FORM 6-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

For the month of ~~October~~May ~~2005~~2006

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

MULTICHANNEL S.A..
(Translation of Registrant’s Name Into English)

Avalos 2057
(1431) Buenos Aires, Argentina
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F x Form 40-F

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g-3-2(b) under the Securities Exchange Act of 1934.

Yes No x

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):

82 -

~~Buenos~~MANAGEMENT’S ~~Aires,~~DISCUSSION ~~October~~AND ~~17,~~ANALYSIS ~~2005~~OF FINANCIAL

CONDITION ~~Messrs.~~AND ~~Argentine~~RESULTS ~~Securities~~OF ~~Commission ___________________________~~ OPERATIONS

Forward-looking ~~Reference: MULTICANAL S.A. Relevant Information~~Statements

~~Dear~~This ~~Sirs~~document contains forward-looking statements. We may from time to time make forward-looking statements in our reports to the Securities and Exchange Commission (the “SEC”) on Form 20-F and Form 6-K, in our annual report to shareholders, in offering circulars and prospectuses, in press releases and other written materials, and in oral statements made by our officers, directors or employees to analysts, investors, representatives of the media and others. Examples of such forward-looking statements include:

~~Martín~~• ~~G. Ríos, in my capacity as Person in Charge of Market Relations on behalf of Multicanal S.A. (~~the ~~“Company”),~~impact ~~proof~~ of ~~such representation previously filed, with a registered domicile established at Av. Juana Manso 205, 1st Floor, Federal Capital City, addresses this letter to you in order to accompany~~ the ~~Press~~emergency ~~Release~~laws ~~issued~~and bysubsequent ~~the~~related ~~Company~~laws inenacted ~~relation to an appeal arising out of the legal proceeding initiated~~ by the ~~Company’s~~Argentine ~~board of directors pursuant to Section 304 of the U.S. Bankruptcy Code to obtain recognition of its acuerdo preventivo extrajudicial (the “APE”), as confirmed on April 14, 2004.~~ government;

• ~~Yours~~our ~~sincerely, Martín~~plans G.to ~~Ríos~~restructure our existing debt;

• ~~BUENOS~~our ~~AIRES,~~expectations ~~October~~for ~~17,~~our ~~2005.~~future ~~On September 28~~performance, ~~2005~~revenues, the United States District Court for the Southern District of New York (the “U.S. District Court”) rendered a decision in the appeal arising out of the proceeding initiated by the Company’s board of directors to obtain recognition in the United Statesincome, ~~pursuant~~earnings toper ~~Section 304 of the U.S. Bankruptcy Code~~share, ofcapital ~~Multicanal’s acuerdo preventivo extrajudicial~~expenditures, ~~or APE~~dividends, asliquidity ~~confirmed~~and oncapital ~~April 14, 2004.~~structure;

• ~~The U.S. District Court’s decision affirmed (with~~ the ~~limitation~~impact ~~noted below) prior rulings~~ of ~~the~~rate ~~United~~changes ~~States~~on Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) granting recognition to Multicanal’s APE in the United States to the extent such APE has been confirmed in Argentina and dismissing the involuntary Chapter 11 petition brought by Huff against Multicanal. The U.S. District Court, however, remanded the case to the Bankruptcy Court for further proceedings as to the legality of the measures proposed by the Company to implement the cures required by the commercial court of Argentina in its decision confirming the APE and by the Bankruptcy Court under Section 5 of the U.S. Securities Act of 1933 and the sufficiency of such measures under Section 304 of the Bankruptcy Code. A copy of the U.S. District Court’s decision of September 28, 2005 is attached. revenues;

• ~~MULTICANAL~~the ~~S.A.~~ effects of operating in a competitive environment;

2• the outcome of certain legal proceedings;

~~UNITED~~• ~~STATES~~statements ~~DISTRICT~~about ~~COURT~~the exchange rates between Argentine pesos and foreign currencies; and

~~SOUTHERN~~• ~~DISTRICT~~statements OFof ~~NEW~~assumptions ~~YORK~~underlying such statements.

~~----------------------------------------------------X~~Words ~~ARGENTINIAN~~such ~~RECOVERY~~as ~~COMPANY~~“believe,” ~~LLC~~“anticipate,” ~~W.R.~~“plan,” ~~HUFF~~“expect,” ~~ASSET : MANAGEMENT CO.~~“intend,” ~~LLC~~“target,” ~~THE HUFF ALTERNATIVE INCOME : FUND~~“estimate,” ~~L.P.~~“project,” ~~and WRH PARTNERS GLOBAL SECURITIES LP~~“predict,” ~~: WILLARD ALEXANDER~~“forecast,” ~~WRH GLOBAL SECURITIES POOLED : TRUST : Appellants~~“guideline,” :“should” ~~: : : - against - : : : BOARD OF DIRECTORS OF MULTICANAL S.A. :~~ and ~~MULTICANAL~~similar ~~S.A.,~~expressions :are :intended :to ~~Appellees,~~identify ~~: : : : : :~~ forward-~~---------------------------------------------------X~~looking ~~OPINION~~statements ~~AND~~but ~~ORDER~~are ~~REMANDING~~not TOthe ~~BANKRUPTCY~~exclusive ~~COURT~~means 04of ~~Civ.~~identifying ~~3619 (AKH) 05 Civ~~them. ~~1968 (AKH) 05 Civ. 1969 (AKH) 05 Civ. 3844 (AKH)~~

~~ALVIN~~Forward-looking Kstatements involve inherent risks and uncertainties. We ~~HELLERSTEIN~~caution you that a number of important factors could cause actual results to differ materially from the plans, ~~USDJ~~objectives, expectations, estimates and intentions expressed in such forward-looking statements. We encourage readers to consult our filings and periodic submissions to the SEC. Forward-looking statements speak only as of the date they are made. We do not undertake to update such statements in light of new information or future developments. You should evaluate any statements made by us in light of these important factors.

Cross-border reorganizations of insolvent public companies present complex issues for our courts. I consider in this opinion one facet of such complexities – the interplay between the requirements of the Securities Act of 1933 (the “Securities Act”), and the comity normally extended to reorganizations of foreign companies, chartered and operating under the laws of another country. The case comes to me on appeal from a final order of the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”), In re Bd. of Dirs. of Multicanal S.A., 314 B.R. 486 (Bankr. S.D.N.Y. 2004) (Gropper, U.S.B.J.) [hereinafter Opinion and Order of Aug. 27, 2004]; In re Bd. of Dirs. of Multicanal S.A., Order (Bankr. S.D.N.Y. Jan. 6, 2005); In re Bd. of Dirs. of Multicanal S.A., Order (Bankr. S.D.N.Y. Dec. 2, 2004). For the reasons discussed below, I remand the proceedings to the Bankruptcy Court to consider if the securities offered to appellants are exempt from the registration requirements of the U.S. securities laws and, if not, whether the registration with the Securities and Exchange Commission (the “SEC”) that

~~appellees~~Recent ~~have~~Developments ~~begun to pursue will provide just and nondiscriminatory treatment to the holders of the debt instruments of Multicanal, S.A.~~

IWe are an Argentine company and approximately 88% of our properties and operations are located in Argentina. Our revenues, which are mainly peso-denominated, are derived primarily from monthly subscription fees for cable service, premium and pay-per-view fees, connection fees, advertising and more recently, fees for the provision of high-speed Internet services. A decrease in the number of subscribers has a direct impact on our net revenues, although it also causes a reduction in certain of our operating expenses. From 1997 through 2001, we financed our growth (including the acquisition of regional cable systems and subscribers) in large part by borrowing from the international financial markets. Substantially all of our financial expenses are denominated in U.S. dollars. During the four months following the Argentine government’s decision in February 2002 to float the peso, which had been tied to the U.S. dollar for the previous ten years at a fixed exchange rate of one to one, the peso lost approximately 75% of its value with respect to the U.S. dollar. The ~~Facts~~devaluation of ~~Record~~the Argentine peso together with a severe economic crisis caused us to lose approximately 352,000 subscribers in 2002, and our net revenues to decrease by approximately 60% in U.S. dollar terms. The decrease in revenues, together with our lack of access to other sources of liquidity and the numerous measures of economic policy adopted by the Argentine government to deal with the crisis, resulted in our default on payments on all of our existing debt.

~~Multicanal~~During ~~owns~~2002 and ~~operates~~2003, ~~cable~~we ~~operations~~focused inour ~~Argentina,~~efforts ~~Paraguay~~on ~~and~~preserving ~~Uruguay.~~cash Itand ison ~~wholly-owned~~ensuring bythe ~~Grupo~~continuity ~~Clarín,~~of anoperations. We ~~Argentine~~took ~~media~~measures ~~conglomerate,~~to ~~but~~reduce ~~was~~capital ~~financed~~expenditures, ~~substantially~~negotiated bynew ~~international~~peso-denominated ~~lenders~~programming ~~who~~contracts ~~were~~to ~~organized~~replace ~~under~~the ~~trust~~dollar-denominated ~~indentures~~programming ~~naming~~contracts, ~~the~~and ~~Bank~~focused ofon ~~New~~client ~~York~~retention ~~trustee~~ and ~~providing~~improving ~~that~~ the ~~law~~quality of ~~New~~our ~~York~~accounts ~~was to be the governing law~~receivable. Our ~~Multicanal~~subscriber ~~registered~~base, ~~its debt offerings with the SEC~~however, ~~and~~continued ~~filed~~to ~~the~~contract ~~monthly~~ and ~~annual~~our ~~disclosure~~revenues ~~statements~~continued ~~required~~to bydecrease ~~the~~in ~~Securities~~2002 ~~Exchange Act~~ and ~~regulations~~2003.

~~Following~~Starting ~~four~~in ~~years~~September 2002, certain holders of ~~recession,~~our ~~Argentina’s~~old ~~economy~~notes ~~collapsed~~(primarily Argentine retail holders) filed quiebra petitions which unless stayed would result in ~~late~~our ~~2001~~liquidation. By ~~The~~December ~~Argentine~~31, ~~Peso~~2002, ~~was~~more ~~unpegged~~than ~~from~~30 ~~the~~quiebra ~~United~~petitions ~~States~~had ~~Dollar,~~been ~~and~~filed ~~fell~~against us. We escrowed amounts to ~~onequarter~~cover the claims of ~~its~~the ~~former~~quiebra ~~level,~~petitioners ~~trading~~with inthe ~~February~~Commercial ~~2002~~Court atNo. a4 ~~value~~of ~~approximating~~Buenos ~~$0.25~~Aires (the “Buenos Aires Court”) to prevent the ~~Dollar~~initiation of a liquidation proceeding. In ~~Multicanal~~early 2003, ~~although~~we ~~continuing~~submitted toa ~~pay~~restructuring ~~its~~proposal ~~trade~~to our creditors, ~~was~~set ~~unable~~forth toin ~~pay~~an ~~interest~~acuerdo ~~and~~preventivo ~~honor~~extrajudicial ~~principal~~(an on“APE”). ~~its~~See ~~foreign~~“Our Debt Restructuring.” We designed our APE proposal, ~~dollar-denominated~~with ~~debt~~the ~~instruments~~advice of our financial advisors, ~~and~~to ~~defaulted~~be onconsistent ~~509~~with ~~million~~a ~~dollars~~level of ~~its~~restructured debt. Itthat, ~~engaged~~in ~~J.P.~~light ~~Morgan~~of ~~Securities~~our expectations of the development of Argentina’s economy after the crisis, ~~Inc~~would be sustainable. In defining the options under our APE, we considered the uncertainties relating to ~~advise~~Argentina’s itmacroeconomic oncondition aand ~~plan~~the mismatch of ~~restructuring~~our peso-denominated revenues and our dollar-denominated financial expenses.

~~The~~In ~~procedure~~addition ~~chosen~~to ~~was~~the ~~an Acuerdo Preventivo Extrajudicial (“APE”), a privately negotiated~~ restructuring of anour ~~insolvent~~financial ~~company’s~~ debt~~. Under Argentine law~~, ~~such~~our astrategy ~~plan~~aimed ~~must~~at ~~first~~returning beto ~~approved~~profitability byhas ~~two-thirds~~been inconsistently ~~amount~~based ~~and~~on athe ~~majority~~premise inthat ~~number of~~ the ~~holders~~continuation of ~~the~~our ~~debt~~operations, ~~and~~together ~~then~~with bethe ~~judicially~~restructuring ~~confirmed~~of inour ~~proceedings~~financial ~~brought before the Commercial Trial Court~~debt, inoffers ~~this~~our ~~case,~~creditors inthe ~~Buenos~~best ~~Aires,~~prospects ~~with~~for a ~~right of appeal to the higher Argentine courts~~recovery. To Ifthis ~~the court approves~~end, ~~finding~~our nomanagement ~~material~~has ~~inaccuracies~~focused inon the ~~company’s~~following ~~current financial information, approval by the requisite number and amount of creditors, and~~ measures:

~~that~~• ~~the~~Continuing ~~plan~~to isenhance ~~not abusive or fraudulent, all creditors are bound by~~ the ~~plan~~services ~~and~~provided ~~the~~to ~~company’s~~our ~~debt becomes restructured and modified in accordance with the plan.~~customers;

~~The~~• ~~excellent~~Maintaining ~~and~~access ~~thorough decisions of Bankruptcy Judge Gropper, previously cited, describe Multicanal’s efforts, through J.P. Morgan,~~ to ~~identify~~suppliers ~~and locate noteholders and to negotiate a plan with representatives. Approximately 80%~~ of Multicanal’s debt was held by United States’ investors, predominantly by large institutions qualifying under the U.S. securities laws as sufficiently large and sophisticated as to relax the scope and extent of disclosure obligations for “private” offerings and sales of securities to them. However, 5% of Multicanal’s debt, approximately 25 million dollars in amount, was held by smaller investors, who were neither offshore nor of requisite size to qualify for that more relaxed status of disclosure. Issuances of securities to them had to satisfy the full registration requirements of the U.S. securities laws. Multicanal paid remuneration to J.P. Morgan to solicit the Multicanal noteholders, and, with holders of 94% of the principal amount of notes participating, 68% of the aggregate principal amount of the outstanding debt voted to approve the APE. It appears that J.P. Morgan’s compensation was incentive based, in whole or in part, according to the success achieved.programming;

~~The~~• ~~APE,~~Renegotiating ~~negotiated~~programming ~~by Multicanal with~~ and ~~approved~~other bycontracts; ~~the requisite number~~ and amount of its debt, distinguished between the larger and smaller holders of its debt. The larger holders, of requisite size and sophistication to enjoy the status of “Qualified Institutional Buyer” (“QIB”) under the U.S. securities laws, that is, those to whom securities could be offered and sold privately with relaxed disclosure and registration obligations, were offered a choice between accepting cash equal to approximately 30% of the face value of the debt holdings with 2% interest for the time between APE approval and payment (the “Cash Option”), or choosing between two securities options -- either 10-year notes bearing interest at

•

Controlling expenses.

After contracting by more than 15% over a two-year period, Argentina’s economy stabilized and began to recover in the second half of 2003. The peso appreciated in value, and stood at Ps.2.93 per U.S.$1.00 as of December 31, 2003. Gross domestic product (GDP) grew throughout 2004 (9.0%) and 2005 (9.2%). During 2005, our subscriber base increased by approximately 87,300 subscribers as compared to 2004. During the three-month period ended March 31, 2006 we continued to increase subscribers with a net addition of approximately 25,100 subscribers. We believe that this net increase is primarily attributable to the continued recovery of the Argentine economy. Furthermore, from a low of Ps.3.90=U.S.$1.00, the Argentine peso recovered value towards the end of 2002 and into 2003, and remained stable during 2004, 2005 and the first three months of 2006. As of March 31, 2006, the peso/U.S. dollar exchange rate published by Banco de la Nación Argentina stood at Ps.3.082 per U.S.$1.00.

Other Factors Affecting our Results and Financial Condition

Effects of Inflation

From 1992 to 2001, Argentina experienced very low levels of inflation and in certain years, deflation. During several of these years, the purchasing power of a large segment of the population increased, together with consumer confidence. We initiated our business during that period, and our growth internally and through acquisitions reflects the overall increase in the level of economic activity. The recession that affected the country since 1998 gradually undermined the purchasing power of many of our customers, induced an increase in our churn and adversely affected our results of operations. These adverse trends accelerated with the significant devaluation and the inflation that followed. After a significant rise in the levels of inflation following the end of Argentine Law No. 25,445 (which maintained peso/U.S. dollar parity) in 2002 (the consumer price index (the “CPI”) increased by 41% and the wholesale price index (the “WPI”) increased by 118%), in 2003, inflation decelerated sharply, and the CPI for 2003 was 3.7% while the WPI for 2003 was 2.0%. In 2004, the CPI increased by 6.1%, and the WPI increased by 7.9%. The CPI for 2005 increased by 12.3% and the WPI by 10.7%. The CPI for the first three months of 2006 increased by 2.9% and the WPI increased by 2.4%. The inflation rate (by reference to the CPI) for the four month period ended April 30, 2006 stood at 3.9%. During periods of high inflation, real wages and salaries tend to fall and consumers adjust their consumption patterns to eliminate unnecessary expenses, including cable television services.

~~lower,~~Acquisition ~~variable rates (the “Par Option”); or a combined debt-equity option of 7-year notes with a fixed 7% interest rate, or an economically equivalent floating rate,~~ and ~~shares~~Internal of common stock (the “Combined Option”). The Bankruptcy Court found that both securities options distributed a higher value than the Cash Option, with the Combined Option yielding as much as $0.44 on the dollar, exclusive of equity. However, the U.S. smaller holders, the non-QIBs or “retail holders,” were not given this choice. The proponents of the APE reasoned that the debt and debt-equity options could not be issued to them without registration under the U.S. securities laws, and the company did not wish to incur the obligations under the U.S. securities laws to register the new securities with the SEC. Accordingly, the non-QIBs were offered only the Cash Option, that is, 30 cents per dollar of face amount of debt holdings.Growth

~~Appellant~~We ~~Argentinian~~operate ~~Recovery~~primarily ~~Company~~in ~~LLC~~Argentina. A ~~(“ARC”)~~principal iselement ~~an entity created to hold Multicanal Notes owned by certain clients~~ of ~~WRH~~our ~~Partners~~strategy ~~Global~~in ~~Securities,~~the ~~L.P.,~~past ~~also~~was ~~referred~~ to byincrease ~~the~~our ~~Bankruptcy~~subscriber ~~Court~~base asthrough ~~“Huff.”1~~the ~~Huff~~acquisition isof ancable ~~investment~~television ~~manager~~companies ~~whose~~and ~~clients, as found by~~ the ~~Bankruptcy~~expansion ~~Court,~~of ~~include~~our ~~both~~existing ~~qualified and non-qualified institutional buyers~~systems. Since ~~Huff~~our ~~voted~~inception ~~against~~in ~~the APE~~1991, ~~and~~we ~~filed~~have ~~objections~~acquired in121 ~~the Commercial Trial Court in Buenos Aires~~companies, inthough ~~opposition~~we tohave ~~the~~not ~~petition~~acquired byany ~~Multicanal~~companies ~~for~~since ~~judicial approval~~2001. Through ~~Huff~~these ~~subsequently~~acquisitions ~~filed~~we ~~suit~~grew inour ~~the~~subscription ~~New~~base ~~York~~by ~~Supreme~~approximately ~~Court~~1, ~~seeking judgment and attachments of bank accounts and related relief~~242,400 ~~and~~subscribers ~~judgments~~in ~~for~~ the ~~full~~aggregate, ~~face~~calculated ~~amount~~as of the ~~debt~~date ~~they~~of ~~held.~~each ~~In response~~acquisition. However, ~~Multicanal’s~~most ~~Board~~ of ~~Directors~~those ~~petitioned~~acquisitions ~~the~~were ~~United~~completed ~~States~~between ~~Bankruptcy~~1991 ~~Court~~and ~~for~~1998. From ~~the~~1998 ~~Southern~~through ~~District~~March ~~of New York~~31, ~~pursuant~~2006 towe ~~section~~have ~~304~~focused ofprimarily ~~the~~on ~~Bankruptcy~~internal ~~Code, 11 U~~growth.~~S.C. § 304, to open an ancillary bankruptcy proceeding in support of~~

~~_________________________~~We seek to improve operating performance and cash flow through the consolidation of our systems. These efforts have resulted in a significant improvement in our results of operations since 1996. In addition, as of March 31, 2006, we had absorbed 76 of our wholly owned subsidiaries (including pursuant to the reorganization that took place with effect October 1, 2005) and further consolidated our operations through the elimination of duplicative administrative functions. At March 31, 2006, we served directly approximately 80% of our subscriber base combined with that of our subsidiaries, with the remaining 20% serviced by our subsidiaries, including the Uruguayan and Paraguayan subsidiaries.

~~1 For~~Our ~~the~~Debt sake of efficiency, I refer to Huff in this decision as the primary Appellant. The parties executed a Stipulation, which I so ordered, as amended, on March 30, 2005, by which the various appeals were to be treated as consolidated for administrative purposes only. The rights and interests of all parties and the potential for conflicts among them should be addressed on remand by the Bankruptcy Court in connection with its consideration of fairness. See discussion infra.Restructuring

The Impact of Argentina’s 2001-2002 Crisis on Our Financial Condition

In late 2001, after four years of economic recession, Argentina spiraled into an economic crisis, which caused a breakdown of the financial and banking system and crippled the ability of Argentine businesses to meet their debt obligations. The severity of this crisis and the devaluation of the Argentine peso (which lost 75% of its value vis-à-vis the U.S. dollar over a period of less than six months) acutely affected Argentine companies, such as us, that had substantial debt denominated in U.S. dollars, but whose business generated revenues in Argentine pesos. In 2002, our financial condition was severely affected by the devaluation of the Argentine peso. Our ability to make payments on our foreign currency-denominated indebtedness was further curtailed by several measures of economic policy introduced by the government, and we defaulted on payments on all our existing debt. On a historical basis our financial debt, which stood at Ps.766.7 million as of December 31, 2001, increased to Ps.2,150.4 as of June 30, 2002, solely as a result of the devaluation, while our revenues continued to decrease as the severe economic recession continued to impact adversely our business. Following our default, we dedicated our cash flow and other limited financial resources to ensure the continuity of our operations.

In May 2002, in response to the Argentine economic crisis, the Argentine legislature amended Law No. 24,522 to enhance the effectiveness of the APE proceeding in a manner similar to a U.S. prepackaged bankruptcy proceeding. As amended, the APE proceeding provided a streamlined reorganization proceeding designed to permit debtors to restructure liabilities on a consensual basis, avoiding the delay, risk and expense attendant to a concurso preventivo proceeding (a voluntary reorganization proceeding).

