The DirecTV Group (DTV)

Asset Impairment

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In the third quarter of 2004, we decided to utilize certain SPACEWAY assets for DIRECTV U.S. high-definition programming. This decision to no longer use these assets for the SPACEWAY broadband service triggered an impairment test of our investment in the SPACEWAY assets. As a result of this test, we determined that the fair value of the SPACEWAY satellites and ground segment equipment for their alternative use exceeded their book value by $1.466 billion. Accordingly, we recorded a charge in "(Gain) loss from asset sales and impairment charges, net" in our Consolidated Statements of Operations in the third quarter of 2004.

        The financial results for PanAmSat, which formerly comprised our Satellite Services segment, and HSS, which formerly was a component of our Network Systems segment, are presented in our Consolidated Statements of Operations as discontinued operations. As a result of the SkyTerra transaction, subsequent to April 22, 2005, we account for our investment in HNS under the equity method of accounting, and accordingly, record our interest in HNS' net income in "Other, net" in our Consolidated Statements of Operations.

        For additional information regarding the transactions described above, see Part I, Item 1, Note 3: Acquisitions, Divestitures and Other Transactions and Note 4: Asset Impairment Charge of this Form 10-Q.