XM Satellite Radio Holdings Inc. Announces Second Quarter 2005 Results and Increases Year-end Subscriber Guidance to 6 Million

XM Satellite Radio Holdings Inc. Announces Second Quarter 2005 Results and Increases Year-end Subscriber Guidance to 6 Million

$125 Million in Revenues More than Double Prior Year Period Ends Quarter at 4.4 Million Subs with 647,226 Net Subscriber Additions

WASHINGTON, July 28 /PRNewswire-FirstCall/ -- XM Satellite Radio Holdings Inc. (NASDAQ:XMSR) today reported financial and operating results for the second quarter ended June 30, 2005. For the quarter, XM reported revenue of $125 million, an increase of 136 percent over the $53 million reported in the second quarter 2004. The significant revenue growth was driven by record second quarter net subscriber additions of 647,226, a 55 percent increase over the 418,449 subscribers added in the second quarter 2004. XM ended the quarter with 4,417,490 subscribers compared with 2,100,352 subscribers reported for the second quarter 2004.

(Logo: http://www.newscom.com/cgi-bin/prnh/20000724/XMSATLOGO )

With XM's first half performance and an even stronger outlook for the second half of the year, XM is increasing 2005 subscriber guidance from 5.5 million to 6 million ending subscribers.

XM's net loss for the second quarter 2005 was ($146.6) million, as compared to ($166.1) million in the second quarter 2004. XM reported an EBITDA loss of ($89.9) million for the second quarter 2005 compared to ($107.8) million for the second quarter 2004. XM's net loss and EBITDA for the second quarter 2004 each included a ($35.0) million charge for de-leveraging activities.

Efficient Quarterly Subscriber Growth

XM's second quarter subscriber growth was strong across both the retail aftermarket and automotive distribution channels. Second quarter 2005 Cost Per Gross Addition (CPGA) was $98, an improvement of $3, or 3 percent, from the $101 CPGA reported in the second quarter 2004. XM's CPGA is the fully-loaded cost to acquire each new subscriber, including Subscriber Acquisition Costs (SAC) of $50, as well as advertising and marketing expenses.

Major League Baseball Continues to Drive Subscriber Growth

In April, XM launched comprehensive live game coverage of the 2005 Major League Baseball (MLB) season. During the May/June time period, approximately 23 percent of new aftermarket subscribers surveyed said they decided to become an XM Radio subscriber because of MLB. In addition to MLB, XM began exclusive satellite radio coverage of live races from the Indy Racing League (IRL) and live golf tournament coverage of PGA TOUR events.

Samsung to Manufacture First MP3 Players with Satellite Radio Capability and XM and Napster Partner to Launch the "XM + NAPSTER" Integrated Music Service

Samsung MP3 players with XM capability will be available in two storage capacity sizes and include an XM home accessory kit. The Samsung players incorporate XM's "Connect and Play" Technology and are expected to be available by year-end.

Napster and XM announced "XM + Napster", a service scheduled to launch in the fourth quarter of 2005. The new service represents an integration of XM's satellite radio and Napster's online music services for listening online and on a variety of MP3 players, including the new Samsung MP3 players. XM subscribers will be able to listen to XM programming, mark their favorite music, and purchase and manage content through Napster for future enjoyment and storage on MP3 devices.

In the second quarter, XM also announced an exclusive agreement with Audible, the leader in digital downloading of spoken word content. Using XM/MP3 players, XM subscribers can purchase and download selections from Audible's 70,000 hours of online audiobook and spoken-word programming.

XM Strategic Initiatives to Broaden the Scope and Reach of Satellite Radio

During the quarter, and into July, XM announced a number of strategic initiatives that leverage its existing infrastructure, core competencies and resources.

-- XM's Canadian partner, Canadian Satellite Radio (CSR), was granted a
license from the Canadian Radio-television and Telecommunications
Commission (CRTC) to deliver satellite radio to Canadians from coast-
to-coast.

-- In July, XM announced an agreement to purchase WCS Wireless, a private
entity, for 5.5 million shares of XM Common Stock. The principal
assets of WCS Wireless are wireless spectrum licenses in geographic
areas covering 163 million people throughout the United States,
including 15 of the top 20 markets. On average, these licenses cover
10 megahertz in the frequency bands adjacent to XM's satellite radio
service. This acquisition will enable XM to potentially double its
bandwidth and broaden the existing business with a variety of
multimedia subscription services, including video, data and additional
audio products. We expect the transaction to close later this year,
subject to regulatory approval.