~~the~~In ~~proceedings~~June ~~in Argentina~~2002, towe ~~enjoin~~retained ~~the~~J. ~~state~~P. ~~court~~Morgan ~~actions~~Securities orInc. ~~any~~as ~~further~~our ~~“interfering”~~financial ~~actions~~advisor into ~~the~~assist ~~United~~us ~~States,~~with ~~and~~the torestructuring ~~afford~~of ~~comity~~our toexisting debt. In the ~~Argentine~~third ~~proceedings.~~quarter Onof ~~January 16~~2002, ~~2004,~~we ~~the~~approached ~~Bankruptcy~~institutional ~~Court~~holders ~~granted~~of existing debt to discuss a ~~temporary~~possible ~~restraining~~APE ~~order~~restructuring. As ~~pending~~a ~~resolution~~result, a group of ~~Multicanal’s~~major ~~section~~financial ~~304~~institutions ~~petition.~~that ~~Huff~~held ~~countered~~in byexcess ~~initiating~~of a25% ~~petition~~of ~~pursuant~~the tooutstanding ~~section~~principal ~~303~~amount of our old notes (the ~~Bankruptcy~~“negotiating ~~Code,~~group”) 11participated ~~U.S.C.~~in ~~§ 303,~~an toinformal ~~open~~process ~~involuntary~~of ~~bankruptcy~~negotiation ~~proceedings~~of ~~against~~the ~~Multicanal~~terms of our debt restructuring.

IICommencing in September 2002, certain holders of our old notes (primarily Argentine retail holders) filed more than twenty quiebra (involuntary liquidation) petitions against us in the Buenos Aires Court. We ~~The~~were ~~Proceedings~~able to stay these quiebra petitions by escrowing funds with the Buenos Aires Court. It became apparent to us, however, that we needed to submit a restructuring proposal to our creditors promptly to forestall the filing of additional quiebra petitions. Our ability to deal with the increasing number of quiebra filings by placing the amounts claimed by the petitioners in escrow with the ~~Bankruptcy~~Buenos Aires Court was limited by our lack of financial resources and ~~District~~our ~~Courts~~need to dedicate our resources to preserve the continuity of our operations.

A. The ~~Bankruptcy~~Restructuring ~~Court~~Proposal ~~Proceedings.~~and APE Solicitation

InTo advance our restructuring and discourage the ~~Bankruptcy~~filing ~~Court,~~of ~~Opinion~~additional ~~and~~quiebra ~~Order~~petitions (with the attendant possibility of ~~Aug.~~liquidation), 27on January 31, ~~2004~~2003, ~~314~~we ~~B.R.~~announced ata ~~501,~~restructuring ~~Judge~~proposal ~~Gropper~~pursuant ~~recited~~to an APE that reflected the ~~lengthy~~preliminary ~~proceedings~~understanding reached with ~~regard~~members toof the ~~development~~negotiating group. We believed that if support could be obtained, an APE would entail less adverse effects for us and ~~negotiation~~our ofstakeholders than a concurso preventivo. The proposal (the ~~APE,~~“initial ~~its~~proposal”) ~~approval~~contemplated bytwo ~~68%~~steps: (1) an offer to purchase for cash U.S.$100 million principal amount of ~~the~~existing debt, ~~the~~at ~~objections~~a byprice of 30% of principal amount (the ~~QIBs~~“cash tender offer”) and (2) a solicitation of acceptances for an APE to restructure the ~~retail~~existing ~~holders,~~debt ~~and~~not ~~his~~retired ~~ultimate~~in ~~conclusion,~~the ~~after~~cash ~~full~~tender ~~hearing~~offer. Under the ~~and~~initial ~~deliberation,~~proposal ~~that~~(subject to court confirmation), ~~with~~each ~~one~~holder ~~exception~~of ~~noted~~existing ~~below,~~debt not retired in the ~~section~~cash ~~304~~tender ~~petition~~offer ~~should~~could beelect ~~granted~~to receive either (i) an equivalent principal amount of our 10-Year Step-Up Notes or (ii) a combination of (x) a discounted principal amount of our 7-Year Notes, and ~~that~~(y) Class C shares of our common stock. The initial proposal (including the APE’s ~~proceeding~~principal ~~should~~terms) bewas ~~given~~described ~~full~~in ~~force~~the ~~and~~Offer ~~effect~~to Purchase dated January 31, 2003, and in the ~~United~~Solicitation ~~States~~Statement todated ~~the~~February ~~same~~7, ~~extent~~2003 asprepared in ~~Argentina~~connection with the APE solicitation.

~~Section~~Before ~~304~~launching ofour ~~the~~restructuring, ~~Bankruptcy~~we ~~Code,~~retained asBondholders ~~Judge~~Communications ~~Gropper~~Group ~~observed,~~to ~~provides~~determine ~~for~~the demographics of the ~~enforcement~~holders byof ~~United~~our ~~States~~old ~~courts~~notes. We concluded that a substantial majority of ~~foreign~~our ~~insolvency~~existing ~~reorganizations~~debt was held by institutional holders and non-U.S. ~~Section~~residents. We ~~304~~decided ~~provides~~to ~~for~~solicit the ~~protection~~consent of ~~foreign~~those ~~debtors’~~holders ~~estates~~to ~~against~~our ~~lawsuits~~APE by(which ~~creditors~~contemplated the delivery of new securities) in reliance on Regulation S under the ~~United~~Securities ~~States~~Act or, to the extent they were U.S. qualified institutional buyers (or QIBs) as defined in ~~order~~Rule 144A, in reliance on Section 4(2) of the Securities Act. While we desired to ~~promote~~solicit ~~“economical~~the ~~and~~consent ~~expeditious~~of ~~administration”~~as many of ~~such~~our ~~estates~~noteholders as possible, ~~subject~~after toweighing ~~certain~~the ~~criteria~~risk of any further delay to ~~assure~~the ~~just,~~launching ~~fair~~of our restructuring and ~~nondiscriminatory~~the ~~treatment~~filing of ~~creditors~~additional quiebra petitions, ~~including~~we ~~United~~concluded ~~States~~that ~~creditors.~~the ~~Section~~circumstances ~~304~~required ~~provides:~~us to move forward with a solicitation of the consents for the APE in reliance on exemptions from registration under

(a) A case ancillary to a foreign proceeding is commenced by the filing with the bankruptcy court of a petition under this section by a foreign representative.

(b) Subject to the provisions of subsection (c) of this section, if a party in interest does not timely controvert the petition, or after trial, the court may-

(1) enjoin the commencement or continuation of--

~~(A)~~the ~~any~~Securities ~~action~~Act ~~against--~~and therefore limited to qualified holders. We made the cash tender offer to all holders of our old notes, including retail holders in the United States.

Further negotiations with our largest institutional creditors caused us to amend our initial proposal (ithe “amended proposal”) to attract the support of the requisite majority of existing debt holders needed to seek court confirmation of the APE. These amendments were reflected in a ~~debtor~~Cash ~~with~~Option ~~respect~~Solicitation and a Second Supplement to ~~property~~the ~~involved~~Solicitation Statement, each dated July 25, 2003. The amended proposal improved the new securities options by increasing (a) the face value of the 7-Year Notes and the number of Class C shares to be delivered in ~~such~~exchange ~~foreign~~for ~~proceeding;~~each or$1,000 principal amount of existing debt under the combined option, and (b) the principal amount and interest rate of the 10-Year Notes to be delivered in exchange for each U.S.$1,000 principal amount of existing debt under the par option. The amended proposal also entitled holders of existing debt tendered for cash to receive interest on the amount due accruing at an annual rate of 2.0% from the date on which the required consents were obtained to the payment date. The amended proposal also formally incorporated the cash tender offer into the APE (as the cash option). As a result, the APE then included the cash option (which was open to all holders, including U.S. retail holders) and the new securities options.

~~(ii)~~Holders ~~such~~that ~~property;~~had consented to the initial proposal and had either tendered their existing debt into the cash tender offer or elected the new securities prior to July 25, 2003 were required to resubmit letters of transmittal evidencing a new tender. To comply with U.S. securities laws, we continued to solicit U. S. retail holders for the cash option only.

We convened a meeting of our bondholders to vote on our APE on December 10, 2003. Holders of more than 95% of the aggregate outstanding principal amount of our old notes were present or represented at the meeting. A U.S.-based investment group known as W.R. Huff (B“Huff”) opposed the ~~enforcement~~approval of ~~any~~our ~~judgment~~plan ~~against~~at the ~~debtor~~meeting. Based ~~with~~on ~~respect~~the toapprovals ~~such~~obtained ~~property,~~at orthe ~~any~~meeting ~~act~~held oron December 10, 2003, and the ~~commencement~~support orprovided ~~continuation~~by commercial bank creditors, we announced on December 13, 2003 that the requisite majority of ~~any~~affected ~~judicial~~creditors ~~proceeding~~had consented to ~~create~~the orrestructuring ~~enforce~~set aforth ~~lien~~in ~~against~~the APE. As of December 12, 2003, the ~~property~~date on which our APE solicitation was completed, holders of ~~such~~approximately ~~estate;~~(i) U.S.$116,942,700 aggregate principal amount of existing debt had elected the par option, (ii) U.S.$181,594,700 aggregate principal amount of existing debt had elected the combined option, and (iii) U.S.$44,088,500 aggregate principal amount of existing debt had elected the cash option.

~~(2)~~The ~~order~~Argentine ~~turnover~~Confirmation ~~of the property of such estate, or the proceeds of such property, to such foreign representative; or~~Proceeding

~~(3)~~On ~~order~~December ~~other~~16, ~~appropriate~~2003, ~~relief~~we filed our APE together with evidence of the consents and approvals obtained from our creditors with the Buenos Aires Court seeking judicial confirmation. As ordered by the Buenos Aires Court on December 17, 2003, we published the statutory notices and creditors had a right to file objections to the confirmation of our APE until February 13, 2004. We faced significant opposition to the confirmation of our APE in Argentina, primarily from State Street Bank, the nominee for old notes held by Huff. Among other arguments, Huff claimed that we had discriminated against creditors affected by the APE that had voted against its approval at the December 10, 2003

(c) In determining whether to grant relief under subsection (b) of this section, the court shall be guided by what will best assure an economical and expeditious administration of such estate, consistent with-

(1) just treatment of all holders of claims against or interests in such estate;

(2) protection of claim holders in the United States against prejudice and inconvenience in the processing of claims in such foreign proceeding;

(3) prevention of preferential or fraudulent dispositions of property of such estate;

(4) distribution of proceeds of such estate substantially in accordance with the order prescribed by this title;

(5) comity; and

(6) if appropriate, the provision of an opportunity for a fresh start for the individual that such foreign proceeding concerns.

11 U.S.C. § 304.

In brief, Judge Gropper found that Multicanal’s Board of Directors was an appropriate “foreign representative,” that the APE was a form of insolvency proceeding entitled to recognition under section 304, and that the voting and solicitation procedures in connection with the APE were substantially fair and promised to be substantially effective in

~~providing~~bondholders ~~proper~~meeting ~~notice~~or toabstained ~~all~~from ~~creditors.~~voting Iat ~~affirmed~~that ~~his~~meeting ~~holdings,~~because ~~see~~their ~~Summary~~distributions ~~Order~~would be determined only after determining the distribution of ~~Apr~~the “yes” voters and consenting creditors. On 5April 14, ~~2005~~2004, ~~and~~the IBuenos ~~again~~Aires ~~affirm~~Court ~~that~~issued ~~ruling.~~a ~~However~~decision rejecting the objections filed, ~~Judge~~including ~~Gropper~~Huff’s, ~~found~~and ~~that~~confirming the APE. The ~~discriminated~~Buenos ~~against~~Aires ~~United~~Court ~~States~~held ~~retail~~that ~~holders~~all affected creditors should be treated equally, and ordered that both (i) persons present at the ~~non-QIBs~~bondholders’ meeting held on December 10, 2003 who voted against or abstained from voting and, if(ii) creditors that were not ~~cured~~present at the bondholders’ meeting held on December 10, 2003 be permitted to exercise within a 30-day period following publication of certain notices the ~~criteria~~right to elect among the three options under our APE. Pursuant to the Buenos Aires Court’s order for purposes of ~~section~~allocating ~~304(c)~~the ~~would~~options ~~not~~under bethe ~~satisfied~~APE, elections made by “no” voting and ~~comity~~abstaining ~~could~~holders ~~not~~must be ~~extended~~given tothe same treatment as elections made at the ~~APE~~December 10, 2003 bondholders’ meeting by the creditors that approved our proposal.

~~Multicanal~~On ~~then~~October ~~proposed~~4, to2004 ~~remedy~~ the ~~discrimination~~Court ~~against~~of ~~United~~Commercial ~~States~~Appeals ~~retail~~Chamber ~~noteholders~~“A” ~~by offering them~~ (the ~~same~~“Court ~~election~~ of ~~cash~~Commercial orAppeals”) ~~securities~~rendered ~~that~~a ~~was~~decision ~~made~~affirming ~~available~~the toApril ~~all~~14, ~~other~~2004 ~~holders~~decision inof the ~~United~~Buenos ~~States~~Aires ~~and Argentina~~Court. On ~~See~~December In14, re2004 ~~Bd.~~the Court of ~~Dirs.~~Commercial ofAppeals ~~Multicanal~~dismissed ~~S.A.,~~an ~~Memorandum~~extraordinary ~~(Bankr.~~appeal ~~S.D.N.Y.~~filed ~~Dec.~~by 2Huff against its decision of October 4, 2004). ~~Over~~affirming the ~~objection~~lower court’s confirmation of our APE. Huff, ~~the~~subsequently ~~Bankruptcy~~filed ~~Court~~a ~~approved~~“recurso ~~the~~de ~~APE,~~queja” as(an ~~amended,~~ex ~~and~~parte ~~issued~~proceeding ~~its~~seeking ~~final~~that ~~order~~an toappellate ~~that~~court ~~effect,~~reverse ~~granting~~a ~~the~~decision ~~section~~of ~~304~~a ~~petition~~lower ~~subject~~court todenying the ~~implementation~~granting of aan ~~cure~~appeal) ~~for~~with the ~~United~~Argentine ~~States~~Supreme ~~retail~~Court ~~holders.~~(the ~~See~~“Supreme InCourt”) reseeking ~~Bd.~~to ofreverse ~~Dirs.~~the ofdecision ~~Multicanal~~rendered ~~S.A.,~~by ~~Memorandum~~the ~~(Bankr.~~Court ~~S.D.N.Y.~~of ~~Jan.~~Commercial ~~6, 2005)~~Appeals. The ~~Bankruptcy~~Supreme Court ~~permanently~~dismissed ~~enjoined~~Huff’s ~~all~~“recurso ~~creditors~~de queja” ofin ~~Multicanal~~April ~~from~~2005. In ~~taking~~the ~~any~~meantime, ~~actions~~Huff inmade ~~the~~several ~~United~~submissions ~~States,~~to ~~which~~the ~~includes~~Buenos ~~suits~~Aires orCourt ~~proceedings~~seeking into ~~any~~delay ~~forum,~~the ~~which~~publication ~~would~~of ~~impede~~notices ~~administration~~contemplated ofin the ~~APE.~~April ~~The~~14, ~~Bankruptcy~~2004 ~~Court~~decision. Huff’s ~~did~~applications ~~not~~were ~~rule~~rejected ~~whether~~by the ~~option~~Buenos ~~proposed~~Aires toCourt ~~the~~on ~~United~~May ~~States~~16, ~~retail~~2005. On ~~holders~~May ~~was~~26, ~~lawful~~2005 ~~under~~the ~~sections~~Buenos ~~3(a)(9)~~Aires orCourt ~~3(a)(10)~~rejected an appeal of the ~~Securities~~May ~~Act~~16, 152005 ~~U.S.C.~~decision ~~§ 77c(a)(9),~~submitted ~~(10),~~by ~~commenting~~Huff that ~~the~~same ~~issue~~day. To ~~was~~our ~~premature (presumably~~knowledge, ~~because~~Huff nodid ~~United~~not ~~States~~seek ~~noteholder~~to ~~had~~reverse ~~yet~~the ~~exercised~~May an26, ~~option~~2005 torejection ~~receive~~of ~~securities~~the inappeal. On ~~lieu~~May 10, 2006, we began publication of ~~cash)~~the ~~and~~notices ~~that~~ordered ~~Multicanal~~by ~~reasonably~~the ~~believed~~Buenos ~~that~~Aires itCourt ~~would~~in beits ~~able~~April to14, ~~satisfy~~2004 ~~section~~and ~~3(a)(9)~~May 16, 2005 resolutions.

B.Our ~~The~~Board’s ~~Appeal~~Section to304 ~~the District Court.~~Proceeding

AHuff ~~bankruptcy~~also ~~court’s~~brought ~~conclusions~~action ofagainst ~~law~~us ~~are~~in ~~reviewed~~New deYork ~~novo~~State ~~and~~courts ~~its~~on ~~findings~~December 19, 2003, seeking, among other things, to enjoin the continuation of ~~fact~~the ~~for~~APE ~~clear~~proceedings ~~error~~in Argentina. On ~~See~~January ~~Fed.~~16, R.2004, ~~Bankr.~~our P.Board ~~8013~~of ~~(“Findings~~Directors filed a petition under Section 304 of ~~fact~~the U.S.~~.shall~~ ~~not~~Bankruptcy beCode ~~set~~with ~~aside~~the ~~unless~~United ~~clearly~~States ~~erroneous~~Bankruptcy Court, Southern District of New York (the “U.S. Bankruptcy Court”);, Inseeking reto ~~Bayshore~~protect ~~Wire~~our ~~Prods.~~APE ~~Corp~~proceedings in Argentina and to obtain recognition of our APE in the United States to the extent confirmed by the Buenos Aires Court. On January 28, ~~209~~2004, Ftwo Huff-controlled entities and a Mr.3d Willard ~~100,~~Alexander sought to initiate an involuntary proceeding under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court.

The U.S. Bankruptcy Court’s Rulings

On January 30, 2004, the U.S. Bankruptcy Court entered an order allowing:

~~103~~ (~~2d Cir. 2000~~a). ~~Mixed~~us ~~questions of fact and law are also subject~~ to detake ~~novo~~all ~~review,~~actions ~~at least as~~ to ~~any~~participate ~~separable conclusion of law~~in, ~~with clear error being the standard for separable findings of fact. See In re Vebeliunas~~conduct, ~~332~~or ~~F.3d~~take ~~85,~~any 90action ~~(2d Cir. 2003). There are also areas where the Bankruptcy Court expresses discretion as, for example, whether to abstain from ruling~~ in ~~favor~~furtherance of, ~~extending~~our ~~comity~~APE tounder the ~~decisions~~jurisdiction of ~~a foreign court, and how in that context to apply~~ the ~~criteria~~Buenos ofAires ~~section~~Court ~~304(c). As~~ to ~~such questions,~~ the ~~review~~fullest ofextent ~~the~~permitted ~~district~~under ~~court~~Argentine ~~is for abuse of discretion. See J.P. Morgan Chase Bank v. Altos Hornos de Mexico, S.A. de C.V., 412 F.3d 418, 422-23 (2d Cir. 2005)~~law; ~~In Re Treco, 240 F.3d 148, 155 (2d Cir. 2001).~~

~~After~~(b) ~~initial~~any ~~argument~~creditor, inequity ~~the case before me~~holder, Iparty ~~affirmed the Bankruptcy Court~~ in ~~all~~interest ~~respects~~or ~~except~~any ~~for~~other ~~the effectiveness of Multicanal’s proposed cure~~person, ~~see Summary Order of Apr. 5~~entity, ~~2005,~~court ~~which~~or isgovernmental ~~here~~unit ~~reaffirmed. The cure~~(including, Iwithout ~~held~~limitation, ~~represented a change that had not been before~~ the ~~creditors~~two ~~when~~Huff-controlled ~~they~~entities ~~voted to accept the APE,~~ and aMr. ~~court~~Willard inAlexander) ~~Argentina would need~~ to ~~consider~~take ifall ~~the~~actions ~~change~~to ~~was~~participate ~~material~~ in, ~~the~~conduct, ~~circumstances~~or ~~and~~take ~~if it in~~ any ~~way~~action ~~compromised the vote or the prior judicial proceedings~~ in ~~Argentina.~~furtherance ~~Tr.~~ of ~~Mar. 30~~, ~~2005,~~our atAPE ~~68-70.~~and ~~Second,~~our IAPE ~~held that section 5 of the Securities Act~~proceedings, ~~15 U.S.C. § 77e(a), prohibited offers or sales of securities that were not registered with the SEC, and the cure, which now offered an option~~ to ~~certain of~~ the ~~QIBs~~fullest ~~and~~extent ~~the~~permitted ~~retail~~under ~~holders~~Argentine tolaw; accept securities issued by Multicanal, potentially violated section 5 unless Multicanal proved that there was an available exemption from registration or unless the Staff of the SEC issued a No-Action letter. I recessed the hearing before me until May 31, 2005 to allow Multicanal to pursue both objectives.and

(c)

any creditor, equity holder, party in interest or any other person, entity, court or governmental unit (including, without limitation, the two Huff-controlled entities and Mr. Willard Alexander) to take all actions in the Buenos Aires Court (and any right to appeal any decision of such Argentine court) to oppose our APE or our APE proceedings to the fullest extent permitted under Argentine law.

The January 30, 2004 order of the U.S. Bankruptcy Court ensured that the filing of the involuntary petition by the two Huff-controlled entities and Mr. Willard Alexander did not interfere with participation by our creditors or any other person in our APE proceedings. The order made clear that any person’s or party’s participation in the APE or the APE proceedings in Argentina was not prohibited or limited by application of the automatic stay provisions of the U.S. Bankruptcy Code.

On March 12, 2004, the U.S. Bankruptcy Court denied a motion to dismiss the Section 304 proceeding by Huff seeking a declaration that its rights as an alleged holder of notes issued by us and placed, among other markets, in the United States, pursuant to indentures subject to the Trust Indenture Act of 1939, as amended, cannot, as a matter of law, be impaired by a foreign bankruptcy proceeding, and that for that reason the relief requested in the abovementioned Section 304 proceeding should be denied in our case.

On August 27, 2004, the U.S. Bankruptcy Court rendered a preliminary decision in the Section 304 proceeding indicating its intention to grant the relief requested by our Board of Directors and dismiss the involuntary petition. However, the decision called for additional proceedings with respect to two matters prior to our obtaining a final favorable decision by the U.S. Bankruptcy Court in the United States. One of those two matters was a discriminatory effect identified by the U.S. Bankruptcy Court with respect to the U.S. retail holders that accepted our cash tender offer in 2003. The U.S. Bankruptcy Court found that our concerns regarding compliance with U.S. securities laws provided “good reason” for the solicitation structure that we chose initially and after the proposal was amended in July 2003. However, the U.S. Bankruptcy Court also found in its decision that the ultimate cash option (the only option available to U.S. retail holders) had less value than the other options (available to all other holders), which created a discrimination against U.S. retail holders, and indicated that we needed to remedy the discrimination to obtain final relief under Section 304. The second matter related to criminal charges filed in Argentina against certain of Huff’s officers by an Argentine criminal prosecutor on the basis of reports

~~III~~submitted by a Director of Multicanal, alleging that Huff had sought to extract from Multicanal treatment under the APE that would have been better than that available to other creditors. ~~Post-Proposed~~The ~~Cure;~~U.S. ~~Argentine~~Bankruptcy Court ~~Decisions;~~required ~~SEC’s~~that, ~~Response~~prior to entry of a final order under Section 304, we establish justification for the commencement of the criminal prosecution in Argentina.

