UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-Q

|(Mark One)                                                    |                                                                                         
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended March 31, 2008                
|or                                                           
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                             to

Commission file number 333-106529

DIRECTV HOLDINGS LLCDIRECTV FINANCING CO., INC.(Exact name of registrant as specified in its charter)

|DIRECTV Holdings LLCDelaware
DIRECTV Financing Co., Inc.Delaware(State or other jurisdiction of
incorporation or organization) |  | 25-1902628
59-3772785(I.R.S. Employer
Identification Number)
|-------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------
|2230 East Imperial Highway,
El Segundo, California(Address of principal executive offices)                                       |  | 90245(Zip Code)                                             
|(310) 964-5000(Registrant's telephone number, including area code)                                                              
|N/A(Former name, former address and former fiscal year, if changed since last report)                                           

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
days. Yes ý    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

|Large accelerated filer o |  | Accelerated filer o |  | Non-accelerated filer ý (Do not check if a smaller reporting company) |  | Smaller reporting company o
|------------------------- |  | ------------------- |  | --------------------------------------------------------------------- |  | ---------------------------

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

The registrant has met the conditions set forth in General Instructions H(1) (a) and (b) of Form 10-Q and is therefore
filing this Quarterly Report on Form 10-Q with the reduced disclosure format.



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DIRECTV HOLDINGS LLC

TABLE OF CONTENTS

|                                         |                                                                                               | Page No                                                                                 
|---------------------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|Part IFinancial Information (Unaudited) |                                                                                               |                                                                                         
|                                         | Item 1. Financial Statements                                                                  |                                                                                         
|                                         |                                                                                               | Consolidated Statements of Operations for the Three Months Ended March 31, 2008 and 2007
|                                         |                                                                                               | Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007                  
|                                         |                                                                                               | Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007
|                                         |                                                                                               | Notes to the Consolidated Financial Statements                                          
|                                         | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                                                         
|                                         | Item 4T. Controls and Procedures                                                              |                                                                                         
|Part IIOther Information                |                                                                                               | 25                                                                                      
|                                         | Item 1. Legal Proceedings                                                                     |                                                                                         
|                                         | Item 1A. Risk Factors                                                                         |                                                                                         
|                                         | Item 6. Exhibits                                                                              |                                                                                         
|Signature                                |                                                                                               | 27                                                                                      

---





DIRECTV HOLDINGS LLC        PART IFINANCIAL INFORMATION (UNAUDITED)

ITEM 1.    FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS        (Unaudited)

|                                   |                                                                                                  | Three Months Ended
March 31,        |      
|---------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------- | -----
|
|
|Revenues                           |                                                                                                  | $                                   | 4,049
|Operating costs and expenses       |                                                                                                  |                                     |      
|                                   | Costs of revenues, exclusive of depreciation and amortization expense                            |                                     |      
|                                   |                                                                                                  | Broadcast programming and other     |      
|                                   |                                                                                                  | Subscriber service expenses         |      
|                                   |                                                                                                  | Broadcast operations expenses       |      
|                                   | Selling, general and administrative expenses, exclusive of depreciation and amortization expense |                                     |      
|                                   |                                                                                                  | Subscriber acquisition costs        |      
|                                   |                                                                                                  | Upgrade and retention costs         |      
|                                   |                                                                                                  | General and administrative expenses |      
|                                   | Depreciation and amortization expense                                                            |                                     |      
|                                   |                                                                                                  |                                     |      
|Total operating costs and expenses |                                                                                                  |                                     | 3,456
|                                   |                                                                                                  |                                     |      
|Operating profit                   |                                                                                                  |                                     | 593  
|Interest income                    |                                                                                                  |                                     | 9    
|Interest expense                   |                                                                                                  |                                     | (55  
|Other, net                         |                                                                                                  |                                     |     
|                                   |                                                                                                  |                                     |      
|Income before income taxes         |                                                                                                  |                                     | 547  
|Income tax expense                 |                                                                                                  |                                     | (215 
|                                   |                                                                                                  |                                     |      
|Net income                         |                                                                                                  | $                                   | 332  
|                                   |                                                                                                  |                                     |      

The
accompanying notes are an integral part of these Consolidated Financial Statements.

1

---





DIRECTV HOLDINGS LLC        CONSOLIDATED BALANCE SHEETS        (Unaudited)

|                                       |                                                       | March 31,
2008                       |       | December 31,
2007
|-------------------------------------- | ----------------------------------------------------- | ------------------------------------ | ----- | -----------------
|
|ASSETS                                 |                                                       |                                      |       |                  
|Current assets                         |                                                       |                                      |       |                  
|                                       | Cash and cash equivalents                             |                                      | $     | 1,175            
|                                       | Accounts receivable, net of allowances of $34 and $39 |                                      |       | 1,199            
|                                       | Inventories                                           |                                      |       | 150              
|                                       | Deferred income taxes                                 |                                      |       | 33               
|                                       | Prepaid expenses and other                            |                                      |       | 137              
|                                       |                                                       |                                      |       |                  
|                                       |                                                       | Total current assets                 |       |                  
|Satellites, net                        |                                                       |                                      | 2,049 |                  
|Property and equipment, net            |                                                       |                                      | 3,318 |                  
|Goodwill                               |                                                       |                                      | 3,032 |                  
|Intangible assets, net                 |                                                       |                                      | 1,135 |                  
|Other assets                           |                                                       |                                      | 229   |                  
|                                       |                                                       |                                      |       |                  
|                                       |                                                       | Total assets                         |       | $                
|                                       |                                                       |                                      |       |                  
|LIABILITIES AND OWNER'S EQUITY         |                                                       |                                      |       |                  
|Current liabilities                    |                                                       |                                      |       |                  
|                                       | Accounts payable and accrued liabilities              |                                      | $     | 2,478            
|                                       | Unearned subscriber revenue and deferred credits      |                                      |       | 329              
|                                       | Current portion of long-term debt                     |                                      |       | 60               
|                                       |                                                       |                                      |       |                  
|                                       |                                                       | Total current liabilities            |       |                  
|Long-term debt                         |                                                       |                                      | 3,332 |                  
|Deferred income taxes                  |                                                       |                                      | 362   |                  
|Other liabilities and deferred credits |                                                       |                                      | 903   |                  
|Commitments and contingencies          |                                                       |                                      |       |                  
|Owner's equity                         |                                                       |                                      |       |                  
|                                       | Capital stock and additional paid-in capital          |                                      |       | 2,703            
|                                       | Retained earnings                                     |                                      |       | 2,290            
|                                       |                                                       |                                      |       |                  
|                                       |                                                       | Total owner's equity                 |       |                  
|                                       |                                                       |                                      |       |                  
|                                       |                                                       | Total liabilities and owner's equity |       | $                
|                                       |                                                       |                                      |       |                  

The
accompanying notes are an integral part of these Consolidated Financial Statements.

2

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DIRECTV HOLDINGS LLC        CONSOLIDATED STATEMENTS OF CASH FLOWS        (Unaudited)

