DIRECTV 2003 Annual Report Download - page 35

THE DIRECTV GROUP, INC.
Satellite Services Segment
PanAmSat, a publicly-held company of which we own approximately 80.5%, constitutes our Satellite
Services segment. Currently, PanAmSat owns and operates 25 satellites that are capable of transmitting
signals to geographic areas covering over 98% of the world’s population. PanAmSat provides satellite
capacity for the transmission of cable and broadcast television programming from the content source to the
cable operator or to the consumer’s home. PanAmSat’s satellites serving the U.S. are able to reach cable
operators representing nearly 100% of all cable subscribers. PanAmSat’s global fleet also serves as the
transmission platform for eight direct-to-home services worldwide, including DLA. In addition, PanAmSat
provides satellite services to telecommunications carriers, government agencies, corporations and ISPs for
the provision of satellite-based communication networks, including private business networks employing
VSATs.
Network Systems Segment
Hughes Network Systems, our wholly-owned subsidiary, constitutes our Network Systems segment.
HNS is a leader in the global market for VSAT private business networks with more than 500,000 terminals
shipped or ordered. HNS operates a satellite-based consumer broadband Internet access service marketed
under the DIRECWAY brand, which had approximately 180,000 subscribers as of December 31, 2003. In
addition, HNS is one of the two largest manufacturers of DIRECTV set-top receivers, having shipped over
14 million units. HNS is also developing SPACEWAY, a more advanced satellite broadband
communications platform that is expected to provide customers with high-speed, two-way data
communications on a more cost-efficient basis than systems that are currently available. The first
SPACEWAY satellite is expected to be launched in 2004 and service is expected to be introduced in 2005.
News Corporation Transactions
On December 22, 2003, GM, the Company and News Corporation completed a series of transactions that
resulted in the split-off of the Company from GM and the simultaneous sale of GM’s 19.8% interest in the
Company to News Corporation. GM received approximately $3.1 billion in cash and 28.6 million News
Corporation Preferred ADSs in these transactions. GM split-off the Company by distributing our common stock
to the holders of the GM Class H common stock in exchange for their GM Class H common shares on a one-for-
one basis. Immediately after the split-off, News Corporation acquired an additional 14.2% of outstanding
common stock from the former GM Class H common stockholders, which provided News Corporation with a
total of 34% of our outstanding common stock. GM Class H common stockholders received about 0.8232 shares
of our common stock and about 0.09207 News Corporation Preferred ADSs for each share of GM Class H
common stock held immediately prior to the closing of the transactions. In addition, we paid to GM a special
cash dividend of $275 million in connection with the transactions. Upon completing these transactions, News
Corporation transferred its 34% interest in the Company to its 82% owned subsidiary, Fox.
For the Company, the transactions represented an exchange of equity interests by investors. As such, we
continued to account for our assets and liabilities at historical cost and did not apply purchase accounting. We
recorded the $275 million special cash dividend payment to GM as a reduction to additional paid-in capital. We
also recorded a $25.1 million decrease to additional paid-in capital representing the difference between the
Company’s consolidated tax receivable from GM as determined on a separate return basis and the receivable
determined pursuant to the amended income tax allocation agreement between GM and the Company. See Note 9
to the Consolidated Financial Statements in Item 8 for additional discussion regarding the amended income tax
allocation agreement.
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