Hughes Communications (HUGH)

Income Tax Expense

The increase in income tax expense was primarily attributable to increases in income earned from our foreign subsidiaries and in state income taxes.

Income Tax Expense

Income Tax Expense

Income tax expense decreased primarily due to the gain on the Distribution and the utilization of the deferred tax asset recorded as of December 31, 2005. In 2007, our income tax expense was primarily related to income earned by our international subsidiaries in Brazil, India and Europe and domestic state income taxes.

Income Tax Expense

The increase in income tax expense was due to income growth from our foreign subsidiaries, primarily in Brazil and India.

49

Table of Contents

Income Tax Expense

For the year ended December 31, 2006, income tax expense increase related primarily to the gain on the Distribution and included the utilization of the deferred tax asset recorded as of December 31, 2005. In addition, income tax expense included taxes on income earned by our subsidiaries in India and Brazil and estimated domestic state income taxes. For the year ended December 31, 2005, the Company recognized a $50.3 million income tax benefit, and associated deferred tax asset, related to the reversal of the valuation allowance associated with the loss carryforwards which were expected to be utilized to offset the Federal taxable income on the Distribution.

Pursuant to a private letter ruling issued by the Internal Revenue Service (“IRS”) and a closing agreement entered into by the IRS and SkyTerra with respect to whether an “ownership change” as defined by Section 382 of the Internal Revenue Code occurred during the period from June 5, 1999 through December 31, 2004, we expect that SkyTerra’s net operating loss carryforwards (a portion of which became our net operating loss carryforwards following the Distribution) will not be subject to limitation and, therefore, will be available to offset future taxable income if such taxable income is generated in a period prior to the expiration of or other limitation on such net operating loss carryforwards. As the Distribution did not qualify as a tax-free spin-off, SkyTerra generated significant taxable income in 2006 for Federal and state income tax purposes.

Discontinued Operations

For the year ended December 31, 2006, net gain on discontinued operations primarily resulted from the sale of our interest in AfriHUB on February 20, 2006. In 2005, the net gain was primarily attributable to the gain of $1.1 million from the settlement of Rare Medium, Inc. liabilities for a lesser amount, partially offset by a $1.0 million loss from operations of AfriHUB.

55

Income Tax Expense

For the year ended
December 31, 2006, income tax expense increase related primarily to the gain on the Distribution and included the utilization of the deferred tax asset recorded as of December 31, 2005. In addition, income tax expense included taxes on
income earned by our subsidiaries in India and Brazil and estimated domestic state income taxes. For the year ended December 31, 2005, the Company recognized a $50.3 million income tax benefit, and associated deferred tax asset, related to the
reversal of the valuation allowance associated with the loss carryforwards which were expected to be utilized to offset the Federal taxable income on the Distribution.

FACE="Times New Roman" SIZE="2">Pursuant to a private letter ruling issued by the Internal Revenue Service (“IRS”) and a closing agreement entered into by the IRS and SkyTerra with respect to whether an “ownership change” as
defined by Section 382 of the Internal Revenue Code occurred during the period from June 5, 1999 through December 31, 2004, we expect that SkyTerra’s net operating loss carryforwards (a portion of which became our net operating
loss carryforwards following the Distribution) will not be subject to limitation and, therefore, will be available to offset future taxable income if such taxable income is generated in a period prior to the expiration of or other limitation on such
net operating loss carryforwards. As the Distribution did not qualify as a tax-free spin-off, SkyTerra generated significant taxable income in 2006 for Federal and state income tax purposes.

Income Tax Expense

For the three months ended March 31, 2007, we recorded income tax expense of $0.5 million, primarily associated with several of HNS’ foreign subsidiaries. For the three months ended March 31, 2006, we recorded income tax expense of $51.3 million, attributable primarily to the gain on the Distribution and included the utilization of the deferred tax asset recorded as of December 31, 2005.

Income Tax Expense

For the year ended December 31, 2006, the Company recorded income tax expense of $54.1 million. This amount related primarily to the gain on the Distribution and included the utilization of the deferred tax asset recorded as of December 31, 2005. In addition, income tax expense included taxes on income earned by the Company’s subsidiaries in India and Brazil and estimated domestic state income taxes. For the year ended

47

Table of Contents

December 31, 2005, the Company recognized a $50.3 million income tax benefit, and associated deferred tax asset, related to the reversal of the valuation allowance associated with the loss carryforwards which are expected to be utilized to offset the Federal taxable income on the Distribution.

Discontinued Operations

For the years ended December 31, 2006 and 2005, we recorded a net gain on discontinued operations of $0.2 million and $0.1 million, respectively. In 2006, the net gain resulted primarily from the sale of our interest in AfriHUB on February 20, 2006. In 2005, the net gain was primarily attributable to the gain of $1.1 million from the settlement of Rare Medium, Inc. liabilities for a lesser amount, partially offset by a $1.0 million loss from operations of AfriHUB.