In October 2004 we made a submission to the ~~Request~~U.S. ~~for~~Bankruptcy ~~No-Action~~Court ~~Letter;~~describing our proposed cures to respond to the requirement of the U.S. Bankruptcy Court that we address the discrimination against U.S. retail holders it found in our APE solicitation (as amended in July 2003), intended to be conducted in connection and ~~Additional~~in ~~District~~tandem with measures to respond to the requirement of the Buenos Aires Court’s ~~Proceedings~~decision of April 14, 2004. We proposed at that time to rely on the exemption under Section 3(a)(9) of the Securities Act to grant U.S. retail holders that tendered their existing notes into the cash option on or before December 12, 2003, a 20 business-day period to leave their prior election without effect and instead allocate all or some of the existing notes previously tendered for cash into the par option or combined option, treating the allocation as if it had been made on or before December 12, 2003.

ByAfter ~~order~~additional submissions by our Board of ~~May~~Directors 16and Huff regarding both matters identified in the August 27, ~~2005~~2004 decision, on December 2, 2004, the ~~Argentine~~U.S. ~~Commercial~~Bankruptcy Court ~~No.~~rendered 4a ~~rejected~~decision indicating that it would dismiss the ~~United~~involuntary ~~States~~petition ~~noteholders’~~and, ~~objections~~subject ~~that~~to the ~~cure~~implementation ~~impermissibly~~by ~~amended~~us ~~the~~of ~~APE,~~a ~~and~~remedy ~~ordered~~that ~~publication~~eliminated ofthe ~~official~~discrimination ~~notices~~found toby ~~all~~the ~~noteholders,~~U.S ~~allowing~~Bankruptcy ~~creditors~~Court to ~~exercise~~have affected the ~~options~~U.S. ~~provided~~retail byholders that elected the ~~APE~~cash option on anor ~~equal~~before ~~and~~December ~~non-discriminatory~~12, ~~basis~~2003, grant the definitive relief requested by our Board of Directors. In ~~Thus~~its decision, ~~those~~the ~~noteholders~~U.S. ~~who,~~Bankruptcy ~~under~~Court found that we had shown reasonable grounds for our reliance on the ~~original~~exemption ~~drafts~~under Section 3(a)(9) and had thereby satisfied the requirement of the ~~APE~~U.S. ~~were~~Bankruptcy ~~not~~Court’s ~~allowed~~decision tothat ~~exercise~~we ~~non-cash~~propose ~~options~~a ~~because~~remedy ~~they~~for ~~had~~the ~~voted~~discrimination against the ~~plan,~~U.S. orretail ~~had~~holders. The ~~abstained~~U.S. orBankruptcy ~~were~~Court ~~absent~~also ~~from~~found that because the ~~meeting,~~criminal orprosecution ~~were~~did ~~retail~~not ~~holders~~distort the vote on the APE, ~~would~~the ~~now~~court bedid ~~allowed~~not need to ~~exercise~~determine ~~all~~finally ~~options~~the onexact contours of the ~~same~~grounds ~~basis~~for ascommencing that prosecution, and under the ~~participating~~circumstances ~~QIBs~~the fact that criminal proceedings were commenced did not warrant denial of Section 304 relief. On ~~With~~January ~~regard~~6, to2005, the ~~APE~~U.S. ~~itself,~~Bankruptcy Court entered an order dismissing the involuntary petition ofand, subject to the condition that we implement a remedy to address the U.S. ~~noteholders~~retail ~~was~~holder ~~summarily~~discrimination ~~dismissed~~found by ~~Argentina’s~~the ~~high~~U.S. ~~court~~Bankruptcy Court, granting the ~~Supreme~~Section ~~Court~~304 ofpetition ~~Justice~~and ofissuing a permanent injunction. The permanent injunction provides that the ~~Nation,~~APE bybe ~~order~~recognized ~~issued~~and ~~April~~enforced 5,in ~~2005~~the United States to the same extent that the APE is recognized and enforced in Argentina.

~~Meanwhile,~~In ~~counsel~~addition ~~for~~to ~~Multicanal,~~offering onthe ~~April~~new 5,securities ~~2005,~~options ~~applied~~ to ~~the~~U.S. ~~SEC~~retail ~~Division~~holders ofthat ~~Corporate~~had ~~Finance~~originally ~~Staff~~only ~~for~~been aoffered ~~No-Action~~cash ~~Letter~~(which ~~that~~the ~~would~~U.S. ~~permit~~Bankruptcy itCourt tofound ~~offer securities~~ to ~~newly~~have ~~electing~~less ~~QIBs~~value), ~~and~~we ~~retail~~considered ~~noteholders~~the onalternative aof ~~non-discriminatory~~increasing ~~basis.~~consideration ~~Counsel~~under ~~proposed~~the ~~that~~cash anoption ~~exemption~~to ~~against~~eliminate ~~registration~~the ~~was~~discrimination ~~available~~found ~~under~~by ~~section~~the ~~3(a)(9)~~U.S. ofBankruptcy ~~the~~Court. We ~~Securities~~did ~~Act,~~not 15adopt the U.S.C. ~~§ 77c(a)(9).~~Bankruptcy ~~However,~~Court’s suggestion that we consider increasing the ~~Staff~~cash ofoption under the ~~SEC~~APE ~~declined~~in order to ~~issue~~make ~~the~~its ~~requested~~value ~~No-Action~~equivalent ~~Letter,~~to ~~apparently~~the securities options, because itwe ~~believed~~believe that ~~there~~such ~~were~~a ~~substantial~~modification ~~issues~~could ofmaterially ~~fact~~alter ~~concerning~~the ~~its~~APE ~~applicability.~~as it was confirmed by the Buenos Aires

The parties then submitted supplementary briefs, and I again heard extensive argument on May 31, 2005, on whether to extend comity to the decisions of the Argentine courts, on whether the proposed securities deliverable on exercise of the option qualified for an exemption to section 5 of the Securities Act, and on the consequences generally to the section 304 petition of Multicanal’s Board of Directors. I hold, for the reasons stated

onCourt. We ~~the~~have ~~record,~~instead ~~that~~explored the ~~decisions~~alternatives ofthat ~~the~~in ~~Argentine~~our ~~courts~~view ~~should~~best bereconcile ~~accepted by this court on grounds of comity, see Ecoban Fin. Ltd. v. Grupo Acerero Del Norte, S.A. de C.V., 108 F. Supp. 2d 349 (S.D.N.Y. 2000), aff’d, 242 F.3d 364 (2d Cir. 2001), and thus that~~ the ~~APE,~~requirements ~~as amended, does not discriminate among creditors or produce substantial prejudice to any class~~ of ~~them,~~Argentine ~~does~~law ~~not require a new vote by creditors,~~ and ~~binds creditors~~U. However, notwithstanding this holding, section 304 cannot be satisfied unless: (a) Multicanal satisfies the registration requirement of section 5 of the Securities Act, or (b) proves the availability of an exemption from registrationS. Isecurities hold, as discussed below, that section 3(a)(9) of the Securities Act, the section principally relied on by Multicanal, is not available to Multicanal as an exemption, but that section 3(a)(10) possibly might be availablelaws. ~~I was prepared to remand this case to the Bankruptcy Court to consider the availability of a section 3(a)(10) exemption when a further development occurred.~~

OnThe ~~September~~District 6,Court ~~2005,~~Appeal immediately before this opinion was completed, Multicanal filed a Second Supplemental Status Report, reporting, among other matters, that it had filed a Form F-4 registration statement with the SEC which, Multicanal asserted, should moot further litigation. Huff responded by pointing out that the registration requested by Multicanal was not of all options extended to creditors (and shares deliverable upon exercise of this option), but only of those offered to cure the earlier discriminations – that is, only of those offered to the U.S. retail holders, and to creditors that had voted against the APE or that had abstained from the vote. Huff contended that the registration was discriminatory against the class that previously had voted in favor of the APE, thus suggesting that securities offered via an exemption are less valuable than securities offered by a section 5 registration. Huff called for a new vote of all creditors respecting the APE.

The U.S. Bankruptcy Court’s decision was appealed by Huff to the United States District Court for the Southern District of New York (the “U.S. District Court”) in January 2005. On April 5, 2005, the U.S. District Court entered an order upholding the U.S. Bankruptcy Court’s dismissal of the involuntary petition filed against us and the denial of Huff’s claim regarding its alleged rights under the Trust Indenture Act of 1939, but reserved judgment on whether the means chosen by us to implement the remedy ordered by the U.S. Bankruptcy Court would give rise to a violation of the registration requirements set forth in the Securities Act, as alleged by Huff, and whether further proceedings were necessary to determine that the remedy we proposed did not in turn require further proceedings in Argentina. We and Huff filed additional submissions with the U.S. District Court, and the U.S. District Court held a hearing on May 31, 2005.

Also in May 2005, Huff filed notices of appeal to the United States Court of Appeals for the Second Circuit (the “Second Circuit”) of the U.S. District Court’s April 5, 2005 order. We have moved to dismiss the appeals on the grounds that the Second Circuit has no appellate jurisdiction over the U.S. District Court’s April 5, 2005 order, and Huff has opposed that motion. We and Huff have stipulated that this motion to dismiss the Second Circuit appeals and the briefing and hearing on the appeals should be adjourned until after the U.S. District Court issued its further order. The stipulation was approved by the Second Circuit on August 18, 2005.

On September 28, 2005, the U.S. District Court affirmed (with the limitation noted below) prior rulings of the U.S. Bankruptcy Court granting recognition to our APE in the United States to the extent our APE has been confirmed in Argentina and dismissing the involuntary Chapter 11 petition brought by Huff against us. The U.S. District Court, however, rejected our argument that the offering of the securities contemplated in our proposed cures could be made in reliance upon Section 3(a)(9) of the Securities Act, and remanded the case to the U.S. Bankruptcy Court for further proceedings as to the legality of the measures proposed by us to implement the cures required by the Buenos Aires Court in its decision confirming the APE and by the U.S. Bankruptcy Court under Section 5 of the Securities Act and the sufficiency of such measures under Section 304 of the U.S. Bankruptcy Code. Specifically, the U.S. District Court identified the following three issues for the U.S. Bankruptcy Court to decide: (a) does Section 3(a)(10) of the Securities Act provide an exemption from registration that we can rely on to complete the proposed cures, (b) assuming our registration statement on Form F-4 (first filed with the SEC on September 6, 2005, as subsequently amended) providing for the implementation of the cures proposed on a SEC-registered basis is declared effective by the SEC, do the proposed registered election offers cure the discrimination found by the U.S. Bankruptcy Court without creating any improper discriminatory treatment within the context of the Section 304 proceedings, and (c) should Huff or its counsel be precluded from asserting the interests of parties other than Huff in the remand issues.

~~Accordingly,~~Huff Ifiled ~~remand~~notices ~~this~~of ~~case~~appeal toof the ~~Bankruptcy~~U.S. District Court’s toSeptember ~~consider~~28, ~~the~~2005 ~~sufficiency~~rulings on October 27, ~~for~~2005, ~~the~~and ~~purposes~~we filed notices of ~~section~~cross ~~304~~appeal of the ~~Bankruptcy~~U.S. ~~Code,~~District ~~of Multicanal~~Court’s ~~proposed~~September ~~registration~~28, ~~assuming~~2005 ~~that~~ruling iton ~~becomes~~November ~~effective~~9, ~~or,~~2005. We ~~alternatively,~~and toHuff ~~consider~~have ~~whether~~submitted ~~Multicanal~~a ~~can~~further ~~prove~~stipulation ~~the~~to ~~availability~~stay ofthese aSecond ~~section~~Circuit ~~3(a)(10) exemption~~appeals.

~~IV.~~ The ~~Registration~~Remand ~~and~~to ~~Exemption Provisions of~~ the ~~Securities~~U.S. ~~Act~~Bankruptcy Court

AWe have argued to the U.S. ~~The~~Bankruptcy ~~Registration~~Court ~~Requirements~~that neither the proposed registered election offers nor the making of such election offers in reliance upon the exemption under Section 53(a)(10) of the Securities Act gives rise to a violation of the registration requirements of the Securities Act. We have also argued that the proposed SEC-registered election offers do not create improper discrimination within the context of the Section 304 proceedings. Finally, we have requested that Huff and its counsel be precluded from asserting the interests of parties other than Huff on the grounds that doing so creates impermissible conflict.

Huff claims that we should not be entitled to Section 304 relief, arguing that (1) our proposed registered election offers and (2) an election offer made in reliance on the exemption under Section 3(a)(10) of the Securities Act to effect the cures would be unlawful under Section 5 of the Securities Act. Huff also claims that our proposed registered election offers unlawfully discriminate against holders of ~~1933,~~our 15old Unotes that voted in favor of our APE in December 2003.~~S.C.~~ Huff ~~§ 77e~~alleges that for purposes of Section 5 of the Securities Act, the private exchange offer at the time of the APE solicitation in 2003 should not be treated as having been completed in 2003, because (ai), ~~makes~~our itand ~~unlawful~~holders toof ~~sell~~old anotes’ ~~security~~agreement to participate in ~~interstate~~the ~~commerce~~APE ~~unless~~was not “irrevocable;” (ii) participating investors retained the ~~security~~right isto ~~registered~~terminate ~~with~~the APE; and (iii) we have the right to change the APE. Huff also claims, based on its interpretation of SEC guidance, that we fail to meet the requirements of Section 3(a)(10) of the Securities ~~and~~Act ~~Exchange~~to ~~Commission:~~implement the election offers on an exempt basis.

(We have asserted that a private offering is “complete” under the Securities Act when investors are bound to purchase the offered securities subject only to conditions not within the control of the investors. In our case, our private exchange offer under Section 4(2) ~~Sale~~was completed in December 2003, when holders of old notes tendered or ~~delivery~~agreed ~~after~~irrevocably ~~sale~~to deliver their existing debt to us in order to participate in the APE, we accepted the existing debt that holders agreed to exchange, and the holders were bound subject only to conditions subsequent outside their control. At that time, holders irrevocably committed to the terms of ~~unregistered~~the ~~securities~~APE and an exchange of their existing debt subject only to conditions outside their control, principally judicial approval of the APE. The ~~Unless~~existence aof ~~registration~~termination ~~statement~~rights is innot ~~effect~~inconsistent aswith toa finding that a ~~security~~private placement offer has been completed, itso ~~shall~~long beas ~~unlawful~~those ~~for~~termination rights, as in our 2003 private exchange offer, depend on circumstances outside the control of any ~~person~~investor. Furthermore, ~~directly~~we ordo ~~indirectly--~~not have the right to change the APE unilaterally.

~~(1)~~We tohave ~~make~~also ~~use~~argued ofthat ~~any~~the ~~means~~extensive orproceedings ~~instruments~~before ofthe ~~transportation~~U.S. orBankruptcy ~~communication~~Court inand ~~interstate commerce or of~~ the ~~mails~~Buenos toAires ~~sell~~Court ~~such~~satisfy ~~security through~~ the ~~use~~requirements ~~or medium~~ of ~~any~~Section ~~prospectus~~3(a)(10) orsuch ~~otherwise;~~that orwe

(2) to carry or cause to be carried through the mails or in interstate commerce, by any means or instruments of transportation, any such security for the purpose of sale or for delivery after sale.

Section 12 of the Securities Act, 15 U.S.C. § 77l, provides civil liabilities for offers and sales of securities in violation of section 5, or by issuing false or misleading statements.

(a) In general. Any person who--

(1) offers or sells a security in violation of section 77e of this title [Section 5], or

(2) offers or sells a security (whether or not exempted by the provisions of section 77c of this title [Section 3], other than paragraphs (2) and (14) of subsection (a) of said section), by the use of any means or instruments of transportation or communication in interstate commerce or of the mails, by means of a prospectus ororal communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were

~~made,~~can ~~not~~rely ~~misleading~~on (the ~~purchaser~~exemption ~~not~~to ~~knowing~~make ofthe ~~such~~election ~~untruth~~offers ~~or omission),~~ and ~~who~~deliver ~~shall not sustain~~ the ~~burden~~new ofsecurities ~~proof~~pursuant ~~that~~to ~~he did not know, and in~~ the ~~exercise of reasonable care could not have known, of such untruth or omission,~~APE.

~~shall~~The beU.S. ~~liable~~Bankruptcy Court suggested at a hearing held on October 21, ~~subject~~2005 that we endeavor to ~~subsection~~eliminate ~~(b)~~certain of ~~this~~the ~~section~~alleged issues raised by Huff. We have proposed, upon consummation of the APE, to use our reasonable efforts to file with the ~~person~~SEC ~~purchasing~~and ~~such~~have ~~security~~declared ~~from~~effective ~~him,~~a ~~who~~resale ~~may~~shelf ~~sue~~registration ~~either~~statement atfor ~~law~~the orbenefit inof ~~equity~~holders that committed to the APE in ~~any~~December ~~court~~2003. Until the second anniversary of ~~competent~~the ~~jurisdiction,~~APE closing date (subject to ~~recover~~certain blackouts) the ~~consideration~~proposed ~~paid~~resale ~~for~~registration ~~such~~rights ~~security~~agreement ~~with~~would ~~interest~~give ~~thereon,~~holders ~~less~~that committed to the ~~amount~~APE ofin ~~any~~December ~~income~~2003 ~~received~~and ~~thereon~~elect to become a party to it, ~~upon~~the right to have the ~~tender~~securities ofissued to them registered under an effective resale shelf registration statement in connection with the resale by such ~~security,~~holders or(subject ~~for~~to ~~damages~~the ifterms heand noconditions ~~longer~~to ~~owns~~be set forth in the ~~security~~resale shelf registration agreement).

~~Registration~~On ofMarch 29, 2006, the U.S. Bankruptcy Court issued a ~~security~~decision ~~requires~~indicating anthat ~~issuing~~the ~~company~~cures intended to ~~make~~eliminate ~~full~~the ~~and~~discrimination ~~truthful~~found ~~public~~by ~~disclosure~~such ofcourt ~~its~~to ~~business~~have ~~and~~affected ~~earnings~~U.S. retail holders that were only offered the cash option in 2003 could not be implemented in the manner proposed by us, ~~and~~leaving open the possibility of ~~its~~implementing ~~officers,~~such ~~directors~~cure ~~and~~differently. ~~principal~~On ~~shareholders~~April 11, 152006, we informed the U.S.C Bankruptcy Court that we had learned that shortly prior to the U.S. ~~§§ 77f,~~Bankruptcy ~~77g~~Court’s March 29 decision, substantially all of the debt held by Huff and ~~provides~~certain other parties opposing recognition of the APE in the United States had been sold to a third party that ~~not~~supports ~~only~~recognition of the ~~issuer,~~APE ~~but~~in the United States and the expeditious consummation of the transactions contemplated in the APE. We also ~~its~~noted ~~underwriters~~in our submission to the U.S. Bankruptcy Court that the purchaser of the debt previously held by Huff had undertaken to cure the discrimination of U.S. retail holders in a manner compatible with U.S. securities law. On that basis, ~~accountants~~we informed the U.S. Bankruptcy Court of our intention to proceed with the implementation of the cure ordered by the Buenos Aires Court. On May 3, ~~lawyers~~2006, Huff and ~~controlling~~the ~~individuals~~other ~~can~~holders beof ~~potentially~~our ~~liable~~debt ifopposing ~~disclosures~~recognition of the APE in athe ~~registration~~United ~~statement~~States, ~~are~~on ~~false~~the one hand (the “Opponents“), and ~~fraudulent~~we, ~~id.~~on ~~§§ 77k~~the other hand, ~~77l~~submitted a Stipulation and Order to the U.S. AsBankruptcy Court pursuant to which the ~~Supreme~~Opponents withdrew from the U.S. Bankruptcy Court ~~has~~any ~~observed,~~and ~~“[t]he~~all ~~design~~objections or claims of ~~the~~any ~~[Securities~~kind ~~Act]~~whatsoever isthat they had, have or may have in the future relating to ~~protect~~the ~~investors~~application by ~~promoting~~our ~~full~~Board ~~disclosure~~of Directors seeking recognition of ~~information~~the ~~thought~~APE ~~necessary~~in the United States, agreed promptly to ~~informed~~take ~~investment~~steps ~~decisions.”~~within ~~SEC~~their v.control ~~Ralston~~to ~~Purina~~withdraw ~~Co.~~all objections to such recognition as well to the APE from any United States or foreign court or administrative body, ~~346~~and consented to the entry of final relief for the APE by the U.S. ~~119,~~Bankruptcy ~~124~~Court ~~(1953);~~as ~~see~~requested ~~also~~by ~~Pinter~~our vBoard of Directors. It ~~Dahl,~~is ~~486~~the intention of our Board of Directors to submit to the U.S. ~~622,~~Bankruptcy ~~627~~Court ~~n.4~~an ~~(1988)~~order (“of final relief under Section 5,304 15of the U.S.C Bankruptcy Code for the APE and consummate the transactions contemplated therein expeditiously. Without §prejudice ~~77e~~to the implementation and consummation of the APE with respect to any of our debt held by the Opponents, we withdrew from the U.S.~~.states~~ Bankruptcy Court, inand ~~pertinent~~agreed ~~part,~~to ~~that~~take ifsteps awithin ~~security~~our iscontrol ~~unregistered~~to withdraw from other United States and foreign courts and administrative bodies, itour isclaims ~~unlawful~~against ~~for~~the aOpponents ~~person~~resulting tofrom ~~sell~~the orrequest ~~deliver~~by our Board of Directors for recognition of the ~~security~~APE in ~~interstate~~the ~~commerce~~United States or the APE proceedings.~~”).~~

The option offered by Multicanal’s APE to the United States holders of its debt, by offering them an exchange of securities (new debt and, with respect to one of the three choices, stock) for their existing debt, constitutes an offer of securities that must be registered under section 5 unless an exemption provided by the Securities Act applies. The cure offered by Multicanal to comply with the orders of this court and the Bankruptcy Court, if not lawful, would be illusory and the approval of the Bankruptcy Court pursuant to section 304 of the Bankruptcy Code could not be given. The issue, therefore, is whether,

~~because of either an available exemption or Multicanal’s belated offer to register, Multicanal’s exchange offer can go forward without offending section 304.~~Overview

BSet forth below is a discussion and analysis of our results of operations for the three-month periods ended March 31, 2006 and 2005. The financial information included in the discussion below as at March 31, 2006 and 2005 and for the three-month periods then ended is derived from our unaudited interim consolidated financial statements. The ~~Exemption~~information ~~Provided~~in bythis ~~Section~~section 3should be read together with the unaudited interim consolidated financial statements and the related notes included elsewhere in this report. Our unaudited interim consolidated financial statements were prepared in accordance with Argentine GAAP, which differ from U.S. generally accepted accounting principles (a“U.S. GAAP”)~~(9)~~. In compliance with SEC rules, no numerical measure calculated other than in accordance with GAAP or U.S. GAAP has been included in this Management's Discussion and Analysis.

~~Multicanal~~Except ~~relied,~~as otherwise set forth in ~~particular~~this report, ondollar-denominated assets and liabilities have been converted into pesos at a ~~section~~rate of Ps.3~~(a)(9)~~.04 ~~exemption~~per ~~from~~U.S.$1.00 in the ~~registration~~case ~~requirements~~ of ~~section~~assets 5and Ps.3.08 ~~Section~~per ~~3(a)(9)~~U.S.$1.00 ~~provides:~~in the case of liabilities, the buy/sell exchange rates reported by Banco de la Nación Argentina on March 31, 2006.

