##### 









SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 20-F


|   |  |                                                                                                  
|-- |  | -------------------------------------------------------------------------------------------------
|o  |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
    OR(g) OF THE SECURITIES EXCHANGE ACT OF 1934
|  
|or
|  
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934         
|   |  | For the fiscal year ended December 31, 2005                                                      
|  
|or
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934     
|  
|or
|  
|o  |  | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934  
|  
|   |  | Date of event requiring this shell company report: N/A                                           

Commission File
No. 333-8880


Satélites Mexicanos, S.A. de C.V.


Mexican Satellites, a Mexican Company of Variable Capital


(Translation of the Registrants Name into English)


Rodolfo Gaona No. 86


Col. Lomas de Sotelo


11200 Mexico, D.F.


Mexico


(52) 55-2629-5800


Jurisdiction of incorporation: Mexico


Securities for which there is a reporting obligation pursuant
to Section 15 (d) of the Act:


10.125% Series B Senior Notes due 2004


The number of outstanding shares of capital stock as of
December 31, 2005 was:


2,550 Class I Series A Shares


2,598,450 Class II Series A Shares


2,450 Class I Series B Shares


2,496,550 Class II Series B Shares


4,900,000 Class II Series N Shares


606,730 Class I Series C Shares


o þ


o þ


þ o


12b-2


o o þ




o þ


12b-2 o þ










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TABLE OF CONTENTS


|         |  |                                                                                           |  |      |    | 
|-------- |  | ----------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                           |  | Page |   
|         |  |                                                                                           |  |      |   
|PART I  
|Item 3.  |  | Key Information                                                                           |  |      | 1  | 
|Item 4.  |  | Information on the Company                                                                |  |      | 13 | 
|Item 4A. |  | Unresolved Staff Comments                                                                 |  |      | 41 | 
|Item 5.  |  | Operating and Financial Review and
    Prospects                                          |  |      | 42 | 
|Item 6.  |  | Directors, Senior Management and
    Employees                                            |  |      | 54 | 
|Item 7.  |  | Major Shareholders and Related Party
    Transactions                                     |  |      | 57 | 
|Item 8.  |  | Financial Information                                                                     |  |      | 61 | 
|Item 9.  |  | Markets                                                                                   |  |      | 63 | 
|Item 10. |  | Additional Information                                                                    |  |      | 63 | 
|Item 11. |  | Quantitative and Qualitative Disclosures
    About Market Risk                            |  |      | 66 | 
|PART II 
|Item 13. |  | Defaults, Dividend Arrearages and
    Delinquencies                                       |  |      | 67 | 
|Item 14. |  | Material Modifications to the Rights of
    Security Holders                              |  |      | 67 | 
|Item 15. |  | Controls and Procedures                                                                   |  |      | 67 | 
|Item 16. |  | A) Disclosure of Audit Committee Financial
    Expert                                     |  |      | 68 | 
|         |  | B) Code of Ethics                                                                         |  |      | 68 | 
|         |  | C) Principle Accountant Fees and
    Services                                             |  |      | 68 | 
|PART III
|Item 18. |  | Financial Statements                                                                      |  |      | 69 | 
|Item 19. |  | Exhibits                                                                                  |  |      | 69 | 
|         |  | All other items have been omitted because they are not
    applicable or are not required |  |      |    | 

i



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PART I







|        |                
|------- | ---------------
|ITEM 3. | Key Information

SELECTED FINANCIAL DATA




|                                       |                                       |                                               |   |       |       |   |   |       |       |   |      |       |       |      |   |       |         |   |   |       |         |  
|-------------------------------------- | ------------------------------------- | --------------------------------------------- | - | ----- | ----- | - | - | ----- | ----- | - | ---- | ----- | ----- | ---- | - | ----- | ------- | - | - | ----- | ------- | -
|                                       |                                       | Years Ended December 31,                      |  
|                                       |                                       |                                               |  
|                                       |                                       | 2005                                          |   |       | 2004  |   |   | 2003  |       |   | 2002 |       |       | 2001 |  
|                                       |                                       |                                               |   |       |       |   |   |       |       |   |      |       |       |      |  
|                                       |                                       | (Amount in millions of U.S. dollars)          |  
|Statement of Operations Data:          |                                       |                                               |   |       |       |   |   |       |       |   |      |       |       |      |   |       |         |   |   |      
|                                       | Revenue(l)                            |                                               | $ | 69.9  |       |   | $ | 71.7  |       |   | $    | 78.8  |       |      | $ | 85.0  |         |   | $ | 128.0 |        
|                                       | Operating (loss) income(1)            |                                               |   | (11.1 | )     |   |   | (5.4  | )     |   |      | (7.6  | )     |      |   | (1.4  | )       |   |   | 35.1  |        
|                                       | Loss before income taxes              |                                               |   | (70.6 | )     |   |   | (58.9 | )     |   |      | (43.4 | )     |      |   | (28.7 | )       |   |   | (4.3  | )      
|                                       | Deferred income tax (expense) benefit |                                               |   | (0.2  | )     |   |   | 4.4   |       |   |      | (21.3 | )     |      |   | 8.8   |         |   |   | 1.1   |        
|                                       |                                       | Net loss                                      |   |       | (70.8 | ) |   |       | (54.5 | ) |      |       | (64.7 | )    |   |       | (19.9   | ) |   |       | (3.1    | )
|                                       |                                       | Net loss applicable to common stockholders(2) |   |       | (72.3 | ) |   |       | (56.0 | ) |      |       | (66.3 | )    |   |       | (21.4   | ) |   |       | (4.6    | )
|Other Data:                            |                                       |                                               |   |       |       |   |   |       |       |   |      |       |       |      |   |       |         |   |   |      
|                                       |                                       | Depreciation and amortization                 |   | $     | 47.9  |   |   | $     | 48.1  |   |      | $     | 48.4  |      |   | $     | 47.4    |   |   | $     | 47.3    |  
|                                       |                                       | Capital expenditures                          |   |       | 8.3   |   |   |       | 1.4   |   |      |       | 37.9  |      |   |       | 123.2   |   |   |       | 95.7    |  
|Balance Sheet Data (at end of period): |                                       |                                               |   |       |       |   |   |       |       |   |      |       |       |      |   |       |         |   |   |      
|                                       |                                       | Total assets                                  |   | $     | 925.3 |   |   | $     | 953.4 |   |      | $     | 977.1 |      |   | $     | 1,004.8 |   |   | $     | 1,089.3 |  
|                                       |                                       | Current maturities of long term debt          |   |       | 527.7 |   |   |       | 523.4 |   |      |       | 523.6 |      |   |       | 1.0     |   |   |       | 13.6    |  
|                                       |                                       | Long-term debt                                |   |       |      |   |   |       |      |   |      |       |      |      |   |       | 523.4   |   |   |       | 542.4   |  
|                                       |                                       | Stockholders equity                          |   |       | 178.6 |   |   |       | 249.4 |   |      |       | 303.9 |      |   |       | 368.7   |   |   |       | 388.6   |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In August 2000, our Solidaridad 1 satellite ceased operating and
    was considered irretrievably lost. The loss was caused by the
    failure of the back-up
    control processor on board the satellite. Solidaridad 1 was
    insured for $250 million. At the date of the loss,
    Solidaridad 1 had a net book value of approximately
    $109.6 million. After deducting prepaid insurance of
    $1.6 million, unpaid insurance premiums of
    $12.5 million, on-going monitoring costs and the excess of
    the estimated cost over revenue for the then-committed
    transponder capacity to be provided to customers of
    $23.2 million, the net gain on the in-orbit failure of
    Solidaridad 1 was approximately $103.1 million. In 2001, we
    reduced the liability for the cost over revenue for the
    committed transponder capacity to be provided to customers by
    $7.3 million. In 2002, we received $3.3 million from
    the satellite manufacturer under the Solidaridad 1 performance
    guarantee and we reduced the liability for the cost over revenue
    for the committed transponder capacity to be provided to
    customers by $5.1 million. In 2003, Satmex canceled the
    balance of the reserve for monitoring costs of
    $3.3 million. These transactions were recorded as
    additional gain on the in-orbit failure of Solidaridad 1 in the
    applicable periods.
|   
|(2) | Net loss applicable to common shareholders comprises our net
    loss for the year less our preferred stock dividend.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

1



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EXCHANGE RATES




|                        |  |                  |       |  |            |  |       |     |  |  |       |  |  |  |       | 
|----------------------- |  | ---------------- | ----- |  | ---------- |  | ----- | --- |  |  | ----- |  |  |  | ----- | 
|                        |  | Exchange Rate(1) |      
|                        |  |                  |      
|Year Ended December 31, |  | Period End       |       |  | Average(2) |  |       | Low |  |  | High  | 
|                        |  |                  |       |  |            |  |       |     |  |  |       | 
|2001                    |  |                  | 9.14  |  |            |  | 9.34  |     |  |  | 8.95  |  |  |  | 9.97  | 
|2002                    |  |                  | 10.31 |  |            |  | 9.66  |     |  |  | 9.00  |  |  |  | 10.36 | 
|2003                    |  |                  | 11.24 |  |            |  | 10.79 |     |  |  | 10.11 |  |  |  | 11.40 | 
|2004                    |  |                  | 11.26 |  |            |  | 11.29 |     |  |  | 10.82 |  |  |  | 11.63 | 
|2005                    |  |                  | 10.71 |  |            |  | 10.90 |     |  |  | 10.41 |  |  |  | 11.40 | 
|2006:  January          |  |                  | 10.46 |  |            |  |       |     |  |  | 10.46 |  |  |  | 10.71 | 
|February                |  |                  | 10.48 |  |            |  |       |     |  |  | 10.43 |  |  |  | 10.53 | 
|March                   |  |                  | 10.95 |  |            |  |       |     |  |  | 10.46 |  |  |  | 10.96 | 
|April                   |  |                  | 11.11 |  |            |  |       |     |  |  | 10.85 |  |  |  | 11.14 | 
|May                     |  |                  | 11.13 |  |            |  |       |     |  |  | 10.84 |  |  |  | 11.29 | 
|June                    |  |                  | 11.40 |  |            |  |       |     |  |  | 11.27 |  |  |  | 11.48 | 






|    |                                          
|--- | -----------------------------------------
|(1) | Source: Federal Reserve Bank of New York.
|   
|(2) | Average of month-end rates.              



CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS


20-F


Factors Relating to Satmex




| |                                                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The order entered by the Mexican court to conclude our
    concurso mercantil may be appealed, or another court procedure
    used to delay our exit from the concurso mercantil, and if such
    an appeal or procedure is made or delay occurs, we cannot assure
    you of its outcome.



2



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concurso mercantil


two-thirds convenio concursal concurso mercantil concurso mercantil convenio concursal convenio
concursal convenio concursal (quiebra) concurso mercantil Ley de Concursos Mercantiles




| |                                                                                                 
| | ------------------------------------------------------------------------------------------------
| | If a financial reorganization is not consummated, we face
    a substantial risk of liquidation.

convenio
concursal  Ley de Concursos Mercantiles




| |                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are successful in exiting our concurso mercantil and
    we file a U.S. chapter 11 case, we cannot assure you
    that we will be able to successfully complete the restructuring
    in the U.S. bankruptcy case.

convenio concursal




3



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concurso mercantil quiebra




We
have not met certain of the deadlines set forth in the
Restructuring Agreement, and as a result, if we do not obtain
the necessary waivers from the Consenting Creditors, the
Restructuring Agreement may be terminated.


convenio concursal convenio concursal




| |                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our largest shareholder, Servicios, has defaulted in the
    payment of certain debt owed to the Mexican government; it is a
    condition to our restructuring that Servicios is liquidated and
    satisfies its claims to the Mexican government.

concurso mercantil concurso mercantil, conciliador concurso mercantil. concurso mercantil quiebra síndico quiebra


4



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| |                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to obtain the Mexican governments
    formal approval as both our shareholder and a creditor of
    Servicios, we may not be able to implement our
    restructuring.







| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Even if our restructuring of the Floating Rate Notes and
    Fixed Rate Notes is successful, our ability to obtain additional
    financing in the future may be limited.

concurso mercantil




| |                                                   
| | --------------------------------------------------
| | Our in-orbit satellites are vulnerable to failure.





| |   |                                                   
| | - | --------------------------------------------------
| |  | component failure;                                
|
| |  | loss of power or fuel;                            
|
| |  | inability to control positioning of the satellite;
|
| |  | solar and other astronomical events; and          
|
| |  | space debris.                                     

5



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| |   |                                                                                  
| | - | ---------------------------------------------------------------------------------
| |  | station-keeping fuel consumption to maintain a satellites
    position in orbit;
|
| |  | the quality of manufacture;                                                      
|
| |  | gradual degradation of solar panels or other components; and                     
|
| |  | the durability of components.                                                    

back-up


back-up


back-up








| |                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may not be able to renew our insurance policies for our
    satellites at commercially reasonable rates, if at all, when
    they expire, and our existing insurance coverage has, and our
    future insurance coverage will likely have, significant
    exceptions.



6



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##### 













| |                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A small number of customers account for a large portion of
    our revenues, and the loss of one or more of these significant
    customers would adversely affect our revenues.





| |                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Between 2000 and 2003, many of our customers in the
    telecommunications industry suffered financial difficulties,
    which resulted in significant cancellations and non-renewal of
    contracts.



7



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| |                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have incurred significant indebtedness, including
    secured indebtedness, to acquire and launch our satellites that
    may limit our cash flow for capital expenditures and other
    expenses.





| |   |                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | limited cash flow available for capital expenditures,
    acquisitions, working capital and other general corporate
    purposes because a substantial portion of our cash flow from
    operations must be dedicated to servicing our debt;
|
| |  | increased our vulnerability to general adverse economic and
    industry conditions;                                                                                                                                                        
|
| |  | limited our flexibility in planning for, or reacting to,
    competitive and other changes in our business and the industries
    in which we operate;                                                                                      
|
| |  | placed us at a relative disadvantage to our competitors that
    have less debt and greater operating and financing flexibility
    than we do; and                                                                                         
|
| |  | limited, through covenants in our indebtedness, our ability to
    borrow additional funds.                                                                                                                                                 





| |                                                
| | -----------------------------------------------
| | We operate in a highly competitive environment.





point-to


8



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Mexican government will be entitled to the economic
    rights, and may exercise substantial influence in respect of 55%
    of Satmexs voting shares and will be entitled to directly
    elect 1 of 7 directors upon conclusion of the
    restructuring. As a result, the Mexican government may cause us
    to pursue certain macroeconomic and social objectives that may
    have an adverse effect on our results of operations and
    financial condition.





| |                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If our restructuring is not successfully completed, Loral
    and Principia will continue to control our board of directors,
    and disagreements between them could result in deadlock.

concurso mercantil




| |                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Upon completion of our restructuring, a special purpose
    entity (the SPE) will be formed in order to hold all
    of the equity received by the holders of the Fixed Rate Notes,
    and its two board appointees will have a right to veto certain
    extraordinary decisions.

quiebra concurso
mercantil




| |                                                                                                             
| | ------------------------------------------------------------------------------------------------------------
| | You may not be able to effect service of process in the
    U.S. upon our officers or our Mexican directors.





| |                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Technological advances may require us to make significant
    expenditures to maintain and improve the competitiveness of our
    service offerings for which our ability to compete is limited by
    our lack of funds.