|                                                                                  |                                                                   | Three Months Ended
March 31                      |                                          
|--------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ------------------------------------------------ | -----------------------------------------
|
|
|Cash Flows from Operating Activities                                              |                                                                   |                                                  |                                          
|Net income                                                                        |                                                                   | $                                                | 332                                      
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                                   |                                                  |                                          
|                                                                                  | Depreciation and amortization expense                             |                                                  |                                          
|                                                                                  | Amortization of deferred revenues and deferred credits            |                                                  |                                          
|                                                                                  | Deferred income taxes                                             |                                                  |                                          
|                                                                                  | Other                                                             |                                                  |                                          
|                                                                                  | Change in other operating assets and liabilities                  |                                                  |                                          
|                                                                                  |                                                                   | Accounts receivable                              |                                          
|                                                                                  |                                                                   | Inventories                                      |                                          
|                                                                                  |                                                                   | Prepaid expenses and other                       |                                          
|                                                                                  |                                                                   | Accounts payable and accrued liabilities         |                                          
|                                                                                  |                                                                   | Unearned subscriber revenue and deferred credits |                                          
|                                                                                  |                                                                   | Other, net                                       |                                          
|                                                                                  |                                                                   |                                                  |                                          
|                                                                                  |                                                                   |                                                  | Net cash provided by operating activities
|                                                                                  |                                                                   |                                                  |                                          
|Cash Flows from Investing Activities                                              |                                                                   |                                                  |                                          
|                                                                                  | Cash paid for property and equipment                              |                                                  |                                          
|                                                                                  | Cash paid for subscriber leased equipmentsubscriber acquisitions |                                                  |                                          
|                                                                                  | Cash paid for subscriber leased equipmentupgrade and retention   |                                                  |                                          
|                                                                                  | Cash paid for satellites                                          |                                                  |                                          
|                                                                                  | Other                                                             |                                                  |                                          
|                                                                                  |                                                                   |                                                  |                                          
|                                                                                  |                                                                   |                                                  | Net cash used in investing activities    
|                                                                                  |                                                                   |                                                  |                                          
|Cash Flows from Financing Activities                                              |                                                                   |                                                  |                                          
|                                                                                  | Repayment of long-term debt                                       |                                                  |                                          
|                                                                                  | Repayment of other long-term obligations                          |                                                  |                                          
|                                                                                  | Cash dividend to Parent                                           |                                                  |                                          
|                                                                                  | Excess tax benefit from share-based compensation                  |                                                  |                                          
|                                                                                  |                                                                   |                                                  |                                          
|                                                                                  |                                                                   |                                                  | Net cash used in financing activities    
|                                                                                  |                                                                   |                                                  |                                          
|Net increase in cash and cash equivalents                                         |                                                                   |                                                  | 373                                      
|Cash and cash equivalents at beginning of the period                              |                                                                   |                                                  | 802                                      
|                                                                                  |                                                                   |                                                  |                                          
|Cash and cash equivalents at the end of the period                                |                                                                   | $                                                | 1,175                                    
|                                                                                  |                                                                   |                                                  |                                          
|Supplemental cash flow information                                                |                                                                   |                                                  |                                          
|Cash paid for interest                                                            |                                                                   | $                                                | 58                                       
|Cash paid for income taxes                                                        |                                                                   |                                                  | 49                                       

The
accompanying notes are an integral part of these Consolidated Financial Statements.

3

---





DIRECTV HOLDINGS LLC        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS        (Unaudited)

Note 1: Basis of Presentation

DIRECTV Holdings LLC is a wholly-owned subsidiary of The DIRECTV Group, Inc. and consists of DIRECTV Enterprises, LLC and its wholly-owned
subsidiaries and DIRECTV Financing Co., Inc. We sometimes refer to DIRECTV Holdings LLC as DIRECTV Holdings, DIRECTV, we or us and sometimes refer to The DIRECTV
Group, Inc. as The DIRECTV Group or Parent.

On
February 27, 2008, Liberty Media Corporation, or Liberty Media, and News Corporation completed a transaction in which Liberty Media acquired News Corporation's approximately
41% interest in our Parent, which we refer to as the Liberty Transaction. On April 3, 2008, Liberty Media announced that it had purchased an additional 78.3 million shares of our
Parent's common stock in a private transaction, increasing its beneficial ownership to approximately 48%.

We
have prepared the accompanying unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, or GAAP, for
interim financial reporting. In the opinion of management, all adjustments (consisting only of normal recurring items) that are necessary for a fair presentation have been included. The results for
interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. For further information, refer to the consolidated financial
statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission, or SEC, on
February 27, 2008 and all of our other filings, including Current Reports on Form 8-K, filed with the SEC after such date and through the date of this report.

Note 2: Accounting Changes and New Accounting Standards



On January 1, 2008 we adopted Statement of Financial Accounting Standards, or SFAS, No. 159, "The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an amendment of FASB Statement No. 115." SFAS No. 159 permits, but does not require, companies to report at fair value the majority of
recognized financial assets, financial liabilities and firm commitments. Under this standard, unrealized gains and losses on items for which the fair value option is elected are reported in earnings
at each subsequent reporting date. Our adoption of SFAS No. 159 did not have any effect on our consolidated results of operations or financial position, as we have not elected to report subject
instruments at fair value.

On
January 1, 2008 we adopted SFAS No. 157, "Fair Value Measurements." SFAS No. 157 defines fair value, sets out a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value measurements of assets and liabilities to include disclosure about inputs used in the determination of fair value using the
following three categories:



SFAS
No. 157 applies under other accounting pronouncements previously issued by the FASB that require or permit fair value measurements. Our adoption of SFAS No. 157 did
not have any effect on our consolidated results of operations or financial position.

On
January 1, 2008 we adopted Emerging Issues Task Force, or EITF, Issue No. 06-1, "Accounting for Consideration Given by a Service Provider to a Manufacturer
or Reseller of Equipment Necessary for an End-Customer to Receive Service from the Service Provider." EITF No. 06-1 provides guidance

4

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

to
service providers regarding the proper reporting of consideration given to manufacturers or resellers of equipment necessary for an end-customer to receive its services. Depending on
the circumstances, such consideration is reported as either an expense or a reduction of revenues. Our adoption of EITF No. 06-1 did not have any effect on our consolidated results
of operations or financial position.

New Accounting Standards

In December 2007, the Financial Accounting Standards Board, or FASB, issued SFAS No.160, "Noncontrolling Interests in Consolidated Financial
Statementsan amendment to ARB No. 51." SFAS No. 160 establishes standards of accounting and reporting of noncontrolling interests in subsidiaries, currently known as
minority interests, in consolidated financial statements, provides guidance on accounting for changes in the parent's ownership interest in a subsidiary and establishes standards of accounting of the
deconsolidation of a subsidiary due to the loss of control. SFAS No.160 requires an entity to present minority interests as a component of equity. Additionally, SFAS No. 160 requires an entity
to present net income and consolidated comprehensive income attributable to the parent and the minority interest separately on the face of the consolidated financial statements. We are currently
assessing the effect SFAS No. 160 will have on our consolidated results of operations and financial position when adopted, as required, on January 1, 2009.

In
December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations." SFAS No. 141R requires the acquiring entity to recognize and measure at an
acquisition date fair value all identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree. The Statement recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase. SFAS No. 141R requires disclosures about the nature and financial effect of the business combination and also changes the accounting for
certain income tax assets recorded in
purchase accounting. We are currently assessing the effect SFAS No. 141R will have on our consolidated results of operations and financial position when adopted, as required, on
January 1, 2009.

Note 3: Intangible Assets

The following table sets forth the amounts recorded for intangible assets as of the periods presented:

|                         |                         |            |  | March 31, 2008 |       | December 31, 2007
|------------------------ | ----------------------- | ---------- |  | -------------- | ----- | -----------------
|
|
|Orbital slots            |                         | Indefinite |  | $              | 432   |                  
|72.5° WL Orbital license |                         | 5          |  |                | 219   |                  
|Subscriber related       |                         | 5-10       |  |                | 1,348 |                  
|Dealer network           |                         | 15         |  |                | 130   |                  
|Distribution rights      |                         | 7          |  |                | 334   |                  
|                         |                         |            |  |                |       |                  
|                         | Total intangible assets |            |  |                | $     | 2,463            
|                         |                         |            |  |                |       |                  

The
following table sets forth amortization expense for intangible assets for each of the periods presented:

Three Months Ended March 31,2008

2007(Dollars in Millions)Amortization expense

$
88

$
89


5

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Estimated
amortization expense for intangible assets in each of the next five years and thereafter is as follows: $264 million for the remainder of 2008,
$289 million in 2009, $90 million in 2010, $34 million in 2011, $10 million in 2012 and $16 million thereafter.

Note 4: Borrowings

The following table sets forth our outstanding borrowings:

Interest Rates at March 31, 2008

March 31, 2008

December 31, 2007(Dollars in Millions)8.375% senior notes due in 2013

8.375
%
$
910

$
9106.375% senior notes due in 2015

6.375
%

1,000


1,000Senior secured credit facility

3.950
%

1,480


1,483Unamortized bond premium




2


2Total debt




3,392


3,395Less: Current portion of long-term debt




60


48Long-term debt



$
3,332

$
3,347


The
fair value of our 8.375% senior notes was approximately $928 million at March 31, 2008 and approximately $948 million at December 31, 2007. The fair value
of our 6.375% senior notes was approximately $937 million at March 31, 2008 and approximately $962 million at December 31, 2007. We calculated the fair values based on
quoted market prices of our senior notes, which is a Level 1 input under SFAS No. 157, on those dates.

