The DIRECTV Group Announces First Quarter 2008 Results

Business Wire, May 7, 2008

Cash flow before interest and taxes2 increased 77% to $617 million and free cash flow3 increased 76% to $544 million compared to the first quarter 2007 primarily due to the higher OPBDA and lower capital expenditures driven by lower set-top box costs and an increase in the use of refurbished set-top boxes, partially offset by less cash provided through working capital. The quarter also included cash paid for share repurchases of $160 million and a capital contribution of $160 million received at the close of the Liberty Media and News Corporation transaction.

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Net subscriber additions of 275,000 increased 17% from last year's first quarter due to a 4% increase in gross subscriber additions to 964,000 and a decline in average monthly churn to 1.36%. The increase in gross additions was primarily due to increased sales of HD and DVR services, as well as strong results from our direct sales channel. The reduction in churn was principally due to an increase in the number of subscribers with advanced services and a continued focus on attaining higher quality subscribers, including the implementation of tighter credit policies.

Also in the quarter, DIRECTV U.S. changed its pricing and packaging strategy for commercial accounts to increase its competitiveness resulting in a change to its commercial equivalent subscriber count. Consequently, DIRECTV U.S. made a one-time downward adjustment to its cumulative subscribers of approximately 71,000. This change does not impact revenues, operating profit or cash flow. Including this adjustment, DIRECTV U.S. ended the quarter with 17.04 million subscribers, an increase of 5% over the 16.19 million subscribers reported on March 31, 2007.

In the quarter, DIRECTV U.S. revenues increased 14% to $4.05 billion due to strong ARPU growth and the larger subscriber base. ARPU of $79.70 increased 8.6% principally due to programming package price increases, higher HD and DVR service fees, higher lease fees due to an increase in the average number of receivers per home, as well as higher ad sales.

First quarter 2008 OPBDA increased 22% to $1.06 billion primarily due to the gross profit on the higher revenues. This growth was partially offset by higher subscriber acquisition costs related to increased dealer incentives linked to the acquisition of higher quality customers and an increase in the number of new customers adding HD and DVR services. Operating profit in the quarter increased 5% to $593 million compared to the same period last year mostly due to the higher OPBDA partially offset by increased depreciation expense associated with the capitalization of set-top boxes under the lease program which began in March of 2006.

DIRECTV Latin America Segment

The DIRECTV Group owns approximately 74% of Sky Brazil, 41% of Sky Mexico and 100% of PanAmericana, which covers most of the remaining countries in the region. Sky Mexico, whose results are accounted for as an equity method investment and therefore are not consolidated by DIRECTV Latin America, had approximately 1.64 million subscribers as of March 31, 2008 bringing the total subscribers in the region to 5.12 million.