-- In July, XM made a strategic investment of $25 million in the common
stock of Worldspace, Inc., a pioneer of satellite radio services in
Asia, Europe, India, the Middle East and Africa. In connection with
the investment, XM and WorldSpace will cooperate to develop satellite
radio products, technology and distribution networks optimized for
global markets.

XM, AOL and AEG Partner to Launch "Network Live" and XM and AOL Expand Online Offering

Capitalizing on the huge potential of multi-platform live entertainment programming, XM Satellite Radio, America Online and AEG, a world-leading sports & entertainment presenter, joined with Kevin Wall, Executive Producer of Live 8, to create Network Live. Network Live is the first multi-platform digital entertainment company committed to delivering live entertainment programming through the Internet, satellite radio and other global media platforms such as VOD, wireless and HDTV.

During the quarter, XM and America Online also announced the creation of the world's largest online digital radio network featuring the XM and AOL Radio Network programming. The co-branded service will combine a sampling of 20 XM stations plus 130 AOL Radio stations. In addition, an enhanced premium service with 70 XM stations and more than 130 AOL Radio original and third party stations will be available to AOL members at no additional charge and to consumers on the web for a low monthly fee. This service is expected to launch later this summer.

About XM Satellite Radio

XM is America's number one satellite radio service with more than 4.4 million subscribers. Broadcasting live daily from studios in Washington, DC, New York City and Nashville at the Country Music Hall of Fame, XM's 2005 lineup includes more than 150 digital channels of choice from coast to coast: the most commercial-free music channels, plus premier sports, talk, comedy, children's and entertainment programming; and 21 channels of the most advanced traffic and weather information. XM was named Best Radio Service at the 2004 Billboard Digital Entertainment Awards.

XM, the leader in satellite-delivered entertainment and data services for the automobile market through partnerships with General Motors, Honda, Toyota, Hyundai, Nissan and Volkswagen/Audi, is available in more than 120 different vehicle models for 2005. XM's industry-leading products are available at consumer electronics retailers nationwide. For more information about XM hardware, programming and partnerships, please visit http://www.xmradio.com/.

Net loss before interest income, interest expense, income taxes,
depreciation and amortization is commonly referred to in our business as
"EBITDA." Consistent with regulatory requirements, EBITDA includes
other income (expense). EBITDA is not a measure of financial
performance under generally accepted accounting principles. A
reconciliation of EBITDA loss is presented on the attachment. We
believe EBITDA is often a useful measure of a company's operating
performance and is a significant basis used by our management to measure
the operating performance of our business. Because we have built our
system through the expenditure of large amounts of capital, our results
of operations reflect significant charges for depreciation, amortization
and interest expense. EBITDA, which excludes this information, provides
helpful information about the operating performance of our business,
apart from the expense associated with our physical plant or capital
structure. EBITDA is frequently used as one of the bases for comparing
businesses in our industry, although our measure of EBITDA may not be
comparable to similarly titled measures of other companies. EBITDA does
not purport to represent operating loss or cash flow from operating
activities, as those terms are defined under generally accepted
accounting principles, and should not be considered as an alternative to
those measurements as an indicator of our performance.

Please note that XM's guidance is comprised of forward-looking
statements, and as described in the last paragraph of this press release
many factors could cause actual results to differ from this guidance.

Factors that could cause actual results to differ materially from those
in the forward-looking statements in this press release include demand
for the Company's service, the Company's dependence on technology and
third party vendors, its potential need for additional financing, as
well as other risks described in XM Satellite Radio Holdings Inc.'s Form
10-K filed with the Securities and Exchange Commission on 3-4-05 and
Form 8-K filed with the Securities and Exchange Commission on June 9,
2005. Copies of the filing are available upon request from XM Radio' s
Investor Relations Department.

