The 1992 International Telecommunication Union (ITU) World Radiocommunication Conference allocated the L band (between 1452 and 1492 MHz) for satellite broadcasting services, such as Digital Audio Radio Service, or DARS, on a global basis, with the upper 25-MHz segment of the L band made available for immediate licensing.

The 1992 World Radiocommunication Conference also allocated the S band (between 2535 and 2655 MHz) for satellite broadcasting services in a limited number of countries, including India, Japan, South Korea, Pakistan and Thailand, with the upper 25 MHz segment of the S band (between 2630 and 2655 MHz) available for immediate use. Because the United States used the L band spectrum for mobile aeronautical applications in 1992, it selected an alternative 50 MHz allocation for DARS in the S band (between 2310 and 2360 MHz), which was subsequently reduced to 25 MHz (between 2322.5 and 2347.5 MHz). Currently, XM and Sirius share that allocation in the United States. India and Mexico have also accepted the S band from 2310 to 2360 MHz as an additional allocation for DARS.

Since L band satellites require less transmitted power than S band satellites to achieve the same link margin, or quality of service, the L band is generally more cost effective as compared to the S band for the provision of satellite DARS operation. Therefore, L band satellites may be either less expensive to build or they may provide a higher quality of service as compared with equivalently priced S band satellites. In addition, L band terrestrial repeaters provide improved terrestrial link margin, or quality of service, compared to S band repeaters for the same emitted power. This could either reduce the L band terrestrial repeater power and associated costs, or increase the radius of terrestrial coverage of each terrestrial repeater, which reduces the number of terrestrial repeaters required for a given market.

The northwest beam of the Company’s AsiaStar satellite offers 39 channels to its primary market of India. The Company’s AfriStar satellite offers 41 channels, most of which are available on all three beams. The programs offered on these channels are broadcast into Africa, the Mediterranean basin countries, the Middle East and parts of Western Europe. This programming includes all of the Company’s international music and news programming, and also includes regionally specific programming such as Radio Caroline, Virgin Radio U.K., East FM, Lamp FM, Europe 1 and Sunrise Radio.

The Company’s receivers are currently available in a range of individual, home and office models. Models available on the market today include portable, durable individual units specially suited to meet the needs of travelers, the military and rural conditions to boom-box type units with CD, AM and FM features designed to interest the younger, electronics savvy consumer.

The Company’s customers can access its digital audio service using special receivers with a small antenna (about 6-8 cm). All receivers have liquid crystal display screens capable of displaying text messages of up to 32 characters in length and can paginate to allow longer messages.

The Company is working to produce a next generation of receivers with advanced capabilities. These receivers will use Digital Signal Processing (DSP), technology in their chipset. The Company’s new product line will include receivers specifically intended for automobile use. Initially, the Company plans to introduce after-market oriented products, which will be housed in a docking station on the automobile’s dashboard and will use an omni-directional antenna mounted on the automobile’s roof. In addition to the receivers the Company currently offers, it intends to integrate it’s next generation receivers into televisions and high-end audio systems. The Company plans to target its multimedia and data broadcasting services to the business-to-business and business-to-government market. The Company has two primary products dedicated to multimedia and data services at 128 kbps, the Personal Computer (PC) card kit and the Digital Data Adapter (DDA).

Total operating expense for the year ended December 31, 2004 was $184.3 million, an 88.2% increase compared with $97.9 million for the year ended December 31, 2003.

Interest income for the year ended December 31, 2004 was $0.4 million, a decrease of 20.5% compared with $0.5 million for the year ended December 31, 2003.

Interest expense for the year ended December 31, 2004 was $119.3 million, an increase of 10.1% compared with $108.4 million for the year ended December 31, 2003.

For the years ended December 31, 2004 and 2003 the Company incurred net losses of $577.4 million and $217.7 million, respectively, an increase of 165.2%.