The DIRECTV Group Announces Third Quarter 2005 Results; DIRECTV U.S. Revenues Increase 22% to over $3.0 Billion; DIRECTV U.S. Operating Profit before Depreciation and Amortization Increases 133% to $338 Million

Business Wire, Nov 3, 2005

EL SEGUNDO, Calif. -- The DIRECTV Group, Inc. (NYSE:DTV) today reported third quarter net income of $95 million compared with a net loss of $1.01 billion last year and operating profit of $156 million compared with an operating loss of $1.55 billion in the same period of 2004. In addition, revenues increased 13% to $3.23 billion and operating profit before depreciation and amortization(1) improved to $365 million from an operating loss before depreciation and amortization of $1.35 billion.

"The more than doubling of DIRECTV U.S. operating profit before depreciation and amortization to $338 million in the quarter provides us with another data point showing the substantial profit-generating potential of DIRECTV," said Chase Carey, president and CEO. "Much of this growth was fueled by the 22% increase in revenues to $3.05 billion in the quarter along with higher operating margins attained through improved cost management in key areas such as subscriber acquisition and upgrade and retention marketing. Driven by these accomplishments, DIRECTV U.S. generated $230 million of free cash flow in the quarter compared to a negative $151 million in last year's third quarter."

Carey continued, "Another highlight in the quarter was gross subscriber additions of 1.1 million, demonstrating the continued consumer demand and strength of our brand and service. This demand -- which carried over to October when we added our 15 millionth customer -- is particularly meaningful because we have substantially improved the credit profiles of new subscribers due to the stricter credit policy we implemented at the beginning of the second quarter. In fact, we reduced the number of high-risk customers attained in the quarter by approximately 50% compared to last year. However, DIRECTV's average monthly churn rate of 1.89% in the quarter remained unacceptably high primarily due to an increase in involuntary churn of high-risk customers attained in 2004 and early 2005 before the new credit policy was put in place. As we continue to churn out these subscribers and add new customers with better credit, we are confident that we will drive churn lower beginning in the fourth quarter and into 2006. After accounting for churn, DIRECTV added 263,000 net subscribers in the quarter."

Carey concluded, "As we approach the busy holiday selling season, we are excited about the many compelling offers that will be available -- including the NFL SUNDAY TICKET SuperFan package, our new interactive DVR and the launch of high-definition local channels in a dozen major markets -- all of which support our goal of making DIRECTV the best television experience available anywhere."

THE DIRECTV GROUP'S OPERATIONAL REVIEW

Third Quarter Review

In the third quarter of 2005, The DIRECTV Group's revenues of $3.23 billion increased 13% compared to the third quarter of 2004 primarily due to strong DIRECTV U.S. subscriber growth, higher average monthly revenue per subscriber (ARPU), and 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. These changes were partially offset by the absence of revenues at Hughes Network Systems (HNS) due to the sale of several HNS business units in 2004 and the sale of a 50% interest in the remaining HNS business in 2005.

Three Months     Nine Months
The DIRECTV Group                         Ended            Ended
                                      September 30,    September 30,
                                     ---------------- ----------------
                                      2005     2004    2005     2004
------------------------------------  ------  -------  ------  -------
Revenues ($M)                        $3,233  $ 2,862  $9,569  $ 7,998
------------------------------------  ------  -------  ------  -------
Operating Profit (Loss) Before
 Depreciation and Amortization ($M)     365   (1,350)  1,045   (1,117)
------------------------------------  ------  -------  ------  -------
Operating Profit (Loss) ($M)            156   (1,550)    414   (1,674)
------------------------------------  ------  -------  ------  -------
Net Income (Loss) ($M)                   95   (1,009)    215   (1,661)
------------------------------------  ------  -------  ------  -------
Net Income (Loss) Per Common Share
 ($)                                   0.07    (0.73)   0.15    (1.20)
------------------------------------  ------  -------  ------  -------

The improvement in operating profit before depreciation and amortization to $365 million was primarily due to an impairment charge of $1.47 billion ($903 million after-tax) booked in the third quarter of 2004 related to the write-down of the SPACEWAY assets(2) at HNS. The comparison was also impacted by 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. In addition, DIRECTV Latin America recorded a third quarter 2005 non-cash gain of $30 million related to the sale of its subscriber list in Mexico. Operating profit of $156 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.