XM SATELLITE RADIO HOLDINGS INC.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands Except Share and Per Share Amounts)

Three Months ended Six Months ended
June 30, June 30,
2005 2004 2005 2004

Revenue:
Subscription $113,379 $48,643 $206,360 $88,404
Activation 2,313 1,058 4,337 1,925
Merchandise 3,798 1,054 6,915 1,733
Net ad sales 4,363 1,407 7,488 2,397
Other 1,601 820 2,919 1,488
Total revenue 125,454 52,982 228,019 95,947

Operating expenses:

Cost of revenue:
(excludes depreciation
& amortization,
shown below)
Revenue share &
royalties 21,071 10,479 40,197 25,957
Customer care &
billing 18,488 8,975 33,868 16,060
Cost of
merchandise 7,496 1,771 10,583 3,367
Ad sales 1,800 1,357 3,867 2,644
Satellite &
terrestrial 10,480 9,822 19,190 19,233
Broadcast &
operations:
Broadcast 4,053 2,436 7,629 5,099
Operations 6,283 3,049 11,110 6,034
Total broadcast &
operations 10,336 5,485 18,739 11,133
Programming &
content 24,529 7,116 42,069 14,340

Total cost of
revenue 94,200 45,005 168,513 92,734

Research &
development
(excludes depreciation
and amortization,
shown below) 6,993 6,731 13,085 12,901
General &
administrative
(excludes
depreciation and
amortization,
shown below) 10,823 6,527 18,117 12,392
Marketing (excludes
depreciation and
amortization, shown
below):
Retention & support 5,080 3,124 9,599 5,923
Subsidies &
distribution 48,532 35,303 96,626 70,082
Advertising &
marketing 40,872 20,340 67,028 35,019
Marketing 94,484 58,767 173,253 111,024
Amortization of
GM liability 9,312 9,313 18,625 18,626
Total marketing 103,796 68,080 191,878 129,650

Depreciation &
amortization 36,737 39,557 68,801 79,038

Total operating
expenses 252,549 165,900 460,394 326,715

Operating loss (127,095) (112,918) (232,375) (230,768)

Interest income 5,078 1,086 9,102 2,165
Interest expense (24,476) (19,225) (44,501) (47,346)
Other income (expense) 453 (34,458) 2,411 (34,072)

Net loss before income
taxes (146,040) (165,515) (265,363) (310,021)

Provision for deferred
income taxes (579) (579) (1,158) (26,152)

Net Loss (146,619) (166,094) (266,521) (336,173)

8.25% Series B and C
preferred stock
dividend requirement (2,150) (2,149) (4,299) (4,504)

Net Loss attributable
to common
stockholders $(148,769) $(168,243) $(270,820) $(340,677)

Basic and diluted
net loss per share: $(0.70) $(0.84) $(1.28) $(1.80)
Weighted average
shares used in
computing net loss
per share - basic
and diluted 213,571,652 200,616,663 212,199,554 189,740,108

Reconciliation of
Net Loss to EBITDA:
Net loss as
reported $(146,619) $(166,094) $(266,521) $(336,173)
Add back
non-EBITDA
items included
in net loss:
Interest income (5,078) (1,086) (9,102) (2,165)
Interest expense 24,476 19,225 44,501 47,346
Provision for
deferred income
taxes 579 579 1,158 26,152
Depreciation &
amortization 36,737 39,557 68,801 79,038

EBITDA $(89,905) $(107,819) $(161,163) $(185,802)

As of As of
SELECTED BALANCE SHEET DATA 6/30/2005 12/31/2004
(Unaudited)
Cash and cash equivalents $930,377 $717,867
Restricted investments 4,506 4,492
System under construction 163,801 329,355
Property and equipment in service, net 693,779 461,333
DARS license 141,252 141,227
Total assets 2,171,007 1,821,635
Deferred revenue 288,795 152,347
Total long-term debt 1,081,315 948,741
Total liabilities 1,785,707 1,485,472
Stockholders' equity 385,300 336,163

XM SATELLITE RADIO HOLDINGS INC.

Three-Month Periods ended

SELECTED OPERATING METRICS 6/30/2005 6/30/2004
EBITDA (in thousands) (1) $(89,905) $(107,819)

Subscriber Data:
Net Subscriber Additions (2) 647,226 418,449

Aftermarket, OEM & Other
Subscribers (3) 3,807,224 1,705,191
Subscribers in OEM
Promotional Periods (4) 565,929 374,930

XM Activated Vehicles with
Rental Car Companies (5) 44,337 20,231
Total Ending Subscribers (3) (4) (5) (6) 4,417,490 2,100,352

Subscription Revenue per Aftermarket,
OEM & Other Subscriber $9.84 $9.26
Subscription Revenue per Subscriber in OEM
Promotional Periods $5.63 $5.78
Subscription Revenue per XM Activated
Vehicle with Rental Car Companies $9.74 $9.23

