PANAMSAT CORP, 10-K/A, 1996-12-23

PANAMSAT CORP
10-K/A, 1996-12-23
COMMUNICATIONS SERVICES, NEC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------------
FORM 10-K/A

|X| ANNUAL REPORT ON FORM 10-K PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES ACT OF 1934 For the fiscal year ended December
31, 1995

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission File No. 0-26712
PanAmSat Corporation
PanAmSat Capital Corporation
(Exact name of registrant as specified in its charter)

DELAWARE 06-1407851
DELAWARE 06-1371155
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

ONE PICKWICK PLAZA
GREENWICH, CONNECTICUT 06830
(Address of principal executive offices) (Zip Code)

(203) 622-6664
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the
Act: None Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.01 per share

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

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.

As of March 29, 1996, the registrant had outstanding 19,081,137 shares
of Common Stock, 40,459,432 shares of Class A Common Stock and 40,459,431 shares
of Class B Common Stock. As of such date, the aggregate market value of voting
stock held by non-affiliates of the registrant was $572,134,110.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 1996 Annual Meeting of
Stockholders (to be filed within 120 days of the Registrant's last fiscal year
end) are incorporated by reference into Part III of this report.
<PAGE>
PART I

ITEM 1. BUSINESS

Overview

PanAmSat Corporation ("PanAmSat" or the "Company") operates the world's
first privately-owned international satellite communications system. The Company
currently provides satellite services primarily to the broadcasting and business
communications markets and also provides services to the long-distance telephony
market. In addition to its current services, the Company is pursuing
international opportunities in the satellite direct-to-home ("DTH") television
market.

The Company's first satellite, PAS-1, was launched in 1988 for service
over the Atlantic Ocean Region and is the leading satellite for television and
cable programming distribution in Latin America. The Company's second satellite,
PAS-2, was launched in July 1994 for service over the Pacific Ocean Region and
is a leading satellite for programming distribution in the Asia-Pacific region.
The Company's PAS-4 satellite was launched in August 1995 for service over the
Indian Ocean Region and commenced service on September 5, 1995. PAS-4 is a
leading satellite for programming distribution in south Asia and Africa. The
Company's PAS-3 Satellite was launched on January 12, 1996 and commenced service
on February 19, 1996 over the Atlantic Ocean Region. PAS-3 is now also a leading
satellite for programming distribution services in Latin America. The Company
expects to launch two additional satellites to serve the Atlantic Ocean Region:
PAS-6 in late 1996; and PAS-5 in the spring of 1997. The Company intends to
launch PAS-7 in late 1997 and PAS-8 in early 1998, which are expected to serve
the Indian Ocean Region and the Pacific Ocean Region, respectively. The Company
expects that in the future it will launch additional satellites to meet
then-anticipated customer demand. There can be no assurance, however, that the
schedule for the Company's future satellite launches will be met.

Customers and Markets

PanAmSat is the first private company to provide global satellite
services. The Company has over 300 customers and, at December 31, 1995, had
signed long-term contracts to provide satellite capacity on PAS-1, PAS-2, PAS-3
and PAS-4 aggregating approximately $1.9 billion. The Company's customers for
television programming distribution and other broadcasting services include
ABS-CBN Broadcasting Co.(R), the BBC(R), Bloomberg Information Television,
CBS(R), China Central Television(TM), Chinese Television Network(TM), Country
Music Television(TM), Discovery(TM), Disney(R), ESPN(R), 20th Century Fox(R),
Fuji TV(R), HBO(R), Liberty Sports(TM), M-Net/MultiChoice(R), NBC(R), NHK(TM),
SABC/ Sentech(R), Sony(R), Taiwan Asia Space Cable, Televisa(R), Television
Broadcasts International(TM), Television Corporation of Singapore(TM), Turner
Broadcasting Systems(TM) (CNN(R), Cartoon Network(R), TNT(R)) and Viacom(R)
(MTV(R), Nickelodeon(R)). The Company's customers for business communications
services include the Associated Press(R), Citicorp(R), Credit Suisse(R), Dow
Jones(R)/Telerate, El Tiempo(R), Ji Tong, Impsat(TM), MCI(R), Procedatos(TM),
Reuters(R), Sara Lee(R), Sprint(R), Transtel(R) and the U.S. government. The
Company's customers for DTH Services include Sky Entertainment Services Latin
America, one of the Latin American JVs (as hereinafter defined), Showtime(R)
(also known as Gulf DTH) and Firstnet(R) which operate in the Middle East,
M-Net/MultiChoice(R), SABC/ Sentech(R) which operate in South Africa and TVBI(R)
and Taiwan Asia Satellite Cable Inc. which operate in Taiwan.

