The DirecTV Group (DTV)

Note 10: Acquisitions and Divestitures

Investments

        During the six months ended June 30, 2008, we paid $97 million in cash to acquire equity method investments and $7 million in cash for other investments.

        On January 30, 2007, we acquired Darlene's 14% equity interest in DLA LLC for $325 million in cash. We accounted for the acquisition of this interest using the purchase method of accounting and have allocated the excess purchase price over the book value of the minority interest acquired to a subscriber related intangible asset of $75 million and goodwill of $187 million.

Divestitures

        During the second quarter of 2007, we recorded a $17 million reduction to our unrecognized tax benefits in "Income from continued operations, net of taxes" in our Consolidated Statements of Operations as a result of a settlement of a foreign withholding dispute from a previously divested business.

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THE DIRECTV GROUP, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(continued)

(Unaudited)

Acquisitions and Divestitures

        The following acquisitions and divestitures are discussed in more detail in Note 5: Acquisitions and Divestitures in the Notes to the Consolidated Financial Statements in Item 1, Part I of this Quarterly Report.

Sky Transactions

        On October 8, 2004, we entered into a series of transactions with News Corporation, Grupo Televisa, S.A., or Televisa, Globo Comunicacoes e Participacoes S.A., or Globo, and Liberty Media International, Inc., or Liberty, which we refer to as the Sky Transactions. The Sky Transactions are designed to strengthen the operating and financial performance of DTVLA by combining the DTH platforms of DTVLA and Sky Latin America into a single platform in each of the major territories served in the region.

Brazil

        On August 23, 2006, we completed the merger of our Brazil business, Galaxy Brasil Ltda., or GLB, with and into Sky Brazil and completed the purchase of News Corporation and Liberty's interests in Sky Brazil. As a result of these transactions, we hold a 74% interest in the combined business. The purchase consideration for the transaction amounted to $670.0 million, represented by $396.4 million in cash paid, of which we paid $362.0 million to News Corporation and Liberty in 2004, the $63.6 million fair value of the reduction of our interest in GLB resulting from the merger and the assumption of $210.0 million of Sky Brazil's debt.

        We accounted for the Sky Brazil acquisition using the purchase method of accounting, and began consolidating the results from the date of acquisition. We also accounted for the reduction of our interest in GLB resulting from the merger as a partial sale, which resulted in us recording a one-time pre-tax gain during the third quarter of 2006 of approximately $60.7 million in "Gain from disposition of businesses, net" in the Consolidated Statements of Operations.

Mexico

        On February 16, 2006, we completed the acquisition of our equity interest in Sky Mexico, which included the acquisition of an equity interest in Sky Mexico in exchange for the sale of our DIRECTV Mexico subscribers to Sky Mexico and the acquisition of News Corporation's and Liberty's Sky Mexico interests for $373.0 million in cash. As a result of this transaction, we recorded gains of $57.0 million in the first quarter of 2006, $28.3 million in the second quarter of 2005 and $30.1 million in the third quarter of 2005 to "Gain on disposition of businesses, net" in the Consolidated Statement of Operations. DIRECTV Mexico ceased operations in the third quarter of 2005 upon completion of the migration of its subscribers to Sky Mexico. We account for our 41% interest in Sky Mexico under the equity method of accounting from the date of acquisition.

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HNS

        On April 22, 2005, we completed the sale of a 50% interest in Hughes Network Systems LLC, or HNS LLC, which owns substantially all of the assets of HNS, to SkyTerra. We received total proceeds of $257.4 million, including cash of $246.0 million, and 300,000 shares of SkyTerra common stock with a fair value of $11.4 million. As a result of this transaction, we recorded a pre-tax impairment charge of $25.3 million during the nine months ended September 30, 2005 to "Gain from disposition of businesses, net" in our Consolidated Statements of Operations to reduce the carrying value of HNS' assets to fair value. In January 2006, we completed the sale of our remaining 50% interest in HNS LLC to SkyTerra for $110.0 million in cash. In the first quarter of 2006, we recorded a gain of $13.5 million related to the sale, in addition to equity earnings of $11.3 million to "Other, net" in the Consolidated Statements of Operations.

Acquisitions and Divestitures

Sky Transactions

        On October 8, 2004, we entered into a series of transactions with News Corporation, Grupo Televisa, S.A., or Televisa, Globo Comunicacoes e Participacoes S.A., or Globo, and Liberty Media International, Inc., or Liberty, which we refer to as the Sky Transactions. The Sky Transactions are designed to strengthen the operating and financial performance of DTVLA by combining the DTH platforms of DTVLA and Sky Latin America into a single platform in each of the major territories served in the region.

Brazil

        The pending merger of Sky Brasil with DIRECTV Brasil is subject to local regulatory approval, which we expect to receive in the third quarter of 2006. Upon completion of this transaction we expect to owe $30.0 million to News Corporation, which is in addition to the $362.0 million that we prepaid in October 2004 for the equity interests of News Corporation and Liberty in Sky Brasil, and will thereafter own a 72% interest in the merged businesses. We also expect to incur incremental costs and charges resulting from the merger of DIRECTV Brasil with Sky Brasil, and the transfer of our DIRECTV subscribers to the Sky Brasil platform. At the close of the Sky Brasil transaction, we expect to receive a payment of approximately $97.0 million from News Corporation, subject to adjustment, which represents a $127.0 million payment for our assumption of certain liabilities of Sky Multi-Country Partners, net of the $30.0 million closing payment due for the Sky Brasil acquisition.

