current position, their prior business experience and the
year in which they were appointed to their current positions:

FIRST
NAME AND DATE OF BIRTH CURRENT POSITION BUSINESS EXPERIENCE APPOINTED
- -------------------------- ------------------------ --------------------------- ---------

Pablo Abel Vazquez Oria Chief Executive Officer Former Chief Executive 2002
(06/29/67) Officer of Cablevision,
former General Manager of
national subsidiaries of
Televisa and former General
Manager of AhorraSi, S.A.
de C.V.

Carlos Ferreiro Rivas Chief Financial Officer and Former Director of 2002
(11/19/68) Executive Director of Corporate Finance of
Finance and Administration Televisa, former Director
of Credit Risk at Banco
Santander, and former
Manager in Corporate
Banking of Grupo Financiero
Inverlat

Jorge Todd Alvarez Chief Commercial Officer Former Director of Sales 1996
(07/18/56) and Distribution of Innova
and former Director of
Sales of Multivision

COMPENSATION

For the year ended December 31, 2002, we paid Ps. 14.4 million (nominal) in
aggregate compensation to our executive officers for their services in all
capacities. We did not pay any compensation to our directors and alternate
directors of the Board in 2002. We did not issue any stock options or provide
any pension, retirement or similar benefits to our directors, alternate
directors and executive officers in 2002.

BOARD PRACTICES

Our directors and alternate directors do not serve on the Board for limited
terms. They generally serve until replaced. Our directors and alternate
directors are not entitled to receive any benefits from Innova or its
subsidiaries upon their termination.

EXECUTIVE COMMITTEE

The Board has delegated certain responsibilities to an Executive Committee
that consists of Messrs. Azcarraga Jean, de Angoitia N., Vazquez O., Pontual,
Haggerty and Bracco. The alternate members of the committee are Messrs. Mijares
O., Balcarcel S., Lara del O., Jacobs, Carrillo G. and Ms. Wardynski. The
Executive Committee generally acts on matters in the absence of the Board of
Directors. Our equity holders must approve our annual audited financial
statements. Questions of executive compensation are considered, reviewed and
approved by the entire Board of Directors.

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EMPLOYEES

As of December 31, 2002, we employed 1,834 people in Mexico, including
full-time and part-time employees, with approximately 87 in transmission and
technology related functions, approximately 510 in marketing and sales,
approximately 1,017 in client services and subscriber handling and approximately
220 in management, finance, personnel and administration. This represents an
overall decrease of 532 employees as compared to the end of December 2001. In
2002, we reduced the number of employees, primarily due to the end of special
projects such as the repointing of antennas and the Smart Card changeover, as
well as other adjustments in order to improve efficiency in our platform.

SHARE OWNERSHIP

All of our social parts are owned by subsidiaries of Televisa, News
Corporation, and Liberty Media. None of our directors, alternate directors or
officers own any direct equity interest in Innova, although they may own
indirect interests through their ownership of interests of Televisa, News
Corporation or Liberty Media. We do not sponsor any program whereby our
directors, alternate directors, officers, or employees may participate in our
capital.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

MAJOR SHAREHOLDERS

The following table sets forth certain information with respect to the
current beneficial ownership of our equity interests:

AMOUNT AND NATURE PERCENTAGE
NAME OF BENEFICIAL OWNER OF OWNERSHIP OWNERSHIP
- ------------------------ ------------ ---------

SKY DTH, S. de R.L. de C.V........................... Series A-1 Social Part 60%
News DTH (Mexico) Investment Ltd..................... Series B-1 Social Part 30%
Liberty Mexico DTH, Inc. ............................ Series B-2 Social Part 10%

SKY DTH is an indirect, wholly owned subsidiary of Televisa. News DTH is an
indirect, wholly owned subsidiary of News Corporation. Liberty Mexico is an
indirect, wholly owned subsidiary of Liberty Media.

The relations between our equity owners are governed by our bylaws and a
Social Part Holders Agreement among Televisa, News Corporation, Innova and its
owners, dated March 6, 1997. Our bylaws were amended on December 22, 1998 to
convert Innova into a limited liability company with variable capital and to
reflect the sale of a ten percent interest represented by the Series B-2 Social
Parts to Liberty Mexico.

SECURITIES HELD IN HOST COUNTRY

All of our senior notes are held of record in the United States by one
record holder.

CONTROL

Televisa, through its subsidiaries, owns approximately 60% of Innova's
total voting power, subject to certain provisions of the bylaws and the Social
Part Holders Agreement (discussed below). Our owners may only take significant
actions with the affirmative vote of both Televisa and News Corporation under
the bylaws and Social Part Holders Agreements. For a description, see "Item 10:
Additional Information--Bylaws." Under our Social Part Holders Agreement,
Televisa and News Corporation have agreed not to engage in the DTH business in
Mexico except through us. Televisa also owns interests in businesses that
compete with us for customers in the Mexican pay television market.
Specifically, Televisa controls and owns a majority interest in Cablevision, the
operator of Mexico's largest cable television system. See "Item 4: Information
on the Company--Business Overview--Competition--Cable Television and MMDS."

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RELATED PARTY TRANSACTIONS

We have engaged in, and expect to continue to engage in, a significant
number and variety of related party transactions, including, but not limited to,
the transactions summarized in Note 9 of our financial statements. Note 9 to the
financial statements provides other information required to be made publicly
available in Mexico with regard to the interest of management in certain
transactions. Several other related party transactions not required to be listed
here are included as Exhibits to this document. We have not performed any
studies or analyses to determine whether the terms of past transactions with
related parties have been on an arms' length basis. Although we believe that
transactions with our affiliates are generally conducted on an arms' length
basis and at market prices, conflicts of interest are inherent in such
transactions. See "Item 3: Key Information-Risk Factors-Risk Factors Related to
Our Business-Our Equity Holders Have, or May Acquire, Interests in Other Pay
Television Operations in Mexico Which Compete with Us for Customers and Business
Opportunities;" and "--We Have Significant Transactions With Our Owners Who Are
Involved in Related Businesses Which Creates the Potential for Conflicts of
Interest."

LOANS AND CAPITAL CONTRIBUTIONS FROM OUR OWNERS

We, and our subsidiary Novavision, owe our owners a total of US$309.9
million plus accrued and unpaid interest for loans extended to us by our owners
since our inception through March 31, 2003 (including a total of US$8.3 million
that has been loaned to Novavision). The loans were made by our owners in
proportion to each of their respective equity interests in Innova over the
period 1998 through 2002. The loans bear a fixed interest rate of 9% per annum
payable at maturity, including any applicable withholding taxes, and mature
between 2008 and 2012. We may be required to make periodic payments of interest
or principal on these loans if we jointly agree with our owners to modify or
accelerate their maturity dates. In June 2002, we entered into a credit
agreement with our owners to memorialize the terms of certain of these loans.
This credit agreement also requires us to execute promissory notes to evidence
the loans we received from our owners from 2000 to 2002 as well as to evidence
any new loans we obtain from our owners. We expect that our owners will provide,
if necessary, up to an aggregate amount of US$25.0 million to meet our cash
requirements during 2003, although they are not obligated to do so.

During the period 1996 to 1999, we received capital contributions from our
owners in proportion to their respective equity interests in Innova in an
aggregate amount equal to US$149.0 million. This amount included forgiveness of
debt amounting to Ps. 424.0 million.

PROGRAMMING ARRANGEMENTS WITH RELATED PARTIES

We obtain, and anticipate that we will continue to obtain, significant
programming on an exclusive DTH basis from Televisa and News Corporation under
our Social Part Holders' Agreement. We compete, in part, based on this exclusive
programming. In 2002 and 2001, we paid Ps. 179.0 million and Ps. 143.5 million
to News Corporation and Televisa affiliates for the exclusive broadcast of their
programming. We also have the option to engage the services of Sky Entertainment
Programming Latin America, a News Corporation affiliate, to acquire certain
programming products and services on a region-wide basis in Latin America, under
an Agency Agreement, dated July 3, 1997. For a description of the risks
associated with our programming arrangements, see "Item 3: Key Information--Risk
Factors--Risk Factors Related to Our Business--Our Ability To Attract
Subscribers Depends on the Availability of Desirable Programming from Third
Party Programmers" and "Item 4: Information on the Company-Business
Overview-Programming and Services."

In addition, we had and continue to have the exclusive rights to
rebroadcast and distribute certain Mexican Soccer League programming from the
2001-2003 seasons and Mexican Boxing programming from the 2001-2002 seasons
under a separate agreement with Televisa. Specifically, these included the
exclusive transmission rights with respect to all TV media and local block-out
rights over 20% of the professional Mexican Soccer League programming during the
summer and winter seasons of 2001 and 2002; exclusive transmission rights with
respect to all TV media and local block-out rights over 10% of the professional
Mexican Soccer League programming during the summer season of 2003; exclusive
local block-out rights, limited to the relevant territory (Monterrey, Puebla or
Guadalajara), with respect to all TV media for all soccer matches where any of
the Monterrey, Puebla or Atlas teams is playing; and exclusive transmission
rights with respect to all TV media to all Mexican Boxing programming during the
calendar years 2001 and 2002. We paid and will pay Televisa a total of US$15
million over three years for the license to these events: US$6 million for all
programming which was licensed during 2001; US$6 million for all programming
which was licensed during 2002; and US$3 million for all programming licensed
through the end of the soccer summer season for the year 2003, subject to
set-off pursuant to all or agreement by the parties.

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During 2002 we entered in two separate agreements with Televisa to obtain
the exclusive pay-TV transmission rights of the reality shows Big Brother, Big
Brother VIP and Operacion Triunfo and to help fund the production of Big Brother
VIP and Operacion Triunfo. We broadcasted these reality shows through our
interactive channels 24 hours-per-day. We paid Televisa a total of US$6.0
million for the license to these events. During 2003 we negotiated again the
exclusive pay-TV transmission rights for the reality shows Big Brother 2 and Big
Brother VIP 2 with Televisa for a total amount of Ps. 28.0 million.

COMPETITIVE ACTIVITIES

Under our Social Part Holders Agreement, subject to certain exceptions, ,
Televisa and News Corporation have agreed not to directly or indirectly own,
manage, operate, control or finance and business or enterprise which operates a
competing DTH service in Mexico.

ONGOING SERVICE ARRANGEMENTS WITH OTHER RELATED PARTIES

UPLINK SERVICES AGREEMENT

DTH TechCo Partners, or TechCo, provides us with play-out and uplink
functions and related services such as head-end operation from two sites in the
United States: a main uplink facility in Miami Lakes, Florida and a redundancy
site in Port St. Lucie, Florida. In 2002, we paid Ps. 82.1 million to TechCo for
their services. TechCo is a partnership formed by Televisa, News Corporation
Globopar and Liberty Media, each of which indirectly holds a 30% interest in the
partnership, except Liberty Media, which indirectly holds a 10% interest. See
"Item 3: Key Information--Risk Factors--Risk Factors Related to Our
Business--If Our Affiliate DTH TechCo is Unable to Obtain Funding, It May Not
Be Able to Provide a Necessary Service for our Operations, Which Could
Adversely Affect Our Business, Financial Condition and Results of Operations."

In addition, Televisa provides us with uplink, downlink, playout and
compression services relating to locally-sourced programming from its Mexico
City facility. In 2002, we paid Ps. 38.5 million for these services.

SYSTEMS AGREEMENTS BETWEEN INNOVA AND NDS

We have ongoing agreements with NDS Group plc, or NDS, a public company and
majority owned subsidiary of News Corporation, to provide us with several key
systems. First, under a September 1996 agreement, NDS provides us the
conditional access system, including the Smart Cards necessary to decode the
signal at the subscriber's home, and equipment needed to digitize, compress,
encrypt and multiplex the signals transmitted to the satellite by our uplink
facilities. This agreement was amended in February 2000 to settle a dispute over
payment for certain software and to include new interactive television
technology. NDS also provides us with our current subscriber management system
under agreements dated October 29, 1996 and August 3, 1998. In 2002, we incurred
expenses of US$5.9 million with NDS for these systems and related services under
our agreements with them and we estimate our commitment under these arrangements
in 2003 will be approximately US$11.0 million.

We are currently implementing a new Subscriber Management System, or SMS,
by using the software "Kenan" from CSG Software, Inc. Once the new SMS is placed
in service, our current agreements with NDS related to maintenance of Provider
II will terminate. We expect the new SMS will be placed in service in late
August 2003. See "Item 10: Additional Information-Material Contracts-New
Subscriber Management System Contract."

GUARANTEES

Televisa, News Corporation and Liberty Media have guaranteed our payments
to PanAmSat for transponder services on PAS-9 in proportion to their respective
beneficial interests in Innova. Corporacion de Radio y Television del Norte, S.
de R.L. de C.V., our subsidiary, entered a satellite services agreement with
PanAmSat on February 8, 1999. Under that agreement, we are obligated to pay a
monthly service fee of US$1.7 million to PanAmSat for satellite signal reception
and retransmission service from transponders on their PAS-9 satellite through
September 2015. The largest amount of this obligation outstanding through
December 31, 2002 was US$238.4 million and the amount outstanding as of June 1,
2003 was US$229.9 million. If we do not pay these fees in a timely manner, our
owners will be required to pay these fees. For more information about our
satellite operations, see "Item 4: Information on the Company-Business
Overview-Operations-Satellites."

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LEGAL SERVICES

We have engaged the law firm of Mijares, Angoitia, Cortes y Fuentes, S.C.,
to advise us on various legal issues. Two of their partners, currently on leave
from the partnership, Alfonso de Angoitia Noriega and Juan Sebastian Mijares
Ortega, serve as members of our Board. Mr. de Angoitia is also the Secretary of
our Board, a member of our Executive Committee and the Executive Vice
President-Chief Financial Officer of our 60% owner, Televisa. Mr. Mijares is
also the Vice President -- General Counsel of Televisa. Neither Alfonso de
Angoitia Noriega nor Juan Mijares Ortega currently receive any form of
compensation from, or participate in any way in the profits of, Mijares,
Angoitia, Cortes y Fuentes, S.C. We believe that the fees we paid for these
services were comparable to those that we would have paid another law firm for
similar services.

ADVERTISING

We engage the services of VISAT, a wholly owned subsidiary of Televisa, for
certain advertising and promotional efforts and to pool advertising time with
channels broadcast commonly among Televisa, Cablevision and Innova. VISAT
negotiates most of our advertising contracts with third party advertisers. Under
our agreement with VISAT, we receive from VISAT the amount of the advertising
sold on our behalf net of a commission that ranges from 18% to 21% for their
promotion, selling and collection services. In 2002, we paid VISAT an aggregate
of US$0.7 million in commissions on advertising sales of approximately US$3.6
million. We estimate that advertising sales generated by VISAT will total
approximately US$3.5 million in 2003. We also purchase magazine advertising
space and television and radio advertising time from Televisa in connection with
the promotion of our DTH satellite services and expect to continue to do so in
the future. We paid Ps. 128.0 million for these services in 2002 and expect to
pay Ps. 120 million for similar services in 2003.

W RADIO CHANNEL

In February 2003, we entered into a one-year agreement with Televisa Radio,
a subsidiary of Televisa, to broadcast, on a pay-television exclusive basis, W
Radio Channel, a news and entertainment radio station channel. The agreement
contemplates that each party will receive 50% of the advertising revenues
generated by W Radio Channel.

TAX SHARING AGREEMENT BETWEEN INNOVA AND TELEVISA

Innova and Televisa are parties to a Tax Sharing Agreement dated March 6,
1997 which sets forth certain rights and obligations of Innova and Televisa in
respect of Innova's liability for taxes imposed pursuant to Mexico's Income Tax
and Asset Tax Law. Televisa received authorization from Mexican tax authorities
to include Innova's results in the consolidated tax return of Televisa and its
consolidated subsidiaries for purposes of determining income taxes and assets
tax beginning January 1, 1997. The tax profits or losses obtained by Innova are
consolidated with the tax profits or losses of Televisa up to 60% of Televisa's
percentage ownership of Innova. Pursuant to the tax sharing agreement, in no
event shall Innova be required to remit to Televisa an amount in respect of its
federal income and assets taxes that is in excess of the product of (x) the
amount that Innova would be required to pay on an individual basis, as if Innova
had filed a separate tax return, and (y) with respect to asset taxes, Televisa's
direct or indirect percentage ownership of Innova's capital stock, and with
respect to income taxes, 60% of Televisa's direct or indirect percentage
ownership in Innova's capital stock, as determined by applicable law.

CALL CENTER AGREEMENT

In June 2001, we purchased from Merkatel, our former call center service
provider and wholly owned subsidiary of Televisa, the equipment Merkatel used to
provide call center services to us, including computers, telephones, furniture,
and fixture along with other software, training materials and significant
transitional support for a total of Ps. 24.2 million plus value-added tax.

ITEM 8. FINANCIAL INFORMATION

See "Item 18-Financial Statements" and pages F-1 through F-42, which are
incorporated herein by reference.

ITEM 9. THE OFFER AND LISTING

Although our senior notes are listed on the Luxembourg Stock Exchange,
there is no active trading market for the senior notes. We believe there is a
limited over-the-counter trading market for the senior notes in the United

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States. We also believe that more than one brokerage firm currently makes a
market in the senior notes in the over-the-counter trading market, although both
bid and ask quotations may be limited at times. Only limited trading data for
our notes has been publicly available since their original issuance in 1997. See
"Item 3: Key Information-Risk Factors-Risk Factors Related to Our
Business-Investors May Not Be Able to Easily Buy and Sell Our Senior Notes
Because Only a Limited Trading Market Exists for Our Securities."

ITEM 10. ADDITIONAL INFORMATION

BYLAWS

Set forth below is a brief summary of some significant provisions of our
bylaws and Mexican law. This description does not purport to be complete, and is
qualified by reference in its entirety to our bylaws, which have been filed as
an exhibit to this annual report and Mexican law.

PURPOSE

We are registered with the Public Registry of Commerce in Mexico City under
the commercial File (folio mercantile) No. 213223. Our corporate purposes are
enumerated in Article II of our bylaws. These include the installation,
operation and commercial exploitation of public telecommunications networks that
provide any type of public services, among them DTH television services. Our
corporate purposes also include general corporate actions such as investing in
other companies, acquiring securities, issuing bonds, contracting loans, leasing
or acquiring property, representing other entities as an agent, providing or
receiving technical services, producing works that may be subject to
intellectual property right protection, acquiring and granting permits and
concessions and executing agreements and contracts.