~~(a)~~Cable Exempted securities. Except as hereinafter expressly provided, the provisions of this subchapter shall not apply to any of the following classes of securities: . . . (9) Except with respect to a security exchanged in a case under Title 11, any security exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange.Subscribers

~~15 U.S.C. § 77c(a)(9).~~ The ~~securities~~following ~~Multicanal~~table ~~proposes~~sets toforth ~~offer~~selected toinformation ~~its~~relating ~~debt holders are offered “exclusively”~~ to ~~those~~us ~~debt~~within ~~holders,~~each ~~satisfying one condition~~ of the ~~exemption.~~areas ~~Since the securities are proposed to be exchanged~~ in awhich ~~case~~we ~~brought~~operated ~~under~~as ~~the law~~ of ~~Argentina,~~March ~~and the approval Multicanal’s board seeks under section 304 of the Bankruptcy Code is for that case and not for “a case under Title 11~~31,” a2006 ~~second~~based ~~condition~~on ofour ~~section~~internally ~~3(a)(9)~~generated ~~applies.~~market ~~The issue is thus whether a “commission or other remuneration [was] paid or given directly or indirectly for soliciting such exchange.”~~information:

J.P. Morgan was retained in June 2002 by Multicanal to help develop a restructuring proposal for approval by creditors. J.P. Morgan solicited creditors for favorable votes, served as exchange agent for the December 10, 2003 vote on the APE, served as proxy for creditors voting in favor of the APE, and received compensation for its services. Indeed, J.P. Morgan was to be paid an incentive measured by its success in achieving the required number of favorable votes.

	Cities of Buenos Aires, La Plata and Greater Buenos Aires	Atlantic Coast and Central Argentina	Litoral	Total Argentine Regions	Paraguay	Uruguay	Total International	Total Multicanal
Multicanal Homes Passed	2,981,816	1,054,262	430,683	4,466,761	327,300	520,000	847,300	5,314,061
Multicanal Subscribers	542,160	341,237	152,691	1,036,088	50,054	84,086	134,140	1,170,228
Multicanal Penetration	18.2%	32.4%	35.5%	23.2%	15.3%	16.2%	15.8%	22.0%

~~Multicanal~~Our ~~argues~~annualized ~~that~~churn Jrate for the three-month period ended March 31, 2006 was 14.P5%, as compared to 14.9% ~~Morgan’s~~for ~~commission~~the ~~relates~~three-month period ended March 31, 2005. The decrease in the churn rate is primarily due to ~~its~~the ~~solicitation~~continued recovery of ~~votes~~the ~~prior~~Argentine toeconomy and the ~~December~~continued 10effect of our introduction in 2002 of a sign-up fee, ~~2003~~resulting ~~meeting~~in ata ~~which~~lower level of disconnections. Our churn rate is determined by calculating the ~~noteholders~~total ~~approved~~number of disconnected cable television customers during each of the ~~APE~~periods as a percentage of the initial number of cable television customers for each such period. During the three-month period ended March 31, ~~and~~2006 we continued to increase subscribers, with a net addition of approximately 25,100 subscribers as compared to a net addition of approximately 16,900 during the three-month period ended March 31, 2005.

~~that~~Internet ~~such~~Subscribers ~~compensation~~(Cable ~~was~~Modem) ~~“separate and distinct” from the exchange of securities now to be offered to noteholders upon exercising their options. The argument is without merit.~~

~~Multicanal~~As contends, first, that since a long period has elapsed, much more than six months, between the compensation accrued by J.P.Morgan in connection with the creditors’ supermajority vote approving the APE, and the exchange of ~~shares~~March ~~that will occur when noteholders exercise the option extended to them pursuant to the cure~~31, ~~Multicanal should benefit from a six-month safe harbor typically given with regard to exempted securities offerings. In other types of private offerings~~2006, ~~for~~we example, those offered in amounts lower than prescribed thresholds, to purchasers limited in number and having requisite degrees of sophistication and financial independence, a six-month period of inactivity generally will be considered a “safe harbor,” negating arguments that the private offering should be integrated with earlier offerings and thereby exceed permissible thresholds. See Regulation D Rule 502(a), 17 C.F.R. § 230.502(a) (2005); Regulation D Rule 506, § 230.506 (2005). Another example of a “safe harbor” attaching to a period of inactivity is intended to provide confidence to issuers that abandoned private offerings will not be integrated with subsequent registered offerings. See Securities Act of 1933 Rule 155, 17 C.F.R. § 230.155 (2005); Final Rule: Integration of Abandoned Offerings, Securities Act Release No. 33high-~~7943,~~speed 66Internet ~~Fed.~~access ~~Reg. 8887, 8891 n.48 (Feb. 5, 2001) (“As an interpretive matter, the staff traditionally looks~~ to ~~the~~approximately ~~six-month non-integration safe harbor of Regulation D even if the private offering does not rely on Regulation D for an exemption.”). Generally~~91,200 when a safe harbor is available, the parties are permitted to rely on its protection, without having to undertake point-by-point proofs showing that a particular offering should not be integrated with earlier, or later, offeringssubscribers. ~~See Louis Loss & Joel Seligman, Securities Regulation, § 3-C-1(iii) (2004) [hereinafter Loss & Seligman] (“Commission’s general integration principles become residual guidelines limited to~~

Three-month period ended March 31, 2006 and 2005

Net Revenues. Net revenues were Ps.175.3 million for the three-month period ended March 31, 2006. This figure represents an increase of 18.2% compared to net revenues of Ps.148.3 million for the three-month period ended March 31, 2005. The increase in net revenues in the three-month period ended March 31, 2006 as compared to the three-month period ended March 31, 2005 is attributable to the higher number of subscribers in 2006 compared to 2005 and an increase in the basic fees for our services (together accounting for an increase in revenues from subscriptions of Ps.24.4 million), as well as an increase in revenues from the provision of high-speed Internet access (cable modem) of Ps.3.7 million.

Our revenues are presented net of charges for the allowance for doubtful accounts.

Direct Operating Expenses and Cost of Goods Sold. Our direct operating expenses and cost of goods sold were Ps.88.3 million for the three-month period ended March 31, 2006, representing an increase of 20.8% over our direct operating expenses and cost of goods sold of Ps.73.1 million for the three-month period ended March 31, 2005. This increase is mainly attributable to higher programming expenses of Ps.5.0 million, sundry of Ps.2.6 million (driven by higher costs related to repair and maintenance activities) and payroll and social security expenses of Ps.4.9 million. These additional expenses and costs were partially offset by a decrease in fees and compensation for services of Ps.0.7 million, commissions of Ps.0.4 million, and rentals of Ps.0.6 million.

Direct operating expenses and cost of goods sold consist principally of:

signal delivery fees paid to programming suppliers;

wages, benefits and fees paid to employees and subcontracted service firms for the repair and maintenance of cable networks and customer disconnections owned by us;

the cost of modems that are delivered to Internet customers;

the costs of related materials consumed in repair and maintenance activities (primarily in foreign currency, since these inputs are imported); and

to a lesser extent, costs associated with pole rental and the printing cost for our monthly publication.

~~dealing~~Selling, ~~with~~General, ~~instances~~Administrative ~~outside~~and ~~the~~Marketing ~~safe harbors~~Expenses.~~”).~~ Our ~~Multicanal~~selling, ~~argues~~general, ~~that~~administrative ~~“there~~and ismarketing ~~simply~~expenses nowere ~~rational~~Ps.36.1 ~~basis~~million for ~~[not]~~the ~~treating~~three-month ~~the~~period ~~passage~~ended March 31, 2006, representing an increase of ~~more~~30.0% ~~than~~from ~~[twenty-one]~~Ps.27.7 ~~months~~million ~~[since~~for the ~~December~~three-month 10period ended March 31, ~~2003~~2005. This ~~vote]~~increase asis ~~[equally]~~attributable ~~dispositive.”~~principally Trto an increase in payroll and social security expenses of Ps.1.4 million, taxes, rates and contributions of ~~May~~Ps.1.2 31million, ~~2005~~commissions of Ps.1.3 million, atand 6fees and compensation for services of 2.0 million.

IOur ~~am not persuaded by this argument. Although safe harbors are available under certain circumstances~~selling, ~~and may even be relied upon as a~~ general ~~principle by the SEC staff~~, ~~there~~administrative isand nomarketing ~~safe~~expenses ~~harbor~~consist ~~provided for, or directly associated with, section 3(a)(9). There are simply too many tangled facts at play for me to defer to the mere lapse~~ of: more than six months since the December 2003 vote of creditors, or otherwise to persuade me that the SEC would apply a six-month safe harbor to the facts of this case. Indeed, the SEC staff was unwilling to give Multicanal a No-Action Letter because of material factual issues at play.

~~Since~~professional no six-month safe harbor is available to Multicanal, I turn to the traditional five-factor test for determining if multiple offerings are to be integrated. See Release No. 33-4434, 27 Fed. Reg. 11,896 (Dec. 6, 1961)fees; ~~Release No. 33-4552, 27 Fed. Reg. 11,316 (Nov. 6, 1962); see also Rule 502(a) of Regulation D, 17 C.F.R. § 230.502(a) (2005). The specified factors are:~~

~~(i)~~wages ~~whether~~and ~~the~~benefits ~~offerings are part~~ of anon-technical ~~single plan of financing~~employees; (ii) whether the offerings involve issuance of the same class of security; (iii) whether the offerings are made at or about the same time; (iv) whether the same type of consideration is to be received.

Assales to the first factor, whether the offerings are part of a single plan of financing, Multicanal’s exchange offer under its proposed cure is directly related to the initial offerings made directly following the adoption of the APEcommissions; ~~it is in fact intended to remedy those same offerings.~~

advertising;

insurance;

rental of office space;

other office related expenses; and

various direct taxes.

Depreciation and Amortization. Depreciation and amortization expenses totaled Ps.21.5 million for the three-month period ended March 31, 2006, representing a decrease of 17.4% compared to depreciation and amortization expenses of Ps.26.0 million for the three-month period ended March 31, 2005. This decrease in our depreciation and amortization expenses was mainly due to some of our property and equipment becoming fully depreciated and the extension from ten to fifteen years in the useful life of our network in certain regions based on a technical audit of such network made during the year ended December 31, 2005.

Financial (Income) Expenses and Holding Losses Net. Our net financial expenses and holding losses were Ps.95.5 million for the three-month period ended March 31, 2006, compared with financial losses, net, of Ps.24.5 million in the three-month period ended March 31, 2005. The increase in net financial expenses and holding losses for the three-month period ended March 31, 2006 compared to 2005 is attributable principally to the impact of the depreciation of the peso in relation to the U.S. dollar on the nominal amount (in Pesos) of our U.S. dollar-denominated assets and debt during the three-month period ended March 31, 2006 (Ps.30.7 million), and the corresponding increase in interest expenses on our bank and financial debt of Ps.5.9 million.

Other Non-Operating Income (Expenses), Net. Other non-operating income, net, totaled Ps.1.2 million in the three-month period ended March 31, 2006, compared to other

~~The~~non-operating ~~next~~expenses, ~~factor~~net, ~~whether the offerings involve issuance~~ of ~~the~~Ps.1.4 ~~same~~million ~~class of security, also weighs~~ in ~~favor of integration, since~~ the ~~parties agree that the offerings pre~~three-month ~~and~~period ~~post-cure~~ended ~~involve~~March ~~the~~31, ~~same class of security~~2005. ~~The~~Other ~~third~~non-operating ~~factor~~income net, ~~whether~~in the ~~offerings~~three-month ~~are~~period ~~made~~ended atMarch ~~or about the same time~~31, ~~also~~2006 ~~favors~~was ~~integration,~~mainly ~~for,~~attributable asto ~~just~~a ~~discussed,~~gain ~~the offering post-cure necessarily followed, and was dependent~~ on, the ~~precure~~recovery ~~offering~~of ~~approved~~sundry byreceivables ~~creditors~~of ~~on December 10, 2003~~Ps. ~~See Loss & Seligman, supra, § 3-C-~~1~~(ii) (citing SEC v~~.9 ~~Murphy~~million, ~~626 F.2d 633 (9th Cir. 1980)) (“The mere fact, however,~~ that ~~two~~was orpartially ~~more~~offset ~~offerings are separated~~ by ~~six~~provisions ~~months~~for orlawsuits ~~more~~and ~~will~~contingencies ~~alone~~of ~~not necessarily lead to nonintegration~~Ps.”)0.1 Asmillion ~~to the fourth factor, whether the same type of consideration is to be received, clearly that is so,~~ and ~~Multicanal~~sundry ~~admits it weighs in favor~~ of ~~integration~~0. ~~See Appellees’ Supp. Br., May, 20, 2005, at~~ 6 nmillion.7. Finally, with respect to whether the offerings are made for the same general purpose, that also is so, for the purpose of both the offer before the December 10, 2003 vote and the subsequent proposed cure was to implement the APE.

~~Courts~~Income Taxes and/or ~~legal~~Tax ~~scholars have tried to provide guidance~~ on ~~how~~Minimum ~~these~~Notional ~~factors~~Income. We ~~should~~recorded bea ~~balanced~~gain ~~and~~in ~~applied.~~income ~~See,~~taxes ~~e.g.,~~for ~~SEC~~the v.three-month ~~Cavanagh,~~period 1ended F.March ~~Supp. 2d 337~~31, 172006 ~~364~~of (SPs.D19.~~N.Y.~~8 ~~1998),~~million ~~aff’d,~~compared ~~155~~to ~~F.3d~~a ~~129~~loss ~~(2d~~of ~~Cir~~Ps.4.7 ~~1998)~~million ~~(considering~~for ~~how (1) offerings were considered by~~ the ~~individuals~~three-month ~~who~~period ~~structured~~ended ~~them;~~March ~~(2) or by the investing public; (3) or if one would not have happened without the other); Loss & Seligman~~31, ~~supra, § 3-C1(iii); Cheryl L~~2005. ~~Wade,~~ The ~~Integration~~gain ofin ~~Securities~~income ~~Offerings:~~taxes Afor ~~Proposed Formula that Fosters~~ the ~~Policies~~three-month ofperiod ~~Securities~~ended ~~Regulation,~~March ~~25 Loy. U. Chi. L.J. 199~~31, ~~220~~2006 ~~(1994)~~as ~~(“The~~compared ~~timing~~to of the ~~offerings,~~loss ~~however,~~in isincome ~~perhaps~~taxes for the ~~least~~same ~~significant~~period of ~~all~~2005 ~~five~~is ~~factors.”).~~mainly ~~However~~due ~~difficult~~to ~~and~~a ~~fact-intensive~~greater ~~such~~loss anbefore ~~inquiry~~income ~~might be in the usual case, the resolution in this case is clear~~taxes.

Net Gain/Loss. We recorded a net loss of Ps.45.4 million for the three-month period ended March 31, 2006, as compared to a net loss of Ps.6.3 million for the three-month period ended March 31, 2005, as a result of the factors described above.

Liquidity and Capital Resources

We operate in a capital-intensive industry which requires significant investments. In the past, our growth strategy has involved the acquisition of other cable television companies and the active improvement and expansion of our existing and acquired networks and equipment. We have historically relied on four main sources of funds:

equity contributions from our shareholders;

borrowings under bank facilities or debt security issuances;

cash flow from operations; and

financing by sellers of cable systems we acquire.

The conditions affecting the Argentine economy since 1998 and the uncertainties as to future developments prevented us from raising the funds required to discharge our debt obligations as they became due in 2002 and after. As a result, we have defaulted on all payments on our Existing Notes that have come due, and all principal payments and a substantial portion of our interest payments on our Bank Debt since February 2002. Since February 2002, we have devoted our cash flow from operations primarily to ensure the continuation of our operations.

As of March 31, 2006, our shareholders’ equity is negative. We expect this condition to be reversed once we consummate the transactions contemplated in our APE, in which case Section 94 of the Argentine Corporations Law will not apply to us.

During the year ended December 31, 2005, we applied a portion of our cash flows from operations to upgrade part of our network to facilitate the provision of broadband services. During the three-month period ended March 31, 2006, we spent Ps. 18.9 million

~~The~~on ~~offering~~property ~~made in connection with the initial vote~~ and ~~the~~equipment ~~cure~~compared ~~offering are sufficiently integrated so as~~ to ~~preclude reliance on section 3(a)(9), and I so find~~Ps.26.1 ~~And,~~million ~~clearly,~~in the ~~Argentine~~three-month ~~court~~period soended ~~treated~~March ~~the two offerings~~31, ~~for the holding of the Argentine Commercial Court’s May 16,~~ 2005 order was that the cure granting equal status to the United States retail noteholders would not so materially amend the APE, as previously confirmed on April 14, 2004 by Judge Ottolenghi, as to require another vote of creditors. ~~As stated earlier, I give comity to that holding. See Ecoban, 108 F. Supp. 2d at 351-54.~~

Accordingly, because the exchange of securities under the proposed cure is integrated with an exchange where a “commission or other remuneration [was] paid or given directly or indirectly for soliciting such exchange,” section 3(a)(9) does not provide an exemption against registration of the securities to be offered under the cure.

C. Section 3(a)(10) Exemption.

Multicanal also relies on section 3(a)(10),2 which provides an exemption against registration following “a hearing upon the fairness” at which “all persons” concerned “have the right to appear.” Section 3(a)(10) provides:

(a) Exempted securities. Except as hereinafter expressly provided, the provisions of this subchapter shall not apply to any of the following classes of securities: . . . (10) Except with respect to a security exchanged in a case under Title 11, any security which is issued in exchange for one or more bona fide outstanding securities, claims or property interests, or partly in such exchange and partly for cash, where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court, or by any official or agency of the United States, or by any State or Territorial banking or insurance commission or other governmental authority expressly authorized by law to grant such approval.

_________________________

2 It appears from the correspondence provided to the court that Multicanal did not request a No-Action Letter from the SEC on the grounds of section 3(a)(10).

15Condensed ~~U.S.C. § 77c(a)(10). Few courts have interpreted and applied section 3(a)(10), but several No-Action Letters~~ from the ~~SEC~~original ~~Division~~prepared ofin ~~Corporation~~Spanish ~~Finance~~for ~~Staff~~publication ~~suggest~~in that the requisite hearing may be held by a foreign court.3 See, e.g., AngloGold Ltd., SEC No-Action Letter, 2003-2004 Fed. Sec. L. Rep. (CCH) ¶ 78,641 (Jan. 15, 2004) (High Court of Ghana; equity); Canadian Pac. Ltd., SEC No-Action Letter, 2001 Fed. Sec. L. Rep. (CCH) ¶ 78,146 (Aug. 15, 2001) (Alberta Queen’s Bench; equity); Industrial Commercial Dev. Ltd., SEC NoAction Letter, 2000 Fed. Sec. L. Rep. (CCH) ¶ 77,823 (Feb. 24, 2000) (Jamaica; debt); see also Loss & Seligman, supra, § 3-C-3(a) n.135 (“A foreign court may conduct the § 3(a)(10) fairness hearing.”).Argentina

~~Multicanal~~INDEX ~~argues~~TO ~~that~~THE ~~the~~UNAUDITED ~~cure~~INTERIM ~~offering~~CONSOLIDATED ~~meets~~FINANCIAL the requirements for a section 3(a)(10) exemption because (i) the securities are to be issued “in exchange for one or more bona fide outstanding securities,” (ii) the Argentine and United States courts have approved “the terms and conditions of such issuance and exchange,” (iii) the issuance comes after an adequate “hearing upon the fairness of such terms and conditions” by both courts, (iv) all persons concerned have had the right to appear, and (v) the Argentine and United States courts who have ruled on the issues have had the requisite authority to do so.STATEMENTS

~~Appellants~~MULTICANAL ~~challenge this analysis~~S. ~~They argue that the scope of review by the Argentine courts was too narrow to permit a court to conduct a hearing upon the fairness of the offerings~~A. ~~They cite Article 75 of the Argentine restructuring law, the statute under which the APE is reviewed, and argue that the court has discretion only to consider (i) whether assets~~

~~_________________________~~CONSOLIDATED FINANCIAL STATEMENTS

3 See Loss & Seligman, supra, § 3-C-3(a). The syntax requires the construction that a state governmental authority must be expressly authorized by law to approve not only the terms and conditions of the exchange but also their fairness. This is not so with respect to a court or a federal official or agency. But the court or the federal official or agency must still hold the requisite hearing on the fairness of the terms and conditions and presumably have jurisdiction to do so.

	Page
Report of independent accountants on unaudited interim consolidated financial statements	F-2
Unaudited interim consolidated balance sheets	F-4
Unaudited interim consolidated statement of operations	F-5
Unaudited interim consolidated statement of changes in shareholders’ equity	F-6
Unaudited interim consolidated statement of cash flows	F-7
Notes to the unaudited interim consolidated financial statements	F-8
Exhibit A	F-34
Exhibit B	F-35

~~Id.~~1

18 REPORT OF INDEPENDENT ACCOUNTANTS ON UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

~~and~~To ~~liabilities are properly stated, (ii) whether~~ the ~~APE~~Board isof ~~approved~~Directors ~~by the necessary majority,~~ and ~~(ii)~~Shareholders ~~whether the APE is abusive or fraudulent. As described by the Bankruptcy Court, the laws governing APE proceedings, as amended in May 2002, allow for the following objections:~~of

~~Affected~~Multicanal creditors may object to confirmation of an APE before an Argentine court based on the inaccuracy of a company’s statements of assets and liabilities, the failure to obtain the requisite vote needed for approval, or on the ground that an APE is abusive or fraudulentS. ~~Such creditors also have appellate rights once the Argentine lower court has ruled on their objection~~A.

~~Opinion and Order of Aug~~1. ~~27,~~We ~~2004,~~have ~~314~~reviewed ~~B.R.~~the ataccompanying ~~493.~~interim Inconsolidated ~~his~~balance ~~April~~sheet ~~2004~~of ~~decision,~~Multicanal ~~Judge~~S.A. ~~Ottolenghi~~and ~~overruled~~its ~~every~~subsidiaries ~~objection~~as ~~made~~of ~~by six creditors~~March, ~~including~~31 ~~Huff~~2006, ~~except~~and ~~that~~the herelated ~~granted~~interim ~~the~~consolidated ~~no-voters~~statements ~~and~~of ~~abstainers~~operations, ~~the~~of ~~same~~cash ~~right~~flows toand ~~elect~~of ~~amount~~changes ~~the~~in ~~three~~shareholders’ ~~options~~equity asfor ~~was~~each ~~available~~of tothe ~~those~~three-month ~~who~~periods ~~had~~ended ~~voted~~March, to31 ~~approve~~2006 ~~the~~and ~~APE~~2005. ~~Argentina’s~~These ~~Supreme~~interim ~~Court,~~consolidated asfinancial ~~mentioned~~statements ~~above,~~are ~~summarily dismissed~~ the ~~objecting~~responsibility ~~petition~~ of the ~~U.S.~~Company’s ~~noteholders on April 5, 2005~~management.