9



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##### 





Factors Relating to Regulatory Environment




| |                                                                         
| | ------------------------------------------------------------------------
| | Our business is regulated, causing uncertainty and
    additional costs.







| |                                                                           
| | --------------------------------------------------------------------------
| | Our government concessions may be revoked under certain
    circumstances.

quiebra






| |   |                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the term of any such Orbital Concessions expires;                                                                                                                                                       
|
| |  | we resign our rights under any such Orbital Concession;                                                                                                                                                 
|
| |  | the Mexican government, through the Secretaría de
    Comunicaciones y Transportes(the Ministry of Communications
    and Transportation or the SCT), expropriates any of
    the Orbital Concessions;
|
| |  | we become subject to liquidation (quiebra);                                                                                                                                                             
|
| |  | the SCT revokes any of the Orbital Concessions; or                                                                                                                                                      

10



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| |   |                                                                              
| | - | -----------------------------------------------------------------------------
| |  | we fail to deliver the free capacity reserved for the Mexican
    government.





| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| |  | unjustified or unauthorized interruption of our operations or
    the services that may be provided under the Orbital Concessions;              
|
| |  | our undertaking any action or refraining from taking any action
    that affects the rights of other licensees or concessionaires;              
|
| |  | failure by us to satisfy the terms or conditions set forth in
    the Orbital Concessions;                                                      
|
| |  | unjustified failure by us to interconnect other concessionaires
    or licensees that have the right to provide telecommunications
    services;
|
| |  | change of our nationality; and                                                                                                                  
|
| |  | assignment or transfer of rights granted under the Orbital
    Concessions in contravention of the terms of applicable Mexican
    law.         



rescate






| |                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are subject to different corporate disclosure
    requirements than U.S. companies, which may limit the
    information available to our investors.

non-U.S.


Factors Relating to Mexico




| |                                                          
| | ---------------------------------------------------------
| | Downturns in the Mexican economy adversely affect
    us.



11



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##### 





| |                                                                      
| | ---------------------------------------------------------------------
| | Currency devaluations may impair our ability to service
    our debt.







| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | Exchange controls may impair our ability to obtain
    U.S. dollars to make U.S. dollar-denominated
    payments.





| |                                                              
| | -------------------------------------------------------------
| | Political developments in Mexico may adversely affect
    us.









| |                                                   
| | --------------------------------------------------
| | Payment of judgments against us would be in pesos.

Ley Monetaria de los Estados Unidos
Mexicanos, Banco de México


12



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|        |                           
|------- | --------------------------
|Item 4. | Information on the Company

General Description


Sociedad Anónima de Capital Variable. 55-2629-5800. 738-6680 738-7210.


Ley Federal de
Telecomunicaciones Telecomunicaciones de
México,






Our Restructuring


back-up






13



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##### 







concurso mercantil,




concurso mercantil. concurso mercantil Ley
de Concursos Mercantiles concurso mercantil conciliador, concurso mercantil, sentencia de reconocimiento, graduación y
prelación de créditos




14



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##### 



concurso mercantil,


conciliador, 90-day concurso mercantil convenio concursal


concurso mercantil conciliador convenio concursal, concurso mercantil


convenio concursal conciliador convenio concursal convenio concursal convenio
concursal






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a principal amount equal to the sum of current principal and
    accrued interest on the Floating Rate Notes through the
    effective date of the restructuring. Assuming an effective date
    of the chapter 11 plan of September 30, 2006, the
    principal amount will be $234.4 million and will be
    adjusted, upward or downward, for each day before or after
    September 30, 2006 that the effective date occurs at a rate
    of one month of the London Interbank Offer Rate
    (LIBOR) + 450 basis points divided by three
    hundred and sixty;
|
| |  | five (5) year maturity with a monthly or quarterly coupon
    of LIBOR + 875 basis points;                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | callable at a price of 103% of the principal in year 1,
    102% in year 2, 101% in year 3, and par thereafter
    plus accrued interest;                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | first priority security interest in all of our assets;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | cash sweep prepayments on any cash balances over
    $5 million; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | a change of control put option at 101% (plus accrued interest).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       



15



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| |   |                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | seven (7) year maturity with a quarterly coupon of
    101/8% per
    annum, with no cash payments and
    101/8%
    payable in kind in year 1, and 2% cash payments and
    81/8% payable in kind thereafter until the First Priority
    Senior Secured Notes are paid in full, after which time the
    coupon shall be paid wholly in cash;
|
| |  | second priority security interest in all of our assets,
    identical in operation and effect to the security interests of
    the First Priority Senior Secured Notes;                                                                                                                                                                         
|
| |  | after the full payment of the First Priority Senior Secured
    Notes, cash sweep prepayments on any cash balances over
    $5 million; and                                                                                                                                                                                                     
|
| |  | a change of control put option at par plus accrued interest,
    unless waived by holders of
    662/3% of the Second Priority Senior Secured Notes or unless
    following the change of control we are controlled by certain
    approved buyers.                                                                                             







conciliador concurso mercantil


16



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##### 



usufructo usufructo usufructo






concurso mercantil concurso


concurso mercantil


Our Satellites


36-MHz






Satmex 5


C-band




17



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##### 









180-day


back-up


back-up


Solidaridad 2


C-band




18



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##### 



Satmex 6


36-MHz


Ku-bands.




Capital Investments








Orbital Coordination




19



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##### 







Landing Rights




Satellite Control Centers and Property Concession








| |   |                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------
| |  | the telemetry, tracking and control (TT&C) systems;                                                       
|
| |  | an equipment maintenance area;                                                                            
|
| |  | a communications signal monitoring area;                                                                  
|
| |  | a dynamic simulator, which allows for the simulation of
    spacecraft dynamics and control maneuvers; and
|
| |  | antennae for the control, monitoring and in-orbit testing of
    satellites.                              



state-of


(Indice Nacional de Precios al
Consumidor) (Secretaría de la
Función Pública)


20



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##### 



Properties




Insurance






372-day






| |   |                                                        
| | - | -------------------------------------------------------
| |  | military or similar actions;                           
|
| |  | anti-satellite devices;                                
|
| |  | governmental actions;                                  
|
| |  | nuclear reaction or radiation contamination;           
|
| |  | willful or intentional acts of us or our contractors;  
|
| |  | loss of income, indirect and consequential damages; and
|
| |  | third-party claims against us.                         

21



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##### 





Business Strategy


direct-to on-site






concurso mercantil.


concurso mercantil, convenio concursal, concurso
mercantil


22



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##### 







| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | enhancing our regional presence;                                                                                             
|
| |  | strengthening our position in sectors that benefit from fixed
    satellite services;                                        
|
| |  | growing our current customer base and offering value-added
    solutions;                                                    
|
| |  | further developing our presence in the video (cable and
    satellite-TV) industry across the U.S. and Latin
    America; and
|
| |  | growing our program distribution through the integration of
    value-added services.                                        



| |                              
| | -----------------------------
| | Enhance Our Regional Presence











| |                                                                                  
| | ---------------------------------------------------------------------------------
| | Strengthen Our Position in Sectors that Benefit from Fixed
    Satellite Services

point-to




point-to direct-to


23



---



##### 



point-to direct-to (local-to direct-to




| |                                                                   
| | ------------------------------------------------------------------
| | Grow Our Current Customer Base and Offer Value-Added
    Solutions







| |                                                                                                              
| | -------------------------------------------------------------------------------------------------------------
| | Further Develop Our Presence in the Video (Cable
    Satellite-TV) Industry across the U.S. and Latin America





Services


direct-to




| |                                   
| | ----------------------------------
| | Broadcasting Transmission Services

point-to point-to direct-to


24



---



##### 









| |                                         
| | ----------------------------------------
| | Telecommunications Transmission Services









end-to




| |                           
| | --------------------------
| | Internet Service Providers



25



---



##### 







| |                                                                 
| | ----------------------------------------------------------------
| | Digital Distribution Platform for Latin-American
    Programming














Customers


direct-to


26



---



##### 









|       |       |                |        |        |      |   |        |        |  |   |        |        | 
|------ | ----- | -------------- | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|       |       | 2005           |        |        | 2004 |   |        | 2003   | 
|       |       |                |        |        |      |   |        |        | 
|       |       | (In thousands) |       
|Mexico |       | $              | 29,315 |        |      | $ | 32,712 |        |  | $ | 33,449 |       
|U.S.   |       |                | 34,692 |        |      |   | 33,569 |        |  |   | 40,740 |       
|Other  |       |                | 5,865  |        |      |   | 5,424  |        |  |   | 4,634  |       
|       |       |                |        |        |      |   |        |        | 
|       | Total |                | $      | 69,872 |      |   | $      | 71,705 |  |   | $      | 78,823 | 
|       |       |                |        |        |      |   |        |        | 

Sales and Marketing




| |            
| | -----------
| | Sales Force







| |        
| | -------
| | Pricing



Comisión Federal de Telecomunicaciones




| |          
| | ---------
| | Contracts

end-of




27



---



##### 



Competition






| |                           
| | --------------------------
| | Global Satellite Operators





| |                             
| | ----------------------------
| | Regional Satellite Operators

direct-to point-to point-to




| |                       
| | ----------------------
| | New Satellite Capacity







| |                
| | ---------------
| | Domestic Market



28



---



##### 



direct-to












| |            
| | -----------
| | U.S. Market



direct-to


29



---



##### 





| |                
| | ---------------
| | Canadian Market



LEY DE CONCURSOS MERCANTILESOF MEXICO


Ley de Quiebras y Suspensión de
Pagos


concurso mercantil concurso mercantil ministerio público




| |   |                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the debtors past due obligations of more than thirty days
    represent 35% or more of all of the debtors payment
    obligations as of the date of filing the petition for
    concurso mercantil; and                                           
|
| |  | the debtors liquid assets, short-term securities, deposits
    and accounts receivable, among others are insufficient to pay at
    least 80% of the debtors payment obligations as of the
    date of filing the petition for concurso mercantil.

visitador Instituto
Federal de Especialistas de Concursos Mercantiles concurso mercantil


concurso
mercantil




| |   |                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a statement confirming the beginning of the conciliation stage,
    unless the debtor has voluntarily requested its liquidation
    (quiebra);                                                                          
|
| |  | an order to the IFECOM to designate a conciliador;                                                                                                                                                                      
|
| |  | an order to the debtor to suspend the payment of any debt
    obligations as of the date of the court order, other than those
    obligations that are necessary for the debtor to continue its
    ordinary operations;
|
| |  | an order to suspend any attachment or foreclosure procedures
    against the debtors assets, other than certain foreclosure
    procedures arising from labor related claims; and                                      
|
| |  | and an order to the conciliadorto commence the creditor
    recognition process.                                                                                                                                        

concurso mercantil, in rem


concurso mercantil,




| |   |                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | principal and interest of unsecured peso-denominated debt will
    cease to accrue interest and will be converted into inflationary
    units known as UDIs at the conversion rate prevailing at that
    time as published by the Banco de México;

30



---



##### 





| |   |                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | principal and interest of unsecured foreign currency (non-peso)
    denominated debt will cease to accrue interest and will be
    converted into pesos at the exchange rate prevailing on the date
    the court declares the concurso mercantil, and such
    amount will then be converted into UDIs at the conversion rate
    prevailing at that time as published by Banco de
    México; and
|
| |  | principal and interest of secured foreign (non-peso) denominated
    debt secured by in remguarantees will remain in such
    currency and will continue to bear interest at the ordinary rate
    of interest.                                                                                                                                                                                    

concurso mercantil (quiebra). convenio
concursal) concurso mercantil. 185-day 90-day


concurso mercantil, conciliador, conciliador conciliador


conciliador conciliador convenio consursal convenio
consursal convenio consursal. convenio consursal.




conciliador concurso
mercantil. convenio
concursal


185-day 90-day conciliador (quiebra).


31



---



##### 



quiebra quiebra




| |   |                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------
| |  | the suspension of the debtors management authority of its
    business; and                                                             
|
| |  | an order to the IFECOM to designate a receiver
    (síndico), which may or may not be the person
    originally appointed as conciliador;

quiebra síndico


concurso
mercantil,




| |   |                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the right to propose to the court all matters relating to the
    appointment, removal and/or substitution of the conciliadorand the receiver (síndico), and to supervise his
    or her actions, including the right to propose a specific
    remuneration regime for the conciliadorand the receiver
    (síndico) that may be different from the rules set
    forth in the LCM;
|
| |  | the right to propose to the court the appointment of a
    supervisor to manage the debtors business affairs if, in
    the ministrys opinion, such removal is necessary to assure
    the continuity and safety of the services the company
    provides; and                                                                                                                    
|
| |  | the right to disapprove any restructuring agreement (convenio
    concursal) between the company and its creditors.                                                                                                                                                                                                                                                                 

concurso mercantil conciliador




REGULATION


Regulatory Framework


Secretaría de Comunicaciones y Transportes provided, however, Comisión Nacional Inversiones Extranjeras


Ley General de
Bienes Nacionales Ley General del


32



---



##### 



Equilibrio Ecológico y Protección al Ambiente Ley Federal de Competencia
Económica Ley de Vías Generales de Comunicación


day-to




| |   |                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | issuing administrative regulations relating to
    telecommunications;                                                                                                                                                   
|
| |  | recommending amendments to existing laws and rules;                                                                                                                                                                      
|
| |  | making recommendations to the SCT on applications for the grant,
    modification, renewal, transfer and revocation of concessions
    and permits;                                                                      
|
| |  | administering the radio frequency spectrum;                                                                                                                                                                              
|
| |  | promoting and overseeing interconnection of equipment and public
    telecommunications networks;                                                                                                                        
|
| |  | registering tariffs for telecommunications services and
    establishing specific obligations relating to tariffs, quality
    of service and provision of information by carriers with
    substantial market power; and
|
| |  | ensuring that carriers comply with the obligations set forth in
    concessions and permits.                                                                                                                             





The Concessions






| |   |                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the Orbital Concessions providing the right to occupy each of
    three orbital slots (one concession per orbital slot) and
    exploit their respective C- and Ku- frequency bands, and
|
| |  | the Property Concession providing the right to use the buildings
    and areas in which the control centers are located.                                                                



33



---



##### 



Comision Federal de Competencia








| |   |                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------
| |  | carry out research and development in Mexico,                                                           
|
| |  | maintain the control centers within Mexico and preferentially
    staff them with Mexican nationals, and
|
| |  | maintain satellite service continuously and efficiently.                                                















| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | pay an annual fee in an amount equal to 7.5% of the assessed
    property value; and
|
| |  | maintain the premises in good condition.                                            

(Indice
Nacional de Precios al Consumidor). (Secretaría de la
Función Pública)


34



---



##### 







Concession Termination


concurso
mercantil concurso mercantil






| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| |  | the term of any such Orbital Concession expires;                                        
|
| |  | we resign our rights under any such Orbital Concession;                                 
|
| |  | the Mexican government through the SCT, expropriates any of the
    Orbital Concessions;
|
| |  | we become subject to liquidation (quiebra); or                                          
|
| |  | the SCT revokes any of the Orbital Concessions.                                         







| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| |  | unjustified or unauthorized interruption of our operations or
    the services that may be provided under the Orbital Concessions;              
|
| |  | our undertaking any action or refraining from taking any action
    that affects the rights of other licensees or concessionaires;              
|
| |  | failure by us to satisfy the terms or conditions set forth in
    the Orbital Concessions;                                                      
|
| |  | unjustified failure by us to interconnect other concessionaires
    or licensees that have the right to provide telecommunications
    services;
|
| |  | change of our nationality, and                                                                                                                  
|
| |  | assignment or transfer of rights granted under the Orbital
    Concessions in contravention of the terms of the
    Telecommunications Law.     