EQUITY AND VOTING RIGHTS

Our equity consists of two series of partes sociales or social parts, the
Series A and the Series B. Only Mexican investors may acquire the Series A,
whereas Mexican and foreign investors may acquire the Series B. The Series A
must always represent at least the percentage of capital required to be held by
Mexican investors under Mexican law. Each social part must represent Ps. 100.00
of capital or a multiple thereof. Each member or social part holder is entitled
to one vote per Ps. 100.00 of capital represented by its social part. Our owners
are identified as social part holders in our bylaws, which are publicly filed in
Mexico. Under both Mexican law and our bylaws, there is no threshold at which a
social part holder or its holdings need be disclosed.

In accordance with the authorization of the Secretary of Economy, dated as
of November 30, 2001, the company may issue Series N quotas representing up to
80% of the capital stock of the company, Series N quotas are considered as
neutral investment for the purposes of the Foreign Investment Law, previous
authorization of the Secretary of Economy, and that Series N bidders have
economic rights and the right to vote at shareholder's meetings only the
following matters:

- to extend the corporate existence;

- to dissolve the company;

- to change the corporate purposes or company's nationality; and

- to approve any transformation or merger involving the company.

Afterwards, on July 30, 2002 our shareholders resolved to modify the
Article Sixth of the corporate by-laws of the company (Capital, Series and
Classes), adding the Series N, integrated by special quotas that may be issued
and considered as neutral investment for purposes of the Foreign Investment Law.
As of May 31, 2003 no social part of Series N has been issued.

Generally, a vote of the majority of the social parts is sufficient to
adopt a resolution of our company's equity holders. However, the approval of
both the Series A and Series B-1 social part holders is required:

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- to approve the audited financial statements;

- to declare and pay dividends;

- to name and remove Directors from the Board of Directors and
establish, appoint, remove or dissolve any committees;

- to divide or redeem any social part interest;

- to require contributions or payments outside the Annual Budget or
Business Plan;

- to issue warrants or other equity equivalents;

- to admit new members and assign any capital interests;

- to amend the bylaws;

- to approve capital increases and decreases or sales of capital
interests;

- to dissolve the company;

- to appoint liquidators;

- to issue bonds; and

- to approve any transformation, merger or spin-off involving the
company.

The majority of the social part holders are entitled to determine how
earnings may be distributed, after legal reserves and capital reserves are
established. Any surplus left over after liquidation shall be distributed among
our members in proportion to their capital interest. Any changes in capital and
the admission of new members must be approved by both the Series A and Series
B-1 social part holders. Each member is entitled to subscribe for any increase
in capital in the same proportion as their percentage ownership interest prior
to the capital call.

The rights of social part holders as defined in our bylaws may not be
changed without the approval of both the Series A and Series B-1 members.
Additionally, an equity owner may not transfer its equity stake without the
consent of the Series A and Series B-1 members. For additional information on
regulatory matters that could affect the rights of social part holders, see
"Item 4: Information On the Company--Business Overview--Mexican Regulation of
DTH Services."

MEETINGS

Our members must meet at least once a year within four months of the close
of the fiscal year. Other meetings may be held at any time. The meetings are
convoked held after notice is issued by any of our Directors pursuant to
Mexico's General Law of Commercial Corporations. At least 15 days' notice is
required, unless waived by all members.

BOARD OF DIRECTORS

The Series A member is entitled to appoint six members of the Board of
Directors while the Series B-1 member is entitled to appoint four members of the
Board of Directors. Directors serve until they are replaced; our directors do
not stand for re-election in staggered terms. Pursuant to our bylaws, a majority
vote of our Board of Directors is generally sufficient for our Board of
Directors to take action. However, the approval of a majority, including at
least two directors selected by Televisa and two directors selected by News
Corporation, is currently required in order to authorize a number of significant
actions, including the following actions, subject to certain exceptions:

- the appointment of the Chief Executive Officer;

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- the appointment of the Chief Financial Officer;

- the selection of local distributors and the terms of the
agreements executed in connection therewith;

- the acceptance of pricing, tiering and other material terms
relating to the distribution of programming services;

- entering into agreements having a term in excess of three years or
involving amounts in excess of US$1 million;

- the incurrence of indebtedness for borrowed money, the granting of
loans and the incurrence or allowance of encumbrances on our
assets involving amounts in excess of US$1 million;

- the sale of assets outside the ordinary course of business;

- the purchase, lease or acquisition of assets involving amounts in
excess of US$1 million;

- the acquisition of, investment in, or merger or joint venture
with, any other entity other than a wholly owned subsidiary;

- the commencement or settlement of any suit, action or proceeding
involving amounts in excess of US$100,000;

- the appointment or dismissal of Innova's auditors or the adoption
or modification of any material accounting or tax principle or
practice;

- the appointment or dismissal of our legal counsel;

- settling or contesting of proposed tax audit adjustments involving
amounts in excess of US$100,000;

- the approval of the location of our principal offices and our
subsidiaries;

- the entering into agreements or transactions with Televisa, News
Corporation, Liberty Media or their affiliates;

- the approval of certain actions by us in our capacity as
stockholder of our subsidiaries;

- the approval of the business plan and any material amendments
thereto;

- the approval of the annual budget and any amendments thereto;

- the approval of any material waiver or amendment of an agreement
otherwise subject to supermajority approval;

- the incorporation, formation or organization of subsidiaries;

- the filing of a voluntary petition in bankruptcy;

- the granting or revocation of powers of attorney; and

- the entering into of consulting agreements which are not on arms'
length terms, have a term in excess of one year or provide for
payments in excess of US$250,000.

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ENFORCEABILITY OF CIVIL LIABILITIES

We are organized under the laws of Mexico. Substantially all of our
directors, executive officers and controlling persons reside outside of the
United States, all or a significant portion of the assets of our directors,
executive officers and controlling persons, and substantially all of our assets,
are located outside of the United States and some of the experts named in this
annual report also reside outside of the United States. As a result, it may not
be possible for you to effect service of process within the United States upon
these persons or to enforce against them or us in U.S. courts judgments
predicated upon the civil liability provisions of the federal securities laws of
the United States. We have been advised by our Mexican counsel, Mijares,
Angoitia, Cortes y Fuentes, S.C., that there is doubt as to the enforceability,
in original actions in Mexican courts, of liabilities predicated solely on U.S.
federal securities laws and as to the enforceability in Mexican courts of
judgments of U.S. courts obtained in actions predicated upon the civil liability
provisions of U.S. federal securities laws. See "Key Information -- Risk Factors
- -- Risks Factors Related to Our Business -- It May Be Difficult to Enforce Civil
Liabilities Against Us or Our Directors, Executive Officers and Controlling
Persons."

MATERIAL CONTRACTS

Our agreements with related parties are described in "Item 7: Major
Shareholders and Related Party Contracts."

NEW SUBSCRIBER MANAGEMENT SYSTEM CONTRACT

Through our subsidiary, Novavision, we entered into two related agreements
with CSG Software, Inc. (CSG), on June 12, 2002 under which CSG will provide:
(a) a non-exclusive, perpetual License for the use of the software "Kenan" to
provide billing and order management to licensed subscribers, besides
installation and implementation of the system to our business, training and
support services and, (b) consulting services.

Under the Software License and Service agreement, we must pay US$3.4
million to CSG for a license capacity of up to 1,125,000 subscribers. However,
we can purchase additional capacity according to our subscriber base growth at
additional cost per every 100,000 subscribers. Technical support in Mexico will
be available for the first 24 months following the date on which we begin live
production of the system; the annual cost for these services is US$510,600 plus
US$75,000 for a 24x7 basis support. We are allowed to use the Kenan system to
provide billing and order management to licensed subscribers from other Latin
American DTH platform in case of merger, acquisition or combination of platforms
(except Sky Brazil). On December 27, 2002 we agreed to remove some applications
of the Kenan software, reducing the total license fees in US$500,000. We are
currently using a SMS called Provider II that we obtained from NDS. NDS will
continue to support Provider II until we complete the switch-over to the new
SMS. We expect the new SMS will be placed in service in late August 2003.

Under the Consulting Services agreement, CSG will provide management and
technology consulting, advisory and integration services related to the
implementation of the Kenan end-to-end integrated solution, as well as the
required interfaces with our Siebel and NDS software currently on operation,
accordingly with an Implementation Planning and Analysis process (IPA),
previously agreed with Novavision. Total cost of US$4.4 million for these
services, will be payable upon completion of certain agreed milestones. CSG is
an enterprise with more than 20 years as customer care and billing expertise,
providing its services in more than 265 companies, and more than 40 countries.
For additional information about how we use the SMS and our agreement with CSG,
see "Item 3: Key Information--Risk Factors--Risk Factors Related to Our
Business-- Our Ability to Provide Billing and Order Management to Our
Subscribers Depends on the Functionality and Flexibility of Our Subscriber
Management System, Which is Currently Being Replaced with a New System from a
New Supplier;" and "Item 4: Information on the Company--Business
Overview--Capital Expenditures" and "--Subscriber Management System."

ANTENNA RE-POINTING CONTRACT

Through our subsidiary, Novavision, we entered into an agreement with NCR
de Mexico, on October 3, 2000 under which NCR re-pointed our existing
subscribers' antennas from Solidaridad 2, a satellite we no longer use for
signal reception and retransmission, to PAS-9, the newer satellite we currently
use for our satellite services. We paid NCR US$28.0 million under this
agreement. NCR began re-pointing our subscribers' antennas under this agreement
in November 2000 and finished in March 2002. The shutdown of this process and
Solidaridad 2 satellite,

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caused us to lose approximately 13,000 subscribers, we do not know how many
reconnected back. Re-pointing costs were approximately US$35 million (NCR and
internal costs). We have no more obligations related with this agreement with
NCR.

SATELLITE TRANSPONDER SERVICES AGREEMENTS

We currently receive satellite signal reception and retransmission services
from 12 Ku-band transponders on the PAS-9 satellite, owned by PanAmSat
Corporation.

AGREEMENT WITH PANAMSAT.

We entered an agreement with PanAmSat on February 8, 1999 for signal
reception and retransmission services from PAS-9. PAS-9 was launched on July 28,
2000 and became operational on September 8, 2000. The service term of the PAS-9
agreement ends at the earlier of: (a) September 2015 or (b) the date PAS-9 is
taken out of service. We must pay a monthly service fee of US$1.7 million for
service from all 12 transponders. We received a credit against the first US$11.7
million of service fees otherwise payable under the PAS-9 agreement. Televisa,
News Corporation and Liberty Media have guaranteed Innova's payments to PanAmSat
in proportion to their respective beneficial interests in Innova. PAS-9 was
manufactured by Hughes and its remaining useful life is estimated to be
approximately 14 to 16 years. Hughes (which holds an indirect interest in
DIRECTV Mexico, our DTH competitor) owns 81% of PanAmSat, while the original
founders own 10% and the remaining 9% is publicly held. Our service on PAS-9 is
not subject to pre-emption except in limited instances with respect to spare
transponder capacity. We have migrated our subscribers to PAS-9 for service by
re-pointing their antennas to this satellite. For more information about our
satellite operations, see "Item 4: Information on the Company--Business
Overview--Operations--Satellites."

AGREEMENT WITH SATMEX

We entered into an agreement with SatMex on April 1, 1999 to allow us to
use 12 Ku-Band transponders on Solidaridad 2 for signal reception and
retransmission. The agreement expired on December 31, 2001 but the Company
negotiated an extension from January 1 to March 31, 2002 in order to avoid an
interruption of service to those subscribers whose antennas had not been
re-pointed to the newer satellite, PAS-9. The extension of the service agreement
enabled us to arrange to have the antennas of approximately 30,000 additional
subscribers re-pointed to PAS-9 without an interruption in service. We were
obligated to pay SatMex a monthly service fee of US$1.752 million for satellite
signal reception and retransmission service from transponders on Solidaridad 2
through December 31, 2001. For the extension of the service, we paid to SatMex
US$1.5 million for the use of up to eight Ku-band transponders. Service from the
Solidaridad 2 satellite ceased on March 31, 2002.

CONCESSIONS

We have been granted two concessions by the Mexican government that
authorize us to operate our DTH systems. These concessions are described under
the caption "Item 4: Information on the Company--Business Overview--Mexican
Regulation of DTH Services--Our Concessions." If we are unable to renew, or if
the Mexican government revokes either concession, we would not be able to
deliver our services. See "Item 3: Key Information--Risk Factors--Risk Factors
Related to Our Business-- The Operation of Our Business May Be Terminated or
Interrupted if the Mexican Government Does Not Renew or Revokes Our
Concessions."

LEGAL PROCEEDINGS

We challenged certain provisions of Mexico's asset tax law that
prohibit us from deducting loans from non-Mexican sources from our asset tax
basis and in order to avoid penalties and interest payments in the event we
could lose the appeal, we paid approximately Ps. 43.2 million nominal (including
interest) of tax on assets for the year ended December 31, 2001 in March of
2002; approximately Ps. 45.2 million nominal in monthly payments during the year
ended December 31, 2002; and approximately Ps. 7.5 million nominal for the
months of January and February 2003. On March 19, 2003, the court issued a
resolution rendering part of article 5 of the Mexican Asset Tax Law
unconstitutional. This law had prohibited taxpayers from deducting debts payable
to nonresidents from the taxable asset's value. Since the declaratory judgment
was favorable to us, to the extent that the Asset Tax Law is not amended, we
will be able to deduct debts payable to nonresidents from the asset tax basis.
We are analyzing the alternatives to recover the amount of Ps.88.4 million (plus
interest and inflation effects) of amounts paid for the tax

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years 2001 and 2002; however, we can not assure you that we will be successful
in recovering this amount. Amounts paid for the months of January and February
of 2003, have already been recovered or credited to us.

In December 2002 the Congress again acted to make this special tax
effective during fiscal year 2003, by adding or modifying some concepts included
in the original text of the law. The Congress does not need to ratify this
special tax every year, but modifications to the law could be made. In response,
we have filed a new amparo proceeding challenging the constitutionality of the
tax. Our action challenges the tax on grounds similar to those we raised last
year and we plan to follow a similar strategy as last year. We have been
informed that similar proceedings were also filed by Cablevision. We cannot
assure you that we will obtain a favorable resolution in these proceedings or
that we will be able to recover the amounts that have been or will be paid for
this tax. See "Item 4: Information on the Company -- Business Overview --Mexican
Regulation of DTH Services--Telecommunications Tax."

In 2001, we decided to settle our suit for declaratory judgment regarding
the withholding tax on the interest paid to our bondholders given the complexity
of the subject matter and the potential tax liability if the declaratory
judgments (amparos) were not resolved in our favor. As a result, we withdrew the
declaratory judgments (amparos) and paid US$4.1 million of surcharges and
penalties in order to obtain a favorable resolution to apply the reduced rate of
4.9% withholding tax on the interest paid to bondholders. On January 24, 2001,
the tax authorities officially confirmed our right to apply the reduced rate of
4.9% withholding tax on interest paid to bondholders. For more information see,
"Item 10: Additional Information-Taxation-Mexican Taxation."

There are other various legal actions and other claims pending against us
that are incidental to our ordinary course of our business. Our management does
not consider these actions or claims to be material.

EXCHANGE CONTROLS

For a description of exchange controls and exchange rate information, see
"Key Information--Exchange Rate Information."

TAXATION

The following is a general summary of certain anticipated U.S. federal
income and Mexican federal tax consequences of the ownership and disposition of
the senior notes, but it does not purport to be a comprehensive description of
all the tax considerations that may be relevant to a decision to own and dispose
of the senior notes. This summary does not describe any tax consequences arising
under the laws of any state, locality or taxing jurisdiction other than the
United States and Mexico.

This summary is based on the federal tax laws of the United States and
Mexico as in effect on the date of this Annual Report, as well as regulations,
rulings and decisions of the United States and rules and regulations of Mexico
available on or before such date and now in effect. All of the foregoing is
subject to change, possibly for U.S. federal income tax purposes with
retroactive effect.

This summary does not constitute, and should not be considered as, legal or
tax advice to holders. Tax consequences of each individual holder of the senior
notes will depend upon the particular facts and circumstances of each such
holder. Accordingly, each person should consult with his or her own professional
advisor with respect to the tax consequences of his or her ownership and
disposition of the senior notes.

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UNITED STATES/MEXICO TAX TREATY

A convention for the Avoidance of Double Taxation between Mexico and the
United States and a protocol to that convention (collectively referred to herein
as the "Tax Treaty"), are in effect. However, as discussed below under " --
Mexican Taxation", as of the date of this Annual Report, the Tax Treaty is not
generally expected to have any material effect on the Mexican tax consequences
described in this Annual Report. The United States and Mexico have also entered
into an agreement that covers the exchange of information with respect to tax
matters.

UNITED STATES FEDERAL INCOME TAXATION

This summary of certain U.S. federal income tax consequences of the
ownership and disposition of the senior notes is limited to holders of senior
notes that are U.S. Holders and will hold the senior notes as capital assets. As
used herein, a "U.S. Holder" includes a holder or beneficial owner of the senior
notes who is, for U.S. federal income tax purposes, a citizen or individual
resident of the United States, a corporation or partnership created or organized
in or under the laws of the United States, or of any political subdivision
thereof, an estate, the income of which is includable in its gross income for
U.S. federal income tax purposes without regard to its source or a trust subject
to the primary supervision of a court within the United States and the control
of one or more U.S. persons, but excludes persons subject to special provisions
of U.S. federal income tax law, such as tax-exempt organizations, financial
institutions, insurance companies, broker-dealers, traders in securities,
persons having a "functional currency" other than the U.S. dollar, U.S.
expatriates, persons subject to the alternative minimum tax, and holders that
will hold the senior notes as part of a straddle, hedging or conversion
transaction or other integrated investment comprised of the senior notes and one
or more other investments. Further, the discussion below does not address the
effect of any U.S. state or local tax law on a holder of the senior notes. This
discussion assumes that each holder of the senior notes will comply with the
certification procedures described below as may be necessary to obtain a reduced
rate of withholding under Mexican law. Each holder of a note should consult a
tax advisor as to the particular tax consequences to such holder of the
ownership and disposition of the note, including the applicability and effect of
any state, local or foreign tax laws.

