The DIRECTV Group Announces First Quarter 2005 Results

Business Wire, May 2, 2005

First Quarter Review

DIRECTV U.S. gross subscriber additions increased by 20% to a first quarter record of 1,137,000 due in part to improved local and international programming, as well as improved distribution mostly through the telephone company partnerships and in the former NRTC territories. After accounting for average monthly churn of 1.49% in the period, DIRECTV U.S. added 505,000 net subscribers in the quarter, an increase of 21% over the same period last year. As of March 31, 2005, the total number of DIRECTV platform subscribers increased 14% to 14.45 million compared to the 12.63 million platform subscribers as of March 31, 2004.

DIRECTV U.S. generated quarterly revenues of $2.80 billion, an increase of 35% compared to last year's first 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 3.5% to $65.78 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 customers subscribing to 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. The consolidation of the former NRTC and Pegasus subscribers negatively impacted ARPU by approximately $2.75. Excluding this negative impact, ARPU would have increased by about 8%.

The first quarter 2005 increase in operating profit before depreciation and amortization to $216 million and operating profit to $38 million was primarily due to the increase in gross profit generated from the higher revenues. This improvement was partially offset by increased subscriber acquisition costs principally related to the record first quarter gross subscriber additions. Also impacting the quarter were higher upgrade and retention expenses mostly due to an increase in the number of existing customers taking Digital Video Recorders (DVRs), the mover's program, as well as high-definition and local channel equipment upgrades. In addition, 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 combining the two Direct-To-Home (DTH) platforms 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.