The DIRECTV Group Announces Second Quarter 2005 Results

Business Wire, August 4, 2005

EL SEGUNDO, Calif. -- The DIRECTV Group, Inc. (NYSE:DTV):

--DIRECTV U.S. Revenues Increase 34% to $3.0 Billion

--DIRECTV U.S. Operating Profit before Depreciation and Amortization Nearly Triples to $505 Million, More than Doubling Margin to 17%

The DIRECTV Group, Inc. (NYSE:DTV) today reported second quarter net income of $162 million, compared with a net loss of $13 million last year, and operating profit of $312 million, compared with an operating loss of $28 million in the same period of 2004. In addition, revenues increased 21% to $3.19 billion, and operating profit before depreciation and amortization(1) of $523 million more than tripled compared to last year's second quarter.

"Our second quarter results are indicative of the substantial profit and cash-generating potential of DIRECTV U.S.," said Chase Carey, president and CEO. "The 34% increase in revenues to $3.0 billion and the nearly tripling of operating profit before depreciation and amortization to over $500 million at DIRECTV U.S. are a reflection of our profitable growth strategy to drive strong subscriber and ARPU growth while also increasing margins through improved cost management, particularly in key areas such as subscriber acquisition and upgrade/retention marketing."

Carey continued: "With 964,000 gross subscriber additions in the quarter, demand for DIRECTV continues to be strong. Importantly, with the stricter credit screening policy that we implemented at the beginning of the second quarter, we are now attaining subscribers with improved credit profiles. However, DIRECTV's net subscriber additions of 225,000 were lower due to a disappointing average monthly churn rate in the quarter of 1.69% primarily resulting from an increase in involuntary churn of high-risk customers attained over the last several quarters. With our new credit policy and other recent actions taken to improve the credit worthiness of new subscribers, we believe we will drive churn lower beginning in the fourth quarter of this year."

Carey concluded: "Looking ahead over the next few months, we are excited about several important initiatives that we believe will extend DIRECTV's leadership in the video marketplace, including a more exciting NFL SUNDAY TICKET(TM) package, the introduction of our more advanced digital video recorder and the roll-out of several markets with high-definition local television."

Second Quarter Review

THE DIRECTV GROUP'S OPERATIONAL REVIEW

In the second quarter of 2005, The DIRECTV Group's revenues of $3.19 billion increased 21%, compared to the second quarter of 2004, driven principally by strong DIRECTV U.S. subscriber growth, the consolidation of the full economics of the former National Rural Telecommunications Cooperative (NRTC) and Pegasus Satellite Television (Pegasus) subscribers acquired in the third quarter of 2004, and strong average monthly revenue per subscriber (ARPU) growth at DIRECTV U.S. These changes were partially offset by lower revenues at Hughes Network Systems (HNS) due to the sale of certain HNS business units.

Three Months         Six Months
The DIRECTV Group                 Ended June 30,      Ended June 30,
                                 -----------------   -----------------
                                  2005      2004      2005      2004
------------------------------   -------   -------   -------   -------
Revenues ($M)                    $3,188    $2,643    $6,336    $5,136
------------------------------   -------   -------   -------   -------
Operating Profit Before
 Depreciation and Amortization
 ($M)                               523       143       681       233
------------------------------   -------   -------   -------   -------
Operating Profit (Loss) ($M)        312       (28)      257      (125)
------------------------------   -------   -------   -------   -------
Net Income (Loss) ($M)              162       (13)      120      (652)
------------------------------   -------   -------   -------   -------
Net Income (Loss) Per Common
 Share ($)                         0.12     (0.01)     0.09     (0.47)
------------------------------   -------   -------   -------   -------

The significant increase in operating profit before depreciation and amortization to $523 million was primarily due to the aforementioned increased revenues combined with higher DIRECTV U.S. operating margin, resulting primarily from the stabilizing of costs in key areas such as subscriber acquisition and upgrade and retention marketing, as well as a $28 million gain recorded for the sale of the DIRECTV Latin America subscribers in Mexico. Also impacting the comparison were charges in the 2004 period for $60 million related to stock-based compensation expense, severance and employee retention plans. Operating profit of $312 million improved due to the higher operating profit before depreciation and amortization, partially offset by higher amortization expense at DIRECTV U.S., resulting from intangible assets recorded as part of the NRTC and Pegasus transactions.