Our
notes payable and senior secured credit facility mature as follows: $45 million in the remainder of 2008; $98 million in 2009; $297 million in 2010;
$98 million in 2011; $10 million in 2012 and $2,842 million thereafter. These amounts do not reflect potential prepayments that may be required under our senior secured credit
facility, which could result from a computation that we may be required to make at each year end under the credit agreement. We were not required to make a prepayment for the year ended
December 31, 2007. The amount of interest accrued related to our outstanding debt was $22 million at March 31, 2008 and $26 million at December 31, 2007.

Covenants and Restrictions.The senior secured credit facility requires us to comply with certain financial covenants. The
senior notes and the senior secured credit facility also include covenants that restrict our ability to, among other things, (i) incur additional indebtedness, (ii) incur liens,
(iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions with affiliates, (v) merge or consolidate with
another entity, (vi) sell, assign, lease or otherwise dispose of all or substantially all of our assets, and (vii) make voluntary prepayments of certain debt, in each case subject to
exceptions as provided in the credit agreement and senior notes indentures. Should we fail to comply with these covenants, all or a portion of our borrowings under the senior notes and senior secured
credit facility could become immediately payable and our revolving credit facility could be terminated. At March 31, 2008, we were in compliance with all such covenants. The senior notes and
senior secured credit facility also provide that the borrowings may be required to be prepaid if certain change-in-control events occur.

6

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5: Contingencies



Litigation is subject to uncertainties and the outcome of individual litigated matters is not predictable with assurance. Various legal actions, claims and
proceedings are pending against us arising in the ordinary course of business. We have established loss provisions for matters in which losses are probable and can be reasonably estimated. Some of the
matters may involve compensatory, punitive, or treble damage claims, or demands that, if granted, could require us to pay damages or make other expenditures in amounts that could not be estimated at
March 31, 2008. After discussion with counsel representing us in those actions, it is the opinion of management that such litigation is not expected to have a material adverse effect on our
consolidated results of operations or financial position.

Finisar Corporation.As previously reported, we filed a notice of appeal to the Court of Appeals for the Federal Circuit on
October 5, 2006 from a jury determination that The DIRECTV Group, Inc. and certain of its subsidiaries, including DIRECTV Holdings, willfully infringed a patent owned by Finisar
Corporation and an award by the jury of approximately $79 million in damages. The trial court increased the damages award by $25 million because of the jury finding of willful
infringement and awarded pre-judgment interest of $13 million to Finisar. We were also ordered to pay into escrow $1.60 per new set-top receiver manufactured for use
with the DIRECTV system beginning June 17, 2006 and continuing until the patent expires in 2012 or was otherwise found to be invalid. Through March 31, 2008, the ongoing royalties
amounted to $37 million, which has been paid into escrow.

Finisar
also filed a notice of appeal on October 18, 2006 and oral arguments on the appeal and cross appeal were heard by the Court of Appeals on January 7, 2008.

On
April 18, 2008, the Court of Appeals vacated (set aside) the verdict of infringement, and sent the case back to the district court for further proceedings and possible retrial
on a limited number of claims. The Court of Appeals, ruled that the lower court had used erroneous interpretations of certain important terms in the patent claims. Thus the district court must now
determine whether there is any infringement using the correct interpretations, which are the ones we originally suggested. Regarding our defenses of invalidity, the Court of Appeals found that one of
the principal independent claims of the patent is clearly anticipated by the prior art we presented. The Court of Appeals then remanded the question of validity for the remaining claims back to the
district court for further consideration in view of this invalidity ruling. The Court of Appeals also reversed the verdict of willful infringement, and affirmed earlier rulings of the district court
that held several additional claims to be invalid. On May 2, 2008, Finisar filed a petition for rehearing by the Court of Appeals. We anticipate that the bond will be released and the escrowed
funds will be returned once the appellate proceedings become final.

We
have not recorded any liability for this litigation or for the compulsory license. Based on our review and discussion with and analysis by counsel we believe that it is not probable
that Finisar will ultimately prevail, particularly in light of the Court of Appeals' ruling.



We may purchase in-orbit and launch insurance to mitigate the potential financial impact of satellite launch and in-orbit failures if the
premium costs are considered economic relative to the risk of satellite failure. The insurance generally covers the unamortized book value of covered satellites. We do not insure against lost revenues
in the event of a total or partial loss of the capacity of a satellite. We generally rely on in-orbit spare satellites and excess transponder capacity at key orbital slots to

7

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

mitigate
the impact that a satellite failure could have on our ability to provide service. At March 31, 2008, the net book value of in-orbit satellites was $1,516 million of
which $1,302 million was uninsured.



As of March 31, 2008, included in "Other assets" in the Consolidated Balance Sheets is a receivable for $34 million of the $57 million rebate
that we can earn from Thomson by purchasing at least $4 billion of set-top receivers through June 2010. We have accrued this receivable based on our assessment that achievement of
the minimum purchase requirement is both probable and reasonably estimable. On a quarterly basis, we assess the probability of earning the rebate over the contract term. If we subsequently determine
that it is no longer probable that we will earn the rebate, we would be required to reverse the amount of the rebate earned to date, most of which would be recorded as a charge to the Consolidated
Statements of Operations at the time such determination is made.

Note 6: Related Party Transactions

In the ordinary course of our operations, we enter into transactions with related parties as discussed below.

The DIRECTV Group and affiliates

We determine our income taxes based upon our tax sharing agreement with The DIRECTV Group, which generally provides that the current income tax liability or
receivable be computed as if we were a separate taxpayer. Payments made to our Parent under this tax sharing arrangement were $47 million for the three months ended March 31, 2008 and
$45 million for the three months ended March 31, 2007. We receive an allocation of employee benefit expenses from The DIRECTV Group. We believe that our consolidated financial statements
reflect our cost of doing business in accordance with SEC Staff Accounting Bulleting No. 55, "Allocation of Expenses and Related Disclosures in Financial Statements of Subsidiaries, Divisions
or Lesser Business Components of Another Entity."

During
the first quarter of 2008, we paid a $100 million dividend to our Parent from available cash and cash equivalents.

Liberty Media, Liberty Global and Discovery Holding Company

As a result of the completion of the Liberty Transaction, beginning February 27, 2008, transactions with Liberty Media and its affiliates, including its
equity method investees may be considered to be related party transactions as Liberty Media currently owns approximately 48% of our Parent's outstanding common stock. Our transactions with Liberty
Media and its affiliates consist primarily of the purchase of programming.

In
addition, John Malone, Chairman of the Board of Directors of our Parent and of Liberty Media, has an approximate 31% voting interest in Discovery Holding Company, or Discovery
Holding, and an approximate 34% voting interest in Liberty Global, and serves as Chairman of both companies, and certain of Liberty Media's management and directors also serve in management or
director roles at Discovery Holding or Liberty Global. As a result of this common ownership and management, transactions with Discovery Holding and Liberty Global, and their equity method investees
may be considered to be related party transactions. Our transactions with Discovery Holding and Liberty Global consist primarily of purchases of programming created, owned or distributed by Discovery
Holding and its subsidiaries and investees.

8

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

News Corporation and affiliates

News Corporation and its affiliates were considered related parties until February 27, 2008, when it sold its 41% interest in our Parent's common stock to
Liberty Media. Accordingly, the following contractual arrangements with News Corporation and its affiliates are considered related party transactions and reported through February 27, 2008:
purchase of programming, products and advertising; license of certain intellectual property, including patents; purchase of system access products, set-top receiver software and support
services; sale of advertising space; purchase of employee services; and use of facilities.

The
majority of payments under contractual arrangements with Liberty Media, Discovery Holding, Liberty Global and News Corporation entities relate to multi-year programming
contracts. Payments under these contracts are typically subject to annual rate increases and are based on the number of subscribers receiving the related programming.

Other

Companies in which we hold equity method investments are also considered related parties.

The
following table summarizes sales to, and purchases from, related parties:

Three Months Ended March 31,2008

2007(Dollars in Millions)Sales:Liberty Media and affiliates

$
7

$
Discovery Holding, Liberty Global and affiliates


1


News Corporation and affiliates


2


4Total

$
10

$
4Purchases:Liberty Media and affiliates

$
27

$
Discovery Holding, Liberty Global and affiliates


16


News Corporation and affiliates


157


204Other


8


4Total

$
208

$
208


The
following table sets forth the amount of accounts receivable from and accounts payable to related parties as of:

March 31, 2008

December 31, 2007(Dollars in Millions)Accounts receivable

$
14

$
20Accounts payable


175


270


The
accounts receivable and accounts payable balances as of March 31, 2008 are primarily related to affiliates of Liberty Media and the accounts receivable and accounts payable
balances as of December 31, 2007 are primarily related to affiliates of News Corporation.