35



---



##### 







| |   |                                                                                                   
| | - | --------------------------------------------------------------------------------------------------
| |  | the Property Concession term expires;                                                             
|
| |  | we resign our rights to any of the Concessions;                                                   
|
| |  | the Orbital Concessions are terminated;                                                           
|
| |  | the purpose for which the Property Concession is granted no
    longer exists;                    
|
| |  | the Mexican government expropriates the Property Concession for
    reasons of public interest; or
|
| |  | the Property Concession is revoked.                                                               





| |   |                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | failure to use the Property Concession for the purpose for which
    it was granted;                                                                                              
|
| |  | failure to comply with the terms of the Property Concession;                                                                                                                      
|
| |  | activities taking place on the premises for which the Property
    Concession was granted, without prior permission of the SCT,
    which interfere with satellite operations; and
|
| |  | under terms and conditions generally applicable to Property
    Concessions of this type under applicable Mexican law.                                                            



concurso mercantil. quiebra concurso mercantil concurso mercantil concurso mercantil


Treaties and International Accords




| |                                                  
| | -------------------------------------------------
| | Reciprocity Agreement Between the U.S. and Mexico





| |   |                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Mexican satellites are permitted to provide satellite service
    to, from and within the U.S. (in conformance with
    applicable U.S. law),                                        
|
| |  | U.S. satellites are permitted to provide satellite service
    to, from and within Mexico (in conformance with applicable
    Mexican law),                                          
|
| |  | the conditions for the transmission and reception of satellite
    signals will be as agreed to in protocols to the agreement,                                                       
|
| |  | the entities operating commercial satellites and earth stations
    may be structured with either public or private participation
    (in conformity with both Mexican and U.S. law),

36



---



##### 





| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | neither Mexico nor the U.S. shall require a satellite
    licensed by the other government to obtain an additional license
    for the operation of the satellite in order to provide the
    satellite services described in the protocols to the Reciprocity
    Agreement,
|
| |  | licenses for earth stations and satellite services must comply
    with national laws and regulations,                                                                                                                                                                       
|
| |  | applicable foreign ownership restrictions on satellite service
    providers and earth station licenses continue to apply, and                                                                                                                                               
|
| |  | both Mexico and the U.S. retain the right to take actions
    that either government considers necessary for the protection of
    our essential security interests.                                                                                                         





| |                            
| | ---------------------------
| | Direct-to-Home
    Protocol

direct-to Direct-to direct-to direct-to direct-to direct-to direct-to






| |                                  
| | ---------------------------------
| | Fixed Satellite Services Protocol



37



---



##### 



direct-to direct-to






| |                                                
| | -----------------------------------------------
| | Reciprocity Agreement Between Canada and Mexico







| |                    
| | -------------------
| | Argentine Agreement

direct-to direct-to




| |                                           
| | ------------------------------------------
| | The General Agreement on Trade in Services



38



---



##### 









| |   |                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | telex and telegraph services are not included;                                                                                                                                  
|
| |  | cross-border traffic must be routed through a company licensed
    by the SCT;                                                                                                  
|
| |  | license fees are imposed;                                                                                                                                                       
|
| |  | licenses will only be awarded to Mexican companies, in which
    foreign participation is limited to 49%, except in cellular,
    where foreign participation may be higher; and
|
| |  | there is no limit to foreign investment in companies that offer
    services to third parties.                                                                                  

Government and Supra-Governmental Regulation




| |                                                                               
| | ------------------------------------------------------------------------------
| | FCC Regulation of Satellite Services and Foreign Ownership
    of FCC Licenses

non-U.S.


non-U.S.


non-U.S.


direct-to direct-to


39



---



##### 





non-U.S. U.S.-licensed non-U.S.




| |   |                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | participating in a U.S. space station processing
    round, or                                                                                                                                                                                          
|
| |  | having a U.S. earth station operator apply for authority to
    communicate with the
    non-U.S.satellite or                                                                                                                                           
|
| |  | applying to be listed on the Permitted Space Station
    List of
    non-U.S.licensed
    satellites that any
    U.S.-authorized earth
    station with an ALSAT designation may communicate
    with, subject to any condition the FCC may impose.

non-U.S. non-U.S. non-U.S.


U.S.-authorized


Role of the International Telecommunication Union








40



---



##### 











| |                         
| | ------------------------
| | Status of Our Satellites














Item 4A.     Unresolved
Staff Comments




41



---



##### 








|        |                                             
|------- | --------------------------------------------
|Item 5. | Operating and Financial Review and Prospects

The information in this section should be read in conjunction
with the financial statements beginning on
page F-1. Our
financial statements are published in U.S. dollars and
prepared in conformity with accounting principles generally
accepted in the U.S., which we refer to as
U.S. GAAP. We maintain our legal books and
records in both Mexican pesos and U.S. dollars. Our
functional currency is the U.S. dollar. Monetary assets and
liabilities denominated in pesos are translated into
U.S. dollars using current exchange rates. The effect of
changes in exchange rates is recorded in the results of
operations. Non-monetary assets and liabilities originally
denominated in pesos are translated into U.S. dollars using
the historical exchange rate at the date of the transaction.
Capital stock is translated at historical exchange rates at the
date of contribution. Certain amounts presented in this annual
report may not sum due to rounding.


Overview




Financial Restructuring




concurso mercantil


concurso mercantil


42



---



##### 



convenio concursal concurso mercantil convenio concursal convenio concursal


Recent Trends in the Satellite Industry




pick-up






direct-to


Satellite Operations


back-up back-up


43



---



##### 







back-up






back-up


back-up


44



---



##### 











| |                                                                                             
| | --------------------------------------------------------------------------------------------
| | Results of Operations for the Year Ended December 31,
    2005 Compared to December 31, 2004



| |        
| | -------
| | Revenue





| |                    
| | -------------------
| | Operating Expenses.



Satellite operations.


Selling and administrative expenses.


License and management fees.


Depreciation and Amortization.




| |               
| | --------------
| | Operating Loss



45



---



##### 





| |                
| | ---------------
| | Interest Income





| |                                   
| | ----------------------------------
| | Interest and Other Financing Costs

concurso mercantil




| |                                
| | -------------------------------
| | Net Foreign Exchange Loss/ Gain





| |                                     
| | ------------------------------------
| | Deferred Income Tax Expense/ Benefit

re-measurement.






| |                                     
| | ------------------------------------
| | Preferred Stock Dividend Requirement





| |                                           
| | ------------------------------------------
| | Net Loss Applicable to Common Stockholders





| |                                                                                             
| | --------------------------------------------------------------------------------------------
| | Results of Operations for the Year Ended December 31,
    2004 Compared to December 31, 2003



| |        
| | -------
| | Revenue



46



---



##### 





| |                   
| | ------------------
| | Operating Expenses



Satellite operations.


Selling and administrative expenses.


License and management fees.


Depreciation and amortization.




| |               
| | --------------
| | Operating Loss





| |                
| | ---------------
| | Interest Income





| |              
| | -------------
| | Interest Cost







| |                                
| | -------------------------------
| | Net Foreign Exchange Loss/ Gain



47



---



##### 





| |                                     
| | ------------------------------------
| | Deferred Income Tax Expense/ Benefit













| |                                     
| | ------------------------------------
| | Preferred Stock Dividend Requirement





| |                                           
| | ------------------------------------------
| | Net Loss Applicable to Common Stockholders





| |                                            
| | -------------------------------------------
| | Inflation and Foreign Exchange Fluctuations





| |                     
| | --------------------
| | Capital Expenditures



48



---



##### 









| |                                
| | -------------------------------
| | Liquidity and Capital Resources

concurso mercantil






concurso mercantil concurso
mercantil






| |                         
| | ------------------------
| | Sources and Uses of Cash









49



---



##### 





| |                                                             
| | ------------------------------------------------------------
| | Contractual Obligations and Other Commercial
    Commitments



|                                                             |  |                        |         |           |          |   |        |           |  |   |           |  |  |               |         |  |  |   |         | 
|------------------------------------------------------------ |  | ---------------------- | ------- | --------- | -------- | - | ------ | --------- |  | - | --------- |  |  | ------------- | ------- |  |  | - | ------- | 
|                                                             |  | Payments Due By Period |        
|                                                             |  |                        |        
|                                                             |  |                        |         | Less than |          |   |       
|Contractual Obligations                                      |  | Total                  |         |           | One Year |   |        | 1-3 Years |  |   | 4-5 Years |  |  | After 5 Years |        
|                                                             |  |                        |         |           |          |   |        |           |  |   |           |  |  |               |        
|Debt and related interest accrued as of December 31, 2005(1) |  |                        | 690,248 |           |          |   | 35,581 |           |  |   | 140,612   |  |  |               | 331,530 |  |  |   | 182,525 | 
|Operating leases(2)                                          |  |                        | 562     |           |          |   | 233    |           |  |   | 233       |  |  |               | 96      |  |  |   |         | 
|Other long-term obligations(3)                               |  |                        | 4,460   |           |          |   | 446    |           |  |   | 892       |  |  |               | 892     |  |  |   | 2,230   | 
|                                                             |  |                        |         |           |          |   |        |           |  |   |           |  |  |               |        
|Total contractual cash obligations                           |  | $                      | 695,270 |           |          | $ | 36,260 |           |  | $ | 141,737   |  |  | $             | 332,518 |  |  | $ | 84,755  | 
|                                                             |  |                        |         |           |          |   |        |           |  |   |           |  |  |               |        
|                                                            
|Other Commercial Commitments:                                |  |                        |         |           |          |   |        |           |  |   |           |  |  |               |         |  |  |   |         | 
|Monitoring Service                                           |  | $                      | 92      |           |          | $ | 92     |           |  |   |           |  |  |               |         |  |  |   |         | 
|Maintenance                                                  |  | $                      | 10      |           |          | $ | 10     |           |  |   |           |  |  |               |         |  |  |   |         | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Variable interest on the Floating Rate Notes is calculated based
    on the following: according to the Restructuring Agreement
    entered into on March 31, 2006, accrued interest to and
    including September 30, 2006 will be $31.0 million.
    From September 30, 2006 and over the five-year life of the
    notes stipulated in the Restructuring Agreement, we have
    calculated interest at 10.13% based on current estimates of
    forward rates. In addition, $274 million of unpaid
    principal and interest relating to our Fixed Rates Notes has
    been excluded as, based on the Restructuring Agreement, such
    amount will be capitalized into equity.
|   
|(2) | Represents future minimum payments under non-cancelable
    operating leases with initial or remaining terms of one year or
    more.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(3) | Represents payments to the Mexican government under the Property
    Concession.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



| |                     
| | --------------------
| | The Fixed Rate Notes

pari
passu






| |                        
| | -----------------------
| | The Floating Rate Notes

pari
passu


50



---



##### 







Critical Accounting Policies






| |                           
| | --------------------------
| | Useful Lives of Satellites





|              |  |  |             | 
|------------- |  |  | ----------- | 
|Solidaridad 2 |  |  | 14.5  years | 
|Satmex 5      |  |  | 15 years    | 
|Satmex 6      |  |  | 15 years    | 







| |                               
| | ------------------------------
| | Valuation of Long-Lived Assets



51



---



##### 





| |                                        
| | ---------------------------------------
| | Valuation of Deferred Income Tax Assets







| |                                 
| | --------------------------------
| | Revenue Recognition on AlternaTV





| |                                
| | -------------------------------
| | Allowance for Doubtful Accounts



Accounting Pronouncements


Share-Based Payments. Accounting for Stock Issued to Employees


Exchanges of Nonmonetary Assets Accounting for Nonmonetary Transactions


52



---



##### 





Accounting Changes and Error Corrections


The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments, 03-1,


04-10, Determining Whether to Aggregate Operating Segments That Do
Not Meet the Quantitative Thresholds 04-10). 04-10 04-10


05-6, Determining the Amortization Period for Leasehold
Improvements Purchased after Lease Inception or Acquired in a
Business Combination, 05-6), 05-6


Accounting for Conditional Asset Retirement Obligations,


Investors Accounting for an Investee
When the Investor Has a Majority of the Voting Interest but the
Minority Shareholder or Shareholders Have Certain Approval or
Veto Rights


53



---



##### 



04-5 ,
Determining Whether a General Partner, or the General Partners,
as a Group, Controls a Limited Partnership or Similar Entity
when the Limited Partners Have Certain Rights.







|        |                                           
|------- | ------------------------------------------
|ITEM 6. | Directors, Senior Management and Employees

Directors and Senior Management


|                               |  |                                                             |  |     |    |  |                   |                     
|------------------------------ |  | ----------------------------------------------------------- |  | --- | -- |  | ----------------- | --------------------
|Name                           |  | Position                                                    |  | Age |    |  | Period of Service
|                               |  |                                                             |  |     |    |  |                  
|Sergio Miguel Autrey Maza(1)   |  | Chairman of the Board, Director and Chief Executive Officer |  |     | 54 |  |                   | Since November 1997 
|Bernard L. Schwartz(2)         |  | Director                                                    |  |     | 80 |  |                   | Since November 1997 
|Eric J. Zahler(2)              |  | Director                                                    |  |     | 55 |  |                   | Since November 1997 
|Francisco Alfredo Ramírez V    |  | Director                                                    |  |     | 38 |  |                   | Since September 2004
|Angel Mario Gutiérrez González |  | Director                                                    |  |     | 52 |  |                   | Since September 2004
|Joaquín Muñoz Izquierdo(3)     |  | Director                                                    |  |     | 75 |  |                   | Since March 2005    
|Carlos Raúl Valencia Barrera   |  | Secretary of the Board of Directors                         |  |     | 50 |  |                   | Since September 2004
|Cynthia M. Pelini              |  | Executive Vice President and Chief Financial Officer        |  |     | 51 |  |                   | Since April 1998    
|Juan Manuel Pinedo             |  | Executive Vice President and Chief Marketing Officer        |  |     | 41 |  |                   | Since April 1998    
|Carmen Ochoa Avendaño          |  | General Counsel                                             |  |     | 49 |  |                   | Since April 2002    
|Manuel Gutiérrez García        |  | Statutory Auditor                                           |  |     | 60 |  |                   | Since November 1997 






| |     |                                                                                                                                                                                                                                                                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | CEO Since February, 2005                                                                                                                                                                                                                                                                                                                            
|
| | (2) | Mr. Schwartz and Mr. Zahler resigned from our Board of
    Directors in March 2006; under Mexican law, these persons must
    remain in office until successors are appointed at the
    shareholders meeting and such successors take office. We
    expect that their resignation and the appointment of their
    successors will occur in 2006.
|
| | (3) | Mr. Muñoz Izquierdo passed away in February 2006,
    having served as a director since March 2005.
    Mr. Muñoz Izquierdo has been substituted in board
    meetings by alternate members of the board of directors. We
    expect that the appointment of his replacement will be resolved
    at a shareholders meeting in 2006.               