The Company's broadcasting services, which generated approximately 72%
of the Company's total revenues in 1995, include the provision of satellite
capacity and services for (i) television programming distribution, (ii)
"backhaul" operations (i.e., the transmission of video feeds from one location
to another) and (iii) ad hoc services, such as the transmission of special
events and live news reports. The Company's business communications services,
which generated approximately 26% of the Company's total revenues in 1995,
include (a) the provision of satellite capacity to communications carriers that
provide private business networks for data, voice and corporate video
communications and (b) the provision of such networks and related services by
the Company directly to end-users. The Company's long-distance telephony
services provide satellite capacity for use in domestic (non-U.S.) and
international public telephone networks.

PanAmSat plans to provide DTH satellite services to specific television
markets around the world. In November 1995, the Company announced that it would
serve as a satellite service provider for the Latin America DTH service to be
offered by the Globo Organization ("Globo"), Grupo Televisa, S.A. ("Televisa"),
The News Corporation Limited ("News Corp.") and Tele-Communications
International, Inc. ("TCI3"). On February 29, 1996, the Company signed a binding
letter agreement with Globo, Televisa and News Corp. (the "1996 Letter
Agreement") to provide service to a series of joint ventures (the "Latin America
JVs") to be formed by them and TCI3 on 48 transponders ultimately on PAS-5 and
PAS-6, with temporary service on PAS-3 pending the commencement of service on
PAS-6. This capacity would enable the Latin America JVs to broadcast to Latin
America, the Caribbean and certain areas of the southern United States
approximately 500 digital channels to subscribers using small 24-36 inch (60-90
cm) antennas and to permit distribution of program packages of approximately 120
digital channels to specific market areas. See "--DTH Strategy" below.

In November 1995, the Company and Televisa announced their intention to
provide DTH services through a joint venture (the "Spain Joint Venture") with
the capacity to broadcast approximately 24 to 80 digital channels to subscribers
in Spain using small 24-36 inch (60-90 cm) antennas. See "--DTH Strategy" below.

The 1996 Letter Agreement has a minimum value of $1.3 billion, which
represents the minimum total backlog of payments expected to be made over the
life of the contracts entered into in connection with the 1996 Letter Agreement.
For most of the transponders, the amounts to be paid reflect service fees that
are equal to the Company's best estimate of the cost to design, construct,
launch, insure and operate the satellites and for the balance of the
transponders, the amounts to be paid reflect service fees that are based on a
fixed price. On the cost-based transponders, the Company also could receive
revenue sharing from the Latin America JVs and the Spain Joint Venture.

The Company has also designed PAS-2 and PAS-4, and intends to design
PAS-7 and PAS-8 with the capability of providing high-powered digital DTH
service in their respective coverage areas. The Company's satellites are
platforms for operational DTH services in the Middle East, South Africa and
Taiwan and planned DTH services for India, Latin America and Spain. Digital DTH
channels on the Company's satellites are capable of providing image and sound
quality superior to current cable or microwave television services.

The Company believes that the demand for international satellite
services in the broadcasting and business communications markets will grow
substantially in the foreseeable future. This growth is expected to result from
(i) increased distribution of television programming to national, regional and
international audiences, (ii) continuing worldwide deregulation of
telecommunications markets, (iii) continuing technological advancements and (iv)
economic development worldwide and the increasing globalization of business.