9

---



DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 7: Condensed Consolidating Financial Statements

The following presents the condensed consolidating statements of operations for the three months ended March 31, 2008 and 2007, the condensed consolidating
balance sheets as of March 31, 2008 and December 31, 2007, and the condensed consolidating statements of cash flows for the three months ended March 31, 2008 and 2007 of DIRECTV
Holdings together with DIRECTV Financing Co., Inc., or the Co-Issuers, and each of DIRECTV Holdings' material subsidiaries (other than DIRECTV Financing), or the Guarantor
Subsidiaries, and the eliminations necessary to present DIRECTV Holdings' financial statements on a consolidated basis. These condensed consolidating financial statements should be read in conjunction
with the accompanying consolidated financial statements of DIRECTV Holdings.

Condensed Consolidating Statement of Operations
For the Three Months Ended March 31, 2008

|                                              |                                                                                                  | Co-Issuers                          |     | Guarantor Subsidiaries |   | Eliminations |     | DIRECTV Holdings Consolidated |     
|--------------------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------- | --- | ---------------------- | - | ------------ | --- | ----------------------------- | ----
|
|Revenues                                      |                                                                                                  | $                                   | 51  |                        | $ | 4,049        |     | $                             | (51 
|Operating costs and expenses                  |                                                                                                  |                                     |     |                        |   |              |     |                               |     
|                                              | Costs of revenues, exclusive of depreciation and amortization expense                            |                                     |     |                        |   |              |     |                               |     
|                                              |                                                                                                  | Broadcast programming and other     |     |                        |  |              |     | 1,683                         |     
|                                              |                                                                                                  | Subscriber service expenses         |     |                        |  |              |     | 274                           |     
|                                              |                                                                                                  | Broadcast operations expenses       |     |                        |  |              |     | 61                            |     
|                                              | Selling, general and administrative expenses, exclusive of depreciation and amortization expense |                                     |     |                        |   |              |     |                               |     
|                                              |                                                                                                  | Subscriber acquisition costs        |     |                        |  |              |     | 530                           |     
|                                              |                                                                                                  | Upgrade and retention costs         |     |                        |  |              |     | 255                           |     
|                                              |                                                                                                  | General and administrative expenses |     |                        |  |              |     | 240                           |     
|                                              | Depreciation and amortization expense                                                            |                                     |     |                       |   |              | 464 |                               |     
|                                              |                                                                                                  |                                     |     |                        |   |              |     |                               |     
|                                              |                                                                                                  | Total operating costs and expenses  |     |                        |  |              |     | 3,507                         |     
|                                              |                                                                                                  |                                     |     |                        |   |              |     |                               |     
|Operating profit                              |                                                                                                  |                                     | 51  |                        |   | 542          |     |                               |    
|Equity in income of consolidated subsidiaries |                                                                                                  |                                     | 327 |                        |   |             |     |                               | (327
|Interest income                               |                                                                                                  |                                     | 9   |                        |   |             |     |                               |    
|Interest expense                              |                                                                                                  |                                     | (51 | )                      |   | (4           | )   |                               |    
|Other, net                                    |                                                                                                  |                                     |    |                        |   |             |     |                               |    
|                                              |                                                                                                  |                                     |     |                        |   |              |     |                               |     
|Income before income taxes                    |                                                                                                  |                                     | 336 |                        |   | 538          |     |                               | (327
|Income tax expense                            |                                                                                                  |                                     | (4  | )                      |   | (211         | )   |                               |    
|                                              |                                                                                                  |                                     |     |                        |   |              |     |                               |     
|Net income                                    |                                                                                                  | $                                   | 332 |                        | $ | 327          |     | $                             | (327
|                                              |                                                                                                  |                                     |     |                        |   |              |     |                               |     

10

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating Statement of Operations
For the Three Months Ended March 31, 2007

|                                              |                                                                                                  | Co-Issuers                          |     | Guarantor Subsidiaries |   | Eliminations |     | DIRECTV Holdings Consolidated |     
|--------------------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------- | --- | ---------------------- | - | ------------ | --- | ----------------------------- | ----
|
|Revenues                                      |                                                                                                  | $                                   |    |                        | $ | 3,539        |     | $                             |    
|Operating costs and expenses                  |                                                                                                  |                                     |     |                        |   |              |     |                               |     
|                                              | Costs of revenues, exclusive of depreciation and amortization expense                            |                                     |     |                        |   |              |     |                               |     
|                                              |                                                                                                  | Broadcast programming and other     |     |                        |  |              |     | 1,483                         |     
|                                              |                                                                                                  | Subscriber service expenses         |     |                        |  |              |     | 280                           |     
|                                              |                                                                                                  | Broadcast operations expenses       |     |                        |  |              |     | 52                            |     
|                                              | Selling, general and administrative expenses, exclusive of depreciation and amortization expense |                                     |     |                        |   |              |     |                               |     
|                                              |                                                                                                  | Subscriber acquisition costs        |     |                        |  |              |     | 432                           |     
|                                              |                                                                                                  | Upgrade and retention costs         |     |                        |  |              |     | 226                           |     
|                                              |                                                                                                  | General and administrative expenses |     |                        |  |              |     | 197                           |     
|                                              | Depreciation and amortization expense                                                            |                                     |     |                       |   |              | 303 |                               |     
|                                              |                                                                                                  |                                     |     |                        |   |              |     |                               |     
|                                              |                                                                                                  | Total operating costs and expenses  |     |                        |  |              |     | 2,973                         |     
|                                              |                                                                                                  |                                     |     |                        |   |              |     |                               |     
|Operating profit                              |                                                                                                  |                                     |    |                        |   | 566          |     |                               |    
|Equity in income of consolidated subsidiaries |                                                                                                  |                                     | 341 |                        |   |             |     |                               | (341
|Interest income                               |                                                                                                  |                                     | 21  |                        |   |             |     |                               |    
|Interest expense                              |                                                                                                  |                                     | (47 | )                      |   | (5           | )   |                               |    
|Other, net                                    |                                                                                                  |                                     |    |                        |   | (2           | )   |                               |    
|                                              |                                                                                                  |                                     |     |                        |   |              |     |                               |     
|Income before income taxes                    |                                                                                                  |                                     | 315 |                        |   | 559          |     |                               | (341
|Income tax benefit (expense)                  |                                                                                                  |                                     | 10  |                        |   | (218         | )   |                               |    
|                                              |                                                                                                  |                                     |     |                        |   |              |     |                               |     
|Net income                                    |                                                                                                  | $                                   | 325 |                        | $ | 341          |     | $                             | (341
|                                              |                                                                                                  |                                     |     |                        |   |              |     |                               |     

11

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating Balance Sheet
As of March 31, 2008

|                                       |                                              | Co-Issuers           |       | Guarantor Subsidiaries |       | Eliminations |       | DIRECTV Holdings Consolidated
|-------------------------------------- | -------------------------------------------- | -------------------- | ----- | ---------------------- | ----- | ------------ | ----- | -----------------------------
|
|ASSETS                                 |                                              |                      |       |                        |       |              |       |                              
|Total current assets                   |                                              | $                    | 1,185 |                        | $     | 1,579        |       | $                            
|Satellites, net                        |                                              |                      |      |                        |       | 2,049        |       |                              
|Property and equipment, net            |                                              |                      |      |                        |       | 3,318        |       |                              
|Goodwill                               |                                              |                      | 1,828 |                        |       | 1,204        |       |                              
|Intangible assets, net                 |                                              |                      |      |                        |       | 1,135        |       |                              
|Other assets                           |                                              |                      | 6,660 |                        |       | 916          |       |                              
|                                       |                                              |                      |       |                        |       |              |       |                              
|Total assets                           |                                              | $                    | 9,673 |                        | $     | 10,201       |       | $                            
|                                       |                                              |                      |       |                        |       |              |       |                              
|LIABILITIES AND OWNER'S EQUITY         |                                              |                      |       |                        |       |              |       |                              
|Total current liabilities              |                                              | $                    | 124   |                        | $     | 2,812        |       | $                            
|Long-term debt                         |                                              |                      | 3,332 |                        |       |             |       |                              
|Deferred income taxes                  |                                              |                      |      |                        |       | 581          |       |                              
|Other liabilities and deferred credits |                                              |                      | 1,224 |                        |       | 903          |       |                              
|Owner's equity                         |                                              |                      |       |                        |       |              |       |                              
|                                       | Capital stock and additional paid-in capital |                      |       | 2,703                  |       |              | 4,440 |                              
|                                       | Retained earnings                            |                      |       | 2,290                  |       |              | 1,465 |                              
|                                       |                                              |                      |       |                        |       |              |       |                              
|                                       |                                              | Total owner's equity |       |                        | 4,993 |              |       | 5,905                        
|                                       |                                              |                      |       |                        |       |              |       |                              
|Total liabilities and owner's equity   |                                              | $                    | 9,673 |                        | $     | 10,201       |       | $                            
|                                       |                                              |                      |       |                        |       |              |       |                              