INTEREST AND ADDITIONAL AMOUNTS

Interest on the senior notes and additional amounts paid in respect of
Mexican withholding taxes imposed on payments on the senior notes ("Additional
Amounts") will be taxable to a U.S. Holder as ordinary income. The amount of
income taxable to a U.S. Holder will include the amount of all Mexican taxes
withheld (as described below under "--Mexican Taxation") by the Company in
respect thereof. Thus, a U.S. Holder will be required to report income in an
amount greater than the cash it receives in respect of payments on its note.
However, a U.S. Holder may, subject to certain limitations, be eligible to claim
as a credit or deduction for purposes of computing its U.S. federal income tax
liability the Mexican taxes withheld, notwithstanding that the payment of such
taxes will be made by the Company. The rules relating to foreign tax credits and
the timing thereof are extremely complex and depend upon a U.S. Holder's
particular circumstances. In addition, under guidance released by the U.S.
Treasury Department, foreign tax credits will not be allowed for withholding
taxes imposed on an arrangement in which a U.S. Holder's reasonably expected
economic profit, after non-U.S. taxes, is insubstantial compared to the value of
the foreign tax credits expected to be obtained as a result of the arrangement.
The Internal Revenue Service has identified such an agreement as a "listed
transaction" (as defined below under "Tax Shelter Disclosure Regulations"). U.S.
Holders should consult with their own tax advisors with regard to the
availability of a foreign tax credit or deduction and the application of the
foreign tax credit rules to their particular situations.

CONTINGENT PAYMENT DEBT INSTRUMENT REGULATIONS

In general, if a debt instrument is subject to the U.S. Treasury
regulations governing the treatment of "contingent payment debt instruments"
(the "contingent debt regulations"), a U.S. Holder, including a U.S. Holder
using the cash method of tax accounting, must accrue interest income as
"original issue discount" over the term of the debt instrument based upon a
projected payment schedule (subject to later adjustments) provided by the issuer
and any gain and (subject to certain limitations) loss recognized by a holder
with respect to such instrument will be ordinary, rather than capital, in
nature.

The application of the contingent debt regulations to instruments such as
the senior notes, which generally provide for interest payable at a fixed rate,
but also provide for Additional Amounts, is uncertain. If the contingent debt
regulations apply to the senior notes, U.S. Holders of senior notes would be
subject to the projected interest

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accruals rules and ordinary income and loss treatment on dispositions as
summarized above. The Company believes that the contingent debt regulations were
not intended to apply to instruments such as the senior notes and, subject to
further clarification of the contingent debt regulations, intends to take the
position that the senior notes are not subject to those regulations. It is
conceivable, however, that the Internal Revenue Service could take the position
that Additional Amounts payable with respect to the senior notes constitute
contingent payments to which the contingent debt regulations apply. Under
certain characterizations, a U.S. Holder would be required to treat the senior
notes consistently with the Company's treatment, unless the holder files a
statement (disclosing the inconsistent treatment and the reason for such
inconsistent treatment) with its timely filed U.S. federal income tax return for
the taxable year that includes the date of acquisition. Holders are urged to
consult their tax advisors to determine the possible application of the
contingent debt regulations to the senior notes.

MARKET DISCOUNT AND BOND PREMIUM

If a U.S. Holder purchases a 12 7/8% senior note at a price that is less
than its principal amount, the excess of the principal amount over the U.S.
Holder's purchase price will be treated as "market discount." However, such
market discount will be considered to be zero if it is less than 1/4 of 1% of
the note's principal amount multiplied by the number of complete years to
maturity from the date the U.S. Holder purchased such note.

Under the market discount rules, a U.S. Holder generally will be required
to treat any partial principal payment on, and any gain realized on the sale,
exchange, retirement or other disposition of, a 12 7/8% senior note as ordinary
income (generally treated as interest income) to the extent of the market
discount which accrued but was not previously included in income during the
period the U.S. Holder held such note. If such note is disposed of in a
nontaxable transaction, for example, by gift (other than a non-recognition
transaction described in section 1276(c) of the Internal Revenue Code of 1986,
as amended), accrued market discount will be includible as ordinary income as if
the note had been sold at its then fair market value. In addition, the U.S.
Holder may be required to defer, until the maturity of the note or its earlier
disposition in a taxable transaction, the deduction of all or a portion of the
interest expense on any indebtedness incurred or continued to purchase or carry
such note.

In general, market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the note, unless the
U.S. Holder makes an irrevocable election (on an instrument-by-instrument basis)
to accrue market discount under a constant yield method. A U.S. Holder of a 12
7/8% senior note may elect to include market discount in income currently as it
accrues (under either a ratable or constant yield method), in which case the
rules described above regarding the treatment as ordinary income of gain upon
the disposition of the note and upon the receipt of certain payments and the
deferral of interest deductions will not apply. The election to include market
discount in income currently, once made, applies to all market discount
obligations acquired on or after the first day of the first taxable year to
which the election applies, and may not be revoked without the consent of the
Internal Revenue Service. Such currently included market discount will increase
the U.S. Holder's tax basis in the note and generally is treated as ordinary
interest income for U.S. federal income tax purposes.

A U.S. Holder that purchases a 12 7/8% senior note for an amount in excess
of the amount payable at maturity of the note will be considered to purchase the
note with "bond premium" equal to the excess of the U.S. Holder's purchase price
over the amount payable at maturity (or on an earlier call date if it results in
a smaller amortizable bond premium). A U.S. Holder of a 12 7/8% senior note may
elect to amortize such premium using a constant yield method over the remaining
term of the note (or until an earlier call date if it resulted in a smaller
amortizable bond premium) and to offset interest otherwise required to be
included in income in respect of such note by the amortized amount of such
excess for such taxable year. Such election, once made, is irrevocable without
the consent of the Internal Revenue Service and applies to all taxable bonds
held during the taxable year for which the election is made or subsequently
acquired. A U.S. Holder which does not make this election will be required to
include in gross income the full amount of interest on the note in accordance
with its regular method of tax accounting, and will include the premium in its
tax basis for the note for purposes of computing the amount of its gain or loss
recognized on the sale, exchange or retirement of the note.

A U.S. Holder may elect to include in gross income under a constant yield
method all amounts that accrue on a 12 7/8% senior note that are treated as
interest for tax purposes (i.e., stated interest, market discount and de minimis
market discount, as adjusted by any amortizable bond premium). U.S. Holders
should consult their tax advisors as to the desirability, mechanics and
collateral consequences of making this election.

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If the senior notes are subject to the contingent debt regulations,
described above, the foregoing market discount and bond premium rules will not
apply. Rather, upon the purchase of a 12 7/8% senior note at other than the
note's adjusted issue price, a U.S. Holder would be required to reasonably
allocate any difference between the "adjusted issue price" and the basis of the
note to the daily portions of interest or projected payments over the remaining
term of the note. Because of the complexity of the rules relating to bond
premium and market discount, U.S. Holders should consult their tax advisors as
to application of these rules and as to the desirability, mechanics and
collateral consequences of making any elections in connection therewith.

DISPOSITIONS

Upon the sale, exchange, retirement or other taxable disposition of a 12
7/8% senior note, a U.S. Holder will recognize taxable gain or loss in an amount
equal to the difference, if any, between such holder's adjusted basis in the
note and the amount realized on such sale, exchange or retirement. A U.S.
Holder's adjusted tax basis in a 12 7/8% senior note will generally equal the
cost of such note, increased by the amount of any market discount previously
included in the U.S. Holder's gross income, and reduced by the amount of any
amortizable bond premium applied to offset interest on the note (unless a 12
7/8% senior note is subject to the contingent debt regulations, described above,
in which case a U.S. Holder's basis in a note would be increased by interest
previously accrued on the note and decreased by the amount of any non-contingent
payment and the projected amount of any contingent payment previously made on
the note). A gain or loss recognized by a U.S. Holder on the sale, exchange,
retirement or other taxable disposition of a 12 7/8% senior note generally will
be a capital gain or loss (except with respect to amounts received upon a
disposition attributable to accrued but unpaid interest, which will be taxable
as ordinary income, and except if the senior notes are subject to the contingent
debt regulations, described above), and will be a long-term capital gain or
loss, if, at the time of the disposition, the note has been held for more than
one year. Any gain recognized by a non-corporate U.S. Holder on the sale,
exchange, redemption, retirement or other disposition of a note generally will
be subject to a maximum tax rate of 15%, which maximum tax rate will increase
under current law to 20% for dispositions occurring during taxable years
beginning on or after January 1, 2009. U.S. Holders should consult their own tax
advisors as to the foreign tax credit implications of a disposition of the
senior notes.

BACKUP WITHHOLDING

In general, "backup withholding" at a rate of 28% (which rate will increase
under current law to 31% for taxable years beginning on or after January 1,
2011) may apply to payments of principal and interest made on a 12 7/8% senior
note, and to the proceeds of a sale or exchange of a 12 7/8% senior note before
maturity within the United States, that are made to a non-corporate holder if
such holder fails to provide a correct taxpayer identification number or
otherwise comply with applicable requirements of the backup withholding rules.
The backup withholding tax is not an additional tax and may be credited against
a U.S. Holder's U.S. federal income tax liability, provided that correct
information is provided to the Internal Revenue Service.

NON-U.S. HOLDERS

A holder or beneficial owner of senior notes that is, with respect to the
United States, a foreign corporation or a nonresident alien individual (a
"non-U.S. Holder") generally will not be subject to U.S. federal income or
withholding tax on: (a) interest and Additional Amounts received in respect of
the senior notes, unless such payments are effectively connected with the
conduct by the non-U.S. Holder of a trade or business in the United States or
(b) gains realized on the sale, exchange or retirement of the senior notes,
unless: (i) such gain is effectively connected with the conduct by the non-U.S.
Holder of a trade or business in the United States or (ii) in the case of a gain
realized by an individual non-U.S. Holder, the non-U.S. Holder is present in the
United States for 183 days or more in the taxable year of the disposition and
certain other conditions are met.

TAX SHELTER DISCLOSURE REGULATIONS

Recently issued U.S. Treasury regulations directed at tax shelter activity
require persons filing U.S. federal income tax returns to disclose certain
information if they participate in a "reportable transaction." A transaction
will be a "reportable transaction" if it is described in any of several
categories of transactions, which include transactions that are the same or
substantially similar to a transaction identified in a public IRS pronouncement
as a tax avoidance transaction (a "listed transaction"), transactions that
result in the incurrence of a loss or losses exceeding certain thresholds,
transactions that result in the existence of significant book-tax differences,
and transactions that

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are offered under conditions of confidentiality. Each holder of a note should
consult with their tax advisors concerning such possible disclosure obligations.
There are pending in Congress legislative proposals that, if enacted, would
impose significant penalties for failure to comply with these disclosure
requirements.

MEXICAN TAXATION

The following is a general summary of the principal consequences, under
Mexico's Income Tax Law (Ley del Impuesto sobre la Renta) (the "Law") and rules
as currently in effect, and under the Tax Treaty, of the ownership and
disposition of the senior notes by a holder that is not a resident of Mexico for
tax purposes and that will not hold the senior notes or a beneficial interest
therein in connection with the conduct of a trade or business through a
permanent establishment in Mexico (a "Foreign Holder") and such Foreign Holder
is not:

- holder of 10% or more of Innova's voting stock, directly or
indirectly, jointly or individually, or

- a corporation or other entity, 20% or more of whose stock is
owned, directly or indirectly, jointly or individually, by persons
related to Innova, that in either case is the effective
beneficiary, directly or indirectly, jointly or individually, of
5% or more of the aggregate amount of any interest payment on
senior notes. For these purposes, persons will be related if:

- one person holds an interest in the business of the other
person and both persons have common interests; or

- a third party has an interest in the business or assets of
both persons.

For purposes of Mexican taxation:

- an individual is a resident of Mexico if such person has
established his home in Mexico, unless such person has resided in
another country for more than 183 days, whether consecutive or
not, during a calendar year and can demonstrate that such person
has become a resident of that country for tax purposes.

- A legal entity is a resident of Mexico if it is incorporated under
Mexican law or if it maintains the main administration of its head
office or business or the effective location of its management in
Mexico.

- A Mexican citizen is presumed to be a resident of Mexico unless
such person can demonstrate the contrary.

- A permanent establishment of a foreign person will be regarded as
a resident of Mexico, and such permanent establishment will be
required to pay taxes in Mexico for income attributable to it, in
accordance with applicable law under a regime that differs from
that applied to Foreign Holders.

This summary is based upon the tax laws of Mexico as in effect on the date
of this Annual Report, as well as judicial and administrative interpretations
thereof available on or before such date. All of the foregoing are subject to
interpretations and to change, possibly with retroactive effect, and could
affect the continued validity of this summary.

Each Foreign Holder should consult a tax advisor as to the particular
Mexican or other tax consequences to such Foreign Holder of owning, purchasing
and disposing of the senior notes, including the applicability and effect of any
state, local or foreign tax laws. This summary does not address the tax
consequences of the ownership, purchase or disposition of the senior notes by
Foreign Holders that do not fulfill the requirements described above.

This summary does not address all of the tax consequences that may be
applicable to Foreign Holders of the senior notes and does not purport to be a
comprehensive description of all the tax considerations that may be relevant to
a decision by the Foreign Holder in respect of the owning, purchasing or
disposing such senior notes.

A-78

INTEREST AND PRINCIPAL

Under the Law, payments of interest (including amounts paid by Innova in
excess of the issue price of the senior notes or premiums which, under the Law,
are deemed to be interest) made by Innova in respect of the senior notes to a
Foreign Holder will be subject to a Mexican withholding tax assessed at a rate
of 4.9% if all of the following requirements are met:

- the senior notes are placed outside of Mexico through banks or
brokerage houses, in a country with which Mexico has entered into
a treaty for the avoidance of double taxation and such treaty is
in effect;

- the senior notes are registered in the Special Section of the
Mexican National Registry of Securities, and copies of such
registration are provided to the Mexican Ministry of Finance and
Public Credit;

- Innova timely files with the Mexican Ministry of Finance and
Public Credit, certain information relating to the original
issuance of the senior notes and the related prospectus; and

- Innova timely files with the Mexican Ministry of Finance and
Public Credit, on a quarterly basis, information representing that
no party related to Innova jointly or individually, directly or
indirectly, is the effective beneficiary of 5% or more of the
aggregate amount of each interest payment, and Innova maintains
records that evidence compliance with this requirement.

Innova has met the first three requirements and expects to timely file all
of the periodic information required by the fourth. Accordingly, Innova expects
to withhold Mexican tax from interest payments on the senior notes made to
Foreign Holders at the 4.9% rate in accordance with the Law rather than a 10%
rate that could apply under other circumstances. On January 24, 2001, the tax
authorities officially confirmed Innova's right to apply the 4.9% withholding
tax on interest paid to our bondholders. In the event that any of the above
information requirements are not met, under the Law, payments of interest on the
senior notes made by Innova to a Foreign Holder will be subject to a Mexican
withholding tax assessed at a rate of 10%.

As of the date of this Annual Report, neither the Tax Treaty nor any other
tax treaty entered into by Mexico is expected generally to have any material
effect on the Mexican income tax consequences described in this Annual Report,
because, as discussed above, we expect that the 4.9% rate will apply in the
future and, therefore, that Innova will continue to be entitled to withhold
taxes in connection with interest payments under the senior notes at the 4.9%
rate.

Foreign holders residing in the United States should nonetheless be aware
that under the Tax Treaty, the Mexican withholding tax rate applicable to
interest payments made to U.S. holders which are eligible for benefits under the
Tax Treaty will be limited to either:

- 15% generally; or

- 4.9% in the event that the senior notes are considered to be
"regularly and substantially traded on a recognized securities
market" or "loans granted by banks including investment banks and
savings banks and insurance companies" within the meaning of the
Tax Treaty.

Other Foreign Holders should consult their tax advisors regarding whether
they reside in a country that has entered into a treaty for avoidance of double
taxation with Mexico which is effective, and, if so, the conditions and
requirements for obtaining benefits under such treaty. As of January 1, 2002,
the Mexican income tax law provides that in order for a Foreign Holder to be
entitled to the benefits under the treaties entered into by Mexico, it is
necessary for the Foreign Holder to meet the procedural requirements established
in the law.

Foreign Holders or beneficial owners of the senior notes may be requested,
subject to specified exceptions and limitations, to provide certain information
or documentation necessary to enable Innova to apply the appropriate Mexican
withholding tax rate applicable to such Foreign Holders or beneficial owners. In
the event that the specified information or documentation concerning the Foreign
Holder or beneficial owner, if requested, is not provided prior to the payment
of any interest to that Foreign Holder or beneficial owner, Innova may withhold
Mexican tax from

A-79

that interest payment to that Foreign Holder or beneficial owner at the maximum
applicable rate, but Innova's obligation to pay Additional Amounts relating to
those withholding taxes will be limited.

Under the Law, payments of interest made by Innova with respect to the
senior notes to non-Mexican pension or retirement funds will be exempt from
Mexican income tax and withholding taxes, provided that the fund: (i) is duly
organized pursuant to the laws of its country of origin (and is the effective
beneficiary of such interest), (ii) is exempt from income tax in such country
and (iii) is registered with the Mexican Ministry of Finance and Public Credit
for that purpose.

Innova has agreed, subject to certain exceptions and limitations, to pay
Additional Amounts in respect of the above-mentioned Mexican withholding taxes
to Foreign Holders.

Under the Law and the rules thereunder, a Foreign Holder will not be
subject to any Mexican withholding or similar taxes in connection with payments
of principal made by Innova in connection with the senior notes.

DISPOSITIONS

Capital gains resulting from the sale or other disposition of senior notes
by a Foreign Holder will not be subject to Mexican income or other taxes.

OTHER TAXES

A Foreign Holder will not be liable for Mexican estate, gift, inheritance
or similar taxes with respect to its holding, nor will it be liable for Mexican
stamp, registration or similar taxes.