Conversion and Initial Public Offering

Between 1992 and March 2, 1995, the Company operated as a Delaware
limited partnership and prior to 1992 as a sole proprietorship and through other
forms of organization. On March 2, 1995, pursuant to an amended Exchange and
Subscription Agreement and Plan of Reorganization, the Company, PanAmSat L.P.
(the "Partnership") and its partners consummated various transactions whereby
the Company acquired the Partnership and converted it to corporate form (the
"Conversion"). In connection therewith, (i) Rene Anselmo, the Company's late
Chairman of the Board and Chief Executive Officer, members of the family of the
late Mr. Anselmo, trusts for the benefit of certain Anselmo family members,
Frederick A. Landman, the Company's current President and Chief Executive
Officer, and Lourdes Saralegui, Executive Vice President of the Company
(collectively, the "Anselmo Group") exchanged their interests in the Partnership
for shares of the Company's Class A Common Stock, par value $.01 per share (the
"Class A Common Stock"), representing approximately 49.66% of the outstanding
common stock of the Company, (ii) Univisa Satellite Holdings, Inc. ("USHI"), a
wholly-owned subsidiary of Televisa, exchanged its interest in the Partnership
for shares of the Company's Class B Common Stock, par value $.01 per share (the
"Class B Common Stock"), representing approximately 50.15% of the outstanding
common stock of the Company and (iii) a partner of the Partnership exchanged his
interest in the Partnership for shares of the Company's Common Stock, par value
$.01 per share (the "Common Stock"), representing approximately 0.19% of the
outstanding capital stock of the Company. On September 27, 1995, the Company
completed an initial public offering of 18,920,000 shares of Common Stock,
including 4,595,676 shares held by members of the Anselmo Group and Televisa,
and the Company received net proceeds of approximately $229 million.

Business Strategy

The Company's strategy has evolved from its experience with the
development and marketing of PAS-1, PAS-2, PAS-3 and PAS-4 and its analysis of
the current and anticipated worldwide market for satellite communications
services. The Company believes that implementation of its strategy has
established PanAmSat as an international leader for broadcasting and business
communication services. The Company's strategy is to continue to focus on six
key elements:

o Customer-driven service offerings

o Superior satellite system technical characteristics

o Emphasis on broadcasting services

o Concentration on other high-growth communications services

o Early market entry

o Global coverage

Customer-Driven Service Offerings

The Company believes that the most important aspect of its business
strategy is that the Company is market driven and responsive to its customers'
needs. The Company offers customers ease-of-access with respect to the use of
satellite capacity. The Company also offers customers a complete end-to-end
package of satellite communications services on a one-stop shopping basis. The
end-to-end services provided by the Company include satellite capacity, teleport
services, network services, including the design, integration, management and
maintenance of networks, and the procurement of ground equipment. The Company
furnishes substantially all of its terrestrial services outside of the United
States through independent contractors.

The Company developed its service strategy when it first commenced
operations, at which time Intelsat (an international consortium of 138
government-authorized telecommunications monopolies or former monopolies,
referred to as signatories) was the Company's only significant competitor.
Intelsat generally provides services only through its signatories and not
directly to end-users. Intelsat's rates are often inflexible, fixed by tariff
and customarily include a mark-up by each signatory. In addition, Intelsat and
its signatories have historically focused on international telephony services,
rather than the requirements of other users, such as television broadcasters and
business communications network users. Intelsat satellites have also generally
been suitable primarily for transmission to the large, expensive "gateway" earth
stations of national telephone companies.

Superior Satellite System Technical Characteristics

The satellites in the Company's global satellite system (the "PAS
Global System") are designed to provide high-transmission power, a key technical
characteristic sought by broadcasting and business communications customers. The
satellites' high power and other technical characteristics permit high-quality
transmissions for the distribution of television programming and enable
broadcasting and business communications customers to utilize cost-effective
networks using small, low-cost antennas on the ground.