Revenue Data:
Subscription Revenue per Subscriber (7) $9.35 $8.63
Net Ad Sales Revenue per Subscriber (8) $0.36
$0.25
Activation, Equipment and Other Revenue
per Subscriber $0.63 $0.52

Total Revenue per Subscriber $10.34 $9.40

Expense Data:
Subscriber Acquisition Costs (SAC) (9) $50
$57
Cost Per Gross Addition (CPGA) (10) $98 $101

(1) EBITDA is commonly referred to in our business as net loss before
interest income, interest expense, income taxes, depreciation and
amortization. Consistent with regulatory requirements, EBITDA
includes Other Income (Expense). EBITDA is not a measure of
financial performance under generally accepted accounting principles.
We believe EBITDA is often a useful measure of a company's operating
performance and is a significant basis used by our management to
measure the operating performance of our business. Because we have
funded and completed the build-out of our system through the raising
and expenditure of large amounts of capital, our results of
operations reflect significant charges for depreciation, amortization
and interest expense. EBITDA, which excludes this information,
provides helpful information about the operating performance of our
business, apart from the expenses associated with our physical plant
or capital structure. EBITDA is frequently used as one of the bases
for comparing businesses in our industry, although our measure of
EBITDA may not be comparable to similarly titled measures of other
companies. EBITDA does not purport to represent operating loss or
cash flow from operating activities, as those terms are defined under
generally accepted accounting principles, and should not be
considered as an alternative to those measurements as an indicator of
our performance.

(2) Total net subscriber additions for the three months ended June 30,
2005, include 315,888 retail, 323,772 OEM, and 7,566 rental car net
additions.

(3) Ending subscribers include 658,313 family plan subscriptions at a
multi-unit rate of $6.99 per radio per month.

(4) OEM Promotional Subscribers are subscribers who have either a portion
or all of their subscription fee paid for by an OEM for a fixed
period following the initial purchase or lease of the vehicle.
Currently, at the time of sale, vehicle owners generally receive a 3-
month trial subscription. XM generally receives two months of the 3-
month trial subscription from the vehicle manufacturer. The automated
activation program provides activated XM radios on dealer lots for
test drives. GM and Honda generally indicate the inclusion of 3
months free of XM service on the window sticker of XM-enabled
vehicles. We measure the success of these programs based on the
percentage that elect to continue to receive the XM service and
convert to self-paying subscribers after the initial promotion
period-we refer to this as the "conversion rate". The conversion
rate for the quarter ended June 30, 2005 is 58% and reflects the auto
activation program, with all XM-enabled vehicles activated for the
promotional period.

(5) Rental car activity commenced in late June 2003. At June 30, 2005,
there were 44,337 XM subscriptions in rental vehicles. For the
initial Model Year 2003 XM-enabled rental vehicles, XM receives
payments based on the use of the service. Customers are charged $2.99
per day per vehicle for use of the XM service, on which XM receives a
revenue share. For subsequent Model Year 2004 and later vehicles, XM
receives $10 per subscription per month.

(6) Subscribers are those who are receiving and have agreed to pay for
our satellite audio service, either by credit card or by invoice,
including those who are currently in promotional periods paid in part
by vehicle manufacturers, as well as XM activated radios in vehicles
for which we have a contractual right to receive payment for the use
of our satellite audio service. Radios that are revenue generating
are counted individually as subscribers. Promotional periods
generally include the period of trial service plus 30 days for the
receipt and processing of payments.

(7) Subscription Revenue includes monthly subscription revenues for our
satellite audio service, net of any promotions or discounts.

(8) Net Ad Sales Revenue includes sales of advertisements and program
sponsorships on the XM network net of agency commissions.

(9) SAC is a subset of total CPGA and includes radio manufacturer
subsidies, certain sales, activation and installation commissions,
and hardware-related promotions.
These costs are reported in subsidies & distribution. SAC also
includes the negative margin on equipment sales. These expenses are
divided by the appropriate per unit gross additions, or units
manufactured.

(10) CPGA includes all costs in SAC, as well as advertising and marketing
expenses, divided by gross additions for the period.

Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20000724/XMSATLOGO
AP Archive: http://photoarchive.ap.org/
PRN Photo Desk photodesk@prnewswire.com
Source: XM Satellite Radio Holdings Inc.

CONTACT: investors, Gary Tiedemann, +1-202-380-4396,
gary.tiedemann@xmradio.com, or media, Chance Patterson, +1-202-380-4318,
chance.patterson@xmradio.com

Web site: http://www.xmradio.com/

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