Thomson And DirecTV Sign Long-Term Supply And Development Agreement; Thomson To Purchase Hughes Network Systems Set-Top Box Manufacturing Assets

14-May-04

The DIRECTV Group, Inc., the parent company of Hughes Network Systems, Inc. and Thomson, announced a definitive agreement for the long-term development and supply of digital satellite set-top boxes (STB). As part of the transaction, Thomson will also acquire HNSí set-top box manufacturing assets. The five-year supply agreement provides DIRECTV with an experienced partner for its forthcoming product and service development initiatives. Thomson will be involved in the technology development of new set-top box models during the contract period and will manufacture a full range of receivers including DIRECTV-brand high-definition and digital video recorder (DVR) receivers, with an objective to deliver home receiving units that meet DIRECTV's pricing, quality and time-to-market objectives. Based on the contract terms, Thomson expects to more than double its current annual revenues with DIRECTV. DIRECTV will receive from Thomson $250 million cash upon close of the sale of HNSí set-top box manufacturing assets. In addition, the agreement includes incentives to DIRECTV-based on revenues and set-top box order volume to Thomson over the next five years-that could increase the amount paid to as much as $400 million, including the up front amount. Thomson will be the lead supplier of DIRECTV System set-top receivers accounting for half of its needs. The agreement is expected to close in the second quarter of 2004, pending customary regulatory reviews and approvals. ìThis transaction reinforces our strategy to focus our business on DIRECTV and making DIRECTV the best television service available in the country,î said Romulo Pontual, Executive Vice President and Chief Technology Officer, The DIRECTV Group. ìThomson is the original manufacturer of DIRECTV receivers and over the years has been at the forefront of developing new set-top box features and technologies. We look forward to continuing our relationship with Thomson and working closely with them to bring innovative new products to DIRECTV customers that will enhance their viewing experience.î HNS has played a key role in the evolution of DIRECTV set-top box technology, and has continued to develop the products and the business to become a market leader with close to 16 million boxes shipped to date. With the sale of these assets, HNS' principal business will consist of DIRECWAY broadband satellite networks and services for customers worldwide (HNS has over 70-percent market share in this VSAT industry); SPACEWAYTM, the next-generation Ka-band satellite system, planned for commercial launch in 2005; and satellite-based communications systems, networks, and equipment. ìThis agreement reinforces and further expands our long term technology and supply relationship with DIRECTV, and strengthens our strategic relationship with News Corp.,î said Ghislain Lescuyer, Senior Executive Vice President for Thomson. ìWe are pleased to become the market leader for DIRECTV and expect to provide to DIRECTV and its subscribers the same degree of innovation and excellence that has characterized our relationship over the last 10 years.î The agreement significantly reinforces Thomson's Video Networks Solutions Division, which provides digital equipment and services for broadcast television, cable, and other network operators. Through this division, Thomson is one of the world's leading suppliers of digital cable and satellite set top boxes, DSL modems, and IP Video set top boxes. As part of this agreement, Thomson will further expand its leadership position in providing advanced technology and solutions to integrated media companies around the world. For more information on DIRECTV, please visit www.DirecTV.com; for more information on Thomson, please visit www.thomson.net.

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