12

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating Balance Sheet
As of December 31, 2007

|                                       |                                              | Co-Issuers           |       | Guarantor Subsidiaries |       | Eliminations |       | DIRECTV Holdings Consolidated
|-------------------------------------- | -------------------------------------------- | -------------------- | ----- | ---------------------- | ----- | ------------ | ----- | -----------------------------
|
|ASSETS                                 |                                              |                      |       |                        |       |              |       |                              
|Total current assets                   |                                              | $                    | 865   |                        | $     | 1,763        |       | $                            
|Satellites, net                        |                                              |                      |      |                        |       | 2,030        |       |                              
|Property and equipment, net            |                                              |                      |      |                        |       | 3,230        |       |                              
|Goodwill                               |                                              |                      | 1,828 |                        |       | 1,204        |       |                              
|Intangible assets, net                 |                                              |                      |      |                        |       | 1,223        |       |                              
|Other assets                           |                                              |                      | 6,126 |                        |       | 490          |       |                              
|                                       |                                              |                      |       |                        |       |              |       |                              
|Total assets                           |                                              | $                    | 8,819 |                        | $     | 9,940        |       | $                            
|                                       |                                              |                      |       |                        |       |              |       |                              
|LIABILITIES AND OWNER'S EQUITY         |                                              |                      |       |                        |       |              |       |                              
|Total current liabilities              |                                              | $                    | 132   |                        | $     | 2,865        |       | $                            
|Long-term debt                         |                                              |                      | 3,347 |                        |       |             |       |                              
|Deferred income taxes                  |                                              |                      |      |                        |       | 559          |       |                              
|Other liabilities and deferred credits |                                              |                      | 600   |                        |       | 958          |       |                              
|Owner's equity                         |                                              |                      |       |                        |       |              |       |                              
|                                       | Capital stock and additional paid-in capital |                      |       | 2,782                  |       |              | 4,420 |                              
|                                       | Retained earnings                            |                      |       | 1,958                  |       |              | 1,138 |                              
|                                       |                                              |                      |       |                        |       |              |       |                              
|                                       |                                              | Total owner's equity |       |                        | 4,740 |              |       | 5,558                        
|                                       |                                              |                      |       |                        |       |              |       |                              
|Total liabilities and owner's equity   |                                              | $                    | 8,819 |                        | $     | 9,940        |       | $                            
|                                       |                                              |                      |       |                        |       |              |       |                              

13

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2008

|                                                     |                                                                  | Co-Issuers                            |       | Guarantor Subsidiaries |      | DIRECTV Holdings Consolidated |     
|---------------------------------------------------- | ---------------------------------------------------------------- | ------------------------------------- | ----- | ---------------------- | ---- | ----------------------------- | ----
|
|Cash flows from operating activities                 |                                                                  |                                       |       |                        |      |                               |     
|                                                     | Net cash provided by operating activities                        |                                       | $     | 446                    |      | $                             | 528 
|                                                     |                                                                  |                                       |       |                        |      |                               |     
|Cash flows from investing activities                 |                                                                  |                                       |       |                        |      |                               |     
|                                                     | Cash paid for property and equipment                             |                                       |       |                       |      |                               | (106
|                                                     | Cash paid for subscriber leased equipmentsubscriber acquisition |                                       |       |                       |      |                               | (156
|                                                     | Cash paid for subscriber leased equipmentupgrade and retention  |                                       |       |                       |      |                               | (161
|                                                     | Cash paid for satellites                                         |                                       |       |                       |      |                               | (46 
|                                                     | Other                                                            |                                       |       |                       |      |                               | 4   
|                                                     |                                                                  |                                       |       |                        |      |                               |     
|                                                     |                                                                  | Net cash used in investing activities |       |                        |     |                               |     
|                                                     |                                                                  |                                       |       |                        |      |                               |     
|Cash flows from financing activities                 |                                                                  |                                       |       |                        |      |                               |     
|                                                     | Repayment of long-term debt                                      |                                       |       | (3                     | )    |                               |    
|                                                     | Repayment of other long-term obligations                         |                                       |       |                       |      |                               | (40 
|                                                     | Cash dividend to Parent                                          |                                       |       | (100                   | )    |                               |    
|                                                     | Excess tax benefit from share-based compensation                 |                                       |       |                       |      |                               | 7   
|                                                     |                                                                  |                                       |       |                        |      |                               |     
|                                                     |                                                                  | Net cash used in financing activities |       |                        | (103 | )                             |     
|                                                     |                                                                  |                                       |       |                        |      |                               |     
|Net increase in cash and cash equivalents            |                                                                  |                                       | 343   |                        |      | 30                            |     
|Cash and cash equivalents at beginning of the period |                                                                  |                                       | 790   |                        |      | 12                            |     
|                                                     |                                                                  |                                       |       |                        |      |                               |     
|Cash and cash equivalents at the end of the period   |                                                                  | $                                     | 1,133 |                        | $    | 42                            |     
|                                                     |                                                                  |                                       |       |                        |      |                               |     

14

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2007

|                                                     |                                                                  | Co-Issuers                            |       | Guarantor Subsidiaries |    | DIRECTV Holdings Consolidated |     
|---------------------------------------------------- | ---------------------------------------------------------------- | ------------------------------------- | ----- | ---------------------- | -- | ----------------------------- | ----
|
|Cash flows from operating activities                 |                                                                  |                                       |       |                        |    |                               |     
|                                                     | Net cash provided by operating activities                        |                                       | $     | 244                    |    | $                             | 647 
|                                                     |                                                                  |                                       |       |                        |    |                               |     
|Cash flows from investing activities                 |                                                                  |                                       |       |                        |    |                               |     
|                                                     | Cash paid for property and equipment                             |                                       |       |                       |    |                               | (169
|                                                     | Cash paid for subscriber leased equipmentsubscriber acquisition |                                       |       |                       |    |                               | (188
|                                                     | Cash paid for subscriber leased equipmentupgrade and retention  |                                       |       |                       |    |                               | (218
|                                                     | Cash paid for satellites                                         |                                       |       |                       |    |                               | (54 
|                                                     | Other                                                            |                                       |       |                       |    |                               | (1  
|                                                     |                                                                  |                                       |       |                        |    |                               |     
|                                                     |                                                                  | Net cash used in investing activities |       |                        |   |                               |     
|                                                     |                                                                  |                                       |       |                        |    |                               |     
|Cash flows from financing activities                 |                                                                  |                                       |       |                        |    |                               |     
|                                                     | Repayment of long-term debt                                      |                                       |       | (3                     | )  |                               |    
|                                                     | Repayment of other long-term obligations                         |                                       |       |                       |    |                               | (17 
|                                                     | Excess tax benefit from share-based compensation                 |                                       |       |                       |    |                               | 4   
|                                                     |                                                                  |                                       |       |                        |    |                               |     
|                                                     |                                                                  | Net cash used in financing activities |       |                        | (3 | )                             |     
|                                                     |                                                                  |                                       |       |                        |    |                               |     
|Net increase in cash and cash equivalents            |                                                                  |                                       | 241   |                        |    | 4                             |     
|Cash and cash equivalents at beginning of the period |                                                                  |                                       | 1,354 |                        |    | 2                             |     
|                                                     |                                                                  |                                       |       |                        |    |                               |     
|Cash and cash equivalents at the end of the period   |                                                                  | $                                     | 1,595 |                        | $  | 6                             |     
|                                                     |                                                                  |                                       |       |                        |    |                               |     

15

---





DIRECTV HOLDINGS LLC        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Concluded)        (Unaudited)

Note 8: Subsequent Events

New Borrowings

We are in the process of obtaining additional borrowings of approximately $2 billion, the proceeds of which will be used for general corporate purposes and
to pay dividends to our Parent for use in its share repurchase program or general corporate purposes. Such proposed new borrowings are subject to market conditions and other factors, so there is no
assurance that such borrowings will be completed or, if completed, will provide the anticipated amount of funding. We anticipate that these borrowing transactions will be completed in May 2008.