DOCUMENTS ON DISPLAY

We submit and file reports, including annual reports on Form 20-F, and
other information with the SEC. These reports and other information, as well as
any related exhibits and schedules, may be inspected, without charge, at the
public reference facility maintained by the SEC at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional
offices located at the Woolworth Building, 233 Broadway, 13th Floor, New York,
New York, 10007, and Northwestern Atrium Center, 500 West Madison Street, Suite
1400 Chicago, Illinois 60661-2511. Copies of these reports and other information
may also be obtained from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. These reports and
other information may also be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005. Our current reports on Form
6-K and Form 20-F are available through the SEC website, since we are filing our
reports electronically through EDGAR.

We furnish the Bank of New York, as the trustee for our outstanding 12 7/8%
senior notes, or senior notes, with annual reports in English. These reports
contain audited consolidated financial statements that have been prepared in
accordance with Mexican GAAP, and reconciled as to net income and stockholders'
equity to U.S. GAAP. These reports have been examined and reported on, with an
opinion expressed by, an independent auditor. The trustee is required to mail
our annual reports to all holders of record of our senior notes. The indenture
for the senior notes also requires us to furnish the depositary with English
translations of all other reports and communications that we send to holders of
our senior notes. The trustee is required to mail these notices, reports and
communications to holders of record of our senior notes. We also furnish the
Luxembourg Stock Exchange with a copy of our annual report as required by their
rules.

Statements contained in this annual report concerning the contents of any
contract or any other document, are not necessarily complete. If a contract or
document has been filed as an exhibit to any filing we have made with the SEC,
we refer you to the copy of the contract or document that has been filed. Each
statement in this annual report relating to a contract or document filed as an
exhibit is qualified in its entirety by the filed exhibit.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the exposure to an adverse change in the value of financial
instruments caused by interest rate changes, foreign currency fluctuations and
changes in the market value of investments. The following information

A-80

includes "forward-looking statements" that involve risks and uncertainties.
Actual results could differ from those presented. Unless otherwise indicated,
all information below is presented on a Mexican GAAP basis in constant Pesos in
purchasing power as of December 31, 2002.

INTEREST RATE RISK

We currently believe that any increase in interest rates in international
money markets is not likely to have a direct adverse impact on our financial
results or cash flows because our total debt, including the senior notes and the
loans received from stockholders, is U.S. dollar-denominated and bears fixed
rates of interest. Our results and cash flow could be affected if additional
financing is required in the future when interest rates are high in relation to
current market conditions. As of December 31, 2002 and 2001, we were not a party
to any interest rate risk management transactions. We will evaluate from time to
time specific actions to cover our exposure to interest rate risk on
commercially acceptable terms.

FOREIGN EXCHANGE RATE RISK

The devaluation of the peso adversely affects our liquidity and results of
operations by increasing the peso equivalent of our U.S. dollar-denominated
indebtedness, operating costs and expenses. Our ability to meet our U.S.
dollar-denominated obligations is affected by changes in the relative values of
the peso against the U.S. dollar. To the extent that we are not able to obtain
dollars from our operations, capital contributions or borrowings in order to
meet our dollar-denominated obligations, we would be required to purchase U.S.
dollars on foreign exchange markets with pesos.

We have substantial indebtedness and operating costs denominated in U.S.
dollars. As of December 31, 2002 and 2001, the Company had US$ 936.0 million and
US$880.5 million of liabilities denominated in U.S. dollars, respectively. Each
percentile point devaluation of the peso against the U.S. dollar and British
Pound Sterling would increase our current costs in pesos by an amount equivalent
to approximately Ps. 17.8 million and Ps. 0.1 million respectively. Also, under
this scenario, the exchange loss in pesos for the total U.S. dollar-denominated
indebtedness would amount to approximately Ps. 97.9 million and Ps. 85.4 million
for the years ended December 31, 2002 and 2001, respectively. It is unlikely
that we would be able to fully recover the negative impact in the costs and
expenses by increasing prices for our services when a devaluation of the peso
exceeds the annual rate of inflation. Our exposure to changes in exchange rates
for currencies other than the U.S. dollar and British Pound Sterling is not
material.

CURRENCY HEDGING

In 2002, 2001 and 2000, we did not engage in any hedging or other
transactions related to the management of risks associated with foreign currency
or interest rate fluctuations. We may consider entering into transactions to
hedge the risk of exchange rate fluctuations in the future if we are able to
obtain hedging arrangements on commercially satisfactory terms.

INFLATION RISKS

In general, the purchasing power of consumers tends to decrease during high
inflation periods since wages and salaries tend to rise less quickly than the
cost of living. This could adversely impact our revenues and cash flow as a
result of lower purchasing power of current or future potential subscribers and
decreased advertising revenues. In addition, we, like most companies in our
sector, may not be able to fully recover our rising costs and compensate for
increases in interest rates during high inflationary periods through raising our
prices. The potential adverse impact of a hyper-inflationary environment on the
results has not been evaluated in light of the success of the Mexican
Government's current anti-inflationary policy.

A-81

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS

Not applicable.

A-82

ITEM 15. CONTROLS AND PROCEDURES

Within the 90-day period prior to the date of this Form 20-F, we carried
out an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures as defined in Rule 13a-14(c) and 15d-14(c) of the Exchange Act. Based
on this evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective to ensure
that information required to be disclosed in our periodic filings under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms.

There have been no significant changes in our internal controls or other
factors that could significantly affect these controls subsequent to the date of
their evaluation, including any significant deficiencies or material weaknesses
of internal controls that would require corrective action.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Not applicable.

ITEM 16B. CODE OF ETHICS

Not applicable.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Not applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS

We have responded to Item 18 in lieu of Item 17.

ITEM 18. FINANCIAL STATEMENTS

See pages A-93 through A-133 which are incorporated by reference herein.

ITEM 19. EXHIBITS

Documents filed as exhibits to this annual report appear on the Exhibit
Index beginning on the following page.

All financial statement schedules relating to the registrant are omitted
because they are not required or because the required information, if material,
is contained in the audited year-end financial statement or the notes thereto.

A-83

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------

1.1 Amended and Restated By-laws (Estatutos Sociales) of the Registrant,
dated December 22, 1998. (7)

1.2. English language translation of resolutions amending the Amended and
Restated By-Laws of the Registrant, dated August 21, 2002. (11)

1.3 English language translation of resolutions amending the Amended and
Restated By-Laws of the Registrant, dated August 21, 2002. (11)

2.1 Indenture, dated as of April 1, 1997, for the Senior 12 7/8% senior
notes between the Registrant and The Bank of New York as Trustee. (2)

2.2 Form of Senior Exchange Note (included in Exhibit 2.1) (2)

4.1 Form of Indemnity Agreement between the Registrant and its directors
and its executive officers (2)

4.2 Memorandum of Understanding dated February 29, 1996 between PanAmSat
Corporation and Grupo Televisa, S.A., Globo Participacoes, Ltda., and
The News Corporation Limited (1)

4.3 System Implementation and License Agreement by and between the
Registrant and News Digital Systems Limited ("NDS") dated September 20,
1996 (the "System Implementation Agreement") (2)

4.4 Subscriber Management System Implementation and License Agreement
between the Registrant and NDS dated October 29, 1996 (the "Subscriber
Management Agreement," the System Implementation Agreement together
with the Subscriber Management Agreement, the "NDS Agreements") (2)(3)

4.5 Agreement by and among Telecomunicaciones de Mexico and Corporacion de
Radio y Television Norte de Mexico, S. de C.V. dated October 1, 1996
(2)

4.6 Agreement by and among Telecomunicaciones de Mexico and Corporacion
Medcom, S.A. de C.V. dated November 1, 1996 (2)

4.7 Social Part Holders Agreement by and among Grupo Televisa, S.A.,
Galavision DTH, S. de R.L., Alejandro Sada, The News Corporation
Limited, News DTH (Mexico) Investment Limited and David Evans dated
March 6, 1997 (2)

4.8 Tax-Sharing Agreement effective as of March 6, 1997 between Grupo
Televisa, S.A. and the Registrant (2)

4.9 Trademark License Agreement by and between News America Publishing
Incorporated and the Registrant dated March 6, 1997 (2)

4.10 Agreement by and among Telecomunicaciones de Mexico and Corporacion de
Radio y Television Norte de Mexico, S.A. de C.V. dated September 9,
1997 (No. TVDP-1191/97). (6)

4.11 Agreement by and among Telecomunicaciones de Mexico and Corporacion de
Radio y Television Norte de Mexico, S.A. de C.V. dated September 9,
1997 (No. TVDP-007/96). (6)

A-84

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------

4.13 Transponder Service Agreement by and among PanAmSat International
Systems, Inc. and Corporacion de Radio y Television del Norte, S.A. de
C.V. dated February 8, 1999. (5)

4.14 Subscriber Management System (SMS) Agreement by and between NDS and
Innova, dated August 3, 1998. (7)

4.15 Agreement by and among Innova, S. de R.L. de C.V., on the one hand and
Grupo Televisa, S.A., Galavision, DTH, S. de R.L., News America, Inc.,
News DTH (Mexico) Investment Ltd., and TCI DTH Mexico, dated December
3, 1998. (7)

4.16 Amendment Letter to the Interim Agreement dated December 3, 1998 by and
among Innova, S. de R.L. de C.V., on the one hand and Grupo Televisa,
S.A., Galavision, DTH, S. de R.L., News America, Inc., News DTH
(Mexico) Investment Ltd., and TCI DTH Mexico, dated as of December 22,
1998. (8)

4.17 Second Amendment Letter to the Interim Agreement dated December 3, 1998
by and among Innova, S. de R.L. de C.V., on the one hand and Grupo
Televisa, S.A., Galavision, DTH, S. de R.L., News America, Inc., News
DTH (Mexico) Investment Ltd., and TCI DTH Mexico, dated May 8, 2000.
(8)

4.18 Amendment to the System Implementation and License Agreement by and
between the Innova, S. de R.L. de C.V., on the one hand and News
Digital Systems Limited ("NDS") dated February 29, 2000 (the "NDS SILA
Amendment") (Note: confidential portions omitted pursuant to a request
for confidential treatment under Rule 24b-2 which was granted on May 3,
2002, and the confidential portions are separately filed with the
Commission. (9)

4.19 DTH Concession granted to Corporacion de Radio y Television del Norte
de Mexico, S. de R.L. de C.V. by the Mexican Secretary of
Communications and Transport, dated November 27, 2000, along with an
English language translation of the agreement. (10)

4.21 Purchase and Sale Contract, dated July 31, 2001, by and between
Merkatel, S.A. de C.V. and Corporacion Novavision, S. de R.L. de C.V.,
along with an English language translation of the agreement. (10)

4.22 Advertising Agreement, dated October 31, 2001, by and between
Televimex, S.A. de C.V. and Corporacion Novavision, S. de R.L. de C.V.,
along with an English language summary. (10)

4.23 Advertising Agreement, dated November 15, 2001, by and between
Televimex, S.A. de C.V. and Corporacion Novavision, S. de R.L. de C.V.,
along with an English language summary. (10)

4.24 Credit Agreement, dated as of July 22, 2002, by and among Innova, S. de
R.L. de C.V., as Borrower, and Grupo Televisa, S.A., Sky DTH, S. de. R.
L. de C.V., News America Incorporated and Liberty Mexico DTH, Inc., as
Lenders, News DTH (Mexico) Investment Limited, as partner at Borrower,
and Corporacion Novavision, S. de. R.L. de C.V., as Issuer.

4.25 Technical Services Agreement, dated as of January 1, 1998, by and
between DTH TechCo. Partners and Corporacion Novavision S. de. R.L. de
C.V. (11)

A-85

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------

8.1 List of Subsidiaries of Registrant.

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

(1) Previously filed with the Securities and Exchange Commission on May 3,
1996 as Exhibit 10.15 to PanAmSat Corporation's 10-Q (No. 000-26712) for
the quarterly period ended March 31, 1996.

(2) Previously filed with the Securities and Exchange Commission on August 22,
1997 as an Exhibit to Innova's Registration Statement on Form F-4, (No.
333-7484).

(3) Portions of these exhibits have been omitted pursuant to an order, dated
August 25, 1997, by the Securities and Exchange Commission granting
confidential treatment.

(4) Previously filed with the Securities and Exchange Commission on June 24,
1998 as Exhibit 10.52 to PanAmSat International Systems' Registration
Statement on Form S-4, (No. 333-56227). Portions of this exhibit have been
omitted pursuant to an application for confidential treatment filed with
the Securities and Exchange Commission by PanAmSat.

(5) Previously filed with the Securities and Exchange Commission on May 17,
1999 as Exhibit 10.56 to PanAmSat Corporation's Quarterly Report on Form
10-Q, (No. 000-22531). Portions of this exhibit have been omitted pursuant
to an application for confidential treatment filed with the Securities and
Exchange Commission by PanAmSat.

(6) Previously filed with the Securities and Exchange Commission on June 30,
1998 as an Exhibit to Innova's Annual Report on Form 20-F (the "1997
Annual Report").

(7) Previously filed with the Securities and Exchange Commission on June 30,
1999 as an Exhibit to Innova's Annual Report on Form 20-F (the "1998
Annual Report").

(8) Previously filed with the Securities and Exchange Commission on June 28,
2000 as an Exhibit to Innova's Annual Report on Form 20-F (the "1999
Annual Report").

(9) Previously filed with the Securities and Exchange Commission on August 28,
2001 as an Exhibit to Amendment One to Innova's Annual Report for the year
ended Dec. 31, 2000 on Form 20-F/A. Portions of this exhibit have been
omitted pursuant to an application for confidential treatment filed with
the Securities and Exchange Commission by Innova and which was granted by
an Order on May 3, 2002.

(10) Previously filed with the Securities and Exchange Commission on June 13,
2002 as an Exhibit to Innova's Annual Report on Form 20-F (the "2001
Annual Report").

(11) Filed herewith.

A-86

SIGNATURES

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

INNOVA, S. DE R.L. DE C.V.
(Registrant)

By: /s/ Pablo Abel Vazquez Oria
-------------------------------------
Name: Pablo Abel Vazquez Oria
Title: Chief Executive Officer

By: /s/ Carlos Ferreiro Rivas
-------------------------------------
Name: Carlos Ferreiro Rivas
Title: Chief Financial Officer

Dated: June 30, 2003

A-87

INNOVA, S DE R.L. DE C.V. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Independent Accountants........................................................... A-93

Consolidated Balance Sheets as of December 31, 2002 and 2001................................ A-95

Consolidated Statements of Loss for the years ended
December 31, 2002, 2001 and 2000...................................................... A-96

Consolidated Statements of Changes in Stockholders' Equity

(Deficit) for the years ended December 31, 2002, 2001 and 2000........................ A-97

Consolidated Statements of Changes in Financial Position for

the years ended December 31, 2002, 2001 and 2000...................................... A-98

Notes to Consolidated Financial Statements.................................................. A-99

Schedules other than those listed above are omitted for the reason that they are
not required or are not applicable, or the required information is shown in the
respective financial statements or notes thereto.

A-90

INNOVA, S. DE R. L. DE C. V. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001

A-91

REPORT OF INDEPENDENT ACCOUNTANTS

Mexico, D. F., January 31, 2003, except for Note 13.c,
for which the date is March 19, 2003.

To the Stockholders of
Innova, S. de R. L. de C. V.:

We have audited the accompanying consolidated balance sheets of Innova, S. de R.
L. de C. V. and its subsidiaries (collectively the "Group") as of December 31,
2002 and 2001, and the related consolidated statements of loss, of changes in
stockholders' (deficit) and of changes in financial position for each of the
three years in the period ended December 31, 2002 all expressed in Mexican
pesos. These financial statements are the responsibility of the Group's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and Mexico. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Innova, S. de R. L.
de C. V. and its subsidiaries at December 31, 2002 and 2001, and the results of
their operations, the changes in their stockholders' (deficit) and the changes
in their financial position for each of the three years in the period ended
December 31, 2002, in conformity with accounting principles generally accepted
in Mexico.

A-93

Accounting principles generally accepted in Mexico vary in certain significant
respects from accounting principles generally accepted in the United States of
America. The application of the latter would have affected the determination of
the consolidated net loss for each of the three years in the period ended
December 31, 2002, and the determination of consolidated stockholders' (deficit)
at December 31, 2002 and 2001 to the extent summarized in Note 21 to the
consolidated financial statements.

PricewaterhouseCoopers

/s/ Felipe Perez Cervantes, C.P.C.
- ------------------------------------
Felipe Perez Cervantes, C.P.C.