The orbital slots for the Company's satellites were selected to
optimize the satellites' coverage and the global connectivity of the PAS Global
System. Since orbital slots are limited in number and each slot provides a
different range of coverage areas, the Company believes that its early selection
of orbital slots enhanced its technological capabilities and scope of coverage.
The geographic coverage patterns of the satellites in the PAS Global System are
custom-designed to focus signal power over centers of population and economic
activity.

Emphasis on Broadcasting Services

The Company expects the international broadcasting market to experience
significant growth as broadcasters and cable television programmers seek to
expand the distribution of their programming to national, regional and
international audiences worldwide. Future demand is expected to include
international television programming distribution, backhaul operations and ad
hoc services. The Company has designed its satellite services to meet the
program distribution requirements of broadcasters and programmers. The technical
characteristics and coverage areas of each of PAS-2, PAS-3 and PAS-4 were
specified after extensive discussions with the Company's major customers and
potential customers regarding their service needs. PAS-5 and PAS-6 are under
construction. The design of PAS-6 is complete and the design of PAS-5 is near
completion. The technical specifications of PAS-7 and PAS-8 are in the design
stages and are subject to change. The Company facilitates television programming
distribution by offering satellite capacity, teleport services and technical
services.

In addition, the Company provides satellite capacity on PAS-3, and
plans to provide satellite capacity on PAS-5 and PAS-6, for digital DTH services
in response to the desire of broadcasters and programmers to increase their
viewing audiences in Latin America. The Company expects there to be significant
demand for digital DTH services in Latin America because of the large number of
television households without cable services or access to extensive programming
in the region. See "--DTH Strategy" below.

Concentration on Other High-Growth Communications Services

The Company targets other high-growth markets where its satellites
provide advantages to users of private business networks and long-distance
telephony services in rural and underdeveloped areas. Business and other
organizations, particularly those with sites in remote locations or inadequate
terrestrial-based services available to them, have become increasingly dependent
upon satellites to serve their communications requirements. These communications
needs are based on requirements to collect, process, respond to and disseminate
information such as ATM and credit card verification and inventory control.
Organizations such as banks and retail chains are, in increasing numbers,
installing very small on-site antennas to set up satellite-based communications
networks instead of using higher cost and/or unreliable terrestrial telephone
lines. In addition, a growing number of domestic and regional telephone
companies, especially in developing countries, are using satellite capacity of
the Company and others to offer long-distance telephony services in rural areas.
Internet service providers in many countries also use satellites for
international access to Internet.

Early Market Entry

The Company's strategy is to launch high-powered satellites early in
their respective markets that are capable of delivering broadcast and business
communications services via signals that can be received by users of small
antennas. Partly as a result of its early market entry, the Company believes it
has established PAS-1, PAS-2, PAS-3 and PAS-4 as leading satellites for
television programming distribution in their respective coverage areas and as
important satellites for private business networks.

Global Coverage

PanAmSat is the first private company to provide global satellite
services. Accordingly, customers are able to contract solely with the Company
for all of their global satellite communications requirements. Previously, users
of satellites who wanted to communicate or transmit over broad areas were
required to enter into contracts with a number of different Intelsat signatories
and/or regional and domestic operators which often provided overlapping coverage
or have substantial gaps in their coverage. Customers with global communications
requirements include video programmers, broadcasters, news and sports
organizations and operators of public and/or private communications networks.

