The DIRECTV Group Announces Second Quarter 2005 Results

Business Wire, August 4, 2005

DIRECTV U.S. generated quarterly revenues of $2.96 billion, an increase of 34% compared to last year's second quarter revenues. The increase was primarily due to continued strong subscriber growth, the consolidation of the full economics of the former NRTC and Pegasus subscribers, and higher ARPU. ARPU increased over 4% to $67.79 from the same period last year principally due to programming package price increases, higher mirroring fees from an increase in the average number of set-top receivers per customer and an increase in the percentage of subscribers purchasing local channels. These ARPU improvements were partially offset by the impact from the consolidation of the former NRTC and Pegasus subscribers, primarily due to the lower ARPU received from these subscribers.

Operating profit before depreciation and amortization nearly tripled to $505 million and operating profit increased by a factor of five to $333 million compared to last year's second quarter due to the increase in DIRECTV U.S. revenues combined with higher operating margins primarily resulting from the stabilizing of costs in key areas such as subscriber acquisition and upgrade and retention marketing. Operating profit was negatively impacted by higher amortization expense resulting from intangible assets recorded as part of the NRTC and Pegasus transactions.

DIRECTV Latin America Segment

On October 11, 2004, The DIRECTV Group announced a series of transactions with News Corporation, Grupo Televisa, Globo and Liberty Media that are designed to strengthen the operating and financial performance of DIRECTV Latin America by consolidating the Direct-To-Home (DTH) platforms of DIRECTV Latin America and Sky into a single platform in each of the major territories served in the region. In aggregate, The DIRECTV Group is paying approximately $580 million in cash for the News Corporation and Liberty Media equity stakes in the Sky platforms, of which approximately $398 million was paid in October 2004, with the remaining amount expected to be paid in 2006.

In Mexico, DIRECTV Latin America's local operating company is in the process of closing its operations and migrating its subscribers to Sky Mexico. Since the transactions were announced, 141,000 subscribers have been migrated to Sky Mexico, including 38,000 in the second quarter. As of June 30, 2005, DIRECTV Latin America's affiliate in Mexico had essentially completed the subscriber migration process. In the second quarter, DIRECTV Latin America booked a non-cash gain of $28 million related to the successful migration and retention of a portion of the Mexico subscribers and expects to book gains of up to $40 million in the second half of 2005 as additional migrated subscribers meet the retention requirements of the agreement. At the close of the transaction -- which is expected to occur in early 2006 -- an additional non-cash gain of up to $63 million is expected to be recognized.

In Brazil, DIRECTV Brasil and Sky Brasil have agreed to merge, with DIRECTV Brasil customers migrating to the Sky Brasil platform. The transactions in Brazil are subject to local regulatory approval, which has not yet been granted. In the rest of the region, The DIRECTV Group effectively acquired Sky's DTH satellite platforms in Colombia and Chile, resulting in the addition of approximately 89,000 subscribers in 2004. DIRECTV Latin America is in the process of migrating Sky Chile subscribers to the DIRECTV Latin America platform. In Colombia, the transaction is subject to regulatory approval, which is in the process of being finalized.