54



---



##### 























55



---



##### 



Telecommunicaciones de
México Presidencia de la República Subsecretaria de Protección Civil, Prevención y
Readaptación Social of Secretaría de
Gobernación Secretaría de Educación Pública Universidad Nacional Autonóma de México


Compensation


















Employees




56



---



##### 



Share Ownership




|                            |  |        |            |  |            |  |        | 
|--------------------------- |  | ------ | ---------- |  | ---------- |  | ------ | 
|                            |  | Shares |            |  | Percentage | 
|                            |  |        |            |  |            | 
|Servicios Corporativos      |  |        | 7,500,000  |  |            |  | 70.71  | 
|Mexican government          |  |        | 2,500,000  |  |            |  | 23.57  | 
|Loral (preferred stock)     |  |        | 473,449    |  |            |  | 4.46   | 
|Principia (preferred stock) |  |        | 133,281    |  |            |  | 1.26   | 
|                            |  |        |            |  |            | 
|                            |  |        | 10,606,730 |  |            |  | 100.00 | 
|                            |  |        |            |  |            | 






|        |                                                  
|------- | -------------------------------------------------
|Item 7. | Major Shareholders and Related Party Transactions

Major Shareholders




concurso mercantil quiebra












57



---



##### 





| |                 
| | ----------------
| | New Common Stock



|                                |  |               |       |   |                  |  |       |  
|------------------------------- |  | ------------- | ----- | - | ---------------- |  | ----- | -
|                                |  | Voting Rights |       |   | Financial Rights | 
|                                |  |               |       |   |                  | 
|Mexican Government              |  |               | 10.0  | % |                  |  | 4.0   | %
|Servicios                       |  |               | 45.0  | % |                  |  | 16.0  | %
|Principia                       |  |               | 0.67  | % |                  |  | 0.67  | %
|Loral                           |  |               | 1.33  | % |                  |  | 1.33  | %
|Holders of the Fixed Rate Notes |  |               | 43.0  | % |                  |  | 78.0  | %
|                                |  |               |       |   |                  | 
|Total                           |  |               | 100.0 | % |                  |  | 100.0 | %
|                                |  |               |       |   |                  | 





|                     |  |                                  
|-------------------- |  | ---------------------------------
| Issuer:            |  | Satmex                           
| Classification:    |  | Series A Common Stock            
| Par Value:         |  | None                             
| Voting:            |  | 55% of total common voting rights
| Preemptive Rights: |  | Equity calls                     



|                     |  |                                  
|-------------------- |  | ---------------------------------
| Issuer:            |  | Satmex                           
| Classification:    |  | Series B Common Stock            
| Par Value:         |  | None                             
| Voting:            |  | 45% of total common voting rights
| Preemptive Rights: |  | Equity calls                     



|                     |  |                                                                                                                                                                                                       
|-------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| Issuer:            |  | Satmex                                                                                                                                                                                                
| Classification:    |  | Series N Common Stock                                                                                                                                                                                 
| Par Value:         |  | None                                                                                                                                                                                                  
| Voting:            |  | Limited voting rights; may vote only with respect to: extension
    of term, conversion or anticipated dissolution, amendment to
    Satmexs corporate purpose or change to Satmexs
    nationality.
| Preemptive Rights: |  | Equity calls                                                                                                                                                                                          



| |                                  
| | ---------------------------------
| | Loral Space & Communications Inc.



58



---



##### 



direct-to






| |               
| | --------------
| | Sale of Assets







| |                                                 
| | ------------------------------------------------
| | Loral is Organized into Two Operating Businesses

Satellite Services. direct-to


Satellite Manufacturing.




| |                           
| | --------------------------
| | Loral Settlement Agreement



59



---



##### 



conciliador concurso
mercantil


usufructo usufructo usufructo




| |                        
| | -----------------------
| | Principia, S.A. de C.V.



Related Party Transactions




(Indice Nacional de Precios al Consumidor) (Secretaría de la Función Pública)


60



---



##### 





end-of



















|        |                      
|------- | ---------------------
|Item 8. | Financial Information

Legal Proceedings




| |                       
| | ----------------------
| | The concurso mercantil



61



---



##### 



concurso
mercantil


concurso mercantil concurso mercantil (quiebra). concurso
mercantil. corcurso mercantil. 185-day 90-day conciliador (quiebra) quiebra


concurso mercantil concurso mercantil conciliador concurso
mercantil sentencia de
reconocimiento, graduación y prelación de
créditos conciliador 90-day convenio concursal conciliador convenio concursal convenio concursal convenio
concursal Ley de
Concursos Mercantiles


Dividend Policy


concurso
mercantil,


20-F.


62



---



##### 








|        |        
|------- | -------
|ITEM 9. | Markets








|         |                       
|-------- | ----------------------
|ITEM 10. | Additional Information

20-F


Articles of Incorporation


F-4 333-08880.


Material Contracts




Exchange Controls




TAXATION








Mexican Taxation




63



---



##### 







| |                                   
| | ----------------------------------
| | Taxation of Interest and Principal

(casas de bolsa) (Registro National de Valores) (Secretaría de Hacienda y Crédito Público)














| |                         
| | ------------------------
| | Taxation of Dispositions



64



---



##### 





| |                         
| | ------------------------
| | Transfer and Other Taxes



U.S. Taxation






| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Tax Consequences Associated With Default on Fixed Rate
    Notes and Restructuring

concurso
mercantil




| |                     
| | --------------------
| | Taxation of Interest





65



---



##### 



Non-U.S. Non-U.S.




| |                         
| | ------------------------
| | Taxation of Dispositions



Non-U.S. Non-U.S. Non-U.S. Non-U.S.




| |                                             
| | --------------------------------------------
| | Backup Withholding and Information Reporting








|         |                                                               
|-------- | --------------------------------------------------------------
|Item 11. | Quantitative and Qualitative Disclosures About Market
    Risk



Exchange Rate Risk




66



---



##### 



Interest Rate Risk






concurso mercantil





PART II







|         |                                                
|-------- | -----------------------------------------------
|Item 13. | Defaults, Dividend Arrearages and Delinquencies

The Floating Rate Notes




The Fixed Rate Notes











|         |                                                             
|-------- | ------------------------------------------------------------
|Item 14. | Material Modifications to the Rights of Security
    Holders








|         |                        
|-------- | -----------------------
|Item 15. | Controls and Procedures

13a-14(c) 15d-14(c))


67



---



##### 










|          |                                 
|--------- | --------------------------------
|Item 16A. | Audit Committee Financial Expert










|          |               
|--------- | --------------
|Item 16B. | Code of Ethics

www.satmex.com







|          |                                       
|--------- | --------------------------------------
|Item 16C. | Principal Accountant Fees and Services



|                   |  |             |     |  |      |   |     | 
|------------------ |  | ----------- | --- |  | ---- | - | --- | 
|                   |  | 2005        |     |  | 2004 |  
|                   |  |             |     |  |      |  
|                   |  | (Amounts in |    
|                   |  | thousands)  |    
|Audit fees         |  | $           | 286 |  |      | $ | 234 | 
|Audit related fees |  |             |    |  |      |   | 12  | 
|Tax fees           |  |             | 71  |  |      |   | 114 | 
|All other fees     |  |             |    |  |      |   | 31  | 
|                   |  |             |     |  |      |  
|Total fees         |  | $           | 357 |  |      | $ | 391 | 
|                   |  |             |     |  |      |  

Audit fees:


Audit-related fees:


Tax fees:


non-audit 1





1


68



---



##### 





PART III




|         |                     
|-------- | --------------------
|Item 18. | Financial Statements





|         |         
|-------- | --------
|Item 19. | Exhibits



|                                                                                                                                 |  |      |     | 
|-------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                                 |  | Page |    
|                                                                                                                                 |  |      |    
|Report of Independent Registered Public
    Accounting Firm                                                                      |  |      | F-2 | 
|Balance Sheets as of December 31, 2005
    and 2004 (Restated)                                                                   |  |      | F-4 | 
|Statements of Operations for the years
    ended December 31, 2005, 2004 (Restated) and 2003
    (Restated)                      |  |      | F-5 | 
|Statements of Changes in Stockholders
    Equity for the years ended December 31, 2005, 2004
    (Restated) and 2003 (Restated) |  |      | F-6 | 
|Statements of Cash Flows for the years
    ended December 31, 2005, 2004 (Restated) and 2003
    (Restated)                      |  |      | F-7 | 
|Notes to the Financial Statements                                                                                                |  |      | F-8 | 





|            |     |             |  |                                                                                                                                                                                                                                                                                                                                                
|----------- | --- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |     | Description
|            |     |            
|            | 1.1 |             |  | Estatutos Sociales(bylaws) of Satélites
    Mexicanos, S. A. de C. V.                                                                                                                                                                                                                                                                         
|            | 1.2 |             |  | Estatutos Sociales(bylaws) of Satélites
    Mexicanos, S. A. de C. V. (English translation).                                                                                                                                                                                                                                                  
|            | 2.1 |             |  | Indenture, dated as of February 2, 1998, between
    Satélites Mexicanos, S. A. de C. V. and The Bank of New
    York, as trustee.                                                                                                                                                                                                            
|            | 2.2 |             |  | Indenture, dated as of March 4, 1998, among, Satélites
    Mexicanos, S. A. de C. V., as the Issuer, Firmamento Mexicano S.
    de R. L. de C. V. and Servicios Corporativos Satelitales, S. A.
    de C. V., as Guarantors, and Citibank, N. A., as trustee.                                                                                 
|            | 2.3 |             |  | First Supplemental Indenture, dated as of June 30, 1998,
    Supplemental to Indenture, dated as of March 4, 1998,
    among, Satélites Mexicanos, S. A. de C. V., as the Issuer,
    Firmamento Mexicano S. de R. L. de C. V. and Servicios
    Corporativos Satelitales, S. A. de C. V., as Guarantors, and
    Citibank, N. A., as trustee.
|            | 2.4 |             |  | Second Supplemental Indenture, dated as of February 16,
    2000, to Indenture, dated as of March 4, 1998, among,
    Satélites Mexicanos, S. A. de C. V., as the Issuer,
    Firmamento Mexicano S. de R. L. de C. V. and Servicios
    Corporativos Satelitales, S. A. de C. V., as Guarantors, and
    Citibank, N. A., as trustee.       
|            | 2.5 |             |  | Supplemental Indenture, dated as of November 25, 2002, to
    Indenture, dated as of February 2, 1998, between
    Satélites Mexicanos, S. A. de C. V. and The Bank of New
    York, as trustee.                                                                                                                                            
|            | 2.6 |             |  | Third Supplemental Indenture, dated as of March 18, 2003,
    to Indenture, dated as of March 4, 1998, among,
    Satélites Mexicanos, S. A. de C. V., as the Issuer,
    Firmamento Mexicano S. de R. L. de C. V. and Servicios
    Corporativos Satelitales, S. A. de C. V., as Guarantors and
    Citibank, N. A., as trustee.           
|            | 4.1 |             |  | Satellite Concession 116.8 degrees W. L.                                                                                                                                                                                                                                                                                                      
|            | 4.2 |             |  | Satellite Concession 116.8 degrees W. L. (English
    Translation)                                                                                                                                                                                                                                                                            
|            | 4.3 |             |  | Satellite Concession 113.0 degrees W. L.                                                                                                                                                                                                                                                                                                      
|            | 4.4 |             |  | Satellite Concession 113.0 degrees W. L. (English
    Translation)                                                                                                                                                                                                                                                                            
|            | 4.5 |             |  | Satellite Concession 109.2 degrees W. L.                                                                                                                                                                                                                                                                                                      
|            | 4.6 |             |  | Satellite Concession 109.2 degrees W. L. (English
    Translation)                                                                                                                                                                                                                                                                            

69



---



##### 



|            |      |             |  |                                                                                                                                                                                                                                                                                                            
|----------- | ---- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |      | Description
|            |      |            
|            | 4.7  |             |  | Property Concession                                                                                                                                                                                                                                                                                       
|            | 4.8  |             |  | Property Concession (English Translation)                                                                                                                                                                                                                                                                 
|            | 4.9  |             |  | Amended and Restated Membership Agreement, dated as of
    August 21, 1998 among Loral SatMex Ltd., Ediciones Enigma,
    S. A. de C. V. and Firmamento Mexicano, S. de R. L. de C.
    V.                                                                                                                
|            | 4.10 |             |  | Restructuring Agreement by and among Satélites Mexicanos,
    S.A. de C.V., Servicios Corporativos Satelitales, S.A. de C.V.,
    Supporting Equity Holders, Supporting FRN Holders and Supporting
    Noteholders, dated as of March 31,
    2006.*                                                   
|            | 4.11 |             |  | Agreement between Hughes Electronics Corporation, through its
    division, Hughes Network Systems and Satélites Mexicanos,
    S.A. de C.V., dated as of January 20, 2000, the Tenth
    Amendment thereto, dated December 1, 2005 and the Twelfth
    Amendment thereto, dated February 1,
    2006.*
|            | 4.12 |             |  | Support Agreements by and among Satélites Mexicanos, S.A.
    de C.V. and the Additional Supporting Holder, dated as of
    May 9, 2006, May 10, 2006, May 12, 2006 and
    May 18, 2006.*                                                                                                             
|            | 12.1 |             |  | Section 302 Certification of Sergio Miguel Angel Autrey
    Maza, Chief Executive Officer.*                                                                                                                                                                                                                
|            | 12.2 |             |  | Section 302 Certification of Cynthia Pelini, Chief
    Financial Officer.*                                                                                                                                                                                                                                 
|            | 13.1 |             |  | Section 906 Certification of Sergio Miguel Angel Autrey
    Maza, Chief Executive Officer.*                                                                                                                                                                                                                
|            | 13.2 |             |  | Section 906 Certification of Cynthia Pelini, Chief
    Financial Officer.*                                                                                                                                                                                                                                 






| |      |                                                                                                                                                                            
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | Incorporated by reference from the registrants
    Registration Statement on
    Form F-4 filed on
    November 9, 1998 (File
    No. 333-8880).                          
|
| |    | Incorporated by reference from the registrants Annual
    Report on
    Form 20-F for the
    year ended December 31, 1999.                                               
|
| |   | Incorporated by reference from the registrants Annual
    Report on
    Form 20-F for the
    year ended December 31, 2002.                                               
|
| |  | Portions of exhibit have been omitted pursuant to Satmexs
    Confidential Treatment Request, submitted to the Commission on
    the date of the filing of this Form 20-F.



| |   |                
| | - | ---------------
| | * | Filed herewith.