Income Tax Expense

In 2006, we recorded income tax expense of $3.3 million, which related to foreign subsidiaries primarily in Brazil and India. In 2005, we recorded income tax expense of $0.9 million related to foreign subsidiaries in India, Brazil and Europe.

Income Tax Expense

For the nine months ended September 30, 2006, we recorded income tax expense of $52.9 million. For the nine months ended September 30, 2005, no income tax benefit was recorded on our net loss before income taxes for that period as we were maintaining a full valuation allowance on our deferred tax assets at that time. During the year ended December 31, 2005, we recognized a $50.3 million income tax benefit, and associated deferred tax asset, related to the reversal of the valuation allowance for the net operating and capital loss carryforwards which are expected to be utilized to offset the Federal taxable income on the Distribution, which did not qualify as a tax-free spin-off. The $52.9 million of income tax expense recorded in the nine months ended September 30, 2006 consisted of a $50.3 million reversal of the previously established deferred tax asset, $0.6 million in estimated state taxes payable, and $2.0 million in estimated foreign taxes payable by our international subsidiaries.

42

Table of Contents

Loss from Discontinued Operations

For the nine months ended September 30, 2006, we recognized a loss from operations of AfriHUB for the period prior to the sale of approximately $42,000. For the nine months ended September 30, 2005, we recognized a loss from operations of AfriHUB of $0.3 million.

Gain on Sale of Discontinued Operations

During the nine months ended September 30, 2006, we recognized a gain of $0.2 million on the February 20, 2006 sale of AfriHUB.

Income Tax Expense

For the nine months ended September 30, 2006, income tax expense increased by $1.6 million to $2.1 million from $0.5 million for the nine months ended September 30, 2005. The increase was primarily due to increase in profits at our international subsidiaries in Brazil and India.

Income Tax Expense

For the six months ended June 30, 2006, we recorded income tax expense of $51.8 million. For the six months ended June 30, 2005, no income tax benefit was recorded on our net loss before income taxes for that period as we were maintaining a full valuation allowance on our deferred tax assets at that time. During the year ended December 31, 2005, we recognized a $50.3 million income tax benefit, and associated deferred tax asset, related to the reversal of the valuation allowance for the net operating and capital loss carryforwards which are expected to be utilized to offset the Federal taxable income on the Distribution, which did not qualify as a tax-free spin-off. The $51.8 million of income tax expense recorded in the six months ended June 30, 2006 consisted of a $50.3 million reversal of the previously established deferred tax asset, $0.6 million in estimated state taxes payable, and $0.9 million in estimated foreign taxes payable by our international subsidiaries.

Loss from Discontinued Operations

For the six months ended June 30, 2006, we recognized a loss from operations of AfriHUB for the period prior to the sale of approximately $42,000. For the six months ended June 30, 2005, we recognized a loss from operations of AfriHUB of $1.2 million.

Gain on Sale of Discontinued Operations

During the six months ended June 30, 2006, we recognized a gain of $0.2 million on the February 20, 2006 sale of AfriHUB.

Income Tax Expense

For the six months ended June 30, 2006, income tax expense increased by $0.6 million to $1.0 million from $0.4 million for the six months ended June 30, 2005. The increase in income tax expense was primarily due to increased profits at HNS’ international subsidiaries in Brazil and India.

Income Tax Expense

For the three months ended March 31, 2006, we recorded income tax expense of $51.3 million. For the three months ended March 31, 2005, no income tax benefit was recorded on our net loss before income taxes for that period as we were maintaining a full valuation allowance on our deferred tax assets at that time. During the year ended December 31, 2005, we recognized a $50.3 million income tax benefit, and associated deferred tax asset, related to the reversal of the valuation allowance for the net operating and capital loss carryforwards which are expected to be utilized to offset the Federal taxable income on the Distribution, which did not qualify as a tax-free spin-off. The $51.3 million of income tax expense recorded in the three months ended March 31, 2006 consisted of a $50.3 million reversal of the previously established deferred tax asset, $0.5 million in estimated state taxes payable, and $0.5 million in estimated foreign taxes payable by our international subsidiaries.

Loss from Discontinued Operations

For the three months ended March 31, 2006, we recognized a loss from operations of AfriHUB for the period prior to the sale of approximately $42,000. For the three months ended March 31, 2005, we recognized a loss from operations of AfriHUB of $0.5 million.

35

Table of Contents

Gain on Sale of Discontinued Operations

During the three months ended March 31, 2006, we recognized a gain of $0.2 million on the February 20, 2006 sale of AfriHUB.