The DIRECTV Group, Inc. (NYSE:DTV) today reported that second quarter revenues increased 17% to $4.14 billion and operating profit before depreciation and amortization1 increased 16% to $1.13 billion compared to last year's second quarter. The DIRECTV Group reported that second quarter 2007 operating profit of $740 million and net income of $448 million were relatively unchanged from last year's second quarter. Earnings per share were $0.37 compared with $0.36 in the same period last year. In addition, DIRECTV's Board of Directors has authorized up to a $1.0 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.

?The DIRECTV Group's second quarter results highlight the financial and operating strengths of our businesses in both the United States and Latin America. Looking first at the quarterly results for DIRECTV U.S., in many ways they reflect the growing demand for advanced services by our customers,? said Chase Carey, president and CEO of The DIRECTV Group, Inc. ?Strong revenue growth of 12% to over $3.7 billion was fueled by a nearly 7% increase in ARPU to $76.43 due in large part to approximately 50% more high definition (HD) and digital video recorder (DVR) customers in the quarter. This increase in customer demand for advanced services also contributed to the higher gross additions of 900,000 and lower monthly churn rate of 1.58%, resulting in net subscriber additions of 128,000 for DIRECTV U.S. in the quarter.?

Carey continued, ?The strong revenue growth drove the increase in DIRECTV U.S. operating profit before depreciation and amortization to $1.06 billion. In addition, upgrade and acquisition costs, including capitalized equipment, were higher than the prior year due to the increased number of customers adding HD and DVR services, as well as converting to our MPEG-4 HD equipment. It's important to highlight that households with HD and/or DVR services generate superior financial returns due to the significantly greater cash flows compared to homes without these services.?

?Second quarter results were also very strong in our DIRECTV Latin America businesses where we attained significantly higher net subscriber additions of 141,000 driven by strong gross additions of 260,000 and a large reduction in the monthly churn rate to 1.38%. In addition, revenues in the region more than doubled to $409 million and operating profit before depreciation and amortization was up threefold to $95 million primarily due to strong subscriber growth and the merger with Sky Brazil which was completed in the second half of last year.?

Carey added, ?In light of the rapidly growing demand for advanced services in the United States, it is particularly exciting to look ahead a couple of months when we leapfrog the competition by offering up to 100 national HD channels. We believe our HD line-up will provide DIRECTV U.S. with a significant competitive advantage in the rapidly growing market for HD television. Consumers are passionate about HD and DIRECTV will be the clear choice for anyone looking for the best HD television experience.?

THE DIRECTV GROUP'S OPERATIONAL REVIEW

The DIRECTV Group Three Months Six Months
Dollars in Millions except Earnings Ended June 30, Ended June 30,
per Common Share 2007 2006 2007 2006
Revenues $4,135 $3,520 $8,043 $6,906
Operating Profit Before Depreciation and Amortization(1) 1,133 976 2,063 1,581
Operating Profit 740 741 1,303 1,133
Net Income 448 459 784 694
Earnings Per Common Share ($) 0.37 0.36 0.64 0.53
Capital Expenditures and Cash Flow        
Cash Paid for DIRECTV U.S. Subscriber Leased Equipment - Acquisitions, Upgrade and Retention 335 253 741 339
Cash Paid for Property, Equipment and Satellites 321 210 605 395
Cash Flow Before Interest and Taxes(2) 305 400 653 585
Free Cash Flow(3) 201 397 510 566

Second Quarter Review

In the second quarter of 2007, The DIRECTV Group's revenues of $4.14 billion increased 17% over the same period last year principally due to strong growth in average revenue per subscriber (ARPU) and a larger subscriber base at DIRECTV U.S., as well as the consolidation of Sky Brazil's financial results due to the completion of the merger with DIRECTV Brazil on August 23, 2006.

The 16% increase in operating profit before depreciation and amortization to $1.13 billion was primarily due to the gross profit associated with the higher revenues discussed above and a $25 million gain from the settlement of several hurricane related insurance claims, partially offset by higher upgrade and acquisition costs at DIRECTV U.S. primarily related to the increased number of new and existing customers adding HD and DVR services. Operating profit of $740 million and net income of $448 million were relatively unchanged with the second quarter of last year as the higher operating profit before depreciation and amortization was offset by higher depreciation and amortization primarily from increased capitalization of customer equipment under the DIRECTV U.S. lease program, as well as the consolidation of Sky Brazil.