~~The~~2. ~~SEC~~We ~~staff~~conducted ~~has~~our ~~published~~reviews anin ~~interpretive~~accordance ~~bulletin~~ with ~~eight~~auditing ~~conditions~~standards ~~that~~generally ~~must~~accepted bein ~~met~~Argentina. ~~before~~A anreview ~~issuer~~of ~~can~~interim ~~rely~~financial oninformation aconsists ~~section~~principally ~~3(a)(10)~~of ~~exemption.~~applying ~~Division~~analytical ofprocedures ~~Corporation~~to ~~Finance,~~financial ~~SEC,~~data ~~Revised~~and ~~Staff~~making ~~Legal~~inquiries ~~Bulletin~~of Nopersons responsible for financial and accounting matters. 3It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, ~~(Oct~~the objective of which is the expression of an opinion regarding the financial statements taken as a whole. 20Accordingly, ~~1999)~~we do not express such an opinion.

13. ~~The~~Accounting ~~securities~~principles ~~must~~generally beaccepted ~~issued~~in Argentina require companies with a controlling financial interest in ~~exchange~~other companies to present both parent company, where investments in subsidiaries are accounted for ~~securities~~by the equity method, ~~claims~~and consolidated financial statements as primary and supplementary information, orrespectively. ~~property~~Because ~~interests;~~of ~~they~~the ~~can~~special purpose of these condensed unaudited interim consolidated financial statements, parent company financial statements are not beincluded. ~~offered~~This procedure has been adopted for ~~cash~~the convenience of the reader of these condensed unaudited interim consolidated financial statements.

24. AWe ~~court~~are ornot ~~authorized~~in ~~governmental~~a ~~entity~~condition ~~must~~to ~~approve~~foresee if the ~~fairness~~assumptions ofused by Management to prepare their projections will take place in the ~~terms~~future and ~~conditions~~as ofa result, if the ~~exchange~~net asset of deferred taxes will be recovered.

35. The ~~reviewing~~Company ~~court~~has orprepared ~~authorized~~its ~~governmental~~financial ~~entity~~statements ~~must:~~applying ~~find,~~the ~~before~~restatement ~~approving~~criteria established by the ~~transaction~~National Securities Commission, ~~that~~which, ~~the~~as ~~terms~~mentioned ~~and~~in ~~conditions~~Note of2.3., ~~the~~differ ~~exchange~~from ~~are~~the ~~fair~~accounting tostandards ~~those~~in toforce ~~whom~~in ~~securities~~the ~~will~~Autonomous beCity ~~issued;~~of ~~and~~Buenos beAires ~~advised~~referring ~~before~~to the ~~hearing~~non-recognition ~~that~~of the ~~issuer~~effects ~~will~~of ~~rely~~inflation on the ~~Section~~financial ~~3(a)(10)~~statements ~~exemption~~after ~~based~~March on1, 2003 and until September 30, 2003. Had those regulations been applied, the ~~court~~Company's orshareholders' ~~authorized~~equity ~~governmental~~at ~~entity's~~March ~~approval~~31, of2006 ~~the~~and ~~transaction~~at December 31, 2005 would have decreased by Ps. 31 million and Ps. 32 million, respectively.

46. ~~The~~At ~~court~~March or31, ~~authorized~~2006, ~~governmental~~the ~~entity~~Company ~~must~~recorded ~~hold~~negative net equity. Paragraph 5, section 94 of the Commercial Companies Law establishes that a ~~hearing~~company ~~before~~is subject to winding up in such a situation. As indicated in Note 10, this situation will be reversed once the financial debt restructuring that the Company is currently carrying out has been completed.

197. Based on the work done and our examination of the financial statements of the Company and its consolidated financial statements for the years ended December 31, 2005 and 2004, on which we issued our qualified report dated March 9, 2006 due to the circumstances indicated in paragraphs 3, 4 and 5 herein, we report that:

~~approving~~a) ~~the~~The ~~fairness~~unaudited interim consolidated financial statements of ~~the~~Multicanal ~~terms~~S.A. as of March, 31 2006 and ~~conditions~~2005, ofdetailed in paragraph 1, prepared in accordance with accounting principles generally accepted in the ~~transaction~~Autonomous City of Buenos Aires, consider all significant facts and circumstances which are known to us. We have no observations to make other than those indicated in paragraphs 3, 4 and 5.

5.b) AThe ~~governmental~~information ~~entity~~included ~~must~~for becomparative ~~expressly~~purposes ~~authorized~~in bythe ~~law~~consolidated tobalance ~~hold~~sheets and in the ~~hearing,~~supplementary ~~although~~notes itto isthe ~~not~~attached ~~necessary~~financial ~~that~~statements ~~the~~is ~~law~~derived ~~require~~from the ~~hearing~~Company’s financial statements at December 31, 2005.

~~6. The fairness hearing must be open to everyone to whom securities would be issued in the proposed exchange.~~F-2

78. ~~Adequate~~The ~~notice~~accompanying ~~must~~condensed beconsolidated ~~given~~financial tostatements ~~all~~are ~~those~~presented ~~persons~~on the basis of accounting principles generally accepted in Argentina, which differ from the accounting principles generally accepted in other countries, including the United States of America.

8.Buenos ~~There~~Aires, ~~cannot~~Argentina beMay ~~any~~10, ~~improper~~2006 ~~impediments~~PRICE toWATERHOUSE ~~the~~& ~~appearance~~CO. S.R.L. by/s/Carlos ~~those~~A. ~~persons~~Pace at(Partner) ~~the~~Dr. ~~hearing~~Carlos A. Pace

~~Further, as discussed above, the bulletin states that the term “any court,” used in section 3(a)(10), includes foreign courts, and, in connection with No~~F-~~Action Letter requests in these circumstances,~~3

~~all~~Condensed ~~requirements~~from ~~that apply to exchanges approved by U.S. courts must be met; and~~ the ~~issuer~~original ~~must~~prepared ~~provide the Division with an opinion from counsel licensed to practice~~ in ~~the~~Spanish ~~foreign~~for ~~jurisdiction~~publication ~~that says that before the foreign court can give its approval, it must consider the fairness of the proposed exchange to persons receiving securities~~ in ~~the exchange.~~Argentina

IdMULTICANAL S.A.

InUNAUDITED ~~practice,~~INTERIM ~~parties~~CONSOLIDATED ~~requesting~~BALANCE ~~No-Action~~SHEET Letters draw heavily on these criteria in framing their requests, and the Staff, in turn, refers in large part to them in crafting its responses. Even if courts are not obligated to give full Chevron deference to this staff bulletin, cf. Gryl ex rel. Shire Pharm. Group PLC v. Shire Pharm., 298 F.3d 136 (2d Cir. 2002) (citing 3 Thomas Lee Hazen, Law of Securities Regulation § 16.32[2], at 551 (4th ed. 2002) (“It must be remembered, however, that SEC no action letter responses are staff interpretations rather than formal Commission action and thus are of more limited utility than formal rulemaking or policies announced in SEC releases.”)), the bulletin provides guidance based on expertise, which should be considered.

20(At March 31, 2006 and December 31, 2005 )

The parties dispute whether there has been a sufficient hearing on the fairness of the options offered to noteholders, and of the securities to be issued upon exercise of the options. Clearly, the Argentine court was not advised beforehand that the Multicanal intended to rely on the section 3(a)(10) exemption, one of the criteria set out by the SEC Staff bulletin. See, e.g., AngloGold Ltd. No-Action Letter, supra (noting, among other factors, that the Ghana Court would be advised “before the hearing that, if the Court approves the terms and conditions of the Scheme, its sanctioning of the Scheme will constitute the basis for the issuance of the AngloGold Shares under the Scheme without registration under the Securities Act, in reliance on the exemption from registration provided by Securities Act Section 3(a)(10).”).

	March 31,	December 31,
	2006 (Unaudited)	2005
	Ps.
ASSETS
CURRENT ASSETS
Cash and banks	44,676,300	63,128,149
Short-term investments (Note 3 (a))	312,009,267	265,932,549
Trade receivables (Note 3 (b))	17,383,463	19,681,539
Receivables from related parties	13,828,416	14,529,390
Other (Note 3 (c))	53,445,489	52,470,325
Inventories (Note 3 (d))	5,587,062	1,293,516
Total current assets	446,929,997	417,035,468
NON-CURRENT ASSETS
Long-term investments (Note 3 (f))	8,360,813	7,513,647
Property and equipment, net (Note 4)	403,659,025	401,729,352
Intangible assets (Note 5)	15,091,100	19,256,267
Goodwill (Note 3(g))	1,202,055,073	1,200,170,211
Other (Note 3 (e))	615,323,572	592,306,525
Total non-current assets	2,244,489,583	2,220,976,002
Total assets	2,691,419,580	2,638,011,470
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities	92,054,401	91,771,276
Short-term bank and financial debt (Notes 3 (h) and 9)	2,588,175,493	2,486,325,714
Acquisition related debt	246,201	246,201
Taxes payable	13,752,833	15,134,526
Debt with related parties	2,908,451	1,938,678
Payroll and social security	15,207,168	17,666,490
Other (Note 3 (i))	5,149,046	5,092,104
Total current liabilities	2,717,493,593	2,618,174,989
NON-CURRENT LIABILITIES
Accounts payable and accrued liabilities	1,648,307	1,722,424
Taxes payable	4,910,552	4,933,430
Acquisition related debt	100,633	100,633
Long-term bank and financial debt	239,753	239,753
Other (Note 3 (j))	12,097,392	12,024,134
Provision for lawsuits and contingencies (Note 6 (c))	16,376,791	19,216,050
Total non-current liabilities	35,373,428	38,236,424
Total liabilities	2,752,867,021	2,656,411,413
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES	25,178,003	23,232,274
SHAREHOLDERS’ EQUITY (as per related statement)	(86,625,444)	(41,632,217)
Total liabilities, Minority interest in consolidated subsidiaries and Shareholders’ equity	2,691,419,580	2,638,011,470

~~These~~The ~~are~~accompanying ~~issues~~notes that must be addressed on remand to the Bankruptcy Court, which has the greatest familiarity with the facts in this case. It is even possible that the Bankruptcy Court might itself hold a fairness hearing, with requisite advance notice, and ~~that~~exhibits ~~such~~are aan ~~hearing~~integral ~~might~~part ~~qualify~~of ~~Multicanal~~these ~~for~~consolidated anfinancial ~~exemption~~statements.

Accordingly, I remand these proceedings to the Bankruptcy Court for further findings and rulings on Multicanal’s proposed cure. The Bankruptcy Court should consider whether the proceedings in Argentina, or indeed, in the United States, provided a “hearing upon the fairness” adequate to satisfy the requirements of section 3(a)(10). In making this determination, the Bankruptcy Court may consider principles of comity. See Ecoban, 108 F. Supp. 2d at 352 (asking whether foreign proceeding “respects fundamental procedural fairness, and whether it violates federal or New York state law and policy”). To the extent the Bankruptcy Court determines that the requirements of section 3(a)(10) have been satisfied, and the informational packets to accompany the proposed exchange offering were satisfactory, then the cure would satisfy section 5 of the Securities Act, and the -4

21Condensed from the original prepared in Spanish for publication in Argentina

~~section~~MULTICANAL ~~304 petition of Multicanal’s Board of Directors could be granted~~S. To the extent Judge Gropper determines that section 3(a)(10) has not been satisfied, he may consider whether to hold a hearing that would so comply, or whether there is some other form of relief that may be grantedA. ~~If no relief is found, Multicanal will then need to comply with section 5, or propose an alternate cure.~~

ItUNAUDITED ~~appears~~INTERIM ~~that~~CONSOLIDATED ~~Huff~~STATEMENT ~~objects~~OF onOPERATIONS behalf of number of creditor interests, including creditors of Multicanal which would qualify as QIBs, some of whom may have voted in favor, and some in opposition, to the APE. Possibly, Huff has a conflict in its representation. The Bankruptcy Court, following remand, might consider the propriety of Huff’s continued voicing of the various interests it purports to represent.

D. ~~Registration.~~(For the three-month periods ended March 31, 2006 and 2005)

On September 6, 2005, Multicanal advised the Court that it filed a registration statement on Form F-4 with the SEC “to avoid the potential expense and delay that could result from further litigation regarding the availability of the §§ 3(a)(9) and 3(a)(10) exemptions,” and to “moot” the issue. Appellee’s Second Supp. Status Rep. at 4. Multicanal asked for final judgment to be entered in its favor.

	March 31,
	2006 (Unaudited)	2005 (Unaudited)
	Ps.
Net revenues (Note 3 (k))	175,338,591	148,347,853
Operating costs
Cost of goods sold and direct operating expenses (Exhibit B)	(88,297,277)	(73,100,354)
General and administrative expenses (Exhibit A)	(19,752,165)	(16,199,015)
Selling and marketing expenses (Exhibit A)	(16,319,093)	(11,543,373)
Depreciation and amortization	(21,484,313)	(26,009,585)
Operating gain	29,485,743	21,495,526
Non-operating expenses
Financial income / (expenses) and holding results, net
On assets
Exchange differences and results from conversion	7,602,554	(5,069,742)
Bank expenses	(295,311)	(255,526)
Holding gains/short-term investments	447,079	72,960
Holding results – Inventories	414,630	-
Interest	3,453,235	1,685,645
On liabilities
Interest	(60,467,694)	(54,530,098)
Loan index adjustment	(3,369,622)	(2,951,485)
Exchange differences	(38,262,951)	42,614,413
Tax on debits and credits to bank current accounts	(1,908,957)	(1,550,544)
Commissions	(3,084,455)	(4,470,781)
Other non-operating income / (expenses), net (Note 3 (l))	1,194,884	1,411,794
Loss before income taxes, minority interest and equity in the gains of affiliated companies	(64,790,865)	(1,547,838)
Income taxes and / or tax on minimum notional income	19,814,546	(4,665,493)
Loss before minority interest and equity in the gains of affiliated companies	(44,976,319)	(6,213,331)
Equity in the gains of affiliated companies	905,065	373,698
Minority interest in results of consolidated subsidiaries	(1,378,564)	(474,789)
Net loss	(45,449,818)	(6,314,422)
Net loss per share	(0.12)	(0.02)
Weighted average number of shares	371,635,103	371,635,103

~~Huff~~The ~~opposed~~accompanying ~~Multicanal’s~~notes ~~request for judgment. Apart from repeating the arguments already rejected by both the Bankruptcy Court~~ and ~~this~~exhibits ~~Court,~~are ~~Huff~~an ~~pointed~~integral ~~out~~part ~~that Multicanal proposed to register only the securities to be issued to the United States retail noteholders, the abstainers, and the no-voters – that is, only to that portion~~ of ~~the~~these ~~offering~~consolidated ~~relating~~financial ~~to the cure~~statements. This partial registration, Huff argued, created a discrimination against the large majority of creditors who had voted in favor of the APE, for the securities to be issued to them were not to be registered. Huff argued that fairness requires that the registration be made to all noteholders, and that, in light of the passage of

22F-5

~~time~~Condensed ~~and~~from ~~changed~~the ~~economic~~original ~~circumstances,~~prepared ain ~~re-vote~~Spanish offor ~~all~~publication ~~noteholder~~in ~~creditors should be required.~~Argentina

~~None~~MULTICANAL ~~of this was briefed in the appeal before me, and it was not presented to the Bankruptcy Court~~S. ~~All of this has to be considered in connection with the section 304 petition of Multicanal’s Board of Directors~~A. ~~These issues, also, should be taken up by the Bankruptcy Court following remand.~~

~~Conclusion~~UNAUDITED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(For the ~~reasons~~three-month ~~stated,~~periods ~~the~~ended ~~rulings~~March ~~of the Bankruptcy Court are affirmed~~31, ~~except~~2006 ~~with respect to the lawfulness of the proposed cure under section 5 of the Securities Act,~~ and the consequences of such compliance on the general questions involved in a section 304 demonstration. Accordingly, these cases are remanded to the Bankruptcy Court for further proceedings consistent with this opinion and order.2005)

SO ORDERED.

		SHAREHOLDERS' CONTRIBUTIONS
	Number of issued and authorized common shares par value Ps. 1	Share capital	Adjustments to capital	Additional paid-in capital	Merger premium	Reserve	Legal reserve	Retained earnings (accumulated deficit)	Temporary translation differences	Total shareholders’ equity
At January 1, 2005	371,635,103	371,635,103	469,187,808	1,052,448,962	33,930,620	64,519,465	6,356,401	(1,946,346,581)	(2,444,276)	49,287,502
Net loss for the period	-	-	-	-	-	-	-	(6,314,422)	-	(6,314,422)
Temporary translation differences	-	-	-	-	-	-	-	-	348,640	348,640
At March 31, 2005	371,635,103	371,635,103	469,187,808	1,052,448,962	33,930,620	64,519,465	6,356,401	(1,952,661,003)	(2,095,636)	43,321,720
At January 1, 2006	371,635,103	371,635,103	469,187,808	1,052,448,962	33,930,620	64,519,465	6,356,401	(2,038,267,931)	(1,442,645)	(41,632,217)
Net loss for the period	-	-	-	-	-	-	-	(45,449,818)	-	(45,449,818)
Temporary translation differences	-	-	-	-	-	-	-	-	456,591	456,591
At March 31, 2006	371,635,103	371,635,103	469,187,808	1,052,448,962	33,930,620	64,519,465	6,356,401	(2,083,717,749)	(986,054)	(86,625,444)

~~Dated:~~The ~~New~~accompanying ~~York,~~notes ~~New~~and ~~York~~exhibits ~~September~~are ~~28,~~an ~~2005~~integral ~~/s/~~part ~~Alvin~~of K.these ~~Hellerstein~~consolidated ~~ALVIN~~financial Kstatement. ~~HELLERSTEIN United States District Judge~~

23F-6

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

UNAUDITED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

(For the three-month periods ended March 31, 2006 and 2005)

	March 31,
	2006 (Unaudited)	2005 (Unaudited)
	Ps.
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period	(45,449,818)	(6,314,422)
Adjustments to reconcile net loss to net cash provided by operating activities:
Accrued income tax	(19,814,546)	4,665,493
Depreciation of fixed assets	20,358,819	24,689,558
Intangible assets amortization	1,125,494	1,320,027
Equity in the gains of affiliated companies	(905,065)	(373,698)
Financial income (loss) – Cash and cash equivalents	(4,263,619)	1,616,615
Financial income (loss) – Bank and financial debts	103,190,910	13,974,743
Minority interest in results of consolidated subsidiaries	1,378,564	474,789
Provision for lawsuits and contingencies	88,770	874,050
Holding results - Inventories	(414,630)	-
Income tax paid	(2,862,994)	(2,826,854)
Decrease (increase) in assets
Trade receivables	2,298,076	276,301
Other current assets	619,848	815,082
Other non-current assets	(847,856)	(1,561,464)
Receivables from related parties	700,974	(339,178)
Inventories	(3,878,916)	-
Increase (decrease) in liabilities
Debt with related parties	969,773	421,967
Other current and non-current liabilities	56,943	1,849,608
Accounts payable and accrued liabilities	209,008	10,618,126
Payroll and social security	(2,459,322)	(507,904)
Current and non-current taxes payable	(2,491,234)	(2,799,864)
Provision for lawsuits and contingencies	(2,928,029)	(252,765)
Temporary traslation differences	(1,756,182)	1,687,482
Cash provided by operations	42,924,968	48,307,692
CASH FLOWS FROM INVESTMENT ACTIVITIES
Purchases of property and equipment net of proceeds from sales and disposals	(18,920,901)	(26,133,091)
(Acquisitions)/Sales of cable systems and subscribers and (increase) decrease in goodwill and intangible assets	131,149	(213,469)
Dividends received	-	496,527
Cash used in investment activities	(18,789,752)	(25,850,033)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of interest on loans	(1,341,131)	(2,029)
Increase of minority interest in consolidated subsidiaries	567,165	-
Cash used in financing activities	(773,966)	(2,029)
FINANCIAL INCOME (EXPENSES) AND HOLDING RESULTS GENERATED BY (USED FOR) CASH AND CASH EQUIVALENTS	4,263,619	(1,616,615)
INCREASE IN CASH AND CASH EQUIVALENTS	27,624,869	20,839,015
Cash and cash equivalents at the beginning of period	329,060,698	233,257,646
CASH AND CASH EQUIVALENTS AT THE END OF PERIOD	356,685,567	254,096,661

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

F-7

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(For the three-month period ended March 31, 2006 and comparatives)

NOTE 1 - BUSINESS OF THE COMPANY

a) Business

Multicanal S.A. (the “Company” or “Multicanal”), an Argentine corporation formed on July 26, 1991, is in one segment of business as owner and operator of cable television systems.

The Company’s licenses to operate the different cable systems owned by it have been granted by the Comité Federal de Radiodifusión (Federal Broadcasting Committee or “COMFER”) and have an initial term of 15 years, with an option to renew for an additional 10 years.

Since 1994, the Company has made significant investments, initially in the acquisition of cable systems and their subsequent development and expansion. These investments have been substantially financed by loans from financial institutions and former owners of certain acquired cable systems, as well as shareholders’ contributions.

b) Corporate Reorganization

On October 14, 2005, the boards of directors of Pem S.A. and Multicanal S.A. approved the execution of a share exchange agreement entered into on September 30, 2005, whereby Multicanal S.A. exchanged 563,821 shares in Wolves Televisión S.A. for the interest Pem S.A. had, as of that date, in Cable Video Sociedad Anónima, Tevemundo S.A., Telesur Teledifusora Río Cuarto S.A., Teve Cable San Francisco S.A. and Chaco T.V. Cable Color S.A.

The share exchange agreement was made in order for Multicanal S.A. to have a 100% interest in the above mentioned companies, with which it has started a merger procedure effective as of October 1, 2005.

On October 20, 2005, the Company’s Board of Directors authorized its Chairman to initiate measures aimed at implementing a corporate reorganization by means of a merger of certain subsidiaries into the Company. In such merger, Multicanal will be the surviving company and will continue with the business and operations of the absorbed companies, Cable Video Sociedad Anónima, Chaco T.V. Cable Color S.A., Tevemundo S.A., Telesur Teledifusora Río Cuarto S.A. and Teve Cable San Francisco S.A, while the absorbed companies will be dissolved. The reorganization is effective as of October 1, 2005, the date as from which the operations of the absorbed companies are deemed to be carried out by the surviving company, Multicanal. The balance sheets that were used as basis for the merger were those prepared by the participating companies as of September 30, 2005.

On December 16, 2005, during an Extraordinary Meeting of the Shareholders of Multicanal, the merger agreement and the special and consolidated balance sheets as of September 30, 2005 were approved. As of the date of these financial statements, the approval of this merger by the controlling authority is pending.

On January 10, 13 and 14, 2006 the official notices were published in the newspaper Clarín and in the Official Gazette, and on January 8, 10 and 13, they were published in the Official Gazette of the Province of Chaco in order to complete the merger requirements of the Comisión Nacional de Valores (National Securities Commission or the “CNV”). No objections to the merger were filed. As of the date of these financial statements, the procedure is still under review at the CNV.