180 Connect Acquisition

On April 18, 2008, we announced an agreement to acquire 100% of 180 Connect, Inc.'s, or 180 Connect, outstanding common stock and exchangeable
shares. In a separate transaction announced simultaneously, UniTek USA, LLC has agreed to acquire 100% of 180 Connect's cable service operating unit and certain of our installation services
markets in exchange for satellite installation services in certain markets and cash. This transaction is expected to close immediately following our acquisition of 180 Connect.

These
transactions will provide us with control over a significant portion of our installation and home service network. We estimate net cash payments of approximately
$74 million, including the equity purchase price, repayment of assumed debt and transaction costs when the transactions close, which we expect to occur in the third quarter of 2008. We will
account for these transactions using the purchase method of accounting.

16

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DIRECTV HOLDINGS LLC

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management's discussion and analysis should be read in conjunction with our management's discussion and analysis of financial condition and results
of operations included in our Annual Report on Form 10-K for the year ended December 31, 2007 filed with the SEC on February 27, 2008 and all of our other filings,
including Current Reports on Form 8-K, filed with the SEC after such date and through the date of this report.

This
Quarterly Report on Form 10-Q may contain certain statements that we believe are, or may be considered to be, "forward-looking statements" within the meaning of
various provisions of the Securities Act of 1933 and of the Securities Exchange Act of 1934. These forward-looking statements generally can be identified by use of statements that include phrases such
as we "believe," "estimate," "expect," "anticipate," "intend," "plan," "foresee," "project" or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals also
are forward-looking statements. All of these forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from historical results
or from those expressed or implied by the relevant forward-looking statement. We discuss these risks and uncertainties in detail in Part I, Item 1A of our 2007
Form 10-K.

BUSINESS OVERVIEW

We are a wholly-owned subsidiary of The DIRECTV Group and our subsidiaries include DIRECTV Enterprises, LLC and its wholly-owned subsidiaries and DIRECTV
Financing Co., Inc. We acquire, promote, sell and distribute digital entertainment programming via satellite to residential and commercial subscribers. We are the largest provider of
direct-to-home, or DTH, digital television services and the second largest provider in the multi-channel video programming distribution, or MVPD, industry in the United States.
As of March 31, 2008, we had approximately 17.0 million subscribers.

DIRECTV
U.S. currently broadcasts from a fleet of ten geosynchronous satellites, including nine owned satellites and one leased satellite. Our eleventh satellite, DIRECTV 11, was
successfully launched March 19, 2008 and will operate from our 99° west longitude, or WL, orbital location once in-orbit testing is completed during the third quarter of
2008. Once operational, DIRECTV 11 will provide us with increased capability for local and national high definition, or HD, as well as capacity for new interactive and enhanced services. DIRECTV 12 is
under construction and will be ready for launch in the second half of 2009.



The following table sets forth the amount of set-top receivers we capitalized, and depreciation expense we recorded under the lease program
implemented in 2006 for each of the periods presented:

Three Months Ended March 31,Capitalized subscriber leased equipment:2008

2007(Dollars in Millions)Subscriber leased equipmentsubscriber acquisitions

$
156

$
188Subscriber leased equipmentupgrade and retention costs


161


218Total subscriber leased equipment capitalized

$
317

$
406Depreciation expensesubscriber leased equipment

$
241

$
114


17

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DIRECTV HOLDINGS LLC

KEY TERMINOLOGY

The following key terminology is used in management's discussion and analysis of financial condition and results of operations:

Revenues.We earn revenues mostly from monthly fees we charge subscribers for subscriptions to basic and premium channel
programming, HD programming and access fees, pay-per-view programming, and seasonal and live sporting events. We also earn revenues from monthly fees that we charge subscribers
with multiple non-leased set-top receivers (which we refer to as mirroring fees), monthly fees we charge subscribers for leased set-top receivers, monthly fees we
charge subscribers for digital video recorder, or DVR, service, hardware revenues from subscribers who lease or purchase set-top receivers from us, our published programming guide,
warranty service fees and advertising services.

Broadcast Programming and Other.These costs primarily include license fees for subscription service programming,
pay-per-view programming, live sports and other events. Other costs include expenses associated with the publication and distribution of our programming guide, continuing
service fees paid to third parties for active subscribers, warranty service costs and production costs for on-air advertisements we sell to third parties.

Subscriber Service Expenses.Subscriber service expenses include the costs of customer call centers, billing, remittance
processing and certain home services expenses, such as in-home repair costs.

Broadcast Operations Expenses.These expenses include broadcast center operating costs, signal transmission expenses
(including costs of collecting signals for our local channel offerings), and costs of monitoring, maintaining and insuring our satellites. Also included are engineering expenses associated with
deterring theft of our signal.

Subscriber Acquisition Costs.These costs include the cost of set-top receivers and other equipment, commissions
we pay to national retailers, independent satellite television retailers, dealers, regional Bell operating companies, and the cost of installation, advertising, marketing and customer call center
expenses associated with the acquisition of new subscribers. Set-top receivers leased to new subscribers are capitalized in "Property and equipment, net" in the Consolidated Balance Sheets
and depreciated over their useful lives. The amount of set-top receivers capitalized each period for subscriber acquisitions is included in "Cash paid for subscriber leased
equipment-subscriber acquisitions" in the Consolidated Statements of Cash Flows.

Upgrade and Retention Costs.The majority of upgrade and retention costs are associated with upgrade efforts for existing
subscribers that we believe will result in higher average monthly revenue per subscriber, or ARPU, and lower churn. Our upgrade efforts include subscriber equipment upgrade programs for DVR, HD and HD
DVR receivers and local channels, our multiple set-top receiver offer and similar initiatives. Retention costs also include the costs of installing and providing hardware under our movers
program for subscribers relocating to a new residence. Set-top receivers leased to existing subscribers under upgrade and retention programs are capitalized in "Property and equipment,
net" in the Consolidated Balance Sheets and depreciated over their useful lives. The amount of set-top receivers capitalized each period for upgrade and retention programs is included in
"Cash paid for subscriber leased equipment-upgrade and retention" in the Consolidated Statements of Cash Flows.

General and Administrative Expenses.General and administrative expenses include departmental costs for legal, administrative
services, finance, marketing and information technology. These costs also

18

---



DIRECTV HOLDINGS LLC

include
expenses for bad debt and other operating expenses, such as legal settlements, and gains or losses from the sale or disposal of fixed assets.

Average Monthly Revenue Per Subscriber.We calculate ARPU by dividing average monthly revenues for the period (total revenues
during the period divided by the number of months in the period) by average subscribers for the period. We calculate average subscribers for the period by adding the number of subscribers as of the
beginning of the period and for each quarter end in the current year or period and dividing by the sum of the number of quarters in the period plus one.

Average Monthly Subscriber Churn.Average monthly subscriber churn represents the number of subscribers whose service is
disconnected, expressed as a percentage of the average total number of subscribers. We calculate average monthly subscriber churn by dividing the average monthly number of disconnected subscribers for
the period (total subscribers disconnected, net of reconnects, during the period divided by the number of months in the period) by average subscribers for the period.

Subscriber Count.The total number of subscribers represents the total number of subscribers actively subscribing to our
service, including seasonal subscribers, subscribers who are in the process of relocating and commercial equivalent viewing units. In March 2008, we implemented a change in our commercial pricing and
packaging to increase our competitiveness. As a result, during the first quarter of 2008, we made a one-time downward adjustment to the subscriber count of approximately 71,000 subscribers
related to commercial equivalent viewing units.

SAC.We calculate SAC, which represents total subscriber acquisition costs stated on a per subscriber basis, by dividing
total subscriber acquisition costs for the period by the number of gross new subscribers acquired during the period. We calculate total subscriber acquisition costs for the period by adding together
"Subscriber acquisition costs" expensed during the period and the amount of cash paid for equipment leased to new subscribers during the period.