A-94

INNOVA, S. DE R. L. DE C. V. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of Mexican Pesos in
purchasing power as of December 31, 2002)

December 31,
------------
2002 2001
---- ----

Assets
- ------
CURRENT ASSETS:
Cash and cash equivalents Ps. 266,631 Ps. 45,180
Trade accounts receivable, net (Note 4) 103,782 128,123
Value added tax credit and other 1,230 9,362
Spare parts 13,019 8,441
Prepaid advertising (Note 9) 122,035 159,741
Other current assets 44,016 37,989
------------- -------------

Total current assets 550,713 388,836

Property and equipment, net (Note 5) 1,544,905 1,952,176
Satellite transponders, net (Note 6) 1,240,997 1,215,450
Deferred costs, net (Note 7) 82,398 106,633
Intangible assets, net (Note 8) 12,956 110,462
Other non-current assets 9,574 770
------------- -------------

Total assets Ps. 3,441,543 Ps. 3,774,327
============= =============

Liabilities and Stockholders' Deficit

CURRENT LIABILITIES:
Trade accounts payable Ps. 99,585 Ps. 85,956
Accrued expenses 268,498 252,474
Satellite reorientation reserve - 51,881
Satellite transponders obligation (Note 6) 52,812 44,085
Due to affiliated companies and other related parties (Note 9) 433,420 349,626
Accrued interest 132,812 117,096
Asset tax 31,551 46,380
Deferred income 109,498 108,411
------------- -------------

Total current liabilities 1,128,176 1,055,909

NON-CURRENT LIABILITIES:
Senior notes (Note 10) 3,924,000 3,637,930
Stockholders' loans (Note 11) 3,242,793 2,720,201
Satellite transponders obligation (Note 6) 1,368,843 1,314,192
Accrued interest 682,451 346,547
Other liabilities 1,179 728
------------- -------------

Total liabilities 10,347,442 9,075,507
------------- -------------

Commitments and contingencies (Note 13) - -

STOCKHOLDERS' DEFICIT:
Contributed capital:
Capital stock (Note 14) 1,913,116 1,913,116
------------- -------------

Earned capital:
Accumulated losses (Note 17) (7,018,675) (6,609,230)
Loss for the period (1,768,863) (409,445)
Deficit from restatement (31,343) (195,606)
------------- -------------

(8,818,881) (7,214,281)
------------- -------------

Supplementary liability for labor obligations (134) (15)

Total stockholders' deficit (6,905,899) (5,301,180)
------------- -------------

Total liabilities and stockholders' deficit Ps. 3,441,543 Ps. 3,774,327
============= =============

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

A-95

INNOVA, S. DE R. L. DE C. V. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF LOSS

(Expressed in thousands of Mexican Pesos in
purchasing power as of December 31, 2002)

Years ended December 31,
------------------------
2002 2001 2000
---- ---- ----

Net sales Ps. 3,432,872 Ps. 3,266,037 Ps. 2,560,159

Operating expenses:
Cost of sales 1,062,761 1,222,857 1,358,609
Administrative expenses 121,474 151,415 118,229
Selling expenses 832,751 818,777 777,518
Other operating expenses 481,787 403,578 536,814
---------------- ---------------- ----------------

Total operating expenses 2,498,773 2,596,627 2,791,170

Depreciation and amortization 925,078 948,335 844,580
---------------- ---------------- ----------------

Operating profit (loss) 9,021 (278,925) (1,075,591)
---------------- ---------------- ----------------

Integral results of financing (Note 3):
Interest expense (983,057) (903,853) (742,589)
Interest income 11,064 19,779 30,204
Foreign exchange (losses) gains, net (1,174,422) 371,001 (118,814)
Gain from monetary position 498,615 442,412 522,194
Other, net - - (43,017)
---------------- ---------------- ----------------

Total integral results of financing (1,647,800) (70,661) (352,022)

Other expenses - Net (22,126) - -

Transponder services - Solidaridad 2 and
reorientation costs (Note 15) (25,933) - (430,916)
Restructuring charges (Note 16) (6,495) (13,576) -
---------------- ---------------- ----------------

Loss before taxes (1,693,333) (363,162) (1,858,529)

Provision for income and assets taxes
(Note 18) (75,530) (46,283) (130)
---------------- ---------------- ----------------

Net loss (Ps. 1,768,863) (Ps. 409,445) (Ps. 1,858,659)
================ ================ ================

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

A-96

INNOVA, S. DE R. L. DE C. V. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

(Expressed in thousands of Mexican Pesos in
purchasing power as of December 31, 2002)

Supplementary
Deficit liability
Capital from for labor Accumulated
stock restatement obligations losses
----- ----------- ----------- ------

Balance at December 31, 1999 Ps. 1,913,116 (Ps. 40,445) Ps. - (Ps. 3,749,968)

Transfer of net loss to accumulated losses (1,000,603)

Comprehensive loss (Note 19) (26,665)
-------------- -------------- ------------- ----------------

Balance at December 31, 2000 1,913,116 (67,110) - (4,750,571)

Transfer of net loss to accumulated losses (1,858,659)

Comprehensive loss (Note 19) (128,496) (15)
-------------- -------------- ------------- ----------------

Balance at December 31, 2001 1,913,116 (195,606) (15) (6,609,230)

Transfer of net loss to accumulated losses (409,445)

Comprehensive loss (Note 19) 164,263 (119)
-------------- -------------- ------------- ----------------

Balance at December 31, 2002 Ps. 1,913,116 (Ps. 31,343) (Ps. 134) (Ps. 7,018,675)
============== ============== ============= ================

Total
Net stockholders'
loss deficit
---- -------

Balance at December 31, 1999 (Ps. 1,000,603) (Ps. 2,877,900)

Transfer of net loss to accumulated losses 1,000,603 -

Comprehensive loss (Note 19) (1,858,659) (1,885,324)
-------------- --------------

Balance at December 31, 2000 (1,858,659) (4,763,224)

Transfer of net loss to accumulated losses 1,858,659 -

Comprehensive loss (Note 19) (409,445) (537,956)
-------------- --------------

Balance at December 31, 2001 (409,445) (5,301,180)

Transfer of net loss to accumulated losses 409,445 -

Comprehensive loss (Note 19) (1,768,863) (1,604,719)
-------------- --------------

Balance at December 31, 2002 (Ps. 1,768,863) (Ps. 6,905,899)
============== ==============

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

A-97

INNOVA, S. DE R. L. DE C. V. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION

(Expressed in thousands of Mexican Pesos in
purchasing power as of December 31, 2002)

Years ended December 31,
------------------------
Operating activities: 2002 2001 2000
- -------------------- ---- ---- ----

Net loss (Ps. 1,768,863) (Ps. 409,445) (Ps. 1,858,659)
Adjustments to reconcile net loss to
resources (used in) provided by operating activities:
Depreciation and amortization 925,078 948,335 833,122
Impairment of fixed assets 30,776 - 11,458
Satellite reorientation reserve and
maintenance reserve 7,082 4,884 210,190
Transponder Services - Solidaridad 2 - - 222,953
Smart cards reserve - - 32,647
-------------- -------------- --------------

(805,927) 543,774 (548,289)
-------------- -------------- --------------

Changes in operating assets and liabilities:

Trade accounts receivable 24,341 53,991 (72,357)
Value added tax credit and other 8,132 13,879 (5,930)
Inventories and spare parts (4,578) (2,224) 32,857
Prepaid advertising and other current assets 31,680 (166,664) 29,838
Deferred costs 14,718 5,301 7,539
Intangible and other assets 5,863 (6,710) 53,905
Trade accounts payable 13,629 (41,267) (6,981)
Accrued expenses and Satellite reorientation reserve (57,768) (374,069) 213,972
Due to affiliated companies and other related parties 83,794 105,499 854
Transponder Services - Solidaridad 2 - (222,953) -
Accrued interest 351,620 182,521 82,283
Deferred income 1,087 5,339 33,003
Supplementary liability for labor obligations (119) (15) -
Other 451 412 (214,569)
-------------- -------------- --------------

Resources (used in) provided by operating activities (333,077) 96,814 (393,875)
-------------- -------------- --------------

Financing activities:

Stockholders' loans 522,592 1,154,945 804,910
Senior notes 286,070 (338,837) (304,466)
Satellite transponders obligation 63,378 (113,932) 1,472,209
Sale of restricted investments, net - - 277,197
-------------- -------------- --------------

Resources provided by financing activities 872,040 702,176 2,249,850
-------------- -------------- --------------

Investing activities:

Investment in property and equipment (317,512) (802,722) (686,130)
Satellite transponders - - (1,432,546)
-------------- -------------- --------------

Resources used in investing activities (317,512) (802,722) (2,118,676)
-------------- -------------- --------------

Cash and cash equivalents:
Increase (decrease) for the period 221,451 (3,732) (262,701)
At the beginning of the period 45,180 48,912 311,613
-------------- -------------- --------------

At the end of the period Ps. 266,631 Ps. 45,180 Ps. 48,912
============== ============== ==============

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

A-98

INNOVA, S. DE R.L. DE C.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of Mexican Pesos in purchasing power as of
December 31, 2002)

NOTE 1 - THE COMPANY AND ITS PRINCIPAL OPERATIONS:

Description of business:

Innova, S. de R.L. de C.V. ("Innova" or the "Company"), a Mexican company with
limited liability and variable capital, provides direct-to-home ("DTH")
broadcast satellite pay television services in Mexico under the SKY brand name.
Innova is a joint venture indirectly owned by Grupo Televisa, S. A. ("Televisa")
(60%), The News Corporation Limited ("News Corporation") (30%) and Liberty Media
International, Inc. ("LMI") (10%). The Company and its subsidiaries are
collectively referred to as the Group.

The Group's business requires a concession (license granted by the Mexican
federal government) to operate. On May 24, 1996, the Ministry of Communications
and Transportation (the "SCT") ratified the concession granted to a wholly-owned
subsidiary of the Company to offer DTH satellite broadcasting services in Mexico
using domestic satellites. The concession is for a period of thirty years,
beginning May 24, 1996, and renewable in accordance with Mexican Communications
Law. On November 27, 2000, the SCT, granted to a wholly-owned subsidiary of the
Company a concession to provide its broadcasting services using foreign
satellites. The concession is for a 20-year period, effective November 27, 2000
and may be extended in accordance with Mexican Communications Law.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in Mexico ("Mexican GAAP") as
promulgated by the Mexican Institute of Public Accountants ("MIPA"). A
reconciliation from Mexican GAAP to United States generally accepted accounting
principles ("U.S. GAAP") is included in Note 21.

The principal accounting policies followed by the Group are as follows:

a. Basis of presentation -

The financial statements of the Group are presented on a consolidated basis. All
significant intercompany balances and transactions have been eliminated.

A-99

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Certain prior period amounts have been reclassified to conform with the current
year basis of presentation.

b. Members of the Group -

At December 31, 2002, the Group consists of the Company and the following
wholly-owned subsidiaries:

- - Corporacion de Radio y Television del Norte de Mexico, S. de R.L. de C.V.

- - Corporacion Novavision, S. de R. L. de C.V.

- - Corporacion Novaimagen, S. de R. L. de C.V.

- - Servicios Novasat, S. de R.L. de C.V.

- - Servicios Corporativos de Telefonia, S. de R. L. de C.V. ("SECOTEL")

SECOTEL was formed in July 2001, when the Company purchased from Televisa the
call center which was providing services to the Group (Note 8).

c. Cash and cash equivalents -

The Group considers all highly liquid temporary cash investments with original
maturities of three months or less, consisting primarily of overnight deposits,
obligations of the Mexican Government, deposits and bonds in US financial
institutions to be cash equivalents.

d. Property and equipment -

Property and equipment are recorded at acquisition cost and thereafter are
restated using the National Consumer Price Index ("NCPI"), except for equipment
of a non-Mexican origin, which are restated using an index which reflects the
inflation in the respective country of origin and the exchange rate of the
Mexican peso against the currency of such country at the balance sheet date
("Specific Index"). Maintenance costs for technical equipment are reserved based
on management estimates. Actual costs are applied against the applicable reserve
when incurred. Repair and maintenance costs for computer equipment and
integrated receiver/decoder ("IRDs") are expensed as incurred.

Installation costs of antennas, low noise block ("LNB") and accessories in
subscribers' homes or businesses are capitalized in the line item antennas, LNBs
and accessories, and are amortized over the useful life of the asset, which is
three years.

A-100

When assets are retired or otherwise disposed of, the cost and the accumulated
depreciation are removed from the appropriate accounts and any gain or loss is
included in results of operations.

External costs incurred for internal use software are capitalized in computer
equipment and depreciated over three years.

e. Spare parts -

Spare parts inventory are recorded at the lower of cost or net realizable value.
The cost of spare parts utilized is charged to income when utilized.

f. Depreciation -

Depreciation of property and equipment is based upon the restated carrying value
of the assets and is recognized using the straight-line method over the
estimated useful lives of the assets, which range from 3 to 10 years. Land,
equipment in progress and advances to suppliers are not depreciated.

g. Preoperating expenses -

The Group deferred preoperating expenses incurred prior to the launch of its
satellite pay television services in December 1996. Amortization was calculated
using the straight-line method over a term of five years and was first recorded
in December 1996, with the commencement of operations. The preoperating expenses
were fully amortized in November 2001.

h. Seniority premiums and indemnities -

The Group established, in accordance with Mexican law, a seniority premium
liability for its employees. The liability is calculated by an independent
actuary using the projected unit credit method. The labor obligation is
calculated using real rates of interest (net of inflation) and the resulting
asset or liability is considered a non-monetary item. The seniority premium
liability is unfunded. Seniority premium payments are charged to the liability
at the time they are made.

Severance obligations to dismissed personnel are charged to income in the year
in which they are incurred.

i. Foreign currency -

Monetary assets and liabilities denominated in foreign currencies are reported
at the prevailing exchange rate at the balance sheet date. Exchange differences
on monetary assets and liabilities are included in income for the period and
reflected in the integral result of financing. Revenues and expenses denominated
in foreign currencies are reported at the exchange rates in effect when
recognized.

A-101

j. Revenue recognition -

Program service revenues are recognized on a monthly basis as DTH service is
provided. Program service revenues paid in advance are deferred until earned.

Through September 30, 2000, the Group sold the DTH antenna, LNB and remote
control to wholesale distributers, who inturn sold the unit to customers.
Revenue was recognized upon the sale of the unit to the wholesale distributer.
Beginning October 1, 2000, the Group began providing the DTH antenna, LNB and
remote control to customers along with the IRD, but has retained title to the
equipment. The IRD is included in fixed assets and is rented to customers under
an operating lease. Rental revenues are recognized on a monthly basis.

Advertising revenues are recognized at the time the advertising services are
rendered.

k. Capitalized financing costs -

The Group capitalizes the integral financing costs attributable to acquired
assets during installation and preoperating expenses. Capitalized integral
financing costs include interest costs, gains from monetary position and foreign
exchange gains or losses, and are determined by reference to the Group's average
interest cost for outstanding borrowings. No amounts were capitalized in 2002,
2001 and 2000.

l. Concentrations -

Financial instruments which potentially subject the Group to significant
concentrations of credit risk consist primarily of cash and cash equivalents and
trade accounts receivable. The Group maintains its cash and cash equivalents
with various major financial institutions and are principally invested in
obligations of the U.S. and Mexican governments. Concentration of credit risk
with respect to trade accounts receivable is limited due to the large number of
customers throughout Mexico. The Group's policy is to require one month's
payment in advance, to reserve for all accounts receivable greater than ninety
days and to write off against the reserve all receivables greater than 120 days.
Bad debt expense was Ps.110,827 in 2002, Ps.174,058 in 2001 and Ps.37,893 in
2000 (Note 4).

In order to provide DTH service to customers, the Group relies on the use of 12
KU-band transponders on the PAS 9 satellite. The use of these transponders is
unprotected and, as a result, any long term disruption to one or more of the
transmission signals could have a material adverse effect on the Group.

m. Comprehensive loss -

Comprehensive loss represents the net loss for the period presented in the
income statement plus other results for the period reflected in stockholders'
equity which are from non-owner sources (Note 19).

A-102

n. Evaluation of long-lived assets

The Group evaluates the recoverability of its long-lived assets to determine
whether current events or circumstances warrant adjustment to the carrying
value. Such evaluation may be based on current and projected income and cash
flows from operations as well as other economic and market variables.

o. Income tax -

Beginning January 1, 2000, the Group adopted the guidelines of amended Bulletin
D-4, "Accounting Treatment of Income Tax, Tax on Assets and Employee Statutory
Profit Sharing", issued by the MIPA. Under Bulletin D-4, deferred income taxes
are calculated using the comprehensive asset and liability method, which
consists of calculating deferred income tax by applying the respective income
tax rate to the temporary differences between the accounting and tax values of
assets and liabilities at the date of the financial statements.

In accordance with the guidelines established in Bulletin D-4, the net accrued
effect as of January 1, 2000 was recorded directly to stockholders' deficit. The
accrued effect required the recognition of a net deferred tax asset and
corresponding valuation allowance of Ps.2,170,028, at January 1, 2000, because
available evidence did not indicate that there was a high probability of future
taxable income to realize the deferred tax asset. Subsequent changes in deferred
tax assets and liabilities and valuation allowances are recognized in income.

p. New accounting bulletins -

In December 2001, the MIPA issued Bulletin C-9, "Liability, Provisions,
Contingent Assets and Liabilities, and Commitments". Bulletin C-9 provides
guidance for the valuation, presentation and disclosure of liabilities and
provisions (other than income taxes, employee benefit plans, financial
instruments to be valued on a fair value basis and asset allowances), including
contingent assets and liabilities, as well as disclosure guidelines for
commitments incurred by an entity as a part of its operations. Bulletin C-9 is
effective as of January 1, 2003, with earlier adoption permitted.

In January 2002, the MIPA issued Bulletin C-8, "Intangible Assets", which
defines intangible assets as costs incurred and rights or privileges acquired
that will generate a future economic benefit. Bulletin C-8 provides a definition
of research and development costs requiring that only development costs could be
deferred to a future period. Furthermore, Bulletin C-8 states that preoperating
costs should be expensed as a period cost, unless they can be classified as
development costs. Bulletin C-8 requires that intangible assets, including
previously existing intangible assets, with indefinite useful lives not be
amortized, but be tested for impairment annually. Intangible assets with finite
lives continue to be amortized over their economic life. Bulletin C-8 is
required to be applied on January 1, 2003, although early adoption is
recommended.

A-103

The Group is currently evaluating the impact of these Bulletins on its results
of operation and financial position. However, the Group does not believe that
the adoption of these Bulletins will have a material impact on its results of
operations and financial position.

NOTE 3 - EFFECTS OF INFLATION ON THE FINANCIAL STATEMENTS:

The consolidated financial statements of the Group have been prepared in
accordance with Bulletin B-10, "Recognition of the Effects of Inflation on
Financial Information", as amended, ("Bulletin B-10"), which provides guidance
for recognizing the effects of inflation. The financial statements of the Group
are presented in Mexican Pesos in purchasing power as of December 31, 2002 in
order to be comparable to financial information as of that date, as follows:

- - The balance sheets have been restated in Mexican Pesos in purchasing power as
of December 31, 2002 using the NCPI as of December 31, 2002.

- - The statements of loss and changes in stockholders' deficit have been
restated in Mexican Pesos in purchasing power as of December 31, 2002 using
the NCPI for the month in which the transactions occurred.

The restatement of the financial statements has been applied in accordance with
Bulletin B-10 guidelines as described below:

Restatement of non-monetary assets -

Property and equipment, except for equipment of non-Mexican origin, are restated
using the NCPI. Equipment of non-Mexican origin is restated by the Specific
Index. The Specific Index is derived from inflation in the country of the
assets' origin and the foreign currency exchange rate of the Mexican Peso
against the currency of such country.

