The DIRECTV Group Announces 2005 Results

Business Wire, Feb 8, 2006

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

--DIRECTV U.S. Reports Strong Financial Results:

--Generated Over $3.4 Billion in Revenues in the Fourth Quarter, Bringing Full Year Revenues to $12.2 Billion, or 25% Greater than the Prior Year

--Operating Profit before Depreciation and Amortization Increased to $442 Million, Leading to Full Year Results of over $1.5 Billion, or Nearly 3 Times 2004 Results

--Generated Free Cash Flow of $155 Million in the Fourth Quarter, Driving a Record $536 Million for the Full Year of 2005

--Board of Directors Authorizes Share Repurchase Program of up to $3 Billion

The DIRECTV Group, Inc. (NYSE:DTV) today reported full year 2005 net income of $336 million, compared with a net loss of $1.95 billion in 2004, and operating profit of $633 million, improved from an operating loss of $2.12 billion. Full year revenues increased nearly 16% to $13.16 billion, and operating profit before depreciation and amortization(1) improved to $1.49 billion from an operating loss before depreciation and amortization of $1.28 billion last year. In addition, DIRECTV's Board of Directors has authorized up to a $3 billion share repurchase program. DIRECTV expects these repurchases to occur from time to time, in the open market or in private transactions, subject to market conditions.

In the fourth quarter of 2005, net income was $121 million, compared with a net loss of $289 million in the fourth quarter of 2004, and operating profit of $219 million improved from an operating loss of $445 million. In addition, revenues increased 7% to $3.60 billion, and operating profit before depreciation and amortization improved to $441 million from an operating loss before depreciation and amortization of $164 million in the fourth quarter of last year.

"Fourth quarter results for DIRECTV U.S. reflect our strategy to improve the quality of our subscriber base and reduce customer churn, while at the same time drive significant revenue and earnings growth. Quarterly revenues increased 15% to $3.4 billion due to our larger subscriber base and a solid 5% ARPU increase in the quarter to $75.53," said Chase Carey, president and CEO. "Operating profit before depreciation and amortization of $442 million was up nearly 4 times over last year's fourth quarter primarily due to the revenue growth and higher operating margin related to improved scale and operating efficiencies. Importantly, these improvements drove free cash flow to $155 million in the quarter and $536 million for the full year -- a nearly $1 billion increase in DIRECTV U.S. free cash flow compared to 2004."

Carey continued, "Subscriber growth in the quarter -- although below expectations -- was consistent with our initiatives to improve the quality of new subscribers and drive lower churn. In fact, even though gross subscriber additions of 965,000 were 13% below last year's fourth quarter additions, the number of high-quality subscriber additions actually increased about 14% over the prior year. These significant improvements were due to a stricter credit policy and changes made to our distribution network -- including dealer terminations and new incentive plans -- designed to better align dealers with our objective to improve the overall credit quality of DIRECTV customers. With these changes, our average monthly churn rate is starting to decline -- monthly churn was 1.70% in the fourth quarter compared to 1.89% in the third quarter, resulting in net subscriber additions of 200,000. A key priority in 2006 is to continue improving the quality of new subscribers while driving further reductions in churn."

Carey continued, "Just as 2004 was an important year for DIRECTV in terms of restructuring the business and selling non-core assets, 2005 was important because we built out critical infrastructure that will provide us with the foundation for future growth. For example, we launched three new satellites, including two that will broadcast high-definition local channels, and we also introduced the industry's first MPEG-4 high-definition receiver and one of the most advanced digital video recorders. With these assets, we believe we are in an excellent position to extend our video leadership in 2006 through the introduction of more high-definition programming, original and compelling content, a video-on-demand service, new interactive services and an enhanced NFL Sunday Ticket(TM) package."

Carey concluded, "We are pleased to announce a share repurchase program of up to $3 billion. This repurchase program reflects our strong balance sheet and confidence in continued strong DIRECTV revenue, earnings and free cash flow growth, as well as our belief that our stock price is far below the intrinsic value of our company."

THE DIRECTV GROUP'S OPERATIONAL REVIEW

Fourth Quarter Review

In the fourth quarter of 2005, The DIRECTV Group's revenues of $3.60 billion increased 7%, compared to the fourth quarter of 2004, primarily due to strong DIRECTV U.S. subscriber growth and higher average monthly revenue per subscriber (ARPU). These changes were partially offset by the deconsolidation of the results of Hughes Network Systems (HNS) due to its sale.