19

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DIRECTV HOLDINGS LLC

Results of Operations

The following table sets forth our unaudited consolidated statements of operations and certain other operating data:

|                                                                  |                                                                                                  | Three Months Ended March 31,        |       | Change |      
|----------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------- | ----- | ------ | -----
|
|
|Revenues                                                          |                                                                                                  | $                                   | 4,049 |        | $    
|Operating costs and expenses                                      |                                                                                                  |                                     |       |        |      
|                                                                  | Costs of revenues, exclusive of depreciation and amortization expense                            |                                     |       |        |      
|                                                                  |                                                                                                  | Broadcast programming and other     |       |        | 1,683
|                                                                  |                                                                                                  | Subscriber service expenses         |       |        | 274  
|                                                                  |                                                                                                  | Broadcast operations expenses       |       |        | 61   
|                                                                  | Selling, general and administrative expenses, exclusive of depreciation and amortization expense |                                     |       |        |      
|                                                                  |                                                                                                  | Subscriber acquisition costs        |       |        | 530  
|                                                                  |                                                                                                  | Upgrade and retention costs         |       |        | 255  
|                                                                  |                                                                                                  | General and administrative expenses |       |        | 189  
|                                                                  | Depreciation and amortization expense                                                            |                                     |       | 464    |      
|                                                                  |                                                                                                  |                                     |       |        |      
|                                                                  |                                                                                                  | Total operating costs and expenses  |       |        | 3,456
|                                                                  |                                                                                                  |                                     |       |        |      
|Operating profit                                                  |                                                                                                  |                                     | 593   |        |      
|Interest income                                                   |                                                                                                  |                                     | 9     |        |      
|Interest expense                                                  |                                                                                                  |                                     | (55   | )      |      
|Other, net                                                        |                                                                                                  |                                     |      |        |      
|                                                                  |                                                                                                  |                                     |       |        |      
|Income before income taxes                                        |                                                                                                  |                                     | 547   |        |      
|Income tax expense                                                |                                                                                                  |                                     | (215  | )      |      
|                                                                  |                                                                                                  |                                     |       |        |      
|Net income                                                        |                                                                                                  | $                                   | 332   |        | $    
|                                                                  |                                                                                                  |                                     |       |        |      
|Other Data:                                                       |                                                                                                  |                                     |       |        |      
|Operating profit                                                  |                                                                                                  | $                                   | 593   |        | $    
|Add: Depreciation and amortization expense                        |                                                                                                  |                                     | 464   |        |      
|                                                                  |                                                                                                  |                                     |       |        |      
|Operating profit before depreciation and amortization(1)          |                                                                                                  | $                                   | 1,057 |        | $    
|                                                                  |                                                                                                  |                                     |       |        |      
|Operating profit before depreciation and amortizationmargin(1)   |                                                                                                  |                                     | 26.1  | %      |      
|Capital expenditures(2)                                           |                                                                                                  | $                                   | 482   |        | $    
|Net cash provided by operating activities                         |                                                                                                  | $                                   | 974   |        | $    
|Net cash used in investing activities                             |                                                                                                  |                                     | (465  | )      |      
|Net cash used in financing activities                             |                                                                                                  |                                     | (136  | )      |      
|Net cash provided by operating activities                         |                                                                                                  | $                                   | 974   |        | $    
|Less:  Cash paid for property and equipment                       |                                                                                                  |                                     | (106  | )      |      
|Cash paid for subscriber leased equipmentsubscriber acquisitions |                                                                                                  |                                     | (156  | )      |      
|Cash paid for subscriber leased equipmentupgrade and retention   |                                                                                                  |                                     | (161  | )      |      
|Cash paid for satellites                                          |                                                                                                  |                                     | (46   | )      |      
|                                                                  |                                                                                                  |                                     |       |        |      
|Free cash flow(3)                                                 |                                                                                                  | $                                   | 505   |        | $    
|                                                                  |                                                                                                  |                                     |       |        |      

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DIRECTV HOLDINGS LLC

|Average monthly revenue per subscriber (ARPU)             |  | $ | 79.70  |   | $ | 73.40  |   | $ | 6.30 |  | 8.6  | % 
|--------------------------------------------------------- |  | - | ------ | - | - | ------ | - | - | ---- |  | ---- | --
|Average monthly subscriber churn %                        |  |   | 1.36   | % |   | 1.44   | % |   |     |  | (5.6 | )%
|Average subscriber acquisition costsper subscriber (SAC) |  | $ | 712    |   | $ | 667    |   | $ | 45   |  | 6.7  | % 
|Gross subscriber additions (000's)                        |  |   | 964    |   |   | 929    |   |   | 35   |  | 3.8  | % 
|Net subscriber additions (000's)                          |  |   | 275    |   |   | 235    |   |   | 40   |  | 17.0 | % 
|Total number of subscribers (000's)(4)                    |  |   | 17,035 |   |   | 16,188 |   |   | 847  |  | 5.2  | % 

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DIRECTV HOLDINGS LLC



Three Months Ended March 31, 2008 Compared with the Three Months Ended March 31, 2007

Subscribers.In the first quarter of 2008, gross subscriber additions increased compared to the first
quarter of 2007 due to higher demand for HD and DVR services and increased sales in our direct sales channel. Average monthly subscriber churn decreased primarily due to increased sales of HD and DVR
services as well as the effect of more stringent credit policies. Net subscriber additions increased due to the higher gross subscriber additions and lower average monthly subscriber churn.

Revenues.Our revenues increased as of result of higher ARPU and the larger subscriber base. The
increase in ARPU resulted primarily from price increases on programming packages, higher HD and DVR equipment and service fees, higher pay-per-view event revenues, an increase
in lease fees due to higher average number of receivers per subscriber and an increase in ad sales.

Operating profit before depreciation and amortization.The improvement of operating profit before
depreciation and amortization was primarily due to the gross profit generated from the higher revenues, partially offset by higher subscriber acquisition, upgrade and retention costs for the increased
number of new and existing customers adding HD and DVR services.

Broadcast
programming and other costs increased due to annual program supplier rate increases and the larger number of subscribers in the first quarter of 2008 as compared to the first
quarter of 2007. Subscriber service expenses decreased in the first quarter of 2008 compared to the first quarter of 2007 primarily due to improved performance at customer call centers. Broadcast
operations expense increased in the first quarter of 2008 as compared to the first quarter 2007 due primarily to costs to support new HD local channel markets.

Subscriber
acquisition costs increased due to higher dealer incentives due to the acquisition of higher quality subscribers, higher costs associated with the increase in subscribers
taking advanced products, higher advertising and direct sales marketing costs and higher gross subscriber additions. SAC per subscriber, which includes the cost of capitalized set-top
receivers, increased due to higher dealer incentives due to the acquisition of higher quality subscribers, higher costs associated with the increase in subscribers taking HD and DVR services and
higher direct sales marketing and advertising costs, partially offset by lower set-top receiver manufacturing costs.

Upgrade
and retention costs increased in 2008 due to an increase in the number of set-top receivers refurbished and satellite dish upgrades.

General
and administrative expenses decreased in the first quarter of 2008 primarily due to a $7 million reduction in bad debt expense compared to the first quarter of 2007.

Operating profit.The increase in operating profit was primarily due to higher operating profit
before depreciation and amortization, partially offset by higher depreciation and amortization expense in 2008 resulting from the capitalization of set-top receivers under the lease
program.

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DIRECTV HOLDINGS LLC

Income tax expense.The $7 million increase in income tax expense was primarily due to the
higher income before income taxes.

Liquidity and Capital Resources

At March 31, 2008, we had cash and cash equivalents of $1,175 million compared to $802 million at December 31, 2007. The
$373 million increase resulted primarily from $974 million of cash provided by operating activities, partially offset by $469 million of cash paid for the acquisition of
satellites, property and equipment and subscriber leased equipment and the $100 million cash dividend paid to our Parent.

As
a measure of liquidity, our current ratio (ratio of current assets to current liabilities) was 0.94 at March 31, 2008 compared to 0.87 at December 31, 2007. The increase
in our current ratio during the quarter was primarily due to the change in our cash and cash equivalents discussed above.

As
of March 31, 2008, we had the ability to borrow up to $500 million under our existing credit facility, which is available until 2011. We are subject to restrictive
covenants under the credit facility. These covenants limit our ability and our respective subsidiaries to, among other things; make restricted payments, including dividends, loans or advances to our
Parent.