70



---



##### 



SIGNATURES


20-F




| |                                        
| | ---------------------------------------
| | Satélites Mexicanos,
    S. A. de C. V.



| |     |                   
| | --- | ------------------
| | By: | /s/ Cynthia Pelini

| | 
| | 
| | 



| |                        
| | -----------------------
| | Cynthia Pelini         
| | Chief Financial Officer





---



##### 



SATÉLITES MEXICANOS, S. A. DE C. V.





PART III


INDEX TO FINANCIAL STATEMENTS


|                                                                                                                                 |  |      |     | 
|-------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                                 |  | Page |    
|                                                                                                                                 |  |      |    
|Report of Independent Registered Public
    Accounting Firm                                                                      |  |      | F-2 | 
|Balance Sheets as of December 31, 2005
    and 2004 (Restated)                                                                   |  |      | F-4 | 
|Statements of Operations for the years
    ended December 31, 2005, 2004 (Restated) and 2003
    (Restated)                      |  |      | F-5 | 
|Statements of Changes in Stockholders
    Equity for the years ended December 31, 2005, 2004
    (Restated) and 2003 (Restated) |  |      | F-6 | 
|Statements of Cash Flows for the years
    ended December 31, 2005, 2004 (Restated) and 2003
    (Restated)                      |  |      | F-7 | 
|Notes to the Financial Statements                                                                                                |  |      | F-8 | 

F-1



---



##### 






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














(concurso
mercantil) concurso mercantil Ley de Concursos Mercantiles




concurso mercantil


F-2



---



##### 





concurso mercantil








| |                                     
| | ------------------------------------
| | Galaz, Yamazaki, Ruiz Urquiza, S. C.
| | Member of Deloitte Touche Tohmatsu  
|
| | C. P. C. Enrique Vázquez Gorostiza  



F-3



---



##### 



SATÉLITES MEXICANOS, S. A. DE C. V.





BALANCE SHEETS


As of December 31, 2005 and 2004


|                                           |                               |                                                                         |                                            |               |             |         |         |        |          |         | 
|------------------------------------------ | ----------------------------- | ----------------------------------------------------------------------- | ------------------------------------------ | ------------- | ----------- | ------- | ------- | ------ | -------- | ------- | 
|                                           |                               |                                                                         |                                            | 2004          |            
|                                           |                               |                                                                         |                                            | (As Restated, |            
|                                           |                               | 2005                                                                    |                                            |               | see Note 2) |        
|                                           |                               |                                                                         |                                            |               |             |        
|                                           |                               | (Amounts in thousands of                                                |                                           
|                                           |                               | U.S. dollars)                                                           |                                           
|ASSETS                                    
|Current assets:                            |                               |                                                                         |                                            |               |             |         |         |       
|                                           | Cash and cash equivalents     |                                                                         | $                                          | 54,874        |             |         | $       | 39,076 |         
|                                           | Restricted cash               |                                                                         |                                            | 2,000         |             |         |         |       |         
|                                           | Accounts receivable, net      |                                                                         |                                            | 3,588         |             |         |         | 2,362  |         
|                                           | Due from related parties, net |                                                                         |                                            | 8,348         |             |         |         | 6,924  |         
|                                           | Guarantee deposits            |                                                                         |                                            | 2,739         |             |         |         | 125    |         
|                                           |                               | Prepaid insurance and others                                            |                                            |               | 3,170       |         |         |        | 3,140    |        
|                                           |                               | Deferred income taxes                                                   |                                            |               | 4,310       |         |         |        | 2,400    |        
|                                           |                               |                                                                         |                                            |               |             |        
|                                           |                               |                                                                         | Total current assets                       |               |             | 79,029  |         |        |          | 54,027  | 
|Noncurrent receivable from related parties |                               |                                                                         | 2,645                                      |               |             |         | 2,990   |       
|Satellites and equipment, net              |                               |                                                                         | 189,433                                    |               |             |         | 222,019 |       
|Construction in process  Satmex 6         |                               |                                                                         | 241,514                                    |               |             |         | 246,113 |       
|Concessions, net                           |                               |                                                                         | 411,900                                    |               |             |         | 424,805 |       
|Guarantee deposit                          |                               |                                                                         | 49                                         |               |             |         | 2,663   |       
|Other assets                               |                               |                                                                         | 701                                        |               |             |         | 761     |       
|                                           |                               |                                                                         |                                            |               |             |        
|                                           |                               |                                                                         | Total assets                               |               | $           | 925,271 |         |        | $        | 953,378 | 
|                                           |                               |                                                                         |                                            |               |             |        
|                                          
|LIABILITIES AND STOCKHOLDERS EQUITY      
|Current liabilities:                       |                               |                                                                         |                                            |               |             |         |         |       
|                                           |                               | Notes payable                                                           |                                            | $             | 527,721     |         |         | $      | 523,388  |        
|                                           |                               | Interest payable                                                        |                                            |               | 106,314     |         |         |        | 64,886   |        
|                                           |                               | Accounts payable                                                        |                                            |               | 3,897       |         |         |        | 2,908    |        
|                                           |                               | Accrued expenses                                                        |                                            |               | 5,490       |         |         |        | 5,690    |        
|                                           |                               | Due to related parties                                                  |                                            |               | 2,540       |         |         |        | 4,980    |        
|                                           |                               | Deferred revenue  Mexican Government                                   |                                            |               | 2,200       |         |         |        | 2,200    |        
|                                           |                               |                                                                         |                                            |               |             |        
|                                           |                               |                                                                         | Total current liabilities                  |               |             | 648,162 |         |        |          | 604,052 | 
|Accrued expenses                           |                               |                                                                         | 318                                        |               |             |         |        |       
|Due to related parties                     |                               |                                                                         |                                           |               |             |         | 1,674   |       
|Deferred revenue  Mexican Government      |                               |                                                                         | 67,935                                     |               |             |         | 70,135  |       
|Deferred income taxes                      |                               |                                                                         | 30,275                                     |               |             |         | 28,127  |       
|                                           |                               |                                                                         |                                            |               |             |        
|                                           |                               |                                                                         | Total liabilities                          |               |             | 746,690 |         |        |          | 703,988 | 
|                                           |                               |                                                                         |                                            |               |             |        
|Contingencies and commitments (Note 9)     |                               |                                                                         |                                            |               |             |         |         |       
|Stockholders equity:                      |                               |                                                                         |                                            |               |             |         |         |       
|                                           |                               | Common stock (10,000,000 shares authorized, issued and
    outstanding) |                                            |               | 389,575     |         |         |        | 388,068  |        
|                                           |                               | Preferred stock (606,730 shares authorized, issued and
    outstanding) |                                            |               | 31,886      |         |         |        | 31,886   |        
|                                           |                               | Accumulated deficit                                                     |                                            |               | (242,880    | )       |         |        | (170,564 | )      
|                                           |                               |                                                                         |                                            |               |             |        
|                                           |                               |                                                                         | Total stockholders equity                 |               |             | 178,581 |         |        |          | 249,390 | 
|                                           |                               |                                                                         |                                            |               |             |        
|                                           |                               |                                                                         | Total liabilities and stockholders equity |               | $           | 925,271 |         |        | $        | 953,378 | 
|                                           |                               |                                                                         |                                            |               |             |        



F-4



---



##### 



SATÉLITES MEXICANOS, S. A. DE C. V.





STATEMENTS OF OPERATIONS


For the Years Ended December 31, 2005, 2004 and 2003


|                                                              |                                     |                                        |         |               |             |   |               |             |  |   |         |        | 
|------------------------------------------------------------- | ----------------------------------- | -------------------------------------- | ------- | ------------- | ----------- | - | ------------- | ----------- |  | - | ------- | ------ | 
|                                                              |                                     |                                        |         | 2004          |             |   | 2003          |            
|                                                              |                                     |                                        |         | (As Restated, |             |   | (As Restated, |            
|                                                              |                                     | 2005                                   |         |               | see Note 2) |   |               | see Note 2) | 
|                                                              |                                     |                                        |         |               |             |   |               |             | 
|                                                              |                                     | (Amounts in thousands of U.S. dollars) |        
|Service revenue                                               |                                     | $                                      | 69,872  |               |             | $ | 71,705        |             |  | $ | 78,823  |       
|                                                              |                                     |                                        |         |               |             |   |               |             | 
|Operating expenses:                                           |                                     |                                        |         |               |             |   |               |             |  |   |         |       
|                                                              | Satellite operations                |                                        |         | 10,563        |             |   |               | 11,923      |  |   |         | 13,086 | 
|                                                              | Selling and administrative expenses |                                        |         | 22,341        |             |   |               | 16,587      |  |   |         | 23,812 | 
|                                                              | License and management fees         |                                        |         | 164           |             |   |               | 533         |  |   |         | 1,126  | 
|                                                              | Depreciation and amortization       |                                        |         | 47,927        |             |   |               | 48,108      |  |   |         | 48,405 | 
|                                                              |                                     |                                        |         |               |             |   |               |             | 
|                                                              |                                     |                                        | 80,995  |               |             |   | 77,151        |             |  |   | 86,429  |       
|                                                              |                                     |                                        |         |               |             |   |               |             | 
|Operating loss                                                |                                     |                                        | (11,123 | )             |             |   | (5,446        | )           |  |   | (7,606  | )     
|Cancellation of provision related to loss of Solidaridad 1    |                                     |                                        |        |               |             |   |              |             |  |   | 3,317   |       
|Interest income                                               |                                     |                                        | 2,315   |               |             |   | 3,583         |             |  |   | 304     |       
|Interest expense and amortization of deferred financing costs |                                     |                                        | (56,041 | )             |             |   | (56,959       | )           |  |   | (39,732 | )     
|Net foreign exchange (loss) gain                              |                                     |                                        | (5,722  | )             |             |   | (97           | )           |  |   | 264     |       
|                                                              |                                     |                                        |         |               |             |   |               |             | 
|Loss before deferred income tax                               |                                     |                                        | (70,571 | )             |             |   | (58,919       | )           |  |   | (43,453 | )     
|Deferred income tax expense (benefit)                         |                                     |                                        | 238     |               |             |   | (4,378        | )           |  |   | 21,296  |       
|                                                              |                                     |                                        |         |               |             |   |               |             | 
|Net loss                                                      |                                     |                                        | (70,809 | )             |             |   | (54,541       | )           |  |   | (64,749 | )     
|Preferred stock dividend requirement                          |                                     |                                        | (1,507  | )             |             |   | (1,507        | )           |  |   | (1,507  | )     
|                                                              |                                     |                                        |         |               |             |   |               |             | 
|Net loss applicable to common stockholders                    |                                     | $                                      | (72,316 | )             |             | $ | (56,048       | )           |  | $ | (66,256 | )     
|                                                              |                                     |                                        |         |               |             |   |               |             | 



F-5



---



##### 



SATÉLITES MEXICANOS, S. A. DE C. V.





STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY


For the Years Ended December 31, 2005, 2004 and 2003


|                                                    |  |                                                 |            |  |                 |   |         |             |  |  |         |  |  |         |        |  |       |   |          |   |  |   |         |  
|--------------------------------------------------- |  | ----------------------------------------------- | ---------- |  | --------------- | - | ------- | ----------- |  |  | ------- |  |  | ------- | ------ |  | ----- | - | -------- | - |  | - | ------- | -
|                                                    |  | Common Stock                                    |            |  | Preferred Stock |   |         |             |  | 
|                                                    |  |                                                 |            |  |                 |   |         | Accumulated |  |  |        
|                                                    |  | Shares                                          |            |  | Amount          |   |         | Shares      |  |  | Amount  |  |  | Deficit |        |  | Total |  
|                                                    |  |                                                 |            |  |                 |   |         |             |  |  |         |  |  |         |        |  |       |  
|                                                    |  | (Monetary amounts in thousands of U.S. dollars) |           
|Balance January 1, 2003                             |  |                                                 | 10,000,000 |  |                 | $ | 385,054 |             |  |  | 606,730 |  |  | $       | 31,886 |  |       | $ | (48,260  | ) |  | $ | 368,680 |  
|Net loss (as restated, see Note 2)                  |  |                                                 |            |  |                 |   |         |             |  |  |         |  |  |         |        |  |       |   | (64,749  | ) |  |   | (64,749 | )
|Preferred stock dividend requirement                |  |                                                 |            |  |                 |   | 1,507   |             |  |  |         |  |  |         |        |  |       |   | (1,507   | ) |  |   |         |  
|                                                    |  |                                                 |            |  |                 |   |         |             |  |  |         |  |  |         |        |  |       |  
|Balance December 31, 2003 (as restated, see Note 2) |  |                                                 | 10,000,000 |  |                 |   | 386,561 |             |  |  | 606,730 |  |  |         | 31,886 |  |       |   | (114,516 | ) |  |   | 303,931 |  
|Net loss (as restated, see Note 2)                  |  |                                                 |            |  |                 |   |         |             |  |  |         |  |  |         |        |  |       |   | (54,541  | ) |  |   | (54,541 | )
|Preferred stock dividend requirement                |  |                                                 |            |  |                 |   | 1,507   |             |  |  |         |  |  |         |        |  |       |   | (1,507   | ) |  |   |         |  
|                                                    |  |                                                 |            |  |                 |   |         |             |  |  |         |  |  |         |        |  |       |  
|Balance December 31, 2004 (as restated, see Note 2) |  |                                                 | 10,000,000 |  |                 |   | 388,068 |             |  |  | 606,730 |  |  |         | 31,886 |  |       |   | (170,564 | ) |  |   | 249,390 |  
|Net loss                                            |  |                                                 |            |  |                 |   |         |             |  |  |         |  |  |         |        |  |       |   | (70,809  | ) |  |   | (70,809 | )
|Preferred stock dividend requirement                |  |                                                 |            |  |                 |   | 1,507   |             |  |  |         |  |  |         |        |  |       |   | (1,507   | ) |  |   |         |  
|                                                    |  |                                                 |            |  |                 |   |         |             |  |  |         |  |  |         |        |  |       |  
|Balance December 31, 2005                           |  |                                                 | 10,000,000 |  |                 | $ | 389,575 |             |  |  | 606,730 |  |  | $       | 31,886 |  |       | $ | (242,880 | ) |  | $ | 178,581 |  
|                                                    |  |                                                 |            |  |                 |   |         |             |  |  |         |  |  |         |        |  |       |  



F-6



---



##### 



SATÉLITES MEXICANOS, S. A. DE C. V.