The Company believes that its orbital slots provide a competitive
advantage for the Company's global satellite services due to the limited number
of available slots that provide commercially desirable transoceanic coverage.
Applications for orbital slots for C-band and Ku-band geostationary satellites
have been filed by the U.S. government with the ITU on behalf of the Company at
45(Degree) West Longitude (Atlantic Ocean Region), 43(Degree) West Longitude
(Atlantic Ocean Region), 68.5(Degree) East Longitude (Indian Ocean Region),
72(Degree) East Longitude (Indian Ocean Region), 191(Degree) West Longitude
(Pacific Ocean Region), and 194(Degree) West Longitude (Pacific Ocean Region).
The Company has requested registration of a second satellite at 43(Degree) West
Longitude (Atlantic Ocean Region) and a satellite at 58(Degree) West Longitude
(Atlantic Ocean Region). See "--Government Regulation--International
Telecommunications Union" below. In addition, the Company has applied for U.S.
government authorization to use 79(Degree) West Longitude and 93(Degree) West
Longitude for C-band and Ku-band geostationary satellites and nine orbital slots
for Ka-band geostationary satellites. The U.S. government has filed with the ITU
for these additional slots, substantially all of which are sought by other U.S.
applicants as well. See "--Government Regulation--United States Regulation"
below.

Services

In the year ended December 31, 1995, the Company's revenues were
derived from the following markets:

Broadcasting 72%
Business communications 26
Long-distance telephony 2
----

Total 100%
====

Broadcasting

Local, domestic and international broadcasters use satellite capacity
and services for (i) television programming distribution, (ii) "backhaul"
operations (i.e., the transmission of video feeds from one location to another)
and (iii) ad hoc services such as the transmission of special events and live
news reports from the scene of the event. Currently, the largest market for
broadcasting services is the full-time leasing of satellite capacity by
programmers for distributing programming to television stations, local cable
operators, master antenna systems and, on a limited basis, directly to homes.

Television Programming Distribution. The Company's program distribution
strategy is to establish each of its satellites as a leading satellite for the
distribution of television programming to cable and other redistribution systems
in its service region and to position the PAS Global System as a single source
for the global distribution of television programming.

In January 1989, CNN(R) became the first international programmer to
use PAS-1 to distribute television programming in Latin America. Over the next
twenty-four months, the Company entered into agreements with other full-time
programmers, such as ESPN(R), HBO(R), Televisa(R) and TNTSM. Local cable
television operators and over-the-air broadcasters installed antennas to receive
programming from this core group of international programmers, thus creating an
infrastructure in Latin America to receive PAS-1 signals. As a result of the
installed base of antennas pointed at PAS-1, programmers desiring regional
distribution now seek to use PAS-1 to reach that audience and compete
effectively with the major full-time video programmers in Latin America.

For domestic Latin America broadcasters, PAS-1 offers the ability to
create national networks where, due to local geography and high costs, none was
possible before. For example, Telefe, the leading television network in
Argentina, was created when a group of independent local Argentine television
stations began using PAS-1 in December 1990 for national programming
distribution. Domestic broadcasters in Peru and Chile also used PAS-1 to create
national networks.

The Company offers broadcasters direct access to PAS-1 from their own
facilities. This direct access leads to both economic and operational
efficiencies for the broadcasters. PAS-1 also offers a number of other
advantages for domestic broadcasters. Domestic broadcasters may, for example,
purchase certain segments of an international programmer's feed (e.g., a sports
event from ESPN(R) or a news show from CNN(R)) for broadcast as part of their
own programming, without incurring the cost of adding a separate earth station
to receive the international programmer's segments. In addition, domestic
broadcasters can sell their programming (e.g., a local sports event) regionally
or internationally because PAS-1 allows them to use the same transmission
antenna to relay their programming internationally as well as domestically.

Local cable and television station operators also benefit from PAS-1
for television programming distribution because they need only one earth station
pointed at PAS-1 to receive programming from both domestic and regional
broadcasters. The Company believes that PAS-1 also attracts a significant
audience of DTH viewers. Household viewers access programming directly from
PAS-1 by installing television receive-only antennas at their homes.

Upon the commencement of PAS-3 services on February 19, 1996, the
Company started migrating some broadcast customers from PAS-1 to PAS-3, under a
plan to provide additional PAS-1 capacity for business communications services.