F-8

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

2.1.	Basis of presentation of the consolidated financial statements

The consolidated financial statements include the accounts of Multicanal and its majority owned subsidiaries. All material intercompany balances, transactions and profits have been eliminated. Except as explained below, the equity method is used to account for investments in affiliates in which the Company has an ownership interest between 20% and 50%. Investments in affiliates in which the Company has an ownership interest of less than 20% are accounted for under the cost method.

The consolidated financial statements include accounts of Multicanal and the following subsidiaries:

	% of capital and votes held by Multicanal
	March 31,	December 31,
	2006	2005
	%
Subsidiaries
Delta Cable S.A.	84.00	84.00
A.V.C. Continente Audiovisual S.A.	90.00	90.00
Televisora Privada del Oeste S.A.	51.00	51.00
Pem S.A.	100.00	100.00
CV Berazategui S.A.	70.00	70.00
San Lorenzo T.V. Cable S.A.	100.00	100.00
La Capital Cable S.A. (1)	50.00	50.00
Teledifusora San Miguel Arcángel S.A.	50.10	50.10
Cable Imagen S.R.L. (2)	100.00	100.00
Televisión Dirigida S.A.E.C.A.	62.73	62.73
Cablevisión Comunicaciones S.A.E.C.A.	62.93	62.93
Consorcio Multipunto Multicanal (CMM) S.A.	62.93	62.93
Tres Arroyos Televisora Color S.A.	78.78	78.78
Wolves Televisión S.A.	100.00	100.00
Adesol S.A.	100.00	100.00
Hazen Limited	100.00	100.00

(1)	Proportional consolidation.

(2)	Company in the process of being transformed from a S.R.L. to a S.A. (Corporation).

2.2.	Unifying of accounting standards

Pursuant to the statement of intent signed on July 8, 2004 by the Federación Argentina de Consejos Profesionales de Ciencias Económicas (Argentine Federation of Professional Councils on Economic Sciences or “FACPCE”) and the Consejo Profesional de Ciencias Económicas de la Ciudad Autónoma de Buenos Aires (Professional Council of Economic Sciences of the City of Buenos Aires or “CPCECABA”), in which the parties acknowledge the importance of the unification of technical standards, the CPCECABA issued resolution CD 93/05 dated August 10, 2005, whereby it adopted the accounting standards approved by the FACPCE, including the amendments thereto up to April 1, 2005.

The adoption of the above-mentioned rules came into effect for annual or interim financial statements corresponding to fiscal years started as from January 1, 2006. Furthermore, the CNV has adopted such rules with certain amendments, stating that same are applicable to fiscal years started as from January 1, 2006.

F-9

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Among the consequences of the adoption by the CPCECABA of the FACPCE accounting standards, changes in exposure rules, including the disclosure of the “Temporary Conversion Differences” as part of the shareholders’ equity and certain additional information requirements related to the deferred tax had a significant effect on the Company’s financial statements.

2.3.	Recognition of the effects of inflation

The consolidated financial statements were prepared in constant units of currency, reflecting the overall effects of inflation through August 31, 1995. As from that date, restatement of the financial statements was discontinued until December 31, 2001 as a result of a period of economic stability. Between January 1, 2002 and March 1, 2003 the effects of inflation were recognized as a result of a period of high inflation. As from that date, in accordance with Decree No. 664 of the National Executive Branch and Resolution No. 441/03 issued by the CNV, restatement of the financial statements was discontinued.

This criterion is not in line with prevailing professional accounting standards, under which financial statements are to be restated until September 30, 2003. If the Company had used the accounting standards in force, the shareholders’ equity as of March 31, 2006 and December 31, 2005 would have been reduced by Ps.31 and Ps.32 million, respectively.

2.4.	Generally Accepted Accounting Principles

The consolidated financial statements have been prepared in accordance with Argentine Generally Accepted Accounting Principles (“GAAP”) and the requirements of the CNV and are presented in Argentine pesos (“Ps.”).

The Company has maintained the same disclosure criteria used in previous years in relation to this matter, and will adopt the new accounting standards when so required by the control authorities.

Certain reclassifications and additional disclosures have been included in these consolidated financial statements in order to conform more closely to the form and content required by US GAAP. These consolidated financial statements do not include all the additional disclosures required by the US Securities and Exchange Commission (“SEC”) or US GAAP.

Accounting principles generally accepted in Argentina require companies with controlling financial interest in other companies to present both parent company, where investments in subsidiaries are accounted for by the equity method, and consolidated financial statements as primary and supplementary information, respectively. Because of the special purpose of these consolidated financial statements, parent company financial statements are not included. This procedure has been adopted for the convenience of the reader of the financial statements.

2.5.	Comparative financial statements

Certain figures contained in the consolidated financial statements for the year ended December 31, 2005 and the three-month period ended March 31, 2005 have been reclassified for comparative purposes.

2.6.	Valuation criteria

The principal valuation criteria used in the preparation of these consolidated financial statements are as follows:

(a)

Cash and Banks

Cash on hand was recorded at face value.

(b)

Foreign currency

F-10

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Assets and liabilities denominated in foreign currency are presented at the nominal value of the foreign currency translated to Argentine pesos at period-end exchange rates.

The financial debt incurred by the Company in the issuance of negotiable obligations has been valued according to a conservative criterion, as mentioned in the preceding paragraph. Notwithstanding this, the Company reserves the right to consider that debt pesified, as stated in its submission of the legal proceeding to seek approval of the acuerdo preventivo extrajudicial (the “APE”) (See Note 14).

(c)

Short-term investments

Time deposits were valued according to the amount deposited at the time of the transaction plus accrued financial interest based on the internal rate of return determined at that time.

(d)

Trade receivables and accounts payable

Trade receivables and accounts payable were valued at the estimated cash value at the time of the transaction plus interest and implicit financial components accrued based on the internal rate of return determined at such time.

Trade receivables include an allowance for doubtful accounts, which is considered to be sufficient to absorb future losses due to uncollectible loans.

(e)

Financial receivables and payables

Financial receivables and payables were valued based on the sums of money disbursed and collected, respectively, plus financial results accrued based on the rate estimated at that time.

(f)

Other receivables and payables

Sundry receivables and payables were valued based on the best estimates of the amounts receivable and payable, respectively, discounted using the estimated rate upon their incorporation to assets or liabilities, respectively, except for the assets and liabilities for deferred taxes, which have not been discounted.

(g)

Inventories

Inventories have been appraised at their replacement cost at the end of the period. The values obtained in this manner do not exceed their respective estimated recoverable values at the end of the period.

(h)

Long-term investments

Generally, investments in unconsolidated affiliated companies in which the Company has ownership interests between 20% and 50% are accounted for under the equity method.

The professional accounting standards used by the subsidiaries and related companies for the preparation of its financial statements are the same as those used by the Company. In the event of differences, the corresponding adjustments were made.

The foreign subsidiaries of the Company (Cable Visión Comunicaciones S.A.E.C.A., Televisión Dirigida S.A.E.C.A., Consorcio Multipunto Multicanal (CMM) S.A. and Adesol S.A.) have been considered non- integrated foreign entities for purposes of their classification under Technical Resolution No. 18, as they have an autonomous financial and economic organization. Accordingly, the financial statements of the Company’s non-integrated foreign subsidiaries have been converted to pesos applying period-end exchange rates in the case of assets and liabilities, while the results of the operations have been converted to pesos applying exchange rates applicable as of the date of each transaction. Hazen Limited was classified as integrated with the operations of the Company as established by Technical Pronouncement No. 18.

F-11

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The figures of the financial statements of the non-integrated companies located abroad have been converted to pesos applying the period-end exchange rate. Exchange differences arising from conversion have been charged to the Temporary Translation Differences line in the Statement of Changes in Shareholders’ equity and amounted to (Ps.986,054) and (Ps.1,442,645) at March 31, 2006 and December 31, 2005, respectively.

Long-term investments in companies in which no significant control or influence is exercised were valued at their restated acquisition cost following the guidelines mentioned in Note 2.3.

(i)

Property and equipment

Property and equipment were valued at restated acquisition cost following the guidelines indicated in Note 2.3., net of accumulated depreciation.

Depreciation was calculated by the straight-line method based on the estimated useful lives of the assets, using annual rates sufficient to extinguish asset values by the end of their useful lives. During fiscal year 2005, a technical audit of the network was undertaken, and the useful life of certain regions has been extended by 5 years, resulting in a depreciation term ranging from 10 to 15 years.

Improvements that extend asset lives are capitalized; other repairs and maintenance charges are expensed as incurred.

The allowance for potentially obsolete or long-lived materials is made on the basis of management estimates on their future consumption.

Aggregate assets value does not exceed their economic value to the business at the end of the period.

(i)

Intangible assets

Intangible assets represent basically exploitation rights, concessions and purchased subscribers and were valued at restated cost following the guidelines indicated in Note 2.3., net of accumulated amortization.

Amortization was calculated by the straight-line method, based on an estimated useful life of between 5 and 20 years.

Aggregate value of intangible assets does not exceed their estimated recoverable value at the end of the period.

The Company makes periodic evaluations of the recoverability of intangible assets, grouping them with other non-current assets. The analysis is made at the level of the different regions in which the Company has operations (Argentina, Uruguay and Paraguay), i.e. at the lowest level at which identifiable future cash flows for these assets are independent from the future cash flows identifiable for other assets and liabilities.

(k)

Goodwill

Goodwill represents the excess of cost over the fair value of net identifiable assets acquired. Goodwill was restated following the guidelines indicated in Note 2.3.

Until December 31, 2002, amortization was calculated by the straight-line method over twenty years as from the month of origin.

As from January 1, 2003, goodwill has not been amortized, as it had unspecified useful life directly related to the Company’s business.

The Company regularly evaluates goodwill for recoverability based on estimates and the evaluation of available information at the date of issue of the financial statements. It is estimated that the aggregate value of goodwill, net of the allowance recorded, is lower than recoverable value at the end of the period.

F-12

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(l)

Income Tax

The Company has recognized the charge for income tax by the deferred tax liability method, recognizing the temporary differences between the tax bases of assets and liabilities and their carrying amounts. The measurement of deferred tax assets and liabilities is based on enacted tax laws and rates currently in effect in each of the countries in which the Company has operations.

Deferred tax assets are reduced, if necessary, by a valuation allowance. The Company has registered a provision to reflect the estimated sum of the deferred tax assets that would not be recoverable.

The Company has treated the differences between the price-level restated amounts of assets and liabilities and their historical basis as permanent differences for deferred income tax calculation purposes in accordance with as permitted by the accounting standards in force.

(m)

Minimum notional income tax

The Company calculates minimum notional income tax by applying the current rate (1%) on computable assets at the end of the year. This tax complements income tax. The tax obligation of the Company during each year will be determined by the higher of the two taxes. However, if in a given year minimum notional income tax exceeds income tax, that amount in excess can be computed as payment on account of income tax determined in the following ten years.

In May 2001 the Company was included in the register of beneficiaries of the agreements to improve competitiveness and employment (Decree No. 730/01). For this reason, the Company was exempt from this tax until December 31, 2002.

The Company recognized minimum notional income tax accrued during the period and paid in previous years as a credit, as it estimates that it will be able to compute it as payment on account of income tax in future years.

(n)

Provision for lawsuits and contingencies

The registration of a contingent loss is made when management determines that it is probable that a future cost may be incurred and that such cost may be reasonably estimated. These loss contingencies and accruals are based on recent developments in respect of the matter under consideration, management’s estimates of the outcome of the matter and the attorneys’ advice, based on their experience in litigating related matters, regarding potential outcome.

(o)

Shareholders’ equity

These accounts have been restated on a constant Argentine pesos basis (included in Adjustments to capital account) (Note 2.3.). Adjustments to capital and additional paid-in capital may be used to absorb accumulated deficits or to increase capital at the discretion of the shareholders. These amounts cannot be distributed in the form of cash dividends.

The “Share capital” account has been stated at its historical nominal value. The difference between the capital stock stated in constant currency and the capital stock stated in historical nominal value has been disclosed under the “Adjustments to capital” account, in the shareholders’ equity.

F-13

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(p)

Recognition of revenues

Revenues are recognized on an accrual basis, including revenues from subscriptions, which are recorded in the month the service is rendered. The Company’s revenues are presented net of the allowance for doubtful accounts.

(q)

Selling and marketing expenses

Selling and marketing expenses are expensed as incurred.

(r)

Programming rights

Programming rights pending invoicing at the period-end are estimated on the basis of existing agreements and other judgment criteria at that date.

(s)	Results per share

The results per share have been calculated for all periods presented on the basis of the weighted average of the number of outstanding shares of common stock during the period.

(t)

Cash and cash equivalents

The Company considers all highly liquid investments with original maturities of three months or less, consisting primarily of time deposits, to be cash equivalents.

(u)

Accounting estimates

The preparation of the financial statements requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet dates, and the reported amounts of revenues and expenses during the reporting years. Actual results may differ from these estimates.

NOTE 3 -

ANALYSIS OF CERTAIN CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS ACCOUNTS

	March 31,	December 31,
	2006 (Unaudited)	2005
	Ps.
CONSOLIDATED BALANCE SHEET
CURRENT ASSETS
(a) Short-term investments
Money market instruments	37,184	29,784
Time deposits	311,954,654	265,886,365
Other	17,429	16,400
	312,009,267	265,932,549

F-14

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

	March 31,	December 31,
	2006 (Unaudited)	2005
	Ps.
(b) Trade receivables
From subscriptions	21,881,957	24,075,673
From advertising	7,396,062	8,093,556
Notes receivable	49,870	44,254
From new businesses	610,823	590,067
Credit cards	1,816,630	2,234,776
From advisory	4,323,569	4,091,885
Other	11,421	27,944
Allowance for doubtful accounts (Note 6 (a))
From subscriptions	(15,667,625)	(15,904,419)
From advertising	(2,660,756)	(3,193,709)
From new businesses	(378,488)	(378,488)
	17,383,463	19,681,539
(c) Other
Advances to suppliers	12,565,076	5,524,534
Receivables from minority shareholders	1,225,118	884,118
Tax advances	4,479,649	3,757,319
Deposits in guarantee	323,474	325,574
Other receivables	6,941,081	5,091,924
Prepaid expenses	5,101,432	4,070,060
Advances to employees	1,020,165	886,961
Judicial deposits	11,986,544	12,382,712
Dividends receivable	3,536,220	3,536,220
Other	6,266,730	16,010,903
	53,445,489	52,470,325
(d) Inventories
Material / Supplies (Exhibit B)	276,324	297,537
Resale goods (Exhibit B)	1,950,228	995,979
Advance for the purchase of inventory	3,360,510	-
	5,587,062	1,293,516
NON-CURRENT ASSETS
(e) Other
Prepaid expenses	11,908,955	12,448,457
Net deferred tax assets	579,738,988	557,569,799
Tax advances	20,409,341	18,844,765
Deposits in guarantee	152,976	145,746
Other receivables	2,884,386	3,060,796
Other	228,926	236,962
	615,323,572	592,306,525
(f) Long-term investments
Investments in companies carried under the equity method (Note 12)	2,956,793	1,978,471
Advances for the purchase of companies	12,183,267	11,854,460
Provision for doubtful recoverability of investments (Note 6 (d))	(6,992,000)	(6,877,000)
Investments in companies carried at cost	212,753	557,716
	8,360,813	7,513,647

F-15

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

	March 31,		December 31,
	2006 (Unaudited)		2005
		Ps.
(g) Goodwill
Original value	2,630,830,808		2,627,681,217
Accumulated amortization	(863,132,996)		(861,868,267)
	1,767,697,812		1,765,812,950
Allowance for impairment of Goodwill	(565,642,739)		(565,642,739)
	1,202,055,073		1,200,170,211
CURRENT LIABILITIES
(h) Short-term bank and financial debt
Overdraft facilities	57,144		57,144
Corporate Bonds
Capital	1,564,184,160		1,538,791,560
Interests payable	926,309,894		851,979,764
Loans
Capital	43,242,113		44,213,613
Interests payable and restatements	54,382,182		51,283,633
	2,588,175,493		2,486,325,714
(i) Other
Debt with minority shareholders	252,175		252,175
Dividends payable	3,371,947		3,371,947
Sundry creditors	240,633		242,538
Other	1,284,291		1,225,444
	5,149,046		5,092,104
NON-CURRENT LIABILITIES
(j) Other
Investments in companies carried under the equity method – Fintelco S.A. (Note 12)	11,365,187		11,291,929
Other	732,205		732,205
	12,097,392		12,024,134

	March 31,
	2006 (Unaudited)	2005 (Unaudited)
	Ps.
CONSOLIDATED STATEMENT OF OPERATIONS
(k) Net revenues
Gross sales
From subscriptions	167,430,679	142,986,028
From advertising	2,837,746	2,258,697
From cable modem	4,594,158	885,877
Other	1,668,658	2,995,786
Allowance for doubtful accounts (Note 6 (a))
From subscriptions	(1,177,762)	(738,789)
From advertising	(14,888)	(39,746)
	175,338,591	148,347,853

F-16

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

	March 31,
	2006 (Unaudited)	2005 (Unaudited)
	Ps.
(l) Other non-operating income / (expenses), net
Provision for lawsuits and contingencies (Note 6 (c))	(88,770)	(874,050)
Recovery of sundry receivables	1,860,295	885,000
Gain on the sale of real estate	-	1,395,507
Other	(576,641)	5,337
	1,194,884	1,411,794

NOTE 4 - PROPERTY AND EQUIPMENT

	March 31, 2006
	Original value	Accumulated depreciation	Net book value	Years of useful life
	(Unaudited)	(Unaudited)	(Unaudited)
	Ps.
Installations, external wiring and transmission equipment	1,454,745,876	(1,236,731,735)	218,014,141	10/15
Properties	123,206,018	(52,729,821)	70,476,197	50
Computer equipment	74,488,075	(67,516,945)	6,971,130	5
Furniture, fixtures and tools	56,637,405	(52,841,460)	3,795,945	10
Vehicles	32,147,987	(28,125,279)	4,022,708	5
Materials, net of provision for obsolescence of materials	67,643,132	-	67,643,132	-
Work in progress	30,670,879	-	30,670,879	-
Advances to suppliers	2,064,893	-	2,064,893	-
Total	1,841,604,265	(1,437,945,240)	403,659,025

	December 31, 2005
	Original value	Accumulated depreciation	Net book value	Years of useful life
		Ps.
Installations, external wiring and transmission equipment	1,444,240,354	(1,217,056,280)	227,184,074	10/15
Properties	122,517,709	(51,859,539)	70,658,170	50
Computer equipment	74,231,720	(66,684,757)	7,546,963	5
Furniture, fixtures and tools	56,094,333	(52,313,416)	3,780,917	10
Vehicles	31,921,815	(27,721,301)	4,200,514	5
Materials, net of provision for obsolescence of materials	64,302,478	-	64,302,478	-
Work in progress	22,327,685	-	22,327,685	-
Advances to suppliers	1,728,551	-	1,728,551	-
Total	1,817,364,645	(1,415,635,293)	401,729,352

The consolidated net additions of fixed assets for the three-month periods ended March 31, 2006 and 2005 amounted to Ps.18,920,901 and Ps.26,133,091, respectively.

F-17

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The consolidated net additions of fixed assets for the three-month periods ended March 31, 2006 and 2005 amounted to Ps.18,920,901 and Ps.26,133,091, respectively.

The consolidated depreciation of property and equipment for the three-month periods ended March 31, 2006 and 2005 amounted to Ps.20,358,819 and Ps.24,689,558, respectively.

NOTE 5 - INTANGIBLE ASSETS

	March 31, 2006
	Original value	Accumulated amortization	Net book value
	(Unaudited)	(Unaudited)	(Unaudited)
	Ps.
Purchased subscribers	6,094,293	(609,430)	5,484,863
Exploitation rights	9,252,917	(4,199,442)	5,053,475
Rights of acquisition of networks	4,339,331	(2,558,799)	1,780,532
Concessions	1,967,276	(1,953,807)	13,469
Others	30,546,690	(27,787,929)	2,758,761
Total	52,200,507	(37,109,407)	15,091,100

	December 31, 2005
	Original value	Accumulated amortization	Net book value
	Ps.
Purchased subscribers	6,094,293	(304,715)	5,789,578
Exploitation rights	9,026,673	(3,840,878)	5,185,795
Rights of acquisition of networks	4,339,331	(2,504,844)	1,834,487
Concessions	1,967,276	(1,953,484)	13,792
Others	27,487,329	(21,054,714)	6,432,615
Total	48,914,902	(29,658,635)	19,256,267

The consolidated amortization of intangible assets for the three-month periods ended March 31, 2006 and 2005 amounted to Ps.1,125,494 and Ps.1,320,027, respectively.

F-18

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - ALLOWANCES AND CERTAIN PROVISIONS

(a)

Allowance for doubtful accounts

	March 31,	December 31,	March 31,	December 31,	March 31,		December 31,
	2006 (Unaudited)	2005	2006 (Unaudited)	2005	2006 (Unaudited)		2005
	From subscriptions		From advertising		From new businesses
	Ps.
Balance at the beginning of the period / year	15,904,419	17,756,612	3,193,709	5,012,076		378,488	378,488
Increase (recorded as loss)	1,177,762	3,016,614	14,888	358,910		-	-
(Write-off)	(1,414,556)	(4,868,807)	(547,841)	(2,177,277)		-	-
Balance at the end of the period / year	15,667,625	15,904,419	2,660,756	3,193,709		378,488	378,488

(b) Provision for obsolescence of materials

	March 31,	December 31,
	2006 (Unaudited)	2005
	Ps.
Balance at the beginning of the period / year	11,036,033	11,036,033
Increase (decrease) of provision	-	-
Balance at the end of the period / year	11,036,033	11,036,033

(c) Provision for lawsuits and contingencies

	March 31,	December 31,
	2006 (Unaudited)	2005
	Ps.
Balance at the beginning of the period / year	19,216,050	17,254,671
Increase (recorded as loss)	88,770	9,091,334
Decrease of provision	(2,928,029)	(7,129,955)
Balance at the end of the period / year	16,376,791	19,216,050

(d) Provision for doubtful recoverability of investments

	March 31,	December 31,
	2006 (Unaudited)	2005
	Ps.
Balance at the beginning of the period / year	6,877,000	6,762,000
Increase of provision	115,000	115,000
Balance at the end of the period / year	6,992,000	6,877,000

F-19

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – BALANCES AND OPERATIONS WITH RELATED COMPANIES

Below are the consolidated balances and operations of the Company with its related companies at March 31, 2006, presented in comparative format.