STATEMENTS OF CASH FLOWS


For the Years Ended December 31, 2005, 2004 and 2003


|                                                                                                                                       |                                                             |                                        |         |               |             |   |               |             |        |   |         |        |        |  
|-------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | -------------------------------------- | ------- | ------------- | ----------- | - | ------------- | ----------- | ------ | - | ------- | ------ | ------ | -
|                                                                                                                                       |                                                             |                                        |         | 2004          |             |   | 2003          |            
|                                                                                                                                       |                                                             |                                        |         | (As Restated, |             |   | (As Restated, |            
|                                                                                                                                       |                                                             | 2005                                   |         |               | see Note 2) |   |               | see Note 2) |       
|                                                                                                                                       |                                                             |                                        |         |               |             |   |               |             |       
|                                                                                                                                       |                                                             | (Amounts in thousands of U.S. dollars) |        
|Operating activities                                                                                                                   |                                                             |                                        |         |               |             |   |               |             |        |   |         |       
|Net loss                                                                                                                               |                                                             | $                                      | (70,809 | )             |             | $ | (54,541       | )           |        | $ | (64,749 | )     
|Adjustments to reconcile net loss to operating cash flows:                                                                             |                                                             |                                        |         |               |             |   |               |             |        |   |         |       
|                                                                                                                                       | Depreciation and amortization                               |                                        |         | 47,927        |             |   |               | 48,108      |        |   |         | 48,405 |       
|                                                                                                                                       | Amortization of deferred financing costs                    |                                        |         |              |             |   |               | 1,929       |        |   |         | 2,238  |       
|                                                                                                                                       | Cancellation of provision related to loss of Solidaridad 1  |                                        |         |              |             |   |               |            |        |   |         | (3,317 | )     
|                                                                                                                                       | Deferred revenue  customers                                |                                        |         |              |             |   |               |            |        |   |         | (60    | )     
|                                                                                                                                       | Deferred revenue  Mexican Government                       |                                        |         | (2,200        | )           |   |               | (2,200      | )      |   |         | (2,200 | )     
|                                                                                                                                       | Deferred income taxes                                       |                                        |         | 238           |             |   |               | (4,378      | )      |   |         | 21,296 |       
|                                                                                                                                       | Interest income from restricted and segregated cash         |                                        |         |              |             |   |               |            |        |   |         | (5     | )     
|                                                                                                                                       | Use of restricted and segregated cash for interest payments |                                        |         |              |             |   |               |            |        |   |         | 177    |       
|                                                                                                                                       | Changes in operating assets and liabilities:                |                                        |         |               |             |   |               |             |        |   |         |        |       
|                                                                                                                                       |                                                             | Accounts receivable                    |         |               | (1,226      | ) |               |             | 1,115  |   |         |        | 436    |  
|                                                                                                                                       |                                                             | Prepaid insurance and others           |         |               | (30         | ) |               |             | 135    |   |         |        | 1,441  |  
|                                                                                                                                       |                                                             | Guarantee deposit                      |         |               |            |   |               |             | (125   | ) |         |        | (2,700 | )
|                                                                                                                                       |                                                             | Accounts payable                       |         |               | 989         |   |               |             | 651    |   |         |        | (570   | )
|                                                                                                                                       |                                                             | Accrued expenses                       |         |               | 118         |   |               |             | (648   | ) |         |        | 1,695  |  
|                                                                                                                                       |                                                             | Interest payable                       |         |               | 40,148      |   |               |             | 34,490 |   |         |        | 16,200 |  
|                                                                                                                                       |                                                             | Due from/to related parties            |         |               | (5,193      | ) |               |             | (2,021 | ) |         |        | 896    |  
|                                                                                                                                       |                                                             | Other assets                           |         |               | 60          |   |               |             | 100    |   |         |        | (909   | )
|                                                                                                                                       |                                                             |                                        |         |               |             |   |               |             |       
|Net cash flows provided by operating activities                                                                                        |                                                             |                                        | 10,022  |               |             |   | 22,615        |             |        |   | 18,274  |       
|                                                                                                                                       |                                                             |                                        |         |               |             |   |               |             |       
|Investing activities                                                                                                                   |                                                             |                                        |         |               |             |   |               |             |        |   |         |       
|Use of restricted and segregated cash  satellite
    construction                                                                     |                                                             |                                        |        |               |             |   |              |             |        |   | 6,645   |       
|Construction in-progress-Satmex 6                                                                                                      |                                                             |                                        | (5,901  | )             |             |   |              |             |        |   | (36,268 | )     
|Liquidity damages for delivery delay-Satmex 6                                                                                          |                                                             |                                        | 8,500   |               |             |   |              |             |        |   |        |       
|Refund of an insurance advance-Satmex 6                                                                                                |                                                             |                                        |        |               |             |   | 5,058         |             |        |   |        |       
|Return of unused deposits restricted for construction of Satmex 6                                                                      |                                                             |                                        | 2,000   |               |             |   |              |             |        |   |        |       
|Restricted cash                                                                                                                        |                                                             |                                        | (2,000  | )             |             |   |              |             |        |   |        |       
|Acquisition of equipment                                                                                                               |                                                             |                                        | (2,436  | )             |             |   | (1,446        | )           |        |   | (1,638  | )     
|                                                                                                                                       |                                                             |                                        |         |               |             |   |               |             |       
|Net cash flows provided by (used in) investing activities                                                                              |                                                             |                                        | 163     |               |             |   | 3,612         |             |        |   | (31,261 | )     
|                                                                                                                                       |                                                             |                                        |         |               |             |   |               |             |       
|Financing activities                                                                                                                   |                                                             |                                        |         |               |             |   |               |             |        |   |         |       
|Exchange rate fluctuation and change of value of notes payable
    to reflect amount in UDIs in accordance with concurso
    mercantil |                                                             |                                        | 5,613   |               |             |   |              |             |        |   |        |       
|Repayment of floating rate notes                                                                                                       |                                                             |                                        |        |               |             |   | (162          | )           |        |   | (824    | )     
|                                                                                                                                       |                                                             |                                        |         |               |             |   |               |             |       
|Net cash flows provided by (used in) financing activities                                                                              |                                                             |                                        | 5,613   |               |             |   | (162          | )           |        |   | (824    | )     
|                                                                                                                                       |                                                             |                                        |         |               |             |   |               |             |       
|Net increase (decrease) in cash and cash equivalents                                                                                   |                                                             |                                        | 15,798  |               |             |   | 26,065        |             |        |   | (13,811 | )     
|Cash and cash equivalents   beginning of year                                                                                         |                                                             |                                        | 39,076  |               |             |   | 13,011        |             |        |   | 26,822  |       
|                                                                                                                                       |                                                             |                                        |         |               |             |   |               |             |       
|Cash and cash equivalents   end of year                                                                                               |                                                             | $                                      | 54,874  |               |             | $ | 39,076        |             |        | $ | 13,011  |       
|                                                                                                                                       |                                                             |                                        |         |               |             |   |               |             |       
|Supplemental disclosures                                                                                                               |                                                             |                                        |         |               |             |   |               |             |        |   |         |       
|Interest paid (net of capitalized interest in 2003 of $18,572)                                                                         |                                                             | $                                      | 7,412   |               |             | $ | 14,664        |             |        | $ | 30,325  |       



F-7



---



##### 



SATÉLITES MEXICANOS, S. A. DE C. V.


NOTES TO THE FINANCIAL STATEMENTS


(Monetary amounts expressed in thousands of
U.S. dollars)







|   |                                          
|-- | -----------------------------------------
|1. | Nature of Business and Significant Events



| |                   
| | ------------------
| | Nature of business

direct-to


36-MHz






| |             
| | ------------
| | Shareholders







| |                                                               
| | --------------------------------------------------------------
| | Loss of Solidaridad 1 and launch of the Satmex 6
    satellite





F-8



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)






| |                            
| | ---------------------------
| | Concurso mercantil and debt



| |                 
| | ----------------
| | a) Notes payable



| |                                 
| | --------------------------------
| | The Floating Rate Notes (FRNs)

pari passu




| |                                                        
| | -------------------------------------------------------
| | The Fixed Rate Notes (High Yield Bonds or
    HYBs)



pari passu




| |                                        
| | ---------------------------------------
| | b) Defaults on long-term loan contracts









| |                      
| | ---------------------
| | c) Concurso mercantil

concurso mercantil concurso mercantil Ley de Concursos
Mercantiles


F-9



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)






| |                           
| | --------------------------
| | d) Status of restructuring



concurso mercantil




| |   |                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The holders of FRNs for $203.4 million, plus accrued
    interest, will obtain new first priority variable rate
    debentures as described below:



| |                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. Principal will be $234.4 million, assuming that the
    restructuring will take place on September 30, 2006. If the
    restructuring is carried out before or after such date,
    principal will be adjusted by applying monthly LIBOR plus 4.5%;
|
| | b. Principal will mature in five years from the
    restructuring date, bearing monthly or quarterly interest at
    LIBOR plus 8.75%;                                                                                                                
|
| | c. Optional cash prepayments of principal and accrued
    interest plus 3%, 2% and 1%, in the first, second and third
    year, respectively. As of the fourth year payments will be at
    par;                                                      
|
| | d. Principal and interest will be secured with the assets
    of Satmex and not with the shares of Servicios and/or Firmamento;                                                                                                                       
|
| | e. Holders may request prepayments of principal if there is
    cash available in excess of $5 million;                                                                                                                                               
|
| | f. In the event of any change in control of Satmex, holders
    may redeem all or part of the debentures plus 1% of the unpaid
    balance of principal and accrued interest, which may take place
    at the same time as the change of control;     
|
| | g. File periodic financial reports in accordance with
    accounting principles generally accepted in the United States of
    America (US GAAP), based on Securities and Exchange
    Commission rules (SEC).                                    



| |   |                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The holders of HYBs for $320 million, plus accrued
    interest, will obtain new second priority fixed rate debentures
    for $140 million and modified common stock shares of Satmex
    for $180 million, plus accrued interest, under the
    following terms:



| |                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. The maturity date of principal will be seven years from
    the restructuring date, accruing quarterly interest at the
    annual rate of 10.125%;                                                                                                                                                                                                                        
|
| | b. In the first year, interest at the annual 10.125% rate
    will be capitalized; from the second up to the fifth year, 2% of
    the 10.125% interest will be paid in cash, and the remaining
    8.125% will be capitalized into equity; and beginning in the
    sixth year, total interest will be paid in cash when the first
    priority FRNs have been paid in full;

F-10



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)




| |                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c. The interest will be secured by the assets of Satmex,
    after the interest on the first priority FRNs has been paid in
    full;                                                                                                                                                                                                                                                           
|
| | d. The holders may request prepayments of principal, once
    the first priority FRNs have been fully paid, and there is
    available cash in excess of US $5 million;                                                                                                                                                                                                                         
|
| | e. In the event of a change in the control of Satmex other
    than that of a buyer approved under the restructuring agreement,
    and unless approved by 66.66% of the second priority HYBs, the
    holders may redeem all or part of the debentures at 100% of the
    unpaid balance of principal and accrued interest, which may take
    place at the same time as the change of control;
|
| | f. File periodic financial reports in accordance with US
    GAAP, based on SEC rules.                                                                                                                                                                                                                                                                                                          



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The holders of the second priority HYBs will obtain, in exchange
    for the capitalization of $274 million of unpaid principal
    and accrued interest, 78% of the financial rights to the
    modified common stock of Satmex, which includes 43% of the
    voting stock.                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | The remaining common shares of Satmex will be held by the
    current shareholders, 2% of the voting stock and 2% of the
    financial rights will belong to Principia and Loral, and 45% and
    10% of the voting stock and 16% and 4% of the financial rights
    will belong to Servicios and the Mexican Government,
    respectively.                                                                                                                                                                                                                                                                                                         
|
| |  | Satmex must: a) obtain the approval of the shareholders of
    Firmamento to restructure the debt and initiate the
    Chapter 11 process under the U.S. Federal Commercial
    Bankruptcy Code; b) provide the debenture holders with the
    resolution containing the amendments to the corporate bylaws of
    Satmex; c) obtain from the National Foreign Investment
    Commission, the Department of Communications and Transportation,
    and the Federal Antitrust Board, approval to modify the current
    common stock structure.                                                                                                      
|
| |  | When the court protection has expired in accordance with
    Section 304, a pre-established restructuring plan will be
    filed under Chapter 11 of the U.S. Federal Commercial
    Bankruptcy Code.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Satmex will grant to certain Loral affiliates the use and
    enjoyment of the transponders of Satmex 6 and Satmex 5,
    which cannot be sold, transferred or pledged in accordance with
    the terms of the restructuring.                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | When the construction of a future satellite begins, Space
    Systems Loral (SSL) will be entitled to
    preferentially receive the technical requirements and technical
    specifications of the satellite. SSL will provide Satmex with a
    proposal for its evaluation, and if it is rejected, Satmex will
    request proposals from other constructors, under the same
    technical requirements and technical specifications, which may
    be accepted, provided that they include more favorable
    conditions and terms than those offered by SSL.                                                                                 
|
| |  | The loan receivable from Enlaces Integra, S.A. de C.V.
    (Enlaces) for $7.6 million as of
    December 31, 2005, will be capitalized into equity and
    Satmex will receive 75% of the shares of Enlaces.                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Satmex Corporativo, S. de R. L. de C. V., Satmex
    Administración, S. de R. L. de C. V., and Satmex Servicios
    Técnicos, S. de R. L. de C. V. (Service
    Companies), subsidiaries of Firmamento, and related
    parties of Satmex, or their survivors, have become subsidiaries
    of Satmex, under the names of SMVS Administración, S. de
    R.L. de C.V. and SMVS Servicios Técnicos, S. de R.L. de
    C.V., and their personnel will be transferred to these
    subsidiaries, while respecting their current compensation
    obligations and acquired rights and obligations as established
    in the Mexican Federal Labor Law.

