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Second Quarter Ending Subscribers Exceed 8.25 Million; Revenue Increases 22 Percent and Net Loss Narrows 23 Percent; Largest Quarter Ever for Gross Automotive Subscriber Additions


PRNewswire-FirstCall/ -- XM Satellite Radio Holdings Inc. (NASDAQ: XMSR) today announced earnings for the three-month period ended June 30, 2007. Revenue for the 2007 second quarter increased 22 percent year over year to $277 million compared to $228 million in the 2006 second quarter. XM’s 2007 second quarter net loss narrowed to $176 million, representing a 23 percent improvement compared to the 2006 second quarter net loss of $229 million.


XM ended the 2007 second quarter with more than 8.25 million subscribers compared to 6.90 million subscribers in the prior year period.

“During the second quarter, XM’s revenue grew and losses narrowed. XM added more automotive gross subscriber additions than during any quarter in the company’s history,” said Hugh Panero, chief executive officer, XM Satellite Radio. “XM’s partners include the nation’s largest and fastest- growing automakers and XM is well positioned for this segment to provide sustained subscriber growth as production of XM-equipped vehicles ramps up for the 2008 model year and beyond.”

“The regulatory review process for our merger with Sirius Satellite Radio continues to move ahead. We look forward to continuing to work with the Federal Communications Commission and with the Department of Justice to further demonstrate that this merger is in the public interest and should be approved. We anticipate the merger will close in late 2007.”

Panero continued, “XM announced earlier this week that I will step down as chief executive officer in August after nearly a decade with the company. XM will be in great hands with Nate Davis as President and Interim CEO. Nate has been an outstanding addition to the senior management team and I am confident he will carry XM to the next level of success.”

For the second quarter of 2007, adjusted operating loss (formerly adjusted EBITDA) was $47 million compared to a loss of $46 million in the same period of 2006. The 2007 second quarter adjusted operating loss includes $4 million in expenses related to the company’s pending merger with Sirius Satellite Radio.

Net loss per share was 57 cents, including 12 cents per share related to a non-cash impairment charge to our investment in Canadian Satellite Radio.

The primary differences between net loss and adjusted operating loss are non-operating amounts and certain operating non-cash charges. For a full reconciliation of XM’s net loss to adjusted operating loss, see the attached financial schedules.

In the 2007 second quarter, XM recorded gross subscriber additions of 942 thousand and net subscriber additions of 338 thousand compared to 926 thousand gross additions and 398 thousand net subscriber additions in the 2006 second quarter.

In the 2007 second quarter, XM’s subscriber acquisition costs (SAC), a component of cost per gross addition (CPGA), was $75 compared to $67 in the second quarter of 2006. Second quarter 2007 SAC included $10 for inventory- related charges as well as a $10 increase as a result of continued OEM growth from increased production by our newer automotive partners. CPGA in the 2007 second quarter was $121 compared to $112 in the second quarter of 2006.

As of June 30, 2007, the company had $275 million in cash compared to $218 million at the end of December 31, 2006. As of June 30, 2007, the company had full availability of its $400 million credit facilities resulting in total available liquidity of $675 million.

Automotive and Retail

During the second quarter of 2007, the company achieved the following in its automotive and retail channels:

- With automotive partnerships representing 60 percent of the U.S.
automotive market, XM had its largest quarter ever in automotive gross
additions with 618 thousand;
- During the second quarter, the total number of vehicles produced with
factory-installed XM surpassed 8 million, including 5.5 million General
Motors vehicles;
- XM and GM launched a satellite radio trial program for GM Certified Used
Vehicles, Cadillac Pre-Owned Vehicles and HUMMER Certified Pre-Owned
Vehicles, complementing programs that XM
previously launched with Honda and Acura;
- Hyundai added XM as standard equipment on its all-new Veracruz
crossover and its upcoming premium sports sedan, joining the 2007
Azera, Elantra, Santa Fe and Sonata. During the second quarter, sales
of the Hyundai Sonata ranked in the top five of XM factory-installed
vehicle sales;
- XM will be standard equipment on the upcoming Lexus LX 570 luxury
utility vehicle and Lexus LS 600 h L hybrid sedan, joining the Lexus
LS 460 L sedan;
- XM and Infiniti announced they will offer 2008 Infiniti QX56 buyers
three years of XM Radio and XM NavTraffic, which are featured
prominently in Infiniti’s national advertising campaign. XM will be
standard on all 2008 Infiniti models as XM becomes the exclusive
satellite radio provider to Nissan and Infiniti with the 2008 models;
- XM introduced new radios at retail, including the XpressR, the first
satellite radio to offer a split screen to see what’s playing on six
channels at once; the entry-level Xpress EZ; and the in-dash XM
CommanderMT receiver for vehicles; and
- The XM Radio Mobile service expanded to more than 30 handset models
from AT&T and Alltel, including the BlackBerry Curve, the Samsung
SGH-a717, and The Wafer by Samsung.

ProgrammingDuring the 2007 second quarter, the company made the following announcements:

- XM launched its third season of Major League Baseball, broadcasting
every game for every team to customers nationwide;
- XM announced complete coverage of the Live Earth concerts, totaling
nearly 100 hours of programming across multiple channels;
- XM unveiled the nation’s first radio channel dedicated to a
presidential election: “P.O.T.U.S. ’08.” The channel will formally
launch in September with 24-hour coverage of the 2008 presidential
campaign. As a public service XM will provide the channel for free on
all XM radios;
- XM expanded its college sports line-up with the addition of the Big 12,
making XM the official satellite radio network for all six power
conferences: ACC, Big East, Big Ten, Big 12, Pac-10, and SEC. XM also
signed an agreement with FOX Sports to become the official satellite
radio network of the Bowl Championship Series (BCS) National
Championship Game and other BCS Bowl games; and
- XM and the National Hockey League announced that XM would become the
official satellite radio network of the NHL in the U.S. and Canada
starting July 1.

Pending Merger with Sirius Satellite RadioThe regulatory review process for XM’s merger with Sirius continues to move forward with the recent completion of the Federal Communications Commission’s (FCC) 45-day initial public comment and reply period. More than 4,000 comments were filed in favor of the merger from individuals as well as from many prestigious organizations and businesses. The volume, diversity and strength of the public comments filed with the FCC during this period demonstrated persuasively that the merger is in the public interest and should be approved.

On July 24, 2007, XM and SIRIUS filed their joint reply comments with the FCC. The filing included detailed programming and pricing plans, including “best of,” “family friendly,” and “a la carte” packages that will give consumers more choice and better pricing options.

XM and Sirius announced their agreement to combine in a tax-free, all-stock merger on February 19, 2007. The companies filed their Merger Agreement with the Securities and Exchange Commission on February 21, 2007. Under the terms of the agreement, XM shareholders will receive a fixed exchange ratio of 4.6 shares of Sirius common stock for each share of XM. XM and Sirius shareholders will each own approximately 50 percent of the combined company.

The transaction is subject to approval by both companies’ shareholders, the satisfaction of customary closing conditions and regulatory review and approvals, including antitrust agencies and the FCC. The companies anticipate the merger will close in late 2007.


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