We
expect to fund our cash requirements and our existing business plan using our available cash balances, and cash provided by operations. Also, we have received capital contributions
and have borrowed amounts from our Parent in the past to fund certain transactions. We may also provide dividends to our Parent or fund other cash requirements, including additional share repurchase
programs or other distributions to its stockholders, or to fund strategic transactions, which may include wireless broadband and other strategic investment opportunities should they arise. We may use
available cash and cash equivalents, cash from operations, or incur additional borrowings, which may include borrowings under our $500 million revolving credit facility, to fund such dividends.

We
are in the process of obtaining additional borrowings of approximately $2 billion, the proceeds of which will be used for general corporate purposes and to pay dividends to our
Parent for use in its share repurchase program or other general corporate purposes. Such proposed new borrowings are subject to market conditions and other factors, so there is no assurance that such
borrowings will be completed or, if completed, will provide the anticipated amount of funding. We anticipate that these borrowing transactions will be completed in May 2008.

Several
factors may affect our ability to fund our operations and commitments that we discuss in "Contingencies" below. In addition, our future cash flows may be reduced if we
experience, among other things, significantly higher subscriber additions than planned, increased subscriber churn or upgrade and retention costs, higher than planned capital expenditures for
satellites and broadcast equipment, satellite anomalies or signal theft or if we are required to make a prepayment on our term loans under our senior secured credit facility. Additionally, our ability
to borrow under the senior secured credit facility is contingent upon our meeting financial and other covenants associated with our credit facility as more fully described in Note 4 of the
Notes to the Consolidated Financial Statements in Item 1, Part I of this Quarterly Report and in Note 7 to the Notes to the Consolidated Financial Statements in Item 8,
Part II of our 2007 Form 10-K.

Borrowings

At March 31, 2008, we had $3,392 million in total outstanding borrowings, bearing a weighted average interest rate of 5.85%. Our outstanding
borrowings primarily consist of notes payable and amounts borrowed under a senior secured credit facility as more fully described in Note 4 of the Notes to the Consolidated Financial Statements
in Item 1, Part I of this Quarterly Report and in Note 7 to the Notes to the Consolidated Financial Statements in Item 8, Part II of our 2007
Form 10-K.

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DIRECTV HOLDINGS LLC

Our
notes payable and senior secured credit facility mature as follows: $45 million in the remainder of 2008, $98 million in 2009, $297 million in 2010,
$98 million in 2011, $10 million in 2012, and $2,842 million thereafter. These amounts do not reflect potential prepayments that may be required under our senior secured credit
facility, which could result from a computation that we are required to make at each year end under the credit agreement. We were not required to make a prepayment for the year ended
December 31, 2007.

Debt
ratings by the various rating agencies reflect each agency's opinion of the ability of issuers to repay debt obligations as they come due and the expected estimated loss given a
default. In general, lower ratings result in higher borrowing costs. Please refer to our 2007 Form 10-K for discussion of Moody's Investors Service and Standard & Poor's
Rating Service ratings range.

Currently,
DIRECTV U.S. has the following security ratings:

Senior Secured

Senior Unsecured

Corporate

OutlookStandard & Poor's

BBB-

BB-

BB

StableMoody's

Baa3

Ba3

Ba2

Negative


CONTINGENCIES

For a discussion of "Contingencies," see Part I, Item 1, Note 5 of the Notes to the Consolidated Financial Statements of this Quarterly
Report, which we incorporate herein by reference.

CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

For a discussion of "Certain Relationships and Related-Party Transactions," see Part I, Item 1, Note 6 of the Notes to the Consolidated
Financial Statements of this Quarterly Report, which we incorporate herein by reference.

ACCOUNTING CHANGES

For a discussion of "Accounting Changes," see Part I, Item 1, Note 2 to the Consolidated Financial Statements of this Quarterly Report, which
we incorporate herein by reference.

ITEM 4T.    CONTROLS AND PROCEDURES

We carried out an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q under the supervision and with the
participation of management, including our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Based on the evaluation, our principal executive officer and
our principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2008.

There
has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that
occurred during our fiscal quarter ended March 31, 2008, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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DIRECTV HOLDINGS LLC

PART IIOTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

(a)    Material
pending legal proceedings, other than ordinary routine litigation incidental to the business, to which we became or were a party during the quarter ended March 31,
2008 or subsequent thereto, but before the filing of this report, are summarized below:

Intellectual Property Litigation.We are a defendant in several unrelated lawsuits claiming
infringement of various patents relating to various aspects of our businesses. In certain of these cases other industry participants are also defendants, and also in certain of these cases we expect
that any potential liability would be the responsibility of our equipment vendors pursuant to applicable contractual indemnification provisions. To the extent that the allegations in these lawsuits
can be analyzed by us at this stage of their proceedings, we believe the claims are without merit and intend to defend the actions vigorously. The final disposition of these claims is not expected to
have a material adverse effect on our consolidated financial position, but could possibly be material to our consolidated results of operations of any one period. Further, no assurance can be given
that any adverse outcome would not be material to our consolidated financial position.

Finisar Corporation.As previously reported, we filed a notice of appeal to the Court of Appeals for the Federal Circuit on
October 5, 2006 from a jury determination that The DIRECTV Group, Inc. and certain of its subsidiaries willfully infringed a patent owned by Finisar Corporation and an award by the jury
of approximately $79 million in damages. The trial court increased the damages award by $25 million because of the jury finding of willful infringement and awarded
pre-judgment interest of $13 million to Finisar. DIRECTV was also ordered to pay into escrow $1.60 per new set-top receiver manufactured for use with the DIRECTV system
beginning June 17, 2006 and continuing until the patent expires in 2012 or was otherwise found to be invalid. Through March 31, 2008, the ongoing royalties amounted to
$37 million, which has been paid into escrow.

Finisar
also filed a notice of appeal on October 18, 2006 and oral arguments on the appeal and cross appeal were heard by the Court of Appeals on January 7, 2008.

On
April 18, 2008, the Court of Appeals vacated (set aside) the verdict of infringement, and sent the case back to the district court for further proceedings and possible retrial
on a limited number of claims. The Court of Appeals, ruled that the lower court had used erroneous interpretations of certain important terms in the patent claims. Thus the district court must now
determine whether there is any infringement using the correct interpretations, which are the ones we originally suggested. Regarding our defenses of invalidity, the Court of Appeals found that one of
the principal independent claims of the patent is clearly anticipated by the prior art we presented. The Court of Appeals then remanded the question of validity for the remaining claims back to the
district court for further consideration in view of this invalidity ruling. The Court of Appeals also reversed the verdict of willful infringement,
and affirmed earlier rulings of the district court that held several additional claims to be invalid. On May 2, 2008, Finisar filed a petition for rehearing by the Court of Appeals. We
anticipate that the bond will be released and the escrowed funds will be returned once the appellate proceedings become final.

Other.We are subject to other legal proceedings and claims that arise in the ordinary course of our
business. The amount of ultimate liability with respect to such actions is not expected to materially affect our financial position, results of operations or liquidity.

(b)    No
previous reported legal proceedings were terminated during the first quarter ended March 31, 2008.

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DIRECTV HOLDINGS LLC

ITEM 1A.    RISK FACTORS

The risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2007 have not materially changed.

ITEM 6.    EXHIBITS

|Exhibit Number |  | Exhibit Name                                                                                                                                                                                  
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*31.1          |  | Certification of the Chief Executive Officer of DIRECTV Holdings LLC pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ("Section 302").                                               
|*31.2          |  | Certification of the Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 302.                                                                                                 
|*31.3          |  | Certification of the Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 302.                                                                                          
|*31.4          |  | Certification of the Chief Financial Officer of DIRECTV Financing Co., Inc. pursuant to Section 302.                                                                                          
|*32.1          |  | Certification of the Chief Executive Officer of DIRECTV Holdings LLC pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ("Section 906").
|*32.2          |  | Certification of the Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 906.                                                                                                 
|*32.3          |  | Certification of the Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.                                                                                          
|*32.4          |  | Certification of the Chief Financial Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.                                                                                          

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DIRECTV HOLDINGS LLC

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|                  |  | DIRECTV HOLDINGS LLC
(Registrant)       
|----------------- |  | ----------------------------------------
|Date: May 7, 2008 |  | By:                                     
|                  |  | DIRECTV FINANCING CO., INC.
(Registrant)
|Date: May 7, 2008 |  | By:                                     

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