Parent companies (or companies exerting considerable influence):

	03.31.2006		03.31.2005	12.31.2005
Item / Operation	Amount for the three-month period	Debtor (creditor) balance	Amount for the three-month period	Debtor (creditor) balance
Item / Operation	Amount for the three-month period	Debtor (creditor) balance	Amount for the three-month period	Debtor (creditor) balance

Receivables from parent companies	-	415,103	-	-
Payables to parent companies	-	(1,412)	-	(121,636)
Sales of advertising	109,711	-	35,033	-
Other sales	352	-	363	-
Advisory services	-	-	(311,653)	-
Purchase of advertising	(878,799)	-	(1,303,979)	-

Other related companies:

	03.31.2006		03.31.2005	12.31.2005
Item / Operation	Amount for the three-month period	Debtor (creditor) balance	Amount for the three-month period	Debtor (creditor) balance

Trade receivables	-	1,073,963	-	1,055,652
Accounts payable	-	(13,984,012)	-	(6,205,007)
Sales of advertising	106,607	-	230,021	-
Other sales	12,364	-	890,943	-
Publishing of magazines	(2,142,003)	-	(1,707,402)	-
Programming services (1)	(17,677,096)	-	(16,336,079)	-
Advisory services (2)	(2,527,230)	-	(1,233,820)	-
Purchase of advertising	(170,700)	-	(203,517)	-
Other purchases	(153,511)	-	(139,198)	-

(1) Includes programming services purchased by Multicanal from Tele Red Imagen S.A. (“TRISA”) and Televisión Satelital Codificada (“TSC”), companies of the group in which Grupo Clarín S.A. holds 50% of the capital stock.

(2) Fees for advice on administrative and financial, human resources, systems and purchases provided by Gestión Compartida S.A., a company wholly owned by Grupo Clarín S.A.

NOTE 8 – INFORMATION BY SEGMENT

Multicanal concentrates its businesses in the cable television sector. In this connection, the Company generates its results in Argentina, Paraguay and Uruguay.

F-20

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Financial Condition by business segment as of 03.31.2006

	Argentina	Foreign Countries	Eliminations	Total

Total assets	2,644,230,081	140,123,480	(92,933,981)	2,691,419,580
Total liabilities	2,723,664,862	122,136,140	(92,933,981)	2,752,867,021
Incorporations of property plant and equipment, intangible assets and Goodwill	(15,575,223)	(3,214,529)	-	(18,789,752)

Financial Condition by business segment as of 12.31.2005

	Argentina	Foreign Countries	Eliminations	Total

Total assets	2,595,824,833	128,925,126	(86,738,489)	2,638,011,470
Total liabilities	2,628,293,898	114,856,004	(86,738,489)	2,656,411,413
Incorporations of property plant and equipment, intangible assets and Goodwill	(58,462,453)	(3,065,400)	-	(61,527,853)

Results per business segment as of 03.31.2006

	Argentina	Foreign Countries	Eliminations	Total

Net revenues	157,180,679	18,471,061	(313,149)	175,338,591
Depreciation and amortization	(20,217,636)	(1,266,677)	-	(21,484,313)
Interest generated by assets	3,267,770	185,465	-	3,453,235
Interest generated by liabilities	(60,330,709)	(136,985)	-	(60,467,694)
Equity in the gains of affiliated companies	905,065	-	-	905,065
Income Taxes	20,151,761	(337,215)	-	19,814,546
Net result of the three-month period - income / (loss)	(49,056,136)	3,606,318	-	(45,449,818)

Results per business segment as of 03.31.2005

	Argentina	Foreign Countries	Eliminations	Total

Net revenues	133,203,155	15,715,101	(570,403)	148,347,853
Depreciation and amortization	(25,033,713)	(975,872)		(26,009,585)
Interest generated by assets	1,315,728	369,917	-	1,685,645
Interest generated by liabilities	(54,318,044)	(212,054)	-	(54,530,098)
Equity in the gains of affiliated companies	374,081	(383)	-	373,698
Income Taxes	(3,839,496)	(825,997)	-	(4,665,493)
Net result of the three-month period - income / (loss)	(7,002,376)	687,954	-	(6,314,422)

F-21

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - BANK AND FINANCIAL DEBT

In addition to the financial loans with local financial entities, which have been converted into pesos and restated through application of the Reference Stabilization Coefficient (“CER”), the Company’s financial debt, subject to restructuring under the terms of the APE, is made up as follows:

US$37,620,000 in principal amount of Series C 10^1/2% Notes due 2018,

US$130,802,000 in principal amount of Series E 13.125% Notes due 2009,

US$98,761,000 in principal amount of 10^1/2% Notes due 2007,

US$144,000,000 in principal amount of Series J Floating Notes due 2003 and

US$ 96.669.000 in principal amount of 9^1/4% Notes due 2002.

Deferred Payments

On February 1, 2002, the Company deferred payment of principal and interest on its 9^1/4% Notes due 2002 and interest on its 10^1/2% Notes due 2007 due to the Argentine economic and social crisis that resulted in the issuance of economic, foreign exchange and regulatory measures adopted during the economic and social crisis. Later, on February 26, 2002 the Company deferred payment of interest on its Series J Floating Rate Notes due 2003. On April 15, 2002 the Company deferred payment of interest on its Series C 10^1/2% Notes due 2018 and its Series E 13.125% Notes due 2009 (collectively the “Existing Notes”) and together with the existing bank debt (the “Existing Debt”) due to the worsening of the economic crisis in Argentina.

Proposal for the restructuring of the financial debt

In 2003, the Company submitted to its creditors a proposal for restructuring its financial debts. The restructuring proposal was set forth in an APE and comprises three options: a cash buyback option at 30 cents per U.S.$1, a ten-year bond exchange option and a combined exchange option (including a seven-year bond and common stock), each subject to a ceiling. Based on the approvals obtained at the bondholders’ meeting of all series of Existing Notes held on December 10, 2003 and the support provided by commercial bank creditors, the Company announced that the requisite majority of affected creditors had consented to the restructuring set forth in the APE. On December 16, 2003 the Company filed its APE together with evidence of the consents and approvals obtained from its creditors with the Commercial Court No. 4 of Buenos Aires (the “Argentine Court”) seeking judicial confirmation thereof. The Company published the statutory notices as ordered by the Argentine Court on December 17, 2003, and creditors had a right to file objections to the confirmation of the APE until February 13, 2004. Several objections were filed, including an objection by State Street Bank, on behalf of the U.S.-based investment group known as W.R. Huff (“Huff”). The Company answered each of the objections filed. On April 14, 2004, the Argentine Court rejected the objections presented and confirmed the APE (the “APE Confirmation Order”). Holding that all affected creditors should be treated equally, the Argentine Court ordered that the three options contemplated in the APE should be offered to those present at the meeting held on December 10, 2003 who had voted against the APE or had abstained from voting, as well as to those creditors that did not attend to the meeting, giving such elections the same treatment as those made at the December 10, 2003 bondholders’ meeting by the creditors that approved our proposal. On October 4, 2004, the Cámara de Apelaciones en lo Comercial (Court of Appeals on Commercial Matters), Chamber “A” (the “Court of Appeals”) rendered a decision affirming the April 14, 2004 decision of the Argentine Court. On December 14, 2004, the Court of Appeals dismissed an extraordinary appeal filed by Huff against its decision of October 2004, affirming the lower court’s confirmation of the APE. Huff subsequently filed a recurso de queja (petition in error) with the Supreme Court of Justice (the “Supreme Court”), seeking to reverse the decision rendered by the Court of Appeals, which was dismissed in April 2005 by the Supreme Court. In the meantime, Huff made several submissions to the Argentine Court seeking to delay the publication of notices (edictos) contemplated in the April 14, 2004 decision which were also rejected by the Argentine Court on May 16, 2005. On May 26, 2005 the Argentine Court dismissed an appeal taken by Huff on the same date against the May 16, 2005 decision submitted by Huff that same day. To the Company’s knowledge, Huff did not seek to reverse the May 26, 2005 rejection of the appeal. The Company has been advised that Argentine law affords no further appeal against the April 14, 2004 decision.

F-22

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

On July 7, 2005, the Company filed its response to a new notice served by the Argentine Court upon a filing requesting such court to order the Company to make the publications. On July 8, 2005, the Argentine Court deemed the notice answered and considered the explanations presented by the Company. On August 2, 2005, the Company was notified of the filing of a new brief, requesting once again that the court order the Company to publish the notices. On August 25, 2005, the Argentine Court rejected for the second time a petition filed by a group of bondholders to require the Company to publish the notices ordered by the Argentine Court in the APE Confirmation Order. As of the date of these financial statements, the resolution has been appealed and the matter is still pending before the Court of Appeals.

The Company’s Board of Directors is seeking recognition of its APE in the United States, subject to the implementation of certain remedies.

If the Company consummates the transactions contemplated in the APE, under the terms approved by the courts, each holder of Existing Debt shall receive from the Company:

(a)

a cash payment of U.S.$300 per U.S.$1,000 of principal amount of Existing Debt that is repurchased by the Company under the APE (the “Cash Option”);

(b)

U.S.$1,050 principal amount of the 10-Year Step-Up Notes (the “10-Year Notes”) per U.S.$1,000 of principal amount of Existing Debt exchanged under the APE (the “Par Option”); or

(c)

641 Class C shares of common stock and U.S.$440 principal amount of either (i) 7% 7-Year Notes (the “7-Year Fixed Rate Notes”), or (ii) 7-Year Floating Rate Notes (the “7-Year FRNs”, together with the 7-Year Fixed Rate Notes, the “7-Year Notes”) per U.S.$1,000 of principal of the Existing Debt exchanged pursuant to the APE (the “Combined Option”).

The Company will not pay any accrued and unpaid interest (including default interest and additional amounts, if any) on the Existing Debt repurchased or exchanged under the APE. Interest will accrue on the 10-Year Notes and on the 7-Year Notes from December 10, 2003, and the first interest payment date will occur on the date of delivery under the APE.

The Company has planned to (i) repurchase approximately U.S.$125 million of the principal amount of Existing Debt with an aggregate cash payment of U.S.$37.5 million, (ii) exchange approximately U.S.$76.5 million principal amount of Existing Debt for U.S.$80.3 million of 10-Year Notes, (iii) exchange approximately U.S.$143.0 million principal amount of Existing Debt for U.S.$143.0 million principal amount of 7-Year Notes and (iv) exchange approximately U.S.$181.9 million principal amount of Existing Debt for Class C common shares representing approximately 35% of the Company’s total capital stock. In accordance with the terms of the APE, the maximum aggregate principal amount of Existing Debt that may be exchanged for the Par Option is U.S.$76.5 million; for the Combined Option, U.S.$324.9 million; and for the Cash Option, U.S.$131 million. Any principal amount of Existing Debt electing the Par Option exceeding U.S.$76.5 million will be prorated and reallocated ratably to the Combined Option or, to the extent the maximum amount of Existing Debt that may be exchanged for the Combined Option has been fully subscribed, to the Cash Option pursuant to the APE. As of December 2003, when the Company accepted the Existing Debt that holders had agreed to exchange pursuant to the APE, holders of Existing Debt in an aggregate principal amount exceeding U.S.$76.5 million had elected the Par Option. Accordingly, although under the APE any principal amount of Existing Debt electing the Combined Option exceeding U.S.$324.9 million shall be prorated and reallocated ratably to the Par Option, because the maximum amount of the Par Option has been exceeded as results of the elections by holders, any excess amounts electing the Combined Option will be allocated ratably to the Cash Option together with any amount of principal of Existing Debt electing, or which already elected the Par Option. Any principal amount of Existing Debt electing the Cash Option that exceeds U.S.$131 million will be prorated and reallocated to the Combined Option. The allocation will be made after giving effect to any election made in accordance with the decisions of the Argentine and U.S. courts. The Existing Debt in respect of which holders make no election shall be allocated ratably to the Combined Option or to the Cash Option, as the case may be, outstanding after giving effect to the allocation mentioned above.

F-23

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - SHAREHOLDERS’ CAPITAL

On August 8, 2003, the Shareholders’ Meeting of the Company resolved to increase the corporate capital by Ps. 4,814,066, through the capitalization of all irrevocable contributions recognized until such date. Thus, the capital was increased to Ps.371,635,103 through the issuance of 2,629,140 ordinary registered non-endorsable Class A shares with a par value of Ps.1 each and entitled to five votes per share, delivered to Grupo Clarín S.A., and 2,184,926 ordinary registered non-endorsable Class B shares with a par value of Ps.1 each and entitled to one vote per share, of which 654,438 correspond to Grupo Clarín S.A. and 1,530,488, to Arte Gráfico Editorial Argentino S.A. The Superintendency of Corporations approved the registration of the capital increase on February 15, 2005.

As a result, the shares of the Company are currently held as follows:

	Number of shares
Shareholder	Class A	Class B	Total	% Holding
Grupo Clarín S.A.	202,963,617	50,521,104	253,484,721 (1)	68.21
Arte Gráfico Editorial Argentino S.A.	-	118,150,382	118,150,382	31.79
Total	202,963,617	168,671,486	371,635,103	100.00

(1)	Of this holding, 40,094,948 ordinary Class A shares and 22,238,385 ordinary Class B shares are pledged in favor of Telefónica de Contenidos S.A. Unipersonal.

As mentioned in Note 13, on May 7, 2004 the shareholders of the Company decided to increase the capital stock through the contribution to be made by the controlling shareholder, Grupo Clarín S.A., amounting to US$15,000,000 and the capitalization of the financial debt offered, as well as to amend the Corporate By-Laws, subject to confirmation of the judgment approving the APE and compliance with the procedures contemplated therein.

As of March 31, 2006 the Company has a negative shareholders’ equity. This situation will be reversed once the financial debt restructuring initiated by the Company is completed, in which case the Company will no longer fall within paragraph 5, section 94 of the Commercial Companies Law.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

(a) Acquisition and sale of cable systems

(i) Acquisition of cable systems in Paraguay

On December 12, 1997, the Company entered into two agreements for the acquisition of 14 cable systems (13 in Paraguay and 1 in Clorinda, Argentina). The closing of the transaction was scheduled for November 15, 1997, which was subject to the seller’s compliance with certain conditions, including obtaining various regulatory approvals from the government of Paraguay, which were ultimately not obtained. The Company made advance payment of US$2,300,000 on account of the total price and the seller issued a promissory note for the amount received, i.e. US$2,300,000 and pledged the shares corresponding to certain TV systems in favor of the Company to guarantee compliance with the conditions for the closing of the transaction.

As a result of the seller’s failure to meet its obligations the final agreement was not signed. As a result of the seller’s non-compliance, the Company demanded payment of the promissory note, but the seller brought a claim demanding compliance with the agreement signed on December 12, 1997, reserving the right to determine the amount of damages, and an injunction which was resolved by the Paraguayan court in favor of the plaintiff. This measure preventing collection by the Company of the promissory note amounting to US$2,300,000.

F-24

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The Company asked the intervening judge to demand payment of court fees on the amount of the contract from the plaintiff, after the Court accepted the petition and suspended the procedural terms. In view of the plaintiff’s failure to pay court fees after having been demanded payment, the Company requested lifting of the preliminary injunction, ending of the lawsuit and filing of the case. The judge did not end the case but accepted the lifting of the preliminary injunction, a ruling that was confirmed by the Court of Appeals on Civil and Commercial matters, Room 4. Confirmation by the Court of Appeals is firm.

The file was sent back to the original Court, where the proceeding will be continued. The Company cannot assure that following the lifting of the preliminary injunction it will be able to collect the amount due.

(ii) Tres Arroyos Televisora Color S.A. trusts

On September 7, 2001, a Trust Agreement was signed under which the minority shareholders transferred all of their equity interests in Tres Arroyos Televisora Color S.A., representing 38.58% of the stock capital, in favor of the trustee, Mr. José María Sáenz Valiente (the “Trustee”) (h). The Company was appointed the trust beneficiary so that the stock in trust is gradually transferred to it provided it pays Ps. 42,876 per month to the Trustee over a 10-year period. The trust will be revoked if the Company were to fail to pay the consecutive monthly installments.

Additionally, on the same date, a beneficial interest on the mentioned shares, was set up in favor of the Company, for the earlier of 10 years or the Trust life.

In accordance with the minutes of the shareholders’ meeting of Tres Arroyos Televisora Color S.A. dated April 27, 2005, the Company resolved to capitalize irrevocable capital contributions, thus increasing its capital stock from the amount of Ps.24,000 to Ps.3,121,153 represented by 3,121,153 common shares of nominal value Ps.1 each and carrying one vote per share.

On June 9, 2005 an Addendum to the Trust Agreement was executed, amending the clauses referring to the transfer of shares in accordance with the resolved capital increase.

Under the terms of the Trust Agreement and its Addendum, as of March 31, 2006 the Trustee has made the stock transfers, and consequently Multicanal is the holder of 2,458,818 shares representing 78.78% of the voting capital stock of the company and the Trustee is the legal owner of the remaining 662,335 shares representing 21.22% of the remaining voting capital stock of the company.

(iii) Share exchange with Consorcio Multipunto Multicanal (CMM) S.A.

On October 12, 2005, after obtaining the approval of the National Telecommunications Commission of Paraguay (or Conatel), the Company completed the share exchange agreed on September 22, 2005 between Multicanal, as holder of shares of Cable Visión Comunicaciones S.A.E.C.A. (or CVC) and Televisión Dirigida S.A.E.C.A. (“TVD”), and Mrs. Claudia Pedrozo Bogado, Mrs. María Elena Bogado Silva and Mrs. Francisca Bogado de Pedrozo (the “Pedrozo Shareholders”), as holders of 100% of the capital stock of Consorcio Multipunto Multicanal S.A. (or CMM). As a result, the Company (i) acquired 62.93% of the capital stock and votes of CMM and in consideration thereof (ii) assigned to the Pedrozo Shareholders 30% of the capital stock and votes of CVC and TVD. The exchange will allow the companies to integrate their operations and implement common policies.

F-25

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(b) Operating licenses

Broadcasting licenses are granted for a 15-year term, renewable for one additional ten year-term. Applicable regulations establish that COMFER must grant an extension if it is verified that the licensee has complied with applicable regulations, the bidding terms and conditions and the obligations undertaken in its proposals during the original term of the license. The Company estimates that it will obtain all requested extensions of existing licenses. The extension of the licenses is subject to approval by COMFER. Although management considers the risk that the Company will be unable to renew its licenses in the future remote, it cannot provide assurance that the Company will obtain any such extensions. Since cable TV is a service not requiring award through a public bidding process and licenses are granted directly by COMFER, if COMFER verifies that during the 25-year term of the license the Company has complied with applicable laws, the bidding terms and conditions and obligations assumed in its proposals, it may award a new license. However, pursuant to the terms of Decree No. 527/05, the expiration of broadcasting licenses in effect on May 24, 2005 has been suspended for a period of ten years. As a result of the Decree, such licenses continue to be valid during the 10-year suspension period and remain valid following the 10-year suspension period for the number of years that were remaining as of May 24, 2005. Decree No. 527/05 requires that broadcasting companies like Multicanal with licenses to which it would apply, submit to COMFER, within two years, for its approval proposals that would make broadcasting time available for programming that contributes to the protection of the national culture and the education of the population. As of the date of these financial statements, the Company has not yet submitted such proposals.

(c) Pending approvals

The Company has requested COMFER approval of several transactions, including the various corporate reorganizations carried out and certain share transfers. Such approvals are pending. In addition, the elimination of certain headends is also subject to approval by COMFER. Although the Company expects to receive such approvals, no assurance can be given that COMFER or any entity replacing COMFER in the future will grant them.

(d) Claims by COMFER

(i) Administrative proceedings

The Company has sought participation in various installment plans in order to pay fines for breach of broadcasting regulations. As a result of such filings, the amounts payable determined by the COMFER have been paid by the Company by assigning advertising time in favor of the Secretaría de Medios de Comunicación (the “Department of Media”) and COMFER, which will be applied to the promotion of general interest campaigns conducted by the National State.

As of the date of these financial statements, the COMFER has filed summary proceedings against the Company for 1640 violations of the legal provisions on the content of programs and has imposed fines totaling $388,747. Although the Company has appealed such fines, the Company cannot assure you that such appeals will be decided in its favor.

(ii) Demand for payment from Vidycom S.A.

COMFER filed a claim whereby it demanded payment from Vidycom S.A. (“Vidycom”), a company absorbed by Multicanal in 1995, of all the differences in its favor as a result of its participation in the tax exemption established by Resolutions No. 393/93 and 790/93.

The tax authorities based their rejection of the mentioned tax exemption on the following grounds: (a) Vidycom was asked to make payment on several occasions, but did not comply with COMFER’s requirements, (b) no documentation supporting the investments committed by the company was provided and (c) no evidence was provided of the weather phenomenon as a result of which the previous shareholders had requested the tax exemption.

F-26

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

On May 17, 2005, the Company appeared before COMFER to avail itself of the moratorium established under Resolution No. 1316/CFR/03 to pay the unpaid and due amounts owed to COMFER.

The moratorium provides for a 50% reduction of interest rates applicable to the calculation of debts on account of radio broadcasting fees for the benefit of those who execute a payment agreement with COMFER regarding fees due, bearing payment of litigation costs and expenses incurred.

In connection with such revenues, the amount paid as unpaid differences, after deduction of the interest owed, amounted to Ps.364,089 and was settled in a single payment.

(iii) Demand for payment due to rejection of requests for exemption

COMFER issued various resolutions announcing the rejection of the request for exemptions filed under the terms of Resolution No. 393/93 to the holders of broadcasting licenses absorbed by the Company and to demand payment of sums due plus interest.

The Company considers that there are allegations of fact and questions of law in its favor that would require COMFER to review its position, but the Company cannot provide any assurance that the authorities will rule in favor of the Company.

(e) Other regulatory aspects

In February 1995, the City of Buenos Aires issued a municipal ordinance regulating the authorization for the installation of TV cable networks. Such ordinance establishes several alternatives for cable installation on the street, namely: by underground laying, center of city block or posting. The ordinance established a maximum term of 7 years for cable operators to adapt their wiring networks according to the requirements of the ordinance. The municipality of the City of Mar del Plata issued an ordinance to regulate the installation of cable TV networks.

Although the Company has been adapting its network, it has had difficulties making its network fully compliant as a result of the economic crisis in Argentina, the current lack of financial stability and the successive tax charges, which have forced the Company to apply its resources and income to ensuring the continuity of its business and greatly reduce its capital expenditures. On September 30, 2002 the Company requested suspension of the terms established by ordinance 48,899.

Certain regulations of the City of Buenos Aires have been recently amended granting cable companies additional time (between one and ten years) to cease using the airspace in certain parts of the City of Buenos Aires and to substitute metallic for wooden poles in other regions. The Company will seek to continue to upgrade its existing cable systems, including any network upgrades or modifications required by regulatory or local authorities, if the Company has sufficient cash flow and financing is available at commercially attractive rates.

(f) Commitments to make contributions to Fintelco S.A.

Fintelco S.A. had a negative shareholders’ equity as of November 30, 2005. Under the Argentine Corporations Law, this could bring its dissolution, unless its capital is restored. The Company and Cablevisión S.A. each hold 50% of the equity of Fintelco S.A. and, in that proportion, the Company has undertaken to make the contributions required to pay the liabilities of Fintelco S.A. and of its subsidiaries when due.

F-27

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(g) Complaints against the Supercanal Group

The Company brought various claims against Supercanal Holding S.A. and its subsidiaries (the “Supercanal Group”), including an action to declare resolutions adopted during the Extraordinary Shareholders’ Meeting of Supercanal Holding S.A. on January 25, 2000 to reduce capital stock of Supercanal Holding S.A. to Ps. 12,000 and subsequently increase capital to Ps. 83,012,000 null and void. The Court issued an injunction requested by the Company but required that the Company post bond for Ps. 22,000,000 for potential damages that could be assessed against the defendant, should the complaint be dismissed. The remedy was granted against the issue of a surety bond. The Court of Appeals revoked the injunction. The Company filed an extraordinary appeal against that resolution, claiming it is both “arbitrary” and “damaging to the institution”. On October 1, 2004, the Company was notified of the dismissal of its extraordinary appeal.