In the Pacific Ocean Region, the Company's strategy has been to
establish PAS-2 as the leading satellite for the trans-Pacific distribution of
television and cable programming. As of December 31, 1995, PAS-2 provided
pan-Asian C-band coverage and access to the western United States for
approximately 17 broadcast customers, including ABS-CBN(R) (Philippines), Asia
Business News, Bloomberg Information Television, CBS(R), Chinese Television
Network(TM) (Hong Kong), Disney(R), ESPN(R) and Liberty Sports(TM), NBC(R),
NHK(R) (Japan), Television Broadcasts International(TM) (Hong Kong) and
Television Corporation of Singapore(TM).

In the Indian Ocean Region, the Company's strategy has been to
establish PAS-4 as the leading satellite for the distribution of television and
cable programming throughout southern Asia, including the Indian Subcontinent
and the Middle East. Broadcast customers for PAS-4 C-band services throughout
southern Asia include Asia Business News, the BBC(R), China Central
Television(TM), Doordarshan (India), ESPN(R), HBO(R), Sony(R) and Turner
Broadcasting System(TM). In addition, PAS-4 is designed to provide C-band
program distribution services throughout Africa and northern Asia.

For the global distribution of television programming, customers that
have agreements with the Company for service over several satellites include
China Central Television(TM), ESPN(R), Doordarshan (India), Liberty Sports(TM),
NHK(R), Turner International(TM) and Viacom(R) International.

Compressed Digital Video. At December 31, 1992, the Company had sold
out its capacity on PAS-1 for full-time television programming distribution to
Latin America. In February 1993, however, the Company executed an agreement to
use General Instrument Corp.'s DigiCipher CDV system, which can expand the
capacity of transponders by enabling a single 36 MHz equivalent transponder to
provide up to six digital channels for video programming simultaneously.
Previously, such a transponder could provide only one or two analog channels.
Prior to the introduction of digital compression, the PAS-1 satellite carried 30
analog video channels, representing virtually total usage of satellite capacity
for video services. Using CDV technology, as of December 31, 1995, PanAmSat has
been able to expand PAS-1's capacity for video channels by approximately 75%.
PAS-1 now carries approximately 14 analog channels and 47 CDV channels. It
employs both single carrier and multicarrier compression technologies for its
CDV services. When implemented, these were the first full-time commercial
applications of a CDV system for international program distribution anywhere in
the world. The Company expects to continue to expand the services it offers
incorporating CDV to many of its customers and to generate substantially more
revenues per transponder as a result of video compression even though each
customer's cost per channel distributed by satellite will be reduced. The
Company also believes that CDV technology provides television viewers with
higher quality channels, movie programming options and new data and other
service applications. The Company is using a range of leading CDV suppliers for
program distribution services on PAS-2, PAS-3 and PAS-4 from various teleport
facilities throughout the world.

Backhaul Operations. Broadcasters use satellite capacity for "backhaul"
operations, such as transporting programming from a broadcaster's foreign news
bureau to its broadcast center for simultaneous or later transmission. The
Company's services in this area are focused on the transportation of program
material and syndicated programming for broadcasters on a scheduled basis.
Program distributors utilize 24-hour full-time channels or scheduled part-time
video services on PanAmSat satellites to transport programming between
locations. NHK, a leading Japanese broadcaster, for example, utilizes full-time
transponders on PAS-1, PAS-2 and PAS-4 for the transportation of programming and
news.

Special Events and Live News Coverage. Broadcasters use PanAmSat to
transmit coverage of live scheduled special events to programmers on a
short-term ad hoc basis. For instance, PAS-1 relayed live and taped coverage of
the 1992 Summer Olympics, the 1994 Winter Olympics and the 1994 World Cup Soccer
Games directly from the site for a variety of broadcasters. The Company will
provide similar broadcast services for the 1996 Summer Olympics. The Company
also provides broadcast services to relay live news coverage, short duration
video feeds and syndicated programming for broadcasters on a scheduled or ad hoc
basis. For instance, during the Persian Gulf War, PAS-1 carried extensive
coverage of events in both directions across the Atlantic Ocean. In April 1995,
PAS-2 carried live coverage of the 20th anniversary of the end of the Vietnam
conflict for ABC, BBC(R), CBS(R), CNN(R), NHK(TM), Tokyo Broadcasting Service
and other broadcasters.