Property and equipment in use at the beginning of the year is depreciated based
upon the restated carrying value of the assets and is recognized using the
straight-line method over the estimated useful lives of the assets. Additions
during the year are depreciated based on the restated value.

Restatement of satellite transponders -

Satellite transponders are restated using the Specific Index.

Restatement of stockholders' deficit -

Capital stock and other stockholders' deficit accounts (other than deficit from
restatement) include the effect of restatement, determined by applying the NCPI
factor to the applicable period. The restatement represents the amount required
to maintain the contributions and the accumulated results in Mexican Pesos in
purchasing power as of December 31, 2002. The deficit / surplus from restatement
includes the result from holding non-monetary assets and is the

A-104

cumulative difference between the cost of the non-monetary assets restated using
NCPI and the restatement of such assets using the Specific Index.

Integral results of financing -

The gain or loss from monetary position represents the effects of inflation, as
measured by the NCPI, on the monetary assets and liabilities of the Group at the
beginning of each month. For the years ended December 31, 2002, 2001 and 2000,
monetary liabilities exceeded monetary assets, resulting in gains from monetary
position during the periods.

Statement of changes in financial position -

Bulletin B-12, "Statements of Changes in Financial Position" ("Bulletin B-12"),
issued by the MIPA, specifies the appropriate presentation of the statement of
changes in financial position when the financial statements have been restated
in constant monetary units in accordance with the Third Amendment to Bulletin
B-10. Bulletin B-12 identifies the generation and application of resources as
the differences between beginning and ending financial statement balances in
constant monetary units. The Bulletin also requires that monetary and foreign
exchange gains and losses not be treated as non-cash items in the determination
of resources provided by operations. The translation effects of operating assets
and liabilities are included in the stated change of the related item.

Other accounts -

The following accounts are restated using the NCPI:

Preoperating expenses and related amortization
Debt issuance costs and related amortization
Leasehold improvements and related amortization
Intangible assets and related amortization

National Consumer Price Index (NCPI) -

Restatement of the financial statements to Mexican pesos in purchasing power as
of December 31, 2002, in accordance with the Third Amendment to Bulletin B-10,
requires restatement of the results for each month during each year using a
factor derived from the change in the NCPI. The NCPI as of December 31, 2002,
2001 and 2000 was 102.904, 97.354 and 93.248, respectively.

A-105

NOTE 4 - TRADE ACCOUNTS RECEIVABLE, NET:

Trade accounts receivable, net includes the receivables from DTH services
provided to subscribers, from the rental of IRD's and from the sale of
advertising. Balances as of December 31, consist of:

2002 2001
---- ----

Trade accounts receivable Ps. 176,917 Ps. 212,898
Allowance for doubtful accounts (73,135) (84,775)
------------- -------------

Ps. 103,782 Ps. 128,123
============= =============

The allowance for doubtful accounts for the years ended December 31, 2002, 2001
and 2000, was as follows:

2002 2001 2000
---- ---- ----

Beginning balance Ps. 84,775 Ps. 14,841 Ps. 13,114
Additions 110,827 174,058 37,893
Write offs (122,467) (104,124) (36,166)
------------ ------------- -------------

Ending balance Ps. 73,135 Ps. 84,775 Ps. 14,841
============ ============= =============

NOTE 5 - PROPERTY AND EQUIPMENT, NET:

Property and equipment, net as of December 31, consists of:

2002 2001
---- ----

Integrated receiver/decoders Ps. 2,548,573 Ps. 2,793,895
Transmission equipment 342,660 363,762
Antennas, LNBs and accessories 554,516 344,803
Computer equipment 305,837 241,735
Furniture 19,514 17,957
Transportation equipment 20,976 19,650
Buildings 2,036 2,036
------------- -------------

3,794,112 3,783,838
Accumulated depreciation (2,377,149) (1,985,849)
------------- -------------

1,416,963 1,797,989
Land 8,744 8,744
Equipment in progress 116,778 145,161
Advances to suppliers 2,420 282
------------- -------------

Ps. 1,544,905 Ps. 1,952,176
============= =============

A-106

Depreciation expense for the years ended December 31, 2002, 2001 and 2000 was
Ps.734,748, Ps.713,235 and Ps.651,244, respectively. The Group recorded an
impairment loss on certain transmission equipment and other equipment not in use
of Ps.30,776 (which was included in "Transponder services -Solidaridad 2 and
reorientation cost" line item) and Ps.11,458 (included in "Depreciation and
amortization" line item) during the years ended December 31, 2002 and 2000,
respectively. No impairment was needed during 2001.

As of April 2002, the Group stopped utilizing the service of the Solidaridad 2
satellite, continuing only with the services provided by the PAS-9 satellite. At
that date, transmission equipment with a book value of Ps.38,342 associated with
Solidaridad 2 was held by the Group and the Group decided to recognize an
impairment charge amounting to Ps.30,776 for the equipment that could not be
utilized by the PAS-9 satellite, and to create a spare-part inventory for the
remaining Ps.7,566 of transmission equipment that could be utilized by the PAS-9
satellite.

At December 31, 2002 and 2001, IRDs, transmission equipment, computer equipment
and transportation equipment include restated assets which are of a non-Mexican
origin of Ps.425,112 and Ps.711,061, respectively, net of accumulated
depreciation. Computer equipment includes Ps.16,301 and Ps.42,815 of capitalized
software costs as of December 31, 2002 and 2001, respectively.

NOTE 6 - SATELLITE TRANSPONDERS:

On February 8, 1999, the Group and PanAmSat Corporation ("PanAmSat") entered
into a new agreement for satellite signal reception and retransmission service
from 12 KU-band transponders on a new satellite ("PAS-9"), which became
operational in September 2000. The service term for PAS-9 will end at the
earlier of (a) the end of 15 years or (b) the date PAS-9 is taken out of
service. The Group is committed to pay a monthly fee of U.S.$1.7 million. The
Group received a credit against the initial service fees of U.S.$11.7 million
paid under the new agreement.

The concession authorizing the use of PAS-9 was granted by the Federal
Government through the SCT in November 2000. Under the terms of this concession,
the Group is bound to offer the service of paid television via DTH satellite for
a three-year term starting in November 2000, in the Municipalities or City
Districts where 40% of the total population of the coverage area dwells in, as
per the most recent census information available. The process of migrating
customers from Solidaridad 2 to PAS-9 started in November 2000 and ended in
March 2002. The Group stopped using the services of Solidaridad 2 in early April
2002.

A-107

The Group recorded an asset equal to the net present value of the U.S.$1.7
million per month payments and the U.S.$11.7 million credit. The balance of the
satellite transponders as of December 31, is as follows:

2002 2001
---- ----

Satellite transponders Ps. 1,469,602 Ps. 1,334,030
Accumulated depreciation (228,605) (118,580)
--------------- ---------------

Ps. 1,240,997 Ps. 1,215,450
=============== ===============

Amortization of satellite transponders in 2002, 2001 and 2000 was Ps.97,974,
Ps.88,935 and Ps.31,835, respectively.

The Group's future obligation from the PAS-9 agreement, determined using the
Group's incremental borrowing rate at the lease commencement date of 11.5%, is
as follows:

Total
-----

2003 Ps. 213,466
2004 213,466
2005 213,466
2006 213,466
2007 213,466
Thereafter 1,640,718
---------------

2,708,048

Less: amount representing interest (1,286,393)
---------------

Ps. 1,421,655
===============

Interest expense recognized during the years ended December 31, 2002, 2001 and
2000 was Ps.159,760, Ps.163,534 and Ps.52,172, respectively.

The obligation is reflected on the consolidated balance sheet as of December 31,
as follows:

December 31,
------------
2002 2001
---- ----

Current portion Ps. 52,812 Ps. 44,085
Long-term portion 1,368,843 1,314,192
--------------- ---------------

Ps. 1,421,655 Ps. 1,358,277
=============== ===============

A-108

The obligations of the Group under the PAS-9 agreement are proportionately
guaranteed by the Group's stockholders in relation to their respective ownership
interests.

NOTE 7 - DEFERRED COSTS, NET:

Deferred costs, net as of December 31, consist of:

2002 2001
---- ----

Preoperating expenses (a) Ps. - Ps. -
Debt issuance costs (b) 73,771 91,015
Leasehold improvements (c) 8,627 15,618
------------ -------------

Ps. 82,398 Ps. 106,633
============ =============

a. Preoperating expenses

Preoperating expenses specifically included the capitalization of advertising
costs incurred prior to the launch of the Group's DTH service, which was also
amortized over five years. Advertising expenses after the launch of the Group's
DTH service have been expensed as incurred and amounted to Ps.204,004,
Ps.226,837 and Ps.229,727 during the years ended December 31, 2002, 2001 and
2000 respectively.

Amortization of preoperating expenses in 2001 amounted to Ps.47,255 and
Ps.51,551 in 2000. The preoperating expenses were fully amortized in November
2001.

b. Debt issuance costs

Debt issuance costs represent expenses incurred for the issuance of the Senior
Notes during 1997. These costs are amortized on a straight-line basis over the
term of the Senior Notes. Amortization expense of Ps.17,250 during each of 2002,
2001 and 2000 is included in interest expense.

c. Leasehold improvements

Amortization of leasehold improvements was Ps.9,517, Ps.6,082 and Ps.5,531 in
2002, 2001 and 2000, respectively.

A-109

NOTE 8 - INTANGIBLE AND OTHER ASSETS, NET:

Intangible assets, net are amortized using the straight-line method over a
period of five years. Balances as of December 31, consist of:

2002 2001
---- ----

Noncompetition agreement (a) Ps. 174,287 Ps. 466,184
Call Center Operations (b) 18,078 18,078
------------- -------------
192,365 484,262
Accumulated amortization (179,409) (373,800)
------------- -------------

Ps. 12,956 Ps. 110,462
============= =============

(a) Consists mainly of a noncompetition agreement and certain rights for the use
of transponders acquired in 1997, both of which were fully amortized in
2002.

(b) Consist mainly of software and other licenses for the Call Center operation
that was acquired from Televisa in 2001.

NOTE 9 - TRANSACTIONS WITH AFFILIATED COMPANIES AND OTHER RELATED PARTIES:

The principal transactions of the Group with affiliated companies and related
parties are:

2002 2001 2000
---- ---- ----

Borrowings and accrued interest from
stockholders (Note 11) Ps. 3,925,244 Ps. 3,066,748 Ps. 1,718,375
Broadcasting services, Florida (a) 82,107 92,118 97,353
Programming (b) 178,973 143,522 130,037
Special events programming (c) (i) 183,202 142,089 83,293
Advertising costs (d) 128,000 140,616 128,683
Royalties (e) 44,223 95,432 72,619
Call Center services (f) - 71,672 71,163
Broadcasting services, Mexico City (g) 38,532 36,252 37,977
Fixed asset acquisitions 11,739 23,067 44,800
Acquisition of smart cards 10,085 52,117 66,547
Finance costs (Note 11) 285,256 213,861 98,472
Management and administrative services 7,242 20,513 12,946
Maintenance services 12,603 11,244 9,426
Advertising revenue 28,711 31,635 -
Transmission services, income 7,172 6,436 6,907
Other 7,829 2,222 1,424

A-110

(a) The Group has an informal agreement with DTH TechCo Partners, an affiliate
of both Televisa and News Corporation, for play-out, uplink and downlink of
signals and compression services. Costs for these services are anticipated
to be approximately U.S.$9.5 million annually.

(b) The Group purchases the rights to broadcast certain popular channels through
affiliates of Televisa and News Corporation. Fees for this programming are
based upon the number of subscribers.

(c) The Group purchases, on occasion, the rights to broadcast certain special
events programming from Televisa and its affiliates.

(d) The Group purchases advertising time from Televisa on an as needed basis and
creative services from DTH TechCo Partners.

(e) Royalties paid to an affiliate of News Corporation consist of license,
security and access fees and charges for the use of certain technology. The
monthly fees and charges are based on the total number of subscribers, new
subscribers during the period and the number of IRD's purchased.

(f) Until June 30, 2001, the Group received call processing services and
customer care from an affiliate of Televisa. As described in Note 2.b., the
Group purchased the call center operations from Televisa for Ps.24,161. Due
to the satellite repointing and price increases, costs during the first six
months of 2001 increased significantly.

(g) The Group purchases uplink and downlink, playout and compression services
from an affiliate of Televisa for operations conducted in the Mexico City
broadcast facility.

The outstanding balances due to affiliates and other related parties, excluding
stockholders' loans and accrued interest, as of December 31, are as follows:

2002 2001
---- ----

Televisa and subsidiaries (h) Ps. 377,804 Ps. 304,478
News Corporation and subsidiaries 55,616 45,148
------------- -------------

Ps. 433,420 Ps. 349,626
============= =============

(h) Amount includes the liability for the prepaid advertising to Televisa. On
October 31, 2001 and November 15, 2001, the Group entered into one-year
advertising agreements with a subsidiary of Televisa for Ps.110 million and
Ps.18 million respectively, covering the period January 1, 2002 to December
31, 2002. In December 2002, the Group entered into another one-year
advertising agreement amounting to Ps.120 million, covering the period
January 1, 2003 to December 31, 2003. The prepaid advertising is amortized
as the advertising is aired.

A-111

(i) The Company has an informal agreement with Televisa for the purchase of
exclusive rights to exhibit and distribute through SKY certain of the
professional Mexican Soccer League programming and Mexican Boxing programming
during the 2001 through 2003 seasons, as follows:

- Exclusive transmission rights and local block-out rights over 20% of the
professional Mexican Soccer League programming during the summer and
winter seasons of 2001 and 2002;

- Exclusive transmission rights and local block-out rights over 10% of the
professional Mexican Soccer League programming during the summer season
of 2003; and

- Exclusive transmission rights to all Mexican Boxing programming during
the calendar years 2001 and 2002.

In consideration for the right to distribute all of the licensed events, the
Group will pay to Televisa a total license fee amounting to US$15 million pro
rata during the term as follows:

- US$6 million for all programing to be licensed during 2001;

- US$6 million for all programing to be licensed during 2002; and

- The remaining US$3 million for all programing to be licensed thereafter
until the end of the summer soccer season for 2003.

NOTE 10 - SENIOR NOTES:

In 1997, the Group concluded an offering of senior debt securities, priced to
yield gross proceeds of U.S.$375 million, which mature in April 2007 ("Senior
Notes"). The Senior Notes bear interest at a rate of 12 7/8% and are redeemable
at the option of the Group, in whole or in part, at any time on or after April
1, 2002, initially at 106.4375% of their principal amount, plus accrued
interest, declining ratably to 100% of their principal amount, plus accrued
interest, on or after April 1, 2004. Interest on the Senior Notes is payable
semi-annually on April 1 and October 1 of each year, commencing October 1, 1997.
The Senior Notes, which are uncollateralized, unsubordinated indebtedness of the
Group, contain certain covenants which, among other things, restrict the ability
of the Company and certain subsidiaries to incur or guarantee additional
indebtedness, make certain dividend, investment or other restricted payments,
issue or sell stock of certain subsidiaries, enter into certain transactions
with stockholders or affiliates, create liens, engage in sales-leaseback
transactions, sell assets (except IRDs), or with respect to the Group,
consolidate, merge, or sell all or substantially all of its assets. The
indenture agreement required the Group to purchase and pledge as security for
the benefit of the holders of the Senior Notes a portfolio of U.S. Government
Securities for a three-year period which ended in March 2000.

A-112

NOTE 11 - STOCKHOLDERS' LOANS:

During 1999, the Group's stockholders agreed to make available to the Group up
to U.S.$67.5 million in loans and up to U.S.$64.5 million in capital
contributions. The loans and capital contributions were based on the monthly
funding requirements of the Group, but were not to exceed the above maximums. On
May 8, 2000, the Group signed an agreement which establishes that the
stockholders would fund, in debt, on a pro rata basis, the amounts required
under the Group's approved Business Plan; provided, however, that the aggregate
amounts of such debt funding during 2000 would not exceed U.S.$72.2 million. The
Group's stockholders' have provided debt funding in excess of the amounts
contained in the agreement.

During 2002 and 2001, the Group borrowed a total of U.S.$29.5 million and
U.S.$132.8 million, respectively, from its stockholders on a prorata basis. This
amount was determined based on its cash flow needs.

The Company expects that its stockholders will provide, if necessary, up to an
aggregate amount of US$25 million to meet the Group's cash requirements during
2003.

The Group has received loans of U.S.$309.9 million as follows:

Amounts in Amounts in
thousands of thousands of
U.S. Mexican
Year Dollars Pesos
- ---- ------- -----

1998 $ 25,000 Ps. 261,600
1999 41,600 435,302
2000 81,000 847,584
2001 132,800 1,389,619
2002 29,500 308,688
----------- ----------------

$ 309,900 Ps. 3,242,793
=========== ================

NOTE 12 - FINANCIAL INSTRUMENTS:

The Group's financial instruments include cash and cash equivalents, trade
accounts receivables, trade accounts payable, due to affiliated companies and
other related parties, and debt. For cash and cash equivalents, trade accounts
receivables, trade accounts payable, and due to affiliated

A-113

companies and other related parties, the carrying amounts approximate fair value
due to the short maturity of these instruments.

The fair value of the Senior Notes is based on quoted market prices. The
estimated fair value of these instruments at December 31, 2002 and 2001 is as
follows (amounts in thousands):

Carrying value Fair value
-------------- ----------

December 31, 2002 U.S.$ 375,000 U.S.$ 330,000

December 31, 2001 U.S.$ 375,000 U.S.$ 360,000

The Senior Notes are thinly traded financial instruments. Accordingly, their
market price at any balance sheet date may not be representative of the price
which would be obtained in a more active market.

Management is unable to estimate the fair value of the stockholders' loans due
to their nature.

NOTE 13 - COMMITMENTS AND CONTINGENCIES:

a. In 1996, the Group signed an agreement with an affiliate of News Corporation
to acquire and implement a conditional access system. This system includes
Smart Cards which decode satellite signals and control access by
subscribers. In 1999, the Group acquired a subscriber management system
(SMS) designed specifically for DTH services. Under these arrangements, the
Group estimates that the 2003 commitment will approximate U.S.$11 million
for royalties, licenses and maintenance of the foregoing systems. In 2002,
2001, and 2000, the Group incurred expenses of US$5.9 million, US$9.7
million and US$8.4 million, respectively.