F-11



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)




| |   |                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The corporate by-laws of Satmex will be amended to conform to
    the terms of the restructuring agreement and will include
    certain rights in benefit of the second priority HYBs, as common
    stock shareholders. Some of these changes are described below:



| |                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. The Satmex Board of Directors will consist of seven
    independent directors, appointed as follows: a) three by
    Servicios; b) one by the Mexican Government; c) one by
    Principia and Loral; and d) two by the second priority HYB
    holders;
|
| | b. The Secretary of the Board of Directors and the
    Companys statutory auditor-examiner will be appointed by
    Principia, Loral, and the second priority HYB holders;                                                                               
|
| | c. In event the conditions established in the restructuring
    agreement are not fulfilled, the first priority FRN holders will
    be entitled to appoint the members of the Board of Directors;                                                        
|
| | d. Series A shares must represent at least 51% of
    common stock and may be acquired only by Mexicans.                                                                                                                                                  



| |   |                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Satmexs Board of Directors and the compensation committee
    will implement a program of compensation and performance bonuses
    for certain key executives and technical engineers of the
    Service Companies who have made significant contributions to the
    restructuring process.                                                             
|
| |  | In the event of a change of control within two years following
    the restructuring date, Satmex will pay to certain technical
    engineers a previously agreed compensation, which amount cannot
    exceed six months wages and medical benefits, in addition
    to any benefits to which they are entitled under the Mexican
    Federal Labor Law.

concurso
mercantil




|   |                                                                         
|-- | ------------------------------------------------------------------------
|2. | Basis of Presentation and Summary of Significant Accounting
    Policies



| |                      
| | ---------------------
| | Basis of Presentation







| |                                                                          
| | -------------------------------------------------------------------------
| | Restatement of the Valuation Allowance for Deferred Income
    Tax Assets



F-12



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)






|               |                                                                                      |      |   |         |   |  |  |  | 
|-------------- | ------------------------------------------------------------------------------------ | ---- | - | ------- | - |  |  |  | 
|               |                                                                                      | 2004 |   |         |  
|               |                                                                                      |      |   |         |  
|Balance Sheet: |                                                                                      |      |   |         |   |  |  | 
|               | Long-term deferred income tax liability as previously reported
    as of December 31 |      | $ | 57,414  |   |  |  |  | 
|               | Adjustment as of December 31                                                         |      |   | (29,287 | ) |  |  |  | 
|               |                                                                                      |      |   |         |   | 
|               | Long-term deferred income tax liability as restated as of
    December 31            |      | $ | 28,127  |   |  |  |  | 
|               |                                                                                      |      |   |         |   | 

|                     |                                                              |      |   |         |      |  |   |         |  
|-------------------- | ------------------------------------------------------------ | ---- | - | ------- | ---- |  | - | ------- | -
|                     |                                                              | 2004 |   |         | 2003 | 
|                     |                                                              |      |   |         |      | 
|Accumulated Deficit: |                                                              |      |   |         |      |  |   |        
|                     | Accumulated deficit as previously reported as of December 31 |      | $ | 199,851 |      |  | $ | 128,964 |  
|                     | Adjustment as of December 31                                 |      |   | (29,287 | )    |  |   | (14,448 | )
|                     |                                                              |      |   |         |      | 
|                     | Accumulated deficit as restated as of December 31            |      | $ | 170,564 |      |  | $ | 114,516 |  
|                     |                                                              |      |   |         |      | 

|                          |                                                                                       |      |   |         |      |  |   |         |  
|------------------------- | ------------------------------------------------------------------------------------- | ---- | - | ------- | ---- |  | - | ------- | -
|                          |                                                                                       | 2004 |   |         | 2003 | 
|                          |                                                                                       |      |   |         |      | 
|Statements of Operations: |                                                                                       |      |   |         |      |  |   |        
|                          | Deferred income tax expense as previously reported for the year
    ended December 31 |      | $ | 10,461  |      |  | $ | 35,744  |  
|                          | Adjustment for the year ended December 31                                             |      |   | (14,839 | )    |  |   | (14,448 | )
|                          |                                                                                       |      |   |         |      | 

|                                                                                                     |  |      |         |   |      |   |         |  
|---------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                                                     |  | 2004 |         |   | 2003 |  
|                                                                                                     |  |      |         |   |      |  
|Deferred income tax expense (benefit) as restated for the year
    ended December 31                 |  | $    | (4,378  | ) |      | $ | 21,296  |  
|                                                                                                     |  |      |         |   |      |  
|Net loss applicable to common stockholders as previously
    reported for the year ended December 31 |  | $    | 70,887  |   |      | $ | 80,704  |  
|Adjustment for the year ended December 31                                                            |  |      | (14,839 | ) |      |   | (14,448 | )
|                                                                                                     |  |      |         |   |      |  
|Net loss applicable to common stockholders as restated for the
    year ended December 31            |  | $    | 56,048  |   |      | $ | 66,256  |  
|                                                                                                     |  |      |         |   |      |  





| |                  
| | -----------------
| | Reclassifications





| |                              
| | -----------------------------
| | Foreign Currency Transactions



F-13



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)






| |                 
| | ----------------
| | Use of Estimates





| |                          
| | -------------------------
| | Cash and Cash Equivalents





| |                
| | ---------------
| | Restricted Cash





| |                         
| | ------------------------
| | Satellites and Equipment





|                       |  |  |             | 
|---------------------- |  |  | ----------- | 
|Solidaridad 2          |  |  | 14.5  years | 
|Satmex 5               |  |  | 15 years    | 
|Equipment              |  |  | 10 years    | 
|Antennas               |  |  | 5 years     | 
|Furniture and fixtures |  |  | 10 years    | 
|Leasehold improvements |  |  | 11 years    | 





| |                         
| | ------------------------
| | Construction In-Progress



F-14



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)






| |            
| | -----------
| | Concessions

20-year






| |                         
| | ------------------------
| | Deferred Financing Costs





| |                               
| | ------------------------------
| | Valuation of Long-Lived Assets





| |                           
| | --------------------------
| | Notes Payable and Interest

concurso mercantil






| |                  
| | -----------------
| | Labor Obligations



F-15



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)




| |           
| | ----------
| | Provisions





| |                    
| | -------------------
| | Deferred Income Tax





| |                    
| | -------------------
| | Revenue Recognition



end-of


AlternaTV.




| |                                      
| | -------------------------------------
| | Deferred Revenue  Mexican Government





| |                         
| | ------------------------
| | Other Comprehensive Loss



F-16



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)




| |                                                         
| | --------------------------------------------------------
| | Concentration of Credit Risk and Principal
    Customers





|                        |  |      |    |  |      |  |    |      |  |  |    | 
|----------------------- |  | ---- | -- |  | ---- |  | -- | ---- |  |  | -- | 
|                        |  | 2005 |    |  | 2004 |  |    | 2003 | 
|                        |  | %    |    |  | %    |  |    | %    | 
|                        |  |      |    |  |      |  |    |      | 
|Customers in Mexico     |  |      | 42 |  |      |  | 46 |      |  |  | 42 | 
|Hughes Networks Systems |  |      | 28 |  |      |  | 28 |      |  |  | 23 | 
|Mexican Government      |  |      | 8  |  |      |  | 8  |      |  |  | 7  | 



| |                         
| | ------------------------
| | New Accounting Standards

Share-Based Payments. Accounting for Stock Issued to Employees,


Exchanges of Nonmonetary Assets  an amendment of
APB Opinion No. 29 Accounting for Nonmonetary Transactions,


Accounting Changes and Error Corrections  a
replacement of APB Opinion No. 20 and FASB Statement
No. 3.


The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments, 03-1, The
Meaning of


F-17



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)


Other-Than Temporary Impairment and Its Application to
Certain Investments Recognition of Other-Than-Temporary
Impairment Upon the Planned Sale of a Security whose Cost
Exceeds Fair Value.


04-10, Determining Whether to Aggregate Operating Segments That Do
Not Meet the Quantitative Thresholds 04-10). 04-10 Disclosures about Segments of an Enterprise and
Related Information 04-10


05-6, Determining the Amortization Period for Leasehold
Improvements Purchased after Lease Inception or Acquired in a
Business Combination, 05-6), 05-6


Accounting for
Conditional Asset Retirement Obligations Accounting for Asset
Retirement Obligations,


Investors Accounting for an
Investee When the Investor Has a Majority of the Voting Interest
but the Minority Shareholder or Shareholders Have Certain
Approval or Veto Rights, Determining Whether a
General Partner, or the General Partners, as a Group, Controls a
Limited Partnership or Similar Entity when the Limited Partners
Have Certain Rights.


F-18



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)




|   |                    
|-- | -------------------
|3. | Accounts Receivable

|                                             |  |              |       |   |      |   |       |  
|-------------------------------------------- |  | ------------ | ----- | - | ---- | - | ----- | -
|                                             |  | December 31, |      
|                                             |  |              |      
|                                             |  | 2005         |       |   | 2004 |  
|                                             |  |              |       |   |      |  
|Customers                                    |  | $            | 2,164 |   |      | $ | 1,441 |  
|Allowance for doubtful accounts              |  |              | (107  | ) |      |   | (563  | )
|Prepaid expenses                             |  |              | 890   |   |      |   | 978   |  
|Taxes recoverable, primarily value-added tax |  |              | 615   |   |      |   | 101   |  
|Other                                        |  |              | 26    |   |      |   | 405   |  
|                                             |  |              |       |   |      |  
|                                             |  | $            | 3,588 |   |      | $ | 2,362 |  
|                                             |  |              |       |   |      |  



|   |                         
|-- | ------------------------
|4. | Satellites and Equipment

|                                          |  |              |          |   |      |   |          |  
|----------------------------------------- |  | ------------ | -------- | - | ---- | - | -------- | -
|                                          |  | December 31, |         
|                                          |  |              |         
|                                          |  | 2005         |          |   | 2004 |  
|                                          |  |              |          |   |      |  
|Satellites                                |  | $            | 403,707  |   |      | $ | 403,707  |  
|Equipment                                 |  |              | 32,233   |   |      |   | 31,929   |  
|Furniture and fixtures                    |  |              | 8,416    |   |      |   | 7,623    |  
|Leasehold improvements                    |  |              | 5,868    |   |      |   | 4,498    |  
|Projects in-process                       |  |              | 476      |   |      |   | 730      |  
|                                          |  |              |          |   |      |  
|                                          |  |              | 450,700  |   |      |   | 448,487  |  
|Accumulated depreciation and amortization |  |              | (261,267 | ) |      |   | (226,468 | )
|                                          |  |              |          |   |      |  
|                                          |  | $            | 189,433  |   |      | $ | 222,019  |  
|                                          |  |              |          |   |      |  









|   |              
|-- | -------------
|5. | Notes Payable

|                                                                                                                     |  |              |         |  |      |   |         | 
|-------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- |  | ---- | - | ------- | 
|                                                                                                                     |  | December 31, |        
|                                                                                                                     |  |              |        
|                                                                                                                     |  | 2005         |         |  | 2004 |  
|                                                                                                                     |  |              |         |  |      |  
|FRNs                                                                                                                 |  | $            | 203,388 |  |      | $ | 203,388 | 
|HYBs at annual fixed rate of 10.125% converted to UDIs on
    September 7, 2005 (955,015,542 UDIs at $3.637532 each) |  |              | 324,333 |  |      |   | 320,000 | 
|                                                                                                                     |  |              |         |  |      |  
|                                                                                                                     |  | $            | 527,721 |  |      | $ | 523,388 | 
|                                                                                                                     |  |              |         |  |      |  

F-19



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)




|   |                                               
|-- | ----------------------------------------------
|6. | Balances and Transactions with Related Parties

|                                          |                                                |              |        |     |      |   |       |     | 
|----------------------------------------- | ---------------------------------------------- | ------------ | ------ | --- | ---- | - | ----- | --- | 
|                                          |                                                | December 31, |       
|                                          |                                                |              |       
|                                          |                                                | 2005         |        |     | 2004 |  
|                                          |                                                |              |        |     |      |  
|Amounts receivable, net:                  |                                                |              |        |     |      |   |       |    
|Loral Skynet                              |                                                | $            | 6,221  |     |      | $ | 3,884 |    
|Enlaces:                                  |                                                |              |        |     |      |   |       |    
|Administrative and logistical expenses(1) |                                                |              | 3,406  |     |      |   | 2,597 |    
|                                          | Current portion of long-term unpaid balance(2) |              |        | 690 |      |   |       | 345 | 
|                                          | Interest(1)(2)                                 |              |        | 735 |      |   |       | 7   | 
|                                          | Satellite service and teleport lease           |              |        | 120 |      |   |       | 495 | 
|Mexican Government agencies               |                                                |              | 676    |     |      |   | 499   |    
|Satmex Do Brazil                          |                                                |              |       |     |      |   | 19    |    
|Allowance for doubtful accounts           |                                                |              | (3,500 | )   |      |   | (922  | )  
|                                          |                                                |              |        |     |      |  
|                                          |                                                | $            | 8,348  |     |      | $ | 6,924 |    
|                                          |                                                |              |        |     |      |  
|Enlaces  long-term unpaid balance(2)     |                                                | $            | 2,645  |     |      | $ | 2,990 |    
|                                          |                                                |              |        |     |      |  
|Amounts payable:                          |                                                |              |        |     |      |   |       |    
|Loral SpaceCom Corporation                |                                                | $            | 630    |     |      | $ | 3,434 |    
|Service companies                         |                                                |              | 1,910  |     |      |   | 1,546 |    
|                                          |                                                |              |        |     |      |  
|                                          |                                                | $            | 2,540  |     |      | $ | 4,980 |    
|                                          |                                                |              |        |     |      |  
|Amounts payable long-term:                |                                                |              |        |     |      |   |       |    
|Loral SpaceCom Corporation                |                                                | $            |       |     |      | $ | 1,674 |    
|                                          |                                                |              |        |     |      |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On December 2004, Satmex and Enlaces executed an agreement,
    without guarantee, for the payments made by Satmex on behalf of
    Enlaces, corresponding to administrative and logistical
    expenses. The unpaid balance bears interest at weighted average
    financing cost incurred by Satmex plus 1% (11.72% and 11.21% as
    of December 31, 2005 and 2004, respectively).                                                       
|   
|(2) | On December 2004, Satmex and Enlaces executed an agreement for
    an unpaid balance of $3.3 million, without guarantee,
    bearing interest at a weighted average financing cost incurred
    by Satmex plus 1% (11.72% and 11.21% as of December 31,
    2005 and 2004, respectively). The unpaid balance matures on
    December 2009, and establishes annual payments of $345 and a
    final payment of $1.6 million in December 2009.