Radio. Radio broadcasters use satellites for program distribution,
coverage of news and sporting events and other broadcast and backhaul
applications. Customers for radio services on PAS-1 include BBC World Service,
Radio France International, Caribbean News Agency and Radio Netherlands.

DTH Distribution. High powered DTH satellites are designed to enable
broadcasters and programmers to reach the maximum number of television viewers
possible. Programming distributed over a DTH satellite is accessed by households
and also by local cable systems that redistribute that programming through
ground-based cable to households. In addition, the total television audience can
be increased significantly because the satellite's high transmission power
enables households equipped with 24-36 inch (60-90 cm) satellite dishes and
related equipment to receive the programming directly from the satellite.

The Company's strategy includes launching and operating satellites
capable of providing DTH services. Each of PAS-2 through PAS-8 has or will have
the capability to provide high powered DTH service in its respective coverage
area. For instance, M-Net/MultiChoice(R) and SABC/Sentech(R) commenced
transmissions in September 1995 of a multichannel DTH service throughout South
Africa using transponders on PAS-4. The Company's satellites are also platforms
for operational DTH services in the Middle East and Taiwan and planned DTH
services in India, Latin America and Spain.

Other Services. The Company offers a number of additional services to
broadcasters. These include teleport services such as signal turnaround (e.g.,
retransmission of a signal from a U.S. domestic satellite through the Company's
teleports to PAS-1 for distribution to Latin America and to PAS-2 for
distribution to Asia). The Company also provides third-party services and
equipment such as trucks equipped for live news reports and sporting events and
domestic satellite capacity if required. In addition, the Company offers
one-stop service management such as coordination and traffic management for
international live news reporting.

Business Communications

The Company's business communications services include (i) the
provision of satellite capacity to communications carriers that provide private
business networks for data, voice and corporate video communications and (ii)
the provision of such networks and related services by the Company directly to
end-users. Network users utilize satellites rather than ground-based
transmission media because satellite systems provide customers:

o cost savings for large, geographically dispersed networks;

o independence from telephone companies;

o predictability of costs over a long period;

o flexibility in changing and adding remote locations to a network;

o integrated network management and control of all remote locations; and

o increased network availability and lower transmission error rates.

Many businesses and organizations currently use satellite communications
networks for certain of their communications needs. For example, retail chains
use satellite business communications networks for rapid credit card
authorization and inventory control. Banks use satellite networks to connect
automated teller machines to processing computers. News agencies use satellite
networks to distribute information continuously to numerous locations, and
paging operators use satellite networks to distribute paging information from a
central switch to multiple remote transmitters for retransmission to pagers.

Carrier Services. The largest portion of the Company's revenues in the
business communications market is derived from the provision of satellite
capacity to domestic and regional communications carriers in Latin America. The
Company does not provide substantial value-added services to such carriers. The
provision of satellite capacity to carriers involves relatively low marketing
and operating costs, while promoting the use of PAS-1 for business
communications in Latin America. Carriers in Latin America that use PAS-1
satellite capacity include Telegan, S.A. of Colombia and Impsat of Argentina.
U.S. carriers include Sprint(R) and MCI(R). In addition, the carrier Ji Tong of
China uses capacity on PAS-2 and Transtel of South Africa uses capacity on
PAS-4.

Internet service providers also use PanAmSat satellites for
international Internet access. As of March 1996, the Company's satellites
provided access to the U.S. Internet network for Internet service providers in
more than 20 countries in Latin America and Asia.

Governments currently represent one of the single largest users of
communications facilities. The United States has stated that it intends to move
governmental traffic, particularly non-classified military traffic, off
dedicated satellites and onto commercial satellites. The Company is
participating in bids for the Defense Department's ongoing procurements of
several commercial satellite transponders. The Company has provided services
directly to the U.S. State and Defense Departments and currently is providing
services to the U.S. government as a subcontractor to government carriers. U.S.
government users accounted for approximately 3% of the Company's total revenue
in 1995.