The Group has entered into agreements with Televisa and an affiliate of
Televisa to provide uplink and downlink, playout and compression services at
the Mexico City station. The annual commitments are estimated to be
approximately U.S.$4.3 million per year. The Group incurred expenses of
US$3.9 million in 2002 and US$3.8 million in each of 2001 and 2000.

The Group entered into several contracts with programming providers,
establishing that the amounts payable to the programmers will be based on
the number of subscribers. These charges totaled Ps.657.3 million, Ps.650.3
million and Ps.517.4 million for the years ended December 31, 2002, 2001 and
2000, respectively.

b. Since January 1st 2002, a 10% excise tax was imposed on the collected
revenues from the Group's pay television services. In February 2002, the
Group filed a petition for constitutional relief against the Legislative
Decree, which contains the amendments to the Law regarding the excise tax.
The respective judgment is pending. Notwithstanding that the Company has
filed

A-114

the aforementioned petition, it is currently paying the corresponding
tax as per the provisions of the Legislative Decree.

c. Under Mexican Tax Law, the Company and its subsidiaries, on an individual
basis, must pay the higher of the income tax or the assets tax as determined
annually. The assets tax is equal to 1.8% of a company's assets less certain
liabilities. The Company and most of its subsidiaries were exempt from the
assets tax from their formation in 1996 through December 31, 1999.

Article 5 of the Asset Tax Law specifies that foreign debt is excluded in
determining the assets tax. In 2000, the Group filed a declaratory judgement
with the Federal Tax Court seeking to be able to deduct foreign debt in
calculating the assets tax based on the unconstitutionality of this
provision of Article 5 as previously determined by the Supreme Court of
Justice. The tax authorities had opposed the Group's declaratory judgement
and issued a tax ruling that the Group must exclude foreign debt in
determining the assets tax.

The Group filed a petition challenging the constitutionality of this
provision of Article 5 of the Asset Tax Law.

In order to avoid incurring penalties or interest, the Group paid Ps.$45.2
million in monthly payments during 2002, Ps.43.2 million in March 2002,
corresponding to the assets tax due for fiscal year 2001 and Ps.7.5 million
for the months of January and February 2003.

On March 19, 2003, the court issued a favorable ruling allowing to the Group
to deduct foreign debt in calculating the assets tax. The Group is analyzing
various alternatives available to it in order to recover the total assets
tax payments of Ps.95.9 million made to date.

d. The Group entered into two related agreements with CSG Software, Inc. (CSG),
on June 12, 2002 under which CSG will provide: a) A non-exclusive, perpetual
license for the use of the software "Kenan" to provide billing and order
management to licensed subscribers, besides installation and implementation
of the system, training and support services and, b) consulting services.

Under the Software License and Service Agreement, the Group must pay US$3.4
million to CSG for a license capacity of up to 1,125,000 subscribers.
However, the Group can purchase additional capacity according to the
subscriber base growth at an additional cost per every 100,000 subscribers.
Technical support in Mexico will be available for the first 24 months
following the date on which live production of the system begin, the annual
cost for these service will be US$585,600. It is possible in accordance with
the agreement to use the Kenan system from other DTH platform in case of
merger, acquisition or combination of platforms. On December 27, 2002 the
Group agreed to remove some applications of the Kenan software, reducing the
total license fees in US$500,000. The Group expects that the new SMS will be
placed in service in late August 2003.

A-115

e. On June 2002, the Group executed an agreement with TV Azteca to begin paying
them for the rights to rebroadcast their over-the-air Channels 7 and 13. It
has also committed to purchase up to US$10.6 million in advertising from TV
Azteca over three years and received rights to broadcast certain soccer
matches and an option for exclusive broadcast rights after 2004. Prior to
May 1, 2002, the Group was permitted to rebroadcast these channels at no
cost.

NOTE 14 - CAPITAL STOCK:

The capital stock as of December 31, 2002 and 2001, is represented by three
partnership interests of unequal value, distributed as follows:

Partnership
interest Subseries Amount
-------- --------- ------

1 A-1 Ps. 1,147,870
1 B-1 573,935
1 B-2 191,311

During 1999, the Group received cash contributions of U.S.$29.4 million,
U.S.$14.7 million and U.S.$4.9 million from Televisa, News Corporation and LMI,
respectively.

Dividends paid will be free of income tax if paid out of the Net Taxable Income
Account (CUFIN). A 34% rate will be paid on the amount exceeding the balance of
the CUFIN by multiplying the dividend paid by the 1.5152 factor. The applicable
tax since 2003 will be payable by the Group, and it may be credited against
income tax the Group is subject to in the fiscal year that the Group pay the
dividends or in the subsequent two fiscal years. Dividends paid will not be
subject to any tax withholding.

The ability of the Group to declare dividends is restricted by the Senior Note
indenture.

A-116

NOTE 15 - TRANSPONDERS SERVICES AND REORIENTATION COSTS:

During 2000, the Group recognized a nonrecurring charge of Ps.430,916 relating
to the redundant use of the transponders on the Solidaridad 2 satellite once the
PAS-9 satellite became operational, and for the increased costs to re-orientate
customers' antennas to PAS-9 in a short period of time. The process of migrating
customers from Solidaridad 2 to PAS-9 started in November 2000 and finally ended
in March 2002. As explained in Note 5, the Group recorded an impairment charge
of Ps.30,776 in April 2002 that related to certain transmission equipment
associated with Solidaridad 2. This impairment loss, together with the payments
for the use of Solidaridad 2 in the first quarter of 2002 amounting to
Ps.14,182, was offset by the reversal of unutilized amounts raised in 2000
amounting to Ps.19,025, and reflected as a nonrecurring charge of Ps.25,933 in
2002.

NOTE 16 - RESTRUCTURING CHARGES:

The restructuring charges in 2002 and 2001 consisted of severance costs in
connection with employee terminations.

NOTE 17 - ACCUMULATED LOSSES:

Under Mexican Corporate Law, interested third parties can request the
dissolution of the Group if accumulated losses exceed two-thirds of capital
stock. At December 31, 2002, the Group's accumulated losses exceeded its capital
stock. Although the Group believes it is unlikely such action will occur, the
Group, obtained from Televisa and News Corporation, a commitment to provide
financial support to the Group for a period of one year from the balance sheet
date, in proportion to their respective ownership interests, if required, to
avoid such action.

NOTE 18 - PROVISION FOR INCOME TAX ("IT"), ASSETS TAX ("AT") AND EMPLOYEES'
STATUTORY PROFIT SHARING:

The Group expects to incur tax losses during the next several years. Tax losses
can be carried forward for up to ten years and offset against any profits that
the Group or Televisa may generate during that period in accordance with the
Income Tax Law.

A-117

At December 31, 2002, the Group had total tax loss carryforwards of
Ps.7,217,541, which will under certain circumstances, be carried forward over
ten years from the period that the respective tax loss was generated in:

Year of
expiration Amount
- ---------- ------

2003 Ps. 5
2004 4
2005 8
2006 317,041
2007 1,231,387
2008 1,885,634
2009 673,364
2010 899,542
2011 703,156
2012 1,507,400
---------------

Ps. 7,217,541
===============

The following items represent the principal differences between income taxes
computed at the statutory rate and the Group's provision for income taxes:

2002 2001 2000
---- ---- ----

Tax at the statutory rate 35% on loss
before taxes (Ps. 592,667) (Ps. 127,106) (Ps. 650,485)
Differences in restatement 89,834 (15,313) 8,853
Valuation allowance 581,927 302,962 414,150
Differences between tax and financial
accounting for cost of sales and purchases - - 2,786
Deferred advertising (13,327) (9,906) (1,108)
Depreciation and amortization (43,071) 21,820 2,010
Debt issuance costs 3,490 3,689 3,852
Provisions (11,065) (159,283) 219,308
Deferred income (7,316) (10,729) 2,711
Other (7,805) (6,134) (2,077)
------------- -------------- -------------

Provision for income tax - - -
Assets tax (75,530) (46,283) (130)
------------- -------------- -------------

Total (Ps. 75,530) (Ps. 46,283) (Ps. 130)
============= ============== =============

A-118

Deferred taxes at December 31, 2002 and 2001, were generated by the following
temporary differences and tax loss carryforwards:

2002 2001
---- ----

Prepaid expenses (Ps. 13,286) (Ps. 10,319)
Property and equipment 126,467 174,497
Other deferred costs 36,733 29,441
Debt issuance costs (25,082) (31,910)
Deferred income 37,218 37,961
Accrued expenses 162,000 62,483
Satellite transponders, net 61,424 49,990
Tax loss carryforwards 2,453,964 1,998,485
---------------- ---------------

2,839,438 2,310,628

Valuation allowance (2,839,438) (2,310,628)
----------------- ---------------

Deferred income tax Ps. - Ps. -
================ ===============

Employees' statutory profit sharing in Mexico is determined for each subsidiary
individually, not on a consolidated basis. There is no employees' statutory
profit sharing deferred tax as of December 31, 2002 and 2001.

Pursuant to the tax legislation in force, the Company must pay annually the
greater of the IT or the AT, which is determined on the average value of assets
less certain liabilities. When the AT payments are greater than IT, they are
recoverable against the IT in excess of the AT from the three prior years and
the ten subsequent years.

The Group is also included in the consolidated tax return of Televisa and its
consolidated subsidiaries for purposes of determining its income taxes and
assets tax. Beginning January 1, 1999, 60% of the tax profit or loss obtained by
the Group will be consolidated with the tax profit or loss of Televisa to the
extent of Televisa's percentage ownership of the Group. Through December 31,
1998, Televisa recognized the total taxable loss of the Group to the extent of
its percentage ownership.

The Group entered into a tax sharing agreement with Televisa under which the
Group will, during the periods that the Group is a part of Televisa's
consolidated tax group, pay Televisa the amount of income and asset taxes that
Televisa is required to pay on behalf of the Group. No such amount will be
payable until the Group's profit exceeds its tax loss carryforwards. Conversely,
Televisa shall pay to the Group the portion of any tax refund allocable to the
Group.

A-119

NOTE 19 - COMPREHENSIVE LOSS:

Comprehensive loss for the years ended December 31, 2002, 2001 and 2000, was as
follows:

2002 2001 2000
---- ---- ----

Loss per statements of loss (Ps. 1,768,863) (Ps. 409,445) (Ps. 1,858,659)
Result from holding non-monetary assets
for the year 164,263 (128,496) (26,665)
Supplementary liability for labor obligations (119) (15) -
--------------- ------------- ----------------

Comprehensive loss for the year (Ps. 1,604,719) (Ps. 537,956) (Ps. 1,885,324)
=============== ============= ================

NOTE 20 - FOREIGN CURRENCY POSITION:

a. The foreign currency position of monetary items of the Group at December 31,
2002 and 2001, were as follows:

2002:

Foreign currency Year-end Mexican pesos
Currency amounts (thousands) Exchange rate (thousands)
- -------- ------------------- ------------- -----------

Assets:
U.S. Dollars 21,391 10.464 Ps. 223,835

Liabilities:
U.S. Dollars 935,999 10.464 9,794,294

2001:

Foreign currency Year-end Mexican pesos
Currency amounts (thousands) Exchange rate (thousands)
- -------- ------------------- ------------- -----------

Assets:
U.S. Dollars 70,640 9.178 Ps. 648,334

Liabilities:
U.S. Dollars 880,499 9.178 8,081,220

A-120

b. The foreign currency position of non-monetary items of the Group at December
31, 2002 and 2001, were as follows:

2002:

Foreign currency Year-end Mexican pesos
Currency amounts (thousands) Exchange rate (thousands)
- -------- ------------------- ------------- -----------

Property and equipment:
U.S. Dollars 35,562 10.464 Ps. 372,121
Pounds Sterling 7,521 17.00 127,857
Satellite transponders:
U.S. Dollars 134,223 10.464 1,404,509

2001:

Foreign currency Year-end Mexican Pesos
Currency amounts (thousands) exchange rate (thousands)
- -------- ------------------- ------------- -----------

Property and equipment:
U.S. Dollars 36,651 9.178 Ps. 336,383
Pounds Sterling 5,969 13.560 80,940

Satellite transponders:
U.S. Dollars 134,223 9.178 1,231,899

c. Transactions during 2002, 2001 and 2000 in foreign currencies included in
the consolidated statements of loss were as follows:

2002:

Foreign
currency Year-end
amounts exchange Mexican Pesos
Currency (thousands) rate (1) (thousands) (1)
-------- ----------- -------- --------------

Interest income U.S. Dollars 74 10.464 Ps. 774
Costs and expenses:
Transponder expense U.S. Dollars 11,941 10.464 124,951
Broadcasting U.S. Dollars 12,663 10.464 132,506
Programming U.S. Dollars 58,800 10.464 615,283
Royalty fees Pounds Sterling 652 17.00 11,084
Royalty fees U.S. Dollars 3,605 10.464 37,723
Other expenses U.S. Dollars 3,552 10.464 37,168
Interest expense U.S. Dollars 79,974 10.464 836,848

A-121

2001:

Foreign
currency Year-end
amounts exchange Mexican Pesos
Currency (thousands) rate (1) (thousands) (1)
-------- ----------- -------- ---------------

Interest income U.S. Dollars 235 9.178 Ps. 2,157
Costs and expenses:
Transponder expense U.S. Dollars 22,527 9.178 206,753
Broadcasting U.S. Dollars 13,581 9.178 124,646
Programming U.S. Dollars 59,281 9.178 544,081
Royalty fees Pounds Sterling 2,177 13.560 29,520
Royalty fees U.S. Dollars 6,481 9.178 59,483
Other expenses U.S. Dollars 8,593 9.178 78,867
Interest expense U.S. Dollars 72,052 9.178 661,293

2000:

Foreign
currency Year-end
amounts exchange Mexican Pesos
Currency (thousands) rate (1) (thousands) (1)
-------- ----------- -------- ---------------

Interest income U.S. Dollars 779 9.610 Ps. 7,486
Costs and expenses:
Transponder expense U.S. Dollars 23,835 9.610 229,054
Inventory U.S. Dollars 30,612 9.610 294,181
Broadcasting U.S. Dollars 9,000 9.610 86,490
Programming U.S. Dollars 47,500 9.610 456,475
Royalty fees Pounds Sterling 2,063 14.588 30,095
Royalty fees U.S. Dollars 3,794 9.610 36,460
Other expenses U.S. Dollars 9,467 9.610 90,978
Interest expense U.S. Dollars 54,452 9.610 523,284

(1) For reference purposes only. Does not indicate the actual amounts presented
in the consolidated statement of loss.

Paragraphs b) and c) are disclosed in accordance with the Fourth Amendment to
Bulletin B-10 issued by the MIPA, which also provides that liabilities
denominated in a foreign currency are translated using exchange rates in effect
at the balance sheet date.

As of December 31, 2002 and 2001, the exchange rate between the Mexican Peso and
the U.S. Dollar was Ps.10.464 and Ps.9.178 per U.S. dollar, respectively, which
represents the interbank free market exchange rate as of those dates as
published by Banco de Mexico, S.A. As of

A-122

January 31, 2003, the exchange rate was Ps.10.864 per U.S. dollar, which
represents the interbank free market exchange rate as of that date as published
by Banco de Mexico, S.A.

NOTE 21 - DIFFERENCES BETWEEN MEXICAN GAAP AND U.S. GAAP:

The Group's consolidated financial statements are prepared in accordance with
Mexican GAAP, which differs in certain significant respects from U.S. GAAP.

The principal differences between Mexican GAAP and U.S. GAAP that affect net
loss and total stockholders' deficit are described below:

Deferred preoperating expenses and advertising costs

Under Mexican GAAP, it is acceptable to defer certain preoperating expenses and
advertising costs and amortize these expenses over the life of the expected
benefit. Under U.S. GAAP, these items are expensed as incurred.

Solidaridad 2 and satellite reorientation costs

Under Mexican GAAP, the Group recognized a non-recurring loss of Ps.430,916
during the year ended December 31, 2000 for the redundent use of the
transponders on the Solidaridad 2 satellite once the PAS-9 satellite became
operational and for the increased costs to reorientate customer's antennas to
PAS-9 in a short period of time.

A-123

Maintenance reserve and smart cards replacement

Under Mexican GAAP, it is acceptable to accrue for certain expenses which
management believes will be incurred in subsequent periods. Under U.S. GAAP,
these costs are expensed as incurred.

Capitalization of financing costs

Mexican GAAP allows, but does not require, capitalization of integral financing
costs attributable to acquired assets during installation and preoperating
expenses. In 1996, the Group capitalized integral financing costs attributable
to those assets. Capitalized integral financing costs include interest expense,
gains from monetary position and foreign exchange losses.

U.S. GAAP requires the capitalization of interest during construction and
installation of qualifying assets. In an inflationary economy, such as Mexico's,
acceptable practice is to capitalize interest net of the monetary gain on the
related Mexican Peso debt, but not on U.S. dollar or other stable currency debt.
In addition, U.S. GAAP does not allow the capitalization of foreign exchange
losses or the capitalization of financing costs on deferred expenses.

No interest costs were capitalized for the years ended December 31, 2002, 2001
and 2000.

Restatement of property and equipment

Effective January 1, 1997, the Group adopted the Fifth Amendment to Bulletin
B-10 which eliminated the use of replacement costs for the restatement of
property and equipment and instead, included an option of using the Specific
Index for the restatement of equipment of non-Mexican origin. The Group has
elected to apply the Specific Index option for determining the restated balances
of equipment of non-Mexican origin under Mexican GAAP. For U.S. GAAP purposes,
the use of an index that contemplates currency exchange movements is not in
accordance with the historical cost concept nor does it present financial
information in a constant currency.

Restructuring charges

In 2002 and 2001, the Group provided for restructuring costs related to expected
employee terminations. Under Mexican GAAP, these costs are recorded as other
expenses. For U.S. GAAP purposes, these costs have been expensed as incurred and
classified in operating expenses.