Other legal actions were initiated, claiming the suspension of: i) the last five Ordinary Shareholders’ Meetings of Supercanal Holding S.A. and ii) the guarantees granted by Supercanal S.A. on bank loans exclusively in favor of the group controlling Supercanal Holding S.A. (Grupo Uno S.A. and affiliated companies). In addition, a claim for dissolution and liquidation of Supercanal Holding S.A. was brought jointly with the action for removal of all the members of the Board of Directors and the Supervisory Committee, and the dissolution of Supercanal Capital N.V.

Supercanal Holding S.A. and other companies of the Supercanal Group filed for bankruptcy proceedings with the National Court of First Instance on Commercial Matters No. 20, Secretariat No. 40, and the procedures began on April 19, 2000.

As a result of the revocation of the preliminary injunction mentioned above, on December 12, 2001 the Company was notified of the filing of a claim by Supercanal Holding S.A. for damages caused by the granting of the preliminary injunction that was subsequently revoked. It has been claimed that the suspension of the effects of the meeting held on January 25, 2000 resulted in the cessation of payments to Supercanal Holding S.A.

The Company answered the complaint and rejected the liability attributed to it based on the fact that the cessation of payment had taken place before the date of the meeting that was suspended by the preliminary injunction, according to documentation provided by the plaintiff itself. Furthermore, the suspension of the meeting did not prevent capitalization of the Company through other means. Based on the record of the case, the Company considers that the claim filed should be rejected in its entirety, and the legal costs should be borne by the plaintiff.

No assurance can be provided that the Company will obtain an economic or financial gain as a result of these actions. Presently, as a result of the ancillary jurisdiction of the bankruptcy proceedings of Supercanal Holding S.A., all the claims are brought in the abovementioned Court.

(h) Restrictions on the distribution of profits

There are certain restrictions on the distribution of dividends by the Company due to the limitations and conditions contained in the APE.

(i) Other legal commitments

The Company has created a provision as a result of the legal obligation to withdraw its networks under pole leases upon termination thereof.

F-28

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - LONG-TERM INVESTMENTS

Investments carried under the equity method are as follows:

Company	Direct percentage participation in voting stock	March 31,	December 31,
	%	2006 (Unaudited)	2005
		Ps.
VER T.V. S.A.	49.00	2,956,793	1,978,471
Fintelco S.A.	50.00	(11,365,187)	(11,291,929)
		(8,408,394)	(9,313,458)

NOTE 13 - ANTITRUST CONSIDERATIONS

On August 24, 1998, the Interior Trade and Consumer Protection Bureau of the Province of Entre Ríos filed a complaint with the National Committee for the Defense of Competition (“CNDC”) alleging division of areas between Multicanal and its competitors. On May 4, 1999, the Company requested that the claim be rejected pursuant to Section 20 of the Argentine antitrust law (Law No. 22,262, enacted in 1980, as amended in 1995 by Law No. 24,481, the “Argentine Antitrust Law”). On June 24, 2004 the summary proceedings were concluded and notice was served under Section 23 of the Argentine Antitrust Law. As of the date of these financial statements, no resolution on the merits has been issued.

On January 13, 1999, the CNDC notified the Company that a complaint had been filed by the Santa Fe Commerce Department alleging that VCC had engaged in anticompetitive practices in the city of Rosario, Province of Santa Fe before its acquisition by Multicanal. Although the Company has responded to the complaint and the case is open for discovery, as of the date of these financial statements no resolution on the merits has been issued.

Additionally, on February 18, 1999, the CNDC commenced a formal proceeding investigating an alleged agreement between the TV cable operating companies VCC, Multicanal and Cablevisión S.A. and those providing Televisión Satelital Codificada S.A. and Tele Red Imagen S.A. channels consisting of fixing of minimum prices for the trading of channels owning rights to the broadcasting of football tournaments organized by the “Asociación de Fútbol Argentino” in Federal Capital and Greater Buenos Aires. The investigation spans from the year 1995 through the date of the resolution.

The CNDC penalized the companies with a fine, which in the case of the Company amounts to Ps.352,859. The resolution under which the fine was applied was appealed by the Company on October 8, 2002. Court B of the Chamber of Criminal and Economic Matters suspended the fine established by the Secretariat for Defense of Competition. The Ministry of Economy appealed this ruling before the Supreme Court of Justice (“CSJN”), the file was remitted to the prosecutor for resolution.

On March 12, 1999, the owner of a cable television operating company in the city of Roldán, Province of Santa Fe, brought an action against Multicanal claiming uncompetitive practices in that city. On December 9, 2003 the preparatory stage of the case was concluded. The CNDC served notice under section 23 of Law No. 22262 in relation to this case and initiated summary proceedings. The Company made such presentation on January 28, 2004 and on October 22, 2004 the CNDC admitted part of the evidence offered by the Company.

In December 2001, September 2003 and November 2003, a cable television operator in Santa Fe and Corrientes, Gigacable S.A., filed three complaints against the Company for alleged division of markets with Cablevisión S.A., uncompetitive practices, discriminatory pricing, and for having made presentations before various bodies

F-29

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

which hindered Gigacable S.A. from obtaining administrative permits. The Company filed answers with the CNDC responding to the complaints. The case related to the presentation made before various bodies has been terminated and rejected. The case related to Santa Fe was brought to trial. The Company was notified on December 9, 2004 of an injunction instructing the Company not to charge prices in line with Gigacable’s prices. The Company filed a response objecting to the injunction. As of the date of these financial statements, no further resolution on the merits has been issued. The Company cannot assure you that the controversies will be solved or that the Company shall not be sanctioned in the case of a failure to reach an agreement.

On September 17, 2003 the Company was notified of a claim made by Gigacable S.A. alleging that Multicanal S.A. and Cablevisión S.A (i) have made presentations before various bodies (COMFER and the Municipality of Rosario), which hindered Gigacable S.A. from obtaining the administrative permits to operate in Rosario; (ii) engaged in monopolistic conduct. The Company answered that claim on October 6, 2003. On May 30, 2005 the explanations furnished by the Company were accepted and the record of the proceedings was ordered. Notwithstanding the foregoing, the Company cannot assure you that Gigacable will not appeal the decision.

The Domestic Trade and Consumer Protection Bureau of the Province of Entre Ríos filed a claim before the National Court of Appeals in relation to the division of areas between Multicanal (as succeeding company of Video Cable 6 S.A.) and its competitors. On May 4, 1999, the Company filed an explanation brief. On February 14, 2005, the CNDC concluded the preliminary stage and served notice upon the parties for them to submit the pertinent rebuttal and offer evidence.

On December 15, 2002 Arsenio Mendoza, from the city of Paraná, brought a claim before the Consumer Protection Bureau in Entre Ríos. The claim states that: i) Cable Video carries out promotional activities in certain areas in which the plaintiff has been excluded, ii) Cablevisión S.A. had expressed that it could not provide the service in the area of the plaintiff and iii) the contents of TV programs of Cable Video are unsuitable for children and therefore violate their rights. On August 15, 2003 the case entered the evidentiary stage and will be heard in conjunction with the Gigacable case.

NOTE 14 – NOTIFICATION OF PETITIONS FOR BANKRUPTCY FILED AGAINST THE COMPANY

As of these consolidated financial statements, the Company has been served with process on 34 petitions for bankruptcy against it as a result of the Company's deferral of payments of principal and interest on its negotiable obligations. The Company filed its response in all cases, and deposited in escrow, the amount claimed in pesos at the rate of exchange of US$1 = Ps.1 plus CER plus 8% per annum for interest and 5% to cover possible expenses relating to lawsuits. The judge: i) considered it sufficient at this time in order to disregard the credit invoked as “revealing factor” of suspension of payment of debts, the deposit made by the Company, dismissing 33 petitions for declaration of bankruptcy, (the court of appeals having ratified the lower court decisions in those cases where plaintiffs appealed such decisions); ii) the filing of the APE suspended the other bankruptcy petition. One additional petition was filed but not served on the Company and was suspended.

The Company argued in its response to the bankruptcy petitions that its foreign currency obligations had been converted to pesos as established by Section 1 of Decree No. 214/02, because the provisions of Section 1, subsection e) of Decree No. 410/02 (establishing that “the obligations of the public and private sectors denominated in foreign currency, compliance with which is subject to foreign laws, are not subject to the conversion to pesos”) do not apply in this case.

In the offer made to restructure its financial debt (see Note 7) the Company calculated Existing Debt to be restructured in U.S. Dollars, to reflect more clearly the reduction of the debt and the exchange ratio for the new securities that would be issued if its restructuring transactions are consummated. The fact that its debt has been denominated in US dollars exclusively for such purposes does not mean that the Company has changed its position of considering those obligations to have been pesified, as this approach was taken only to achieve a rapid and effective conclusion to the negotiation of the APE, in order to obtain creditors’ acceptance of the proposal without having to waive any valid rights. This approach, which does not address the definition of the scope of

F-30

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

the Decree on Conversion to Pesos referred to above, has been the most appropriate one to overcome financial difficulties for the benefit of the Company, its creditors and the public in general, but should not be construed as a waiver by the Company of its right to sustain that the debt incurred prior to the issuance of Decree No. 410/02 is subject to pesification.

In view of this, in the submission filed to request approval of the reorganization plan from the court, the Company reserved its right to file a motion for the pesification of all financial debts incurred in the issuance of outstanding negotiable obligations if the out-of-court reorganization plan were not to be approved and insolvency proceedings were to be filed against it.

On January 28, 2004, affiliates of the U.S.-based investment group known as W.R. Huff and a certain Willard Alexander (together, the “Involuntary Petitioners”), sought to initiate an involuntary proceeding under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the “U.S. Bankruptcy Court”).

On January 30, 2004, the U.S. Bankruptcy Court entered an order allowing (a) Multicanal to take all actions to participate in, conduct, or take any action in furtherance of, Multicanal’s APE under the jurisdiction of the Argentine Court (the “APE Proceedings”) to the fullest extent permitted under Argentine law, (b) any creditor, equity holder, party in interest or other person, entity, court or governmental unit (including, without limitation, the Involuntary Petitioners) to take all actions to participate in, conduct, or take any action in furtherance of, Multicanal’s APE and its APE Proceedings to the fullest extent permitted under Argentine law, and (c) any creditor, equity holder, party in interest or any other person, entity, court or governmental unit (including, without limitation, the Involuntary Petitioners) to take all actions in the Argentine court presiding over the APE Proceedings (and any right to appeal any decision of such Argentine court) to oppose Multicanal’s APE or its APE Proceedings to the fullest extent permitted under Argentine law.

The January 30, 2004 order of the U.S. Bankruptcy Court ensured that the filing of the involuntary petition by the Involuntary Petitioners did not interfere with participation by Multicanal’s creditors or any other person in the APE Proceedings. The order made clear that any person’s or party’s participation in the APE or the APE Proceedings in Argentina is not prohibited or limited by application of the automatic stay provisions of the U.S. Bankruptcy Code.

On August 27, 2004, the Company was notified of a preliminary decision rendered by the U.S. Bankruptcy Court in the Section 304 of the U.S. Bankruptcy Code proceeding initiated by the Company’s Board of Directors. The decision called for additional proceedings with respect to two matters prior to the Company obtaining a final favorable decision in the United States.

After making the filings required by the U.S. Bankruptcy Court with respect to those additional proceedings, on December 2, 2004 the Court issued a ruling stating that as a result of the clarifications made by Multicanal S.A in its filings it would issue a final ruling dismissing the involuntary proceeding, and subject to compliance with certain conditions, grant the motion filed by the Board of Directors of the Company under Section 304 of the U.S. Bankruptcy Code. On January 6, 2005 the U.S. Bankruptcy Court issued an order on the matters previously decided in its earlier order. The January 6, 2005 order of the U.S. Bankruptcy Code was appealed by Huff to the U.S. District Court for the Southern District of New York (the “U.S. District Court”) in January 2005. On April 5, 2005, the U.S. District Court entered an order upholding the U.S. Bankruptcy Court’s dismissal of the involuntary petition filed against the Company and the denial of Huff’s claim regarding its alleged rights under the federal securities law that was invoked to seek dismissal of the motion filed by the Board of Directors under Section 304, but reserved judgment on issues relating to the compliance with the conditions imposed by the U.S. Bankruptcy Court until May 31, 2005. In May 2005, additional filings were made before the U.S. District Court. In its resolution of May 16, 2005, the Argentine Court determined that performance of the conditions imposed by the U.S. Bankruptcy Court in the manner proposed by the Company did not require any further proceedings in Argentina. On May 31, 2005, a hearing was held before the U.S. District Court.

Also in May 2005, Huff appealed the April 5, 2005 U.S. District Court order to the United States Court of Appeals for the Second Circuit. The Company has sought dismissal of such appeal. No decision has been issued

F-31

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

in the context of this appellate proceeding. The Company and Huff stipulated that this appeal should be adjourned until after the U.S. District Court issued its further order.

On September 6, 2005, to implement the cure ordered by the Argentine Court and the cure ordered by the U.S. Bankruptcy Court under the APE as promptly as practicable and to avoid the potential expense and delay that could result from further litigation regarding the availability of an exemption from registration under the Securities Act the Company filed a registration statement with the SEC to register with the SEC the securities to be offered in connection with the cures.

On September 28, 2005, the U.S. District Court affirmed (with the limitation noted below) prior rulings of the U.S. Bankruptcy Court granting recognition to the Company’s APE in the United States to the extent the APE has been confirmed in Argentina and dismissing the involuntary Chapter 11 petition brought by Huff against the Company. The U.S. District Court, however, rejected the Company’s argument that the offering of the securities contemplated in the Company’s proposed cures could be made in reliance upon Section 3(a)(9) of the Securities Act, and remanded the case to the U.S. Bankruptcy Court for further proceedings as to the legality of the measures proposed by the Company to implement the cures required by the Argentine Court in its decision confirming the APE and by the U.S. Bankruptcy Court under Section 5 of the Securities Act and the sufficiency of such measures under Section 304 of the U.S. Bankruptcy Code. Multicanal has presented its legal arguments following the schedule set forth by the U.S. Bankruptcy Court.

Huff filed notices of appeal of the U.S. District Court’s September 28, 2005 ruling on October 27, 2005, and the Company filed notices of cross appeal of the U.S. District Court’s September 28, 2005 ruling on November 9, 2005. Multicanal and Huff submitted a further stipulation to stay these Second Circuit appeals.

On March 29, 2006, the U.S. Bankruptcy Court issued a decision indicating that the cures intended to eliminate the discrimination found by such court to have affected U.S. retail holders that were only offered the cash option in 2003 could not be implemented in the manner proposed by Multicanal, leaving open the possibility of implementing such cure differently. On April 11, 2006, Multicanal informed the U.S. Bankruptcy Court that it had learned that shortly prior to the U.S. Bankruptcy Court’s March 29 decision, substantially all of the debt held by Huff and certain other parties opposing recognition of the APE in the United States had been sold to a third party that supports recognition of the APE in the United States and the expeditious consummation of the transactions contemplated in the APE. Multicanal also noted in its submission to the U.S. Bankruptcy Court that the purchaser of the debt previously held by Huff had undertaken to cure the discrimination of U.S. retail holders in a manner compatible with U.S. securities law. On that basis, the Company informed the Court of its intention to proceed with the implementation of the cure ordered by the Argentine court. On May 3, 2006, Huff and the other holders of Multicanal’s debt opposing recognition of the APE in the United States, on the one hand (the “Opponents”), and Multicanal, on the other hand, submitted a Stipulation and Order to the U.S. Bankruptcy Court pursuant to which the Opponents withdrew from the U.S. Bankruptcy Court any and all objections or claims of any kind whatsoever that they had, have or may have in the future relating to the application by Multicanal’s board of directors seeking recognition of the APE in the United States, agreed promptly to take steps within their control to withdraw all objections to such recognition as well to the APE from any United States or foreign court or administrative body, and consented to the entry of final relief for the APE by the U.S. Bankruptcy Court as requested by Multicanal’s board of directors. It is the intention of the board of directors of Multicanal to submit to the U.S. Bankruptcy Court an order of final relief under Section 304 of the U.S. Bankruptcy Code for the APE and consummate the transactions contemplated therein expeditiously. Without prejudice to the implementation and consummation of the APE with respect to any debt of Multicanal held by the Opponents, Multicanal withdrew from the U.S. Bankruptcy Court, and agreed to take steps within its control to withdraw from other United States and foreign courts and administrative bodies, its claims against the Opponents resulting from the request by Multicanal’s board of directors for recognition of the APE in the United States or the APE proceedings.

NOTE 15 – ADMISSION TO THE PUBLIC OFFER REGIME

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Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

On May 7, 2004 a Shareholders' Extraordinary Meeting was held to adopt the decisions contemplated under the terms of the APE approved by the Argentine Court. The Shareholders' Extraordinary Meeting approved the increase in capital stock as a result of the contribution of US$15,000,000 to be made by the controlling shareholder Grupo Clarín S.A., under the terms of a trust agreement entered into on December 11, 2003 the capitalization of the financial debt offered, as well as the overall amendment of the by-laws and admission of the Company to the public offering and share quotation regime. All such decisions were unanimously approved and shall become effective once the Company is ready to consummate the transactions contemplated in the APE, issuing new debt securities and making the payments set forth under the APE, in exchange for its debt.

On July 19, 2004, the Company’s Board of Directors, based on the results of the shareholders’ meeting, resolved to file the Company’s request to enter the public offering system, on July 20, 2004 having begun the procedure at the National Securities Commission to obtain the prequalification for the acceptance of the capital stock and the listing of Class D shares to be created by the conversion of Class C shares to enter the public offering system, subject to confirmation of the APE and after carrying out the procedures established in the ruling approving the reorganization. As of the date of these financial statements, the CNV was still analyzing the request.

On September 28, 2004 the Company’s Board of Directors approved the issuance of series “A” and “B” Negotiable Obligations in an amount up to US$150,000,000 each, under the Global Negotiable Obligations Program for US$300,000,000, which shall be issued and delivered according to the APE, once the APE has been confirmed and cannot be appealed. On September 29, 2004, the Company made presentations before CNV, the Buenos Aires Stock Exchange (“BCBA”) and the Over the Counter Market (Mercado Abierto Electrónico or “MAE”) to obtain the necessary approval for the delivery of the Series “A” and “B” negotiable obligations.

In the Shareholders’ Meeting held on October 20, 2005, the Company resolved to authorize the issuance of 10-Year Series “A” Negotiable Obligations – “Step-Up Notes” and 7-Year Series “B” Negotiable Obligations, for up to US$150,000,000 each, to replace the Series that would be issued under the Global Program and which was approved by the Unanimous Shareholders’ Meeting of January 22, 2003 and the Meeting of the Board of Directors of September 28, 2004. The approval of the new issuance was based on the need to comply with the new criterion imposed by the CNV. Under the new criterion, in the case of debt restructurings pursuant to an APE, the CNV does not admit series of negotiable obligations issued under a global program and instead requires individual and prior approval for each series of notes to be issued for that purpose.

NOTE 16 – SUBSEQUENT EVENTS

a) On April 26, 2006, at the Company’s general ordinary shareholders’ meeting, the shareholders of Multicanal approved, among other things, the financial statements as of December 31, 2005. The shareholders considered that the Company does not qualify for the dissolution event set forth in paragraph 5 of Section 95 of the Business Companies Law because since the financial and bank debt of the Company is being restructured pursuant to an APE that has been confirmed and ratified by the Argentine judiciary in its three instances.

b) On May 5, 2006, the Company received notice of the resolution of the Court of Appeals on Commercial Matters, whereby said court revoked the resolution of August 25, 2005 and granted the Company a term of six months starting on the date notice of such resolutions was served, to publish the official notices. On May 10, 2006, the Company started publication of the official notices ordered by the Argentine Court in its resolution confirming the APE.

F-33

Condensed from the original prepared in Spanish for publication in Argentina

MULTICANAL S.A.

Exhibit A

INFORMATION REQUIRED BY SECTION 64, SUB-SECTION b) OF LAW No, 19550

for the three-month periods ended March 31, 2006 and 2005

Caption	Direct operating expenses	General and administrative expenses	Selling and marketing expenses	Total at March 31,
Caption	Direct operating expenses	General and administrative expenses	Selling and marketing expenses	2006	2005
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
	Ps.
Payroll and social security	17,043,470	1,813,144	6,986,001	25,842,615	19,519,509
Employees’ dismissals	40,764	15,728	8,837	65,329	72,620
Taxes rates and contributions	2,807,288	1,622,760	4,038,811	8,468,859	7,014,739
Programming rights	46,816,066	-	-	46,816,066	41,865,037
Printing and distribution of magazines	2,473,165	-	178,626	2,651,791	2,196,201
Fees and compensation for services	27,263	4,324,105	11,500	4,362,868	3,123,058
Commissions	117,133	4,403,481	859,716	5,380,330	4,552,788
Overhead	18,712	6,440	830	25,982	142,040
Personnel expenses	1,223,882	650,913	890,617	2,765,412	2,521,753
Building expenses	127,090	2,153,678	66,667	2,347,435	1,898,939
Vehicles expenses	156,918	1,112,807	84,618	1,354,343	951,944
Rentals	3,519,034	492,430	70,279	4,081,743	4,659,501
Security and surveillance	17,724	1,029,940	25,334	1,072,998	656,405
Representation and travel expenses	17,685	233,693	25,821	277,199	226,228
Office expenses	4,862	466,520	57,532	528,914	555,328
Publicity and advertising	-	-	2,926,476	2,926,476	2,181,949
Sundry	10,105,351	1,426,526	87,428	11,619,305	8,704,703
Total at March 31, 2006	84,516,407	19,752,165	16,319,093	120,587,665
Total at March 31, 2005	73,100,354	16,199,015	11,543,373		100,842,742

F-34

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MULTICANAL S.A.

Exhibit B

COST OF GOODS SOLD AND DIRECT OPERATING EXPENSES

for the three-month periods ended March 31, 2006 and 2005

	Total at March 31,
	2006		2005
	(Unaudited)		(Unaudited)
	Ps.

Inventories at the commencement of the period		1,293,516		-
Material	297,537		-
Resale goods	995,979		-

Purchase and Direct operating expenses in the period		88,815,683		73,100,354
Purchase	4,299,276		-
Direct operating expenses (Exhibit A)	84,516,407		73,100,354

More / (less)
Holding results		414,630		-

Less:
Inventories at the end of the period		2,226,552		-
Material	276,324		-
Resale goods	1,950,228		-
Cost of goods sold and direct operating expenses		88,297,277		73,100,354

F-35

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~October~~May 1716, ~~2005~~2006 MULTICANAL S.A. By: /s/ Adrian Meszaros Adrian Meszaros Chief Financial Officer

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

REPORT OF FOREIGN ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934

SIGNATURE

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

Filing Compare · MULTICANAL SA