The DIRECTV Group Announces Second Quarter 2006 Results

Business Wire, August 8, 2006

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

--DIRECTV U.S. Revenues Increase 12% to $3.3 Billion and Cash Flow before Interest and Taxes Nearly Triples to $450 Million

--Results Bolstered by Lower Monthly Churn of 1.59% and Strong ARPU Growth of 5.6%

The DIRECTV Group, Inc. (NYSE:DTV) today reported that second quarter revenues increased 10% to $3.52 billion and operating profit before depreciation and amortization(1) nearly doubled to $977 million compared to last year's second quarter. The DIRECTV Group reported second quarter 2006 operating profit and net income both more than doubled to $741 million and $459 million, respectively, when compared to the same period last year. Earnings per share were $0.36 compared with $0.12 in the same period last year. These operating results include the effect of $253 million of equipment that DIRECTV U.S. capitalized during the quarter under its lease program, which was implemented March 1, 2006.

"Similar to recent quarters, DIRECTV U.S. generated excellent financial results highlighted by a 12% increase in revenues to $3.3 billion, a 93% increase in operating profit before depreciation and amortization to $977 million and a nearly tripling of cash flow before interest and taxes to $450 million," said Chase Carey, president and CEO of The DIRECTV Group, Inc.

Carey continued, "In many ways, the results in the quarter reflect our strategy to target higher quality subscribers. For example, although gross subscriber additions of 863,000 and net additions of 125,000 in the quarter were below expectations, it's important to note that we added 11% more higher quality gross subscribers in the quarter compared to last year. This trend -- which is driving both the top-line and bottom-line financial results -- is primarily due to the ongoing changes we're making to refine our credit policy and dealer network. These factors played an important role in reducing DIRECTV's monthly churn rate from 1.69% to 1.59% this quarter. In addition, customers are buying more premium services such as high definition programming and digital video recorders which is contributing to the strong ARPU growth of 5.6% in the quarter. The increase in operating profit -- excluding the accounting effect from the new lease program -- is also directly linked to the improved subscriber mix primarily due to the reduced acquisition costs associated with the significant reduction in lower quality customers attained and the related lower bad debt expense incurred. We are also pleased that our acquisition cost per subscriber, or SAC, declined both sequentially and compared to last year as our set-top box cost reductions offset the higher sales of advanced boxes."

Carey concluded, "With continued improvements in subscriber growth and the launch of several new products and services, we look forward to a strong second half of the year. For example, we are currently promoting our enhanced NFL SUNDAY TICKET(R) package that features new interactive services and more high definition games. In addition, we just launched 19 regional sports networks in high definition and we will continue to add new high definition local channel markets as we strive to reach approximately 75% of all U.S. television households by the end of the year. Finally, we're also very excited about the launch of our new HD-DVR which is scheduled to be introduced in Los Angeles later this month and nationwide in the following weeks."

Second Quarter Review

Lease Program. On March 1, 2006, DIRECTV U.S. introduced a set-top receiver lease program primarily to increase future profitability by providing DIRECTV U.S. with the opportunity to retrieve and reuse set-top receivers from deactivated customers. Under this new program, set-top receivers are capitalized and depreciated over their estimated useful lives of three years. Prior to March 1, 2006, set-top receivers provided to new and existing DIRECTV U.S. subscribers were immediately expensed upon activation as a subscriber acquisition or upgrade and retention cost. The lease program is expected to result in a reduction in subscriber acquisition, and upgrade and retention costs. The amount of set-top receivers capitalized during the period is now reported in the DIRECTV U.S. Consolidated Statements of Cash Flows under the captions "Cash paid for subscriber leased equipment - subscriber acquisitions" and "Cash paid for subscriber leased equipment - upgrade and retention." The amount of cash DIRECTV U.S. paid during the quarter ended June 30, 2006 for leased set-top receivers totaled $253 million -- $153 million for subscriber acquisitions and $100 million for upgrade and retention.

THE DIRECTV GROUP'S OPERATIONAL REVIEW

                                        Three Months     Six Months
                                       Ended June 30,  Ended June 30,
Dollars in Millions except Earnings    --------------- ---------------
per Common Share                        2006    2005    2006    2005
-------------------------------------- ------- ------- ------- -------
Revenues                               $3,520  $3,188  $6,906  $6,336
-------------------------------------- ------- ------- ------- -------
Operating Profit Before
Depreciation and Amortization(1)          977     523   1,582     681
-------------------------------------- ------- ------- ------- -------
Operating Profit                          741     312   1,134     257
-------------------------------------- ------- ------- ------- -------
Net Income                                459     162     694     120
-------------------------------------- ------- ------- ------- -------
Earnings Per Common Share ($)            0.36    0.12    0.53    0.09
-------------------------------------- ------- ------- ------- -------
Free Cash Flow(2)                         397      99     566    (103)
-------------------------------------- ------- ------- ------- -------