Revenue recognition

In prior years, under Mexican GAAP, concession fees paid to the Mexican
Government and to the actors and artists guild were recorded against revenues.
From January 1, 2002, these fees are recorded in cost of sales, consistent with
the accounting treatment under US GAAP. Revenues

A-124

under Mexican GAAP for the years ended December 31, 2001 and 2000 have been
restated to conform with classification in the current year. Accordingly, the
accompanying condensed consolidated statement of loss contains no adjustment in
respect of the classification of such expenses.

Through September 30, 2000, the Group sold and transferred title to the DTH
antenna, LNB and accessories to wholesale and other distributors who then
re-sold the units to the subscriber. Revenue was recognized upon the sale of the
unit to the distributor.

Effective October 1, 2000, the Group began providing the antenna, LNB and
accessories to new subscribers, together with the IRD, for a set monthly rental
fee, retaining title and ownership of all the equipment. From that date, the
Group also uses intermediate parties to perform certain customer acquisition and
installation services on its behalf. Under Mexican GAAP, the Group records as
revenue amounts received from these intermediate parties. Under US GAAP, the
Group follows the guidance of Emerging Issues Task Force Summary No. 99-19,
"Reporting Revenue Gross as a Principal versus Net as an Agent", pursuant to
which it has determined that it serves as principal in these transactions and
that it should record as revenue amounts billed to the subscriber, as ultimate
customer. The accompanying condensed consolidated statement of loss under US
GAAP for the year ended December 31, 2002 therefore includes an adjustment to
reflect as revenue the amounts billed to subscribers and not the amounts
received from intermediate parties. The adjustments for the year ended December
31, 2001 and 2000 were not material.

In addition, under Mexican GAAP, initial non-refundable subscription fees are
recognized upon activation of the new subscriber's DTH services. Under US GAAP,
initial non-refundable subscription fees are recognized over the period that a
new subscriber is expected to remain a customer (2002 and 2001 estimated to be 3
years). Customer acquisition costs directly attributable to the income are
recognized over the same period under US GAAP. Those customer acquisition costs
in excess of the initial non-refundable subscription fee revenues, are expensed
as incurred.

Initial non-refundable subscription fees for the year ended December 31, 2002
amounted to Ps.144.9 million (Ps.165.8 million in 2001). Under US GAAP, deferred
initial non-refundable subscription fee revenues of approximately Ps.195.0
million were recorded as of December 31, 2002 (Ps.135.9 million in 2001). In
addition, customer acquisition costs which are expensed immediately under
Mexican GAAP, have been deferred to match and equal initial non-refundable
subscription revenues; therefore at December 31, 2002, deferred costs under US
GAAP also amounted to Ps.195.0 million (Ps.135.9 million in 2001). Initial
non-refundable subscription revenues (which are matched by customer acquisition
costs) that have been recognized during the year amount to Ps.78.5 million
(Ps.30.0 million in 2001). Deferred initial non-refundable subscription fee
revenues and customer acquisition costs as of and for the year ended December
31, 2000 were not material.

The net impact on both operating loss and net loss of these US GAAP adjustments
is nil in 2002, 2001 and 2000.

A-125

Deferred income taxes

Under Mexican GAAP, the Group follows the guidelines of amended Bulletin D-4 in
accounting for income taxes. Bulletin D-4 is similar to U.S. GAAP, Statement of
Financial Accounting Standards No. 109 ("SFAS 109") "Accounting for Income
Taxes", in many respects.

SFAS 109 requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the financial
statements and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. Deferred
tax assets including benefits from tax loss carryforwards are recognized to the
extent their realization is more likely than not.

The tax effects of temporary differences that give rise to significant deferred
tax assets and liabilities, applying SFAS 109 at December 31, 2002 and 2001, are
as follows:

2002 2001
---- ----

Deferred income tax liabilities:
Current:
Prepaid expenses and other (Ps. 79,601) (Ps. 10,319)
---------------- ---------------

Total current (79,601) (10,319)

Non-current:
Debt issuance costs (25,082) (31,910)
----------------- ---------------

Total deferred income tax liabilities (104,683) (42,229)
----------------- ---------------

Deferred income tax assets:
Current:
Satellite transponders, net 71,576 49,990
Accrued expenses 157,932 40,730
Deferred income 103,533 37,961
---------------- ---------------

Total current 333,041 128,681

Non-current:
Other deferred costs 36,733 29,441
Property and equipment 101,635 174,497
Tax loss carryforwards 2,453,964 1,998,498
---------------- ---------------

Total deferred income tax assets 2,925,373 2,331,117

Less: Valuation allowance (2,820,690) (2,288,888)
----------------- ---------------

Net deferred income tax assets 104,683 42,229
---------------- ---------------

Deferred income taxes Ps. - Ps. -
================ ===============

A-126

In conformity with the Income Tax Law, the Group restates the tax basis of
preoperating expenses and property and equipment in a form similar to the
restatement for financial reporting purposes, however based on a different date
criteria.

Summary

Net loss for the years ended December 31, 2002, 2001 and 2000, adjusted to take
into account the principal differences between Mexican GAAP and U.S. GAAP, as
they relate to the Group, are as follows:

2002 2001 2000
---- ---- ----

Net loss as reported under Mexican GAAP (Ps. 1,768,863) (Ps. 409,445) (Ps. 1,858,659)
Deferred preoperating expenses - 46,667 50,958
Solidaridad 2 costs - (264,086) 264,086
Satellite reorientation costs (32,314) (252,584) 89,594
Maintenance reserve 7,082 (6,535) 3,798
Smartcards replacement - (32,648) 32,648
Capitalization of financing costs - 1,850 1,221
Restatement of property and equipment (992) (18,592) 7,898
Restructuring charge (4,714) 4,714 -
------------- ----------- -------------

Net loss in accordance with U.S. GAAP (Ps. 1,799,801) (Ps. 930,659) (Ps. 1,408,456)
============= =========== =============

Stockholders' deficit as of December 31, 2002 and 2001, adjusted to take into
account the principal differences between Mexican GAAP and U.S. GAAP, as they
relate to the Group, are as follows:

2002 2001
---- ----

Total stockholders' deficit under Mexican GAAP (Ps. 6,905,899) (Ps. 5,301,180)
U.S. GAAP adjustments:
Satellite reorientation costs - 51,881
Maintenance reserve 11,967 4,884
Restatement of property and equipment 43,179 188,868
Restructuring charge - 4,714
--------------- ---------------

Total U.S. GAAP adjustments 55,146 250,347
--------------- ---------------

Total stockholders' deficit under U.S. GAAP (Ps. 6,850,753) (Ps. 5,050,833)
=============== ===============

A-127

A summary of the Group's statement of changes in stockholders' deficit with
balances determined under U.S. GAAP is as follows:

Balance at December 31, 2000 (Ps. 4,120,159)
Supplementary liability for labor obligations (15)
Net loss for the year (930,659)
---------------

Balance at December 31, 2001 (5,050,833)
Supplementary liability for labor obligations (119)
Net loss for the year (1,799,801)
---------------

Balance at December 31, 2002 (Ps. 6,850,753)
===============

A summary of the Group's stockholders' deficit after the U.S. GAAP adjustments
described above, as of December 31, is as follows:

2002 2001
---- ----

Capital stock Ps. 1,913,116 Ps. 1,913,116
Accumulated losses (8,775,571) (6,975,770)
Other comprehensive income:
Excess from restatement 11,836 11,836
Supplementary liability for labor obligations (134) (15)
--------------- ---------------

Total stockholders' deficit under U.S. GAAP (Ps. 6,850,753) (Ps. 5,050,833)
=============== ================

Included below are condensed consolidated financial statements of the Group as
of December 31, 2002 and 2001 and for the years ended December 31, 2002, 2001
and 2000, after giving effect to the U.S. GAAP adjustments.

A-128

CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of Mexican Pesos in purchasing power as of December 31,
2002)

December 31,
-----------
2002 2001
---- ----

ASSETS
Current assets:
Cash and cash equivalents Ps. 266,631 Ps. 45,180
Trade accounts receivables, net 103,782 128,123
Prepaid expenses and other 122,035 197,731
Other current assets 58,265 62,992
---------------- ----------------

Total current assets 550,713 434,026

Property and equipment, net 1,617,943 2,044,714
Satellite transponders, net 1,211,138 1,311,776
Deferred costs, net 277,442 197,391
Intangible and other assets, net 22,530 111,232
---------------- ----------------

Total assets Ps. 3,679,766 Ps. 4,099,139
================ ================

LIABILITIES
Current liabilities:
Trade accounts payable Ps. 99,585 Ps. 85,956
Accrued expenses 256,531 289,254
Satellite transponders obligation 52,812 44,085
Due to affiliated companies and other related parties 433,420 349,626
Other current liabilities 468,905 270,695
---------------- ----------------

Total current liabilities 1,311,253 1,039,616

Non-current liabilities:
Senior notes 3,924,000 3,637,930
Stockholder's loans 3,242,793 2,720,201
Satellite transponders obligation 1,368,843 1,314,192
Other non-current liabilities 683,630 438,033
---------------- ----------------

Total liabilities 10,530,519 9,149,972
---------------- ----------------

Commitments and contingencies - -
Stockholders' deficit (6,850,753) (5,050,833)
---------------- ----------------

Total liabilities and stockholders' deficit Ps. 3,679,766 Ps. 4,099,139
================ ================

A-129

CONDENSED CONSOLIDATED STATEMENT OF (LOSS) INCOME
(Expressed in thousands of Mexican Pesos in purchasing power as of December 31,
2002)

Years ended December 31,
------------------------
2002 2001 2000
---- ---- ----

Revenues from programming services Ps. 1,904,516 Ps. 1,998,665 Ps. 1,716,179
Revenues from rental of IRDs 804,826 515,358 381,321
Other revenues 606,634 626,973 462,002
--------------- --------------- ---------------

Net revenues 3,315,976 3,140,996 2,559,502

Operating expenses:
Cost of sales - programming services 557,832 780,028 624,543
Cost of sales - other 388,033 560,745 799,972
Administrative expenses 132,683 445,195 330,392
Selling expenses 832,751 858,242 816,414
Other operating expenses 555,078 369,695 254,671
Depreciation and amortization 926,070 918,410 784,503
--------------- --------------- ---------------

Total operating expenses 3,392,447 3,932,315 3,610,495
--------------- --------------- ---------------

Operating loss (76,471) (791,319) (1,050,993)

Integral results of financing (1,647,800) (93,057) (357,332)
--------------- --------------- ---------------

Loss before tax (1,724,271) (884,376) (1,408,325)

Provision for income and assets taxes (75,530) (46,283) (131)
--------------- --------------- ---------------

Net loss (Ps. 1,799,801) (Ps. 930,659) (Ps. 1,408,456)
=============== =============== ===============

Cash Flows

Mexican GAAP Bulletin B-12, specifies the appropriate presentation of the
statements of changes in financial position. Under Bulletin B-12, the sources
and uses of resources are determined based upon differences between beginning
and ending financial statement balances in constant pesos. Under U.S. GAAP, a
statement of cash flows is required, which presents only cash movements and
excludes non-cash items.

A-130

Presented below are statements of cash flow for the years ended December 31,
2002, 2001 and 2000, prepared after considering the impact of U.S. GAAP
adjustments. The cash flow statements present nominal cash flows during the
period, adjusted to December 31, 2002, purchasing power.

2002 2001 2000
---------------- --------------- ----------------

Operating activities:
Net loss (Ps. 1,799,801) (Ps. 930,659) (Ps. 1,408,456)
Adjustments to reconcile net (loss)
to cash flows (used in)
operating activities:
Gain from monetary position (498,615) (432,168) (495,772)
Unrealized exchange losses (gains) 1,022,900 (303,104) 84,403
Allowance for doubtful accounts 110,827 174,058 37,893
Depreciation and amortization 926,070 918,410 773,046
Impairment of fixed assets 30,776 - 11,458
Other - 37,563 -

Changes in operating assets and liabilities:
Assets (116,385) (249,798) (132,912)
Liabilities 629,954 247,065 395,889
---------------- --------------- ----------------

Cash flows provided by (used in)
operating activities 305,726 (538,633) (734,451)
---------------- --------------- ----------------

Financing activities:
Stockholders' loans 308,688 1,288,311 858,982
Satellite transponders obligation (45,089) (29,909) -
---------------- --------------- ----------------

Cash flows provided by financing
activities 263,599 1,258,402 858,982
---------------- --------------- ----------------

Investing activities:
Investment in property and equipment (337,081) (719,889) (643,468)
Sale of restricted investments - - 277,197
---------------- --------------- ----------------

Cash flows (used in) investing activities (337,081) (719,889) (366,271)
---------------- --------------- ----------------

Effects of inflation (10,793) (3,612) (20,962)
---------------- --------------- ----------------

Increase (decrease) in cash and cash
equivalents 221,451 (3,732) (262,702)

Cash and cash equivalents, beginning
of period 45,180 48,912 311,614
---------------- --------------- ----------------

Cash and cash equivalents, end of period Ps. 266,631 Ps. 45,180 Ps. 48,912
================ =============== ================

A-131

2002 2001 2000
---------------- --------------- ----------------

Interest and taxes paid:
Interest paid Ps. 495,124 Ps. 510,433 Ps. 617,178
Income and asset taxes paid 88,868 129 48

Non-cash Investing and Financing Activities

Recently Issued Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligation" ("SFAS 143"). SFAS 143 establishes accounting standards for
recognition and measurement of a liability at fair value for an asset retirement
obligation and an addition to the associated asset retirement cost. The
accretion of interest expense each period is subsequently recorded as an expense
and added to the liability. The Group is required to adopt SFAS 143 effective
January 1, 2003. The Group does not expect that the adoption of FAS 143 will
have a material impact on its results of operations and financial position.

In April 2002, the FASB issued Statements of Accounting Standards No. 145,
"Rescission of SFAS Nos. 4, 44 and 64, Amendment of SFAS 13, and Technical
Corrections as of April 2002" ("SFAS 145"). SFAS 145 rescinds SFAS No. 4,
"Reporting Gains and Losses from Extinguishment of Debt," SFAS No. 44,
"Accounting for Intangible Assets of Motor Carriers", and SFAS 64,
"Extinguishments of Debt made to satisfy Sinking-Fund requirements". As a
result, gains and losses from extinguishment of debt will no longer be
classified as extraordinary items unless they meet the criteria of unusual or
infrequent as described in Accounting Principles Boards Opinion 30, "Reporting
the Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions". In addition, SFAS 145 amends SFAS 13, "Accounting for Leases", to
eliminate an inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions. SFAS 145
also amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability under
changed conditions. SFAS 145 is effective for fiscal years beginning after May
15, 2002. The Group is currently evaluating the impact that the adoption of SFAS
145 will have on its results of operations and financial position. However, the
Group does not believe that the adoption of SFAS 145 will have a material impact
on its results of operations and financial position.

A-132

In June 2002, the FASB issued Statement of Accounting Standards No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS 146").
This Statement addresses financial accounting and reporting for costs associated
with exit or disposal activities and nullifies Emerging Issues Task Force Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exist an Activity (including Certain Costs Incurred in a
Restructuring)" ("EITF 94-3"). SFAS 146 eliminates the definition and
requirements for recognition of exist costs in EITF 94-3. SFAS 146 requires that
a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. Under EITF 94-3, a liability for an
exit cost as defined in EITF 94-3 was recognized at the date of an entity's
commitment to an exit plan. SFAS 146 also concludes that an entity's commitment
to a plan, by itself, does not create a present obligation to others that meets
the definition of a liability. SFAS 146 also establishes that fair value is the
objective for initial measurement of the liability. SFAS 146 is effective for
exist or disposal activities initiated after December 31, 2002. The Group is
currently evaluating the impact that the adoption of SFAS 146 will have on its
results of operations and financial position. However, the Group does not
believe that the adoption of SFAS 146 will have a material impact on its results
of operations and financial position.

A-133

INNOVA, S. DE R.L. DE C.V.
Insurgentes Sur 694, Piso 8
Colonia Del Valle
03100 Mexico, D.F., Mexico

EXCHANGE AGENT, TRUSTEE, REGISTRAR,
PAYING AGENT
AND TRANSFER AGENT
The Bank of New York
Corporate Trust Operations
Reorganization Unit
101 Barclay Street
Floor 7 East
New York, New York 10289
Attention: Giselle Guadalupe
U.S.A.

LUXEMBOURG PAYING
AGENT, TRANSFER AGENT, AND LISTING AGENT
The Bank of New York (Luxembourg), S.A.
Aerogolf Centre
1A Hoehenhof
L-1736, Senningerberg Luxembourg

LEGAL ADVISORS TO INNOVA, S. DE R.L. DE C.V.

AS TO UNITED STATES LAW: AS TO MEXICAN LAW:
Fried, Frank, Harris, Shriver & Jacobson LLP Mijares, Angoitia, Cortes y Fuentes, S.C.
One New York Plaza Montes Urales 505, Piso 3
New York, New York 10004 Colonia Lomas de Chapultepec
U.S.A. 11000 Mexico, D.F., Mexico

AUDITORS OF INNOVA, S. DE R.L. DE C.V.
PricewaterhouseCoopers, S.C.
Mariano Escobedo 573
Colonia Rincon del Bosque
11580 Mexico, D.F., Mexico

INNOVA, S. DE R.L. DE C.V.

OFFER TO EXCHANGE ALL OF OUR OUTSTANDING
$300,000,000 9.375% SENIOR NOTES DUE 2013
FOR
$300,000,000 9.375% SENIOR NOTES DUE 2013
WHICH HAVE BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933
--------------------------------------------------

PROSPECTUS

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

You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
information or represent anything contained in this prospectus. You must not
rely on any unauthorized information. This prospectus does not offer to sell nor
does it solicit to buy any exchange notes in any jurisdiction where it is
unlawful. The information in this prospectus is current as of February 13, 2004.

DEALER PROSPECTUS DELIVERY OBLIGATION. Until June 15, 2004, or, if we
extend the period of the exchange offer, for a period of 90 days following the
consummation of the exchange offer, all dealers that effect transactions in
these securities, whether or not participating in this offering, may be required
to deliver a prospectus. This is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.