Mexico

        On February 16, 2006, we completed the acquisition of a 47% equity interest in Sky Mexico, which included the acquisition of a 12% equity interest in Sky Mexico resulting from the sale of DIRECTV Mexico subscribers to Sky Mexico and the acquisition of News Corporation's and Liberty's Sky Mexico interests for $373.0 million in cash. As a result of this transaction, we recorded a $57.0 million gain in the first quarter of 2006 and a $28.3 million gain in the second quarter 2005 to "General and administrative expenses" in the Consolidated Statement of Operations. On April 27, 2006, Televisa acquired a portion of our equity interest in Sky Mexico at book value for $58.7 million in cash, which resulted in a reduction in our equity interest in Sky Mexico to approximately 41%. DIRECTV Mexico ceased operations in the third quarter of 2005 upon completion of the migration of its subscribers to Sky Mexico. We account for our investment in Sky Mexico under the equity method of accounting from the date of acquisition.

HNS

        On April 22, 2005, we completed the sale to SkyTerra of a 50% interest in HNS LLC, which owns substantially all of the assets of HNS. We received total proceeds of $257.4 million, including cash of $246.0 million, and 300,000 shares of SkyTerra common stock with a fair value of $11.4 million. As a result of this transaction, we recorded pre-tax impairment charges of $4.4 million during the three months ended June 30, 2005 and $25.3 million during the six months ended June 30, 2005 to "General and administrative expenses" in our Consolidated Statements of Operations to reduce the carrying value of HNS' assets to fair value. In January 2006, we completed the sale of our remaining 50% interest in HNS LLC to SkyTerra. In exchange for our remaining 50% interest and resolution of a final closing adjustment from the April 22, 2005 transaction, we received cash proceeds of $110.0 million. In

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the first quarter of 2006, we recorded a gain of $13.5 million related to the sale, in addition to equity earnings of $11.3 million to "Other, net" in the Consolidated Statements of Operations.

        For additional information regarding the transactions described above, see Note 4: Acquisitions and Divestitures in the Notes to the Consolidated Financial Statements in Item 1, Part I of this Quarterly Report.

Acquisitions and Divestitures

Brazil

        The pending merger of Sky Brasil with DIRECTV Brasil is subject to local regulatory approval, which we expect to receive in the second half of 2006. Upon completion of the DIRECTV Brasil transactions we expect to pay $30 million to News Corporation, which is in addition to the $368 million that we prepaid in 2004 for the equity interests of News Corporation and Liberty in Sky Brasil, and will thereafter own in excess of 70% of the merged platform. Upon completion of this transaction, we expect to incur incremental costs and charges resulting from the merger of DIRECTV Brasil with Sky Brasil, and the transfer of our DIRECTV subscribers to the Sky Brasil platform.

Mexico

        On February 16, 2006, we completed the acquisition of a 47% equity interest in Sky Mexico, which included the acquisition of a 12% equity interest in Sky Mexico resulting from the sale of our DIRECTV Mexico subscribers to Sky Mexico and the acquisition of News Corporation's and Liberty's Sky Mexico interests for $373 million in cash. As a result of the acquisition of the 12% equity interest, we recorded a $57.0 million gain to "(Gain) loss from asset sales and impairment charges, net" in the Consolidated Statement of Operations during the first quarter of 2006 based on the fair value of the equity. On April 27, 2006, Televisa acquired a portion of our equity interest in Sky Mexico for $58.7 million in cash, which resulted in a reduction in our equity interest of Sky Mexico to approximately 41%. DIRECTV Mexico ceased operations in the third quarter of 2005 upon completion of the migration of its subscribers to Sky Mexico. We account for our investment in Sky Mexico under the equity method of accounting from the date of acquisition.

PanAmericana

        As part of our 2004 acquisition of the Sky PanAmericana entities for $30 million in cash, News Corporation has agreed to reimburse us $127 million for the assumption of the Sky PanAmericana entities net liabilities, which we expect to receive upon completion of the Sky Brasil transaction.

HNS

        On April 22, 2005, we completed the sale of a 50% interest in a new entity, HNS LLC, that owns substantially all of the net assets of HNS to SkyTerra. We received total proceeds of $257.4 million, including cash of $246.0 million, and 300,000 shares of SkyTerra common stock received with a fair value of $11.4 million. As a result of this transaction, we recorded a pre-tax impairment charge of $20.9 million during the three month period ended March 31, 2005 to "(Gain) loss from asset sales and impairment charges, net" in our Consolidated Statements of Operations to reduce the carrying value of HNS' assets to fair value. In January 2006, we completed the sale of our remaining 50% interest in HNS LLC to SkyTerra. In exchange for our remaining 50% interest and resolution of a final closing adjustment from the April 22, 2005 transaction, we received cash proceeds of $110 million. In the first

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quarter of 2006, we recorded a gain of $13.5 million related to the sale, in addition to equity earnings of $11.3 million to "Other, net" in the Consolidated Statements of Operations.

        For additional information regarding the transactions described above, see Note 4: Acquisitions and Divestitures in the Notes to the Consolidated Financial Statements in Item 1, Part I of this Quarterly Report.