Cash flow before interest and taxes2 and free cash flow3 declined to $305 million and $201 million, respectively, primarily due to an increase in capital expenditures. The higher capital expenditures were primarily at DIRECTV U.S. related to an increase in the number of new and existing customers leasing HD and DVR equipment, as well as higher infrastructure costs associated with the implementation and rollout of additional HD programming. Also contributing to the increase in capital expenditures was the consolidation of the Sky Brazil business. In addition, free cash flow was impacted by tax payments made in the second quarter of 2007 compared to tax refunds in the prior period. The quarter also included share repurchases of $596 million.

Year-to-Date Review

In the first six months of 2007, The DIRECTV Group's revenues of $8.04 billion increased 16% over the same period in the prior year principally due to strong ARPU growth and a larger subscriber base at DIRECTV U.S., as well as the consolidation of Sky Brazil's financial results.

Operating profit before depreciation and amortization in the first half of 2007 of $2.06 billion increased 30% compared with the first half of 2006 due to the higher gross profit associated with the higher revenues and the capitalization of customer equipment under the lease program implemented in March 2006 at DIRECTV U.S., as well as the consolidation of Sky Brazil's results. Also impacting the comparison was a $57 million gain recorded in the first quarter of 2006 for the completion of DIRECTV Latin America's Sky Mexico transactions. Operating profit of $1.30 billion through June 2007 increased 15% compared with the same period in 2006 as the higher operating profit before depreciation and amortization was partially offset by higher depreciation and amortization resulting primarily from the increased capitalization of customer equipment under the DIRECTV U.S. lease program, as well as the consolidation of Sky Brazil.

Net income increased 13% to $784 million in the first six months of 2007 primarily due to the changes in operating profit discussed above partially offset by higher income tax expense in the most recent period associated with the higher pre-tax income.

Cash flow before interest and taxes increased to $653 million in the first half of 2007 mostly due to the higher operating profit before depreciation and amortization partially offset by increased capital expenditures. Capital expenditures were higher primarily at DIRECTV U.S. due to the implementation of the equipment lease program in March 2006, higher costs for the increased number of new and existing customers adding HD and DVR services, and greater infrastructure costs associated with the rollout of additional HD programming. In addition, free cash flow declined to $510 million primarily due to tax payments made in the first half of 2007 compared to tax refunds in the prior period. Other uses of cash in the first half of 2007 were for share repurchases of $697 million, the purchase of Darlene's interest in DIRECTV Latin America for $325 million and the repayment of $210 million of outstanding debt at Sky Brazil.

SEGMENT FINANCIAL REVIEW

DIRECTV U.S. Segment

Second Quarter Review

Gross subscriber additions increased to 900,000 and average monthly churn declined to 1.58% primarily due to increased sales of HD and DVR services. As a result, net subscribers increased to 128,000 in the quarter bringing the total number of DIRECTV U.S. subscribers as of June 30, 2007 to 16.32 million, an increase of 5% over the 15.51 million subscribers reported on June 30, 2006.

In the quarter, DIRECTV U.S. revenues increased 12% to $3.73 billion due to strong ARPU growth and the larger subscriber base. ARPU of $76.43 increased 6.8% compared to last year principally due to programming package price increases and higher HD, lease and DVR fees.

Three Months Six Months
DIRECTV U.S. Ended June 30, Ended June 30,
Dollars in Millions except ARPU 2007 2006 2007 2006
Revenue $3,726   $3,319   $7,265   $6,512  
Average Monthly Revenue per Subscriber (ARPU) ($) 76.43   71.59   74.96   70.73  
Operating Profit Before Depreciation and Amortization(1) 1,062   978   1,931   1,522  
Operating Profit 722   775   1,288   1,137  
Cash Flow Before Interest and Taxes(2) 308   450   651   661  
Free Cash Flow(3) (47 ) 225   215   273  

Subscriber Data (in 000's except Churn)

       
Gross Subscriber Additions 900   863   1,829   1,782  
Average Monthly Subscriber Churn 1.58 % 1.59 % 1.51 % 1.52 %
Net Subscriber Additions 128   125   363   380  
Cumulative Subscribers 16,316   15,513   16,316   15,513  

The second quarter 2007 operating profit before depreciation and amortization increased 9% to $1.06 billion primarily due to the gross profit on the higher revenues and a $25 million gain associated with the settlement of several hurricane related insurance claims. These increases were partially offset by higher costs for the increased number of new and existing customers adding HD and DVR services and converting to MPEG-4 HD equipment in the quarter. Operating profit in the quarter declined 7% to $722 million compared to the same period last year mostly due to 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

In January 2007, The DIRECTV Group purchased Darlene's 14% ownership in DIRECTV Latin America, LLC, for $325 million in cash. As a result, The DIRECTV Group owns approximately 74% of the merged business in 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 1.49 million subscribers as of June 30, 2007.