F-20



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)




|                         |                                           |              |                                          |        |      |       |  |        |   |       |  |        |   |       | 
|------------------------ | ----------------------------------------- | ------------ | ---------------------------------------- | ------ | ---- | ----- |  | ------ | - | ----- |  | ------ | - | ----- | 
|                         |                                           | December 31, |                                         
|                         |                                           |              |                                         
|                         |                                           | 2005         |                                          |        | 2004 |       |  | 2003   |  
|                         |                                           |              |                                          |        |      |       |  |        |  
|Revenues from:           |                                           |              |                                          |        |      |       |  |        |   |       |  |       
|                         | Satellite Service                         |              |                                          |        |      |       |  |        |   |       |  |        |  
|                         |                                           |              | Mexican government agencies services     |        | $    | 3,036 |  |        | $ | 2,454 |  |        | $ | 3,448 | 
|                         |                                           |              | Satellite capacity to Mexican government |        |      | 2,200 |  |        |   | 2,200 |  |        |   | 2,200 | 
|                         |                                           |              | Loral                                    |        |      | 1,253 |  |        |   | 1,542 |  |        |   | 2,737 | 
|                         |                                           |              | Enlaces                                  |        |      | 950   |  |        |   | 659   |  |        |   | 223   | 
|                         |                                           | Enlaces      |                                          |        |      |       |  |        |   |       |  |        |   |      
|                         |                                           |              | Lease of equipment                       |        |      |      |  |        |   | 500   |  |        |   | 995   | 
|                         |                                           |              | Interest income                          |        |      | 632   |  |        |   | 7     |  |        |   |      | 
|                         |                                           |              | Recovery of expenses                     |        |      | 287   |  |        |   | 2,597 |  |        |   |      | 
|Expenses from:           |                                           |              |                                          |        |      |       |  |        |   |       |  |       
|                         | Administrative labor  Service Companies  |              |                                          | 10,622 |      |       |  | 14,773 |   |       |  | 15,464 |  
|                         | Storage  SSL                             |              |                                          | 1,760  |      |       |  | 1,753  |   |       |  |        |  
|                         | Purchase equipment  Enlaces              |              |                                          |       |      |       |  | 107    |   |       |  |        |  
|                         | Commissions  Loral Skynet                |              |                                          | 1,540  |      |       |  |        |   |       |  | 395    |  
|                         | Intellectual fee  Loral Skynet           |              |                                          | 164    |      |       |  | 533    |   |       |  | 1,141  |  
|                         | Rent control center  Mexican Government  |              |                                          | 411    |      |       |  | 382    |   |       |  | 407    |  
|                         | Guarantee fees  Servicios and Firmamento |              |                                          | 55     |      |       |  | 53     |   |       |  | 63     |  
|                         | Replacement capacity  Loral              |              |                                          | 7      |      |       |  | 7      |   |       |  | 989    |  
|Construction in-progress |                                           |              |                                          |        |      |       |  |        |   |       |  |       
|                         | Construction Satmex 6  Loral             |              |                                          | 1,651  |      |       |  |       |   |       |  | 12,170 |  





|   |                     
|-- | --------------------
|7. | Stockholders Equity





F-21



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)




|                  |  |              |            |  |      |  |            | 
|----------------- |  | ------------ | ---------- |  | ---- |  | ---------- | 
|                  |  | December 31, |           
|                  |  |              |           
|Series            |  | 2005         |            |  | 2004 | 
|                  |  |              |            |  |      | 
|A Common stock    |  |              | 2,601,000  |  |      |  | 2,601,000  | 
|B Common stock    |  |              | 2,499,000  |  |      |  | 2,499,000  | 
|N Common stock    |  |              | 4,900,000  |  |      |  | 4,900,000  | 
|C Preferred stock |  |              | 606,730    |  |      |  | 606,730    | 
|                  |  |              |            |  |      | 
|                  |  |              | 10,606,730 |  |      |  | 10,606,730 | 
|                  |  |              |            |  |      | 



|                 |                  |        |            |           |        |   |         |         |  |  |            |           |  |   |         |         | 
|---------------- | ---------------- | ------ | ---------- | --------- | ------ | - | ------- | ------- |  |  | ---------- | --------- |  | - | ------- | ------- | 
|                 |                  | 2005   |            |           | 2004   |  
|                 |                  |        |            |           |        |  
|                 |                  | Shares |            |           | Amount |   |         | Shares  |  |  | Amount     |          
|                 |                  |        |            |           |        |   |         |         |  |  |            |          
|Common stock:    |                  |        |            |           |        |   |         |         |  |  |            |           |  |   |         |        
|                 | Fixed portion    |        |            | 5,000     |        |   | $       | 6       |  |  |            | 5,000     |  |   | $       | 6       | 
|                 | Variable portion |        |            | 9,995,000 |        |   |         | 389,569 |  |  |            | 9,995,000 |  |   |         | 388,062 | 
|                 |                  |        |            |           |        |   |         |         |  |  |            |          
|                 |                  |        | 10,000,000 |           |        | $ | 389,575 |         |  |  | 10,000,000 |           |  | $ | 388,068 |        
|                 |                  |        |            |           |        |   |         |         |  |  |            |          
|Preferred stock: |                  |        |            |           |        |   |         |         |  |  |            |           |  |   |         |        
|                 |                  |        |            |           |        |   |         |         |  |  |            |          
|                 | Fixed portion    |        |            | 606,730   |        |   | $       | 31,886  |  |  |            | 606,730   |  |   | $       | 31,886  | 
|                 |                  |        |            |           |        |   |         |         |  |  |            |          

Dividend tax






|   |                       
|-- | ----------------------
|8. | Income and Asset Taxes



|                                          |  |      |     |               |             |   |               |             |  |   |        | 
|----------------------------------------- |  | ---- | --- | ------------- | ----------- | - | ------------- | ----------- |  | - | ------ | 
|                                          |  |      |     | 2004          |             |   | 2003          |            
|                                          |  |      |     | (As Restated, |             |   | (As Restated, |            
|                                          |  | 2005 |     |               | see Note 2) |   |               | see Note 2) | 
|                                          |  |      |     |               |             |   |               |             | 
|Net deferred income tax expense (benefit) |  | $    | 238 |               |             | $ | (4,378        | )           |  | $ | 21,296 | 
|                                          |  |      |     |               |             |   |               |             | 

F-22



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)




|                        |                          |                                      |         |               |             |   |         |         |         |  
|----------------------- | ------------------------ | ------------------------------------ | ------- | ------------- | ----------- | - | ------- | ------- | ------- | -
|                        |                          | December 31,                         |        
|                        |                          |                                      |        
|                        |                          |                                      |         | 2004          |            
|                        |                          |                                      |         | (As Restated, |            
|                        |                          | 2005                                 |         |               | see Note 2) |  
|                        |                          |                                      |         |               |             |  
|Current assets:         |                          |                                      |         |               |             |   |         |        
|                        | Deferred revenue         |                                      | $       | 1,024         |             |   | $       | 1,006   |        
|                        | Other, net               |                                      |         | 4,107         |             |   |         | 2,302   |        
|                        |                          |                                      |         |               |             |  
|                        |                          | Total current assets                 |         |               | 5,131       |   |         |         | 3,308   |  
|Current liabilities:    |                          |                                      |         |               |             |   |         |        
|                        | Prepaid insurance        |                                      |         | (821          | )           |   |         | (908    | )      
|                        |                          |                                      |         |               |             |  
|                        |                          | Net current deferred tax asset       |         | $             | 4,310       |   |         | $       | 2,400   |  
|                        |                          |                                      |         |               |             |  
|Noncurrent assets:      |                          |                                      |         |               |             |   |         |        
|                        | Tax loss carryforwards   |                                      | $       | 111,298       |             |   | $       | 104,806 |        
|                        | Deferred revenue         |                                      |         | 13,745        |             |   |         | 13,508  |        
|                        | Other, net               |                                      |         | 954           |             |   |         |        |        
|                        |                          |                                      |         |               |             |  
|                        |                          | Total noncurrent assets              |         |               | 125,997     |   |         |         | 118,314 |  
|Noncurrent liabilities: |                          |                                      |         |               |             |   |         |        
|                        | Satellites and equipment |                                      |         | (34,013       | )           |   |         | (39,057 | )      
|                        | Concessions              |                                      |         | (33,497       | )           |   |         | (31,865 | )      
|                        |                          |                                      |         |               |             |  
|                        |                          | Total noncurrent liabilities         |         |               | (67,510     | ) |         |         | (70,922 | )
|Valuation allowance     |                          |                                      | (88,762 | )             |             |   | (75,519 | )      
|                        |                          |                                      |         |               |             |  
|                        |                          | Net long-term deferred tax liability |         | $             | (30,275     | ) |         | $       | (28,127 | )
|                        |                          |                                      |         |               |             |  

Carryforwards


|                |  |   |         | 
|--------------- |  | - | ------- | 
|Expiration Date |  |  
|                |  |  
|2008            |  | $ | 90,850  | 
|2010            |  |   | 139,523 | 
|2012            |  |   | 64,125  | 
|2013            |  |   | 75,265  | 
|2014            |  |   | 27,731  | 
|                |  |   |        
|                |  | $ | 397,494 | 
|                |  |   |        



F-23



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)




|                                                |  |      |     |               |             |  |               |             |  |  |      |   
|----------------------------------------------- |  | ---- | --- | ------------- | ----------- |  | ------------- | ----------- |  |  | ---- | --
|                                                |  |      |     | 2004          |             |  | 2003          |            
|                                                |  |      |     | (As Restated, |             |  | (As Restated, |            
|                                                |  | 2005 |     |               | see Note 2) |  |               | see Note 2) | 
|                                                |  |      |     |               |             |  |               |             | 
|Statutory income tax rate                       |  |      | 30  | %             |             |  | 33            | %           |  |  | 34   | % 
|Inflation component and effect of remeasurement |  |      | (19 | )%            |             |  | (2            | )%          |  |  | 21   | % 
|Non-deductible expenses                         |  |      |    |               |             |  |              |             |  |  | 1    | % 
|Change in valuation allowance                   |  |      | (11 | )%            |             |  | (37           | )%          |  |  | (105 | )%
|Effect of change in statutory tax rate          |  |      |    |               |             |  | 13            | %           |  |  |     |   
|                                                |  |      |     |               |             |  |               |             | 
|Effective tax rate                              |  |      | 0   | %             |             |  | 7             | %           |  |  | (49  | )%
|                                                |  |      |     |               |             |  |               |             | 

Statutory income tax rate




Asset tax




|   |                              
|-- | -----------------------------
|9. | Contingencies and Commitments



| |           
| | ----------
| | Satellites

BS-601.




F-24



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)




on-board back-up






| |                     
| | --------------------
| | Capital expenditures







| |                 
| | ----------------
| | Transfer pricing





| |       
| | ------
| | Leases



F-25



---



##### 



SATÉLITES MEXICANOS, S. A. DE C.
V.  (Continued)






|           |  |      |        | 
|---------- |  | ---- | ------ | 
|           |  | 2005 |       
|           |  |      |       
|2006       |  | $    | 33,123 | 
|2007       |  |      | 19,791 | 
|2008       |  |      | 13,014 | 
|2009       |  |      | 7,782  | 
|2010       |  |      | 6,009  | 
|Thereafter |  |      | 15,729 | 
|           |  |      |       
|           |  | $    | 95,448 | 
|           |  |      |       



| |                 
| | ----------------
| | Other litigation





|    |                             
|--- | ----------------------------
|10. | Revenue by Customer Location



|              |       |      |        |        |      |   |        |        |  |   |        |        | 
|------------- | ----- | ---- | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|              |       | 2005 |        |        | 2004 |   |        | 2003   | 
|              |       |      |        |        |      |   |        |        | 
|Mexico        |       | $    | 29,315 |        |      | $ | 32,712 |        |  | $ | 33,449 |       
|United States |       |      | 34,692 |        |      |   | 33,569 |        |  |   | 40,740 |       
|Other         |       |      | 5,865  |        |      |   | 5,424  |        |  |   | 4,634  |       
|              |       |      |        |        |      |   |        |        | 
|              | Total |      | $      | 69,872 |      |   | $      | 71,705 |  |   | $      | 78,823 | 
|              |       |      |        |        |      |   |        |        | 





|    |                  
|--- | -----------------
|11. | Subsequent Events



| |    |                                                                                                                                                                                                                                                                                                                                                  
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. | Satmex recently requested the SCTs confirmation of an
    extension of the Orbital Concessions for an additional
    twenty-year term, without the payment of any additional
    consideration to the Mexican government. Once this extension has
    been granted, the Orbital Concessions will be scheduled to
    expire on October 22, 2037.



| |    |                                                   
| | -- | --------------------------------------------------
| | b. | On July 1, 2006, Satmex 6 was placed in operation.



| |    |                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c. | As discussed in Note 1(c), Satmex was granted protection in
    the U.S. under Section 304 of the U.S. Bankruptcy Code
    with respect to any sanctions against its assets. The order
    granting such protection is scheduled to expire on
    August 14, 2006.

F-26



---



##### 



SATÉLITES MEXICANOS, S. A. DE C. V.


VALUATION AND QUALIFYING ACCOUNTS


Years Ended December 31, 2005, 2004 and 2003


|                                                |                                         |            |   |            |             |  |   |            |   |            |             |       |     |  |   |        | 
|----------------------------------------------- | --------------------------------------- | ---------- | - | ---------- | ----------- |  | - | ---------- | - | ---------- | ----------- | ----- | --- |  | - | ------ | 
|                                                |                                         |            |   | Additional |             |  |   |            |  
|                                                |                                         | Balance at |   |            | Charged     |  |   |            |   |           
|                                                |                                         | Beginning  |   |            | (Credited)  |  |   |            |   | Balance at |            
|                                                |                                         | of Year    |   |            | to Expenses |  |   | Deductions |   |            | End of Year |      
|                                                |                                         |            |   |            |             |  |   |            |   |            |             |      
|Allowance for doubtful accounts                 |                                         |            |   |            |             |  |   |            |   |            |             |       |     |  |   |       
|                                                | Year ended December 31, 2005            |            | $ | 563        |             |  | $ | 104        |   |            | $           | 560   | (1) |  | $ | 107    | 
|                                                | Year ended December 31, 2004            |            | $ | 1,859      |             |  | $ | 12         |   |            | $           | 1,308 | (1) |  | $ | 563    | 
|                                                | Year ended December 31, 2003            |            | $ | 1,739      |             |  | $ | 300        |   |            | $           | 180   | (1) |  | $ | 1,859  | 
|Allowance for due from related parties accounts |                                         |            |   |            |             |  |   |            |   |            |             |       |     |  |   |       
|                                                | Year ended December 31, 2005            |            | $ | 922        |             |  | $ | 2,578      |   |            | $           |       |     |  | $ | 3,500  | 
|                                                | Year ended December 31, 2004            |            | $ | 1,934      |             |  | $ | (1,012     | ) |            | $           |       |     |  | $ | 922    | 
|                                                | Year ended December 31, 2003            |            | $ | 430        |             |  | $ | 1,504      |   |            | $           |       |     |  | $ | 1,934  | 
|Valuation allowance on deferred income taxes    |                                         |            |   |            |             |  |   |            |   |            |             |       |     |  |   |       
|                                                | Year ended December 31, 2005            |            | $ | 75,519     |             |  | $ | 13,243     |   |            | $           |       |     |  | $ | 88,762 | 
|                                                | Year ended December 31, 2004 (Restated) |            | $ | 70,130     |             |  | $ | 5,389      |   |            | $           |       |     |  | $ | 75,519 | 
|                                                | Year ended December 31, 2003 (Restated) |            | $ | 25,608     |             |  | $ | 44,522     |   |            | $           |       |     |  | $ | 70,130 | 






|    |                                      
|--- | -------------------------------------
|(1) | Write-offs of uncollectible accounts.

F-27