Second Quarter Review

In the second quarter of 2007, DIRECTV Latin America's net subscriber additions increased 83% to 141,000 primarily due to subscriber growth in Brazil, Venezuela and Colombia. Also contributing to the net subscriber increase was a decline in aggregate churn from 1.46% to 1.38% in the current quarter primarily due to lower churn in Brazil. The total number of DIRECTV subscribers in Latin America as of June 30, 2007 increased to 2.94 million compared to 1.73 million as of June 30, 2006 due to the 869,000 subscribers added as a result of the merger with Sky Brazil in the third quarter of 2006 as well as the new subscribers added throughout the region over the past year.

Three Months Six Months
DIRECTV Latin America Ended June 30, Ended June 30,
Dollars in Millions except ARPU 2007

2006

2007 2006
Revenue $409   $202   $778   $395  
Average Monthly Revenue per Subscriber (ARPU) ($) 47.51   39.78   46.04   39.62  
Operating Profit Before Depreciation and Amortization(1) 95   21   175   97  
Operating Profit (Loss) 41   (13 ) 57   31  
Cash Flow Before Interest and Taxes(2) 44   (5 ) 78   (17 )
Free Cash Flow(3) 34   (5 ) 65   (16 )

Subscriber Data (in 000's except Churn)

       
Gross Subscriber Additions 260   151   464   289  
Average Monthly Subscriber Churn 1.38 % 1.46 % 1.39 % 1.51 %
Net Subscriber Additions(4) (000's) 141   77   229   139  
Cumulative Subscribers(4) (000's) 2,940   1,732   2,940   1,732  

Revenues for DIRECTV Latin America more than doubled to $409 million in the quarter principally due to the consolidation of Sky Brazil's operations including significantly higher ARPU, as well as continued subscriber and ARPU growth at PanAmericana. The increase in DIRECTV Latin America's second quarter 2007 operating profit before depreciation and amortization to $95 million was primarily attributable to the consolidation of the Sky Brazil business and the gross profit generated from the higher revenues. DIRECTV Latin America's operating profit improved to $41 million as the higher operating profit before depreciation and amortization discussed above was partially offset by higher depreciation and amortization expense related to the tangible and intangible assets recorded as part of the Sky Brazil and Darlene transactions.

CONFERENCE CALL INFORMATION

A live webcast of The DIRECTV Group's second quarter 2007 earnings call will be available on the company's website at www.directv.com/investor. The webcast will begin at 2:00 p.m. ET, today August 9, 2007 and will be archived on our website at www.directv.com/investor. Access to the earnings call is also available by dialing (973) 582-2751. The confirmation code is 8962688.

FOOTNOTES

(1) Operating profit before depreciation and amortization, which is a financial measure that is not determined in accordance with accounting principles generally accepted in the United States of America, or GAAP, should be used in conjunction with other GAAP financial measures and is not presented as an alternative measure of operating results, as determined in accordance with GAAP. Please see each of The DIRECTV Group's and DIRECTV Holdings LLC's Annual Reports on Form 10-K for the year ended December 31, 2006 for further discussion of operating profit before depreciation and amortization. Operating profit before depreciation and amortization margin is calculated by dividing operating profit before depreciation and amortization by total revenues.

(2) Cash flow before interest and taxes, which is a financial measure that is not determined in accordance with GAAP, is calculated by deducting amounts under the captions ?Cash paid for property and equipment?, ?Cash paid for satellites?, ?Cash paid for subscriber leased equipment ? subscriber acquisitions? and ?Cash paid for subscriber leased equipment ? upgrade and retention? from ?Net cash provided by operating activities? from the Consolidated Statements of Cash Flows and adding back net interest paid and ?Cash paid (refunded) for income taxes?. This financial measure should be used in conjunction with other GAAP financial measures and is not presented as an alternative measure of cash flows from operating activities, as determined in accordance with GAAP. The DIRECTV Group and DIRECTV U.S. management use cash flow before interest and taxes to evaluate the cash generated by our current subscriber base, net of capital expenditures, and excluding the impact of interest and taxes, for the purpose of allocating resources to activities such as adding new subscribers, retaining and upgrading existing subscribers and for additional capital expenditures. The DIRECTV Group and DIRECTV U.S. believe this measure is useful to investors, along with other GAAP measures (such as cash flows from operating and investing activities), to compare our operating performance to other communications, entertainment and media companies. We believe that investors also use current and projected cash flow before interest and taxes to determine the ability of our current and projected subscriber base to fund required and discretionary spending and to help determine the financial value of the company.

(3) Free cash flow, which is a financial measure that is not determined in accordance with GAAP, is calculated by deducting amounts under the captions ?Cash paid for property and equipment