Private Networks. The Company offers end-to-end satellite services for
two types of private business communications networks: International Digital
Services ("IDS") networks and very small aperture terminal ("VSAT") networks.
IDS networks consist of rooftop antennas and are used by customers that have
relatively steady flows of information to and/or from all of the points in the
network. Because of their large transmission requirements, IDS networks require
dedicated, permanent communication links to each point. VSAT networks differ
from IDS networks in that VSAT networks consist of very small (e.g., 1.2 to 1.8
meters) rooftop antennas and are utilized by customers that need to send short
bursts of data over the network for relatively short periods of time. Through
the use of VSAT technology and sophisticated software, these networks can be
served with a relatively small amount of satellite capacity.

In addition to providing satellite capacity, the Company's services to
its business communications customers include the purchase and installation of
on-site antennas and the design, integration, management, operation and
maintenance of business networks. These services are provided by the Company's
primary teleport in Ellenwood, Georgia, other Company teleports in Homestead,
Florida and Sylmar, California, or through subcontractors. Examples of the
Company's business communications services using PAS-1 and the Company's
teleports include an IDS network linking Citicorp's regional headquarters in
Miami, Florida with eight locations in Latin America, five other IDS networks
for banks and another IDS network linking several of Reuters' Latin American
offices to Reuters offices in the United States.

Networks using VSATs have been growing rapidly to meet the specialized
data requirements of particular industries, such as banking, mining and
retailing. The Company expects the international VSAT market to grow
significantly in the future. Recognizing both the demand for this service as
well as the failure of existing carriers to provide adequate VSAT services, many
governments have recently deregulated this market.

Long-Distance Telephony

Although the Company was initially not permitted by the Federal
Communications Commission (the "FCC") to offer international public telephone
service between the United States and any other country, the Company has
provided domestic and international non-U.S. long-distance telephony services.
The Company currently provides satellite capacity to domestic telephone
companies in Chile, Nicaragua and Honduras. The Company also provides satellite
capacity to Tricom, a Dominican Republic-based carrier which provides
international long-distance telephone service between the United States and the
Dominican Republic. Tricom is currently the only international telephone carrier
under contract with the Company.

Ongoing changes in the FCC's policy should permit the Company to offer
increased levels of public telephone traffic between the United States and other
countries and are expected to allow the Company to offer unlimited levels of
such service beginning on January 1, 1997. See "--Government Regulation" below.
The emergence of competition for long-distance services and significant
deregulation in several countries such as the United Kingdom, Japan, Korea, New
Zealand, Philippines and Australia has led the Company to believe that the
long-distance telephony market offers the Company considerable future
opportunities globally.

DTH Strategy

The Company has designed the Ku-band capacity on the PAS Global System
(other than PAS-1) with the capability of providing DTH services. The Company's
strategy is either to provide satellite capacity to customers that provide DTH
services, as in South Africa, or to undertake a direct investment in a joint
venture that will provide DTH services through satellite capacity provided by
the Company. The Company also contemplates facilitating the development of DTH
service in certain regions by providing satellite capacity and coordinating
technical issues with its customers, without direct investment in the DTH
service. Based on this strategy, the Company's satellites are platforms for
current DTH services in South Africa and Taiwan and planned DTH services in
India, Latin America, the Middle East and Spain.

As part of the Company's digital DTH strategy, the Company intends to
provide satellite capacity on PAS-3, PAS-5 and PAS-6 for digital DTH services in
Latin America, the Caribbean, certain areas of the southern United States and
Spain. The Company believes there is significant demand for digital DTH service
in these regions in part because of the limited percentage of households that
receive television programming (except in the United States) through other
transmission systems such as cable and wireless cable and, in the United States,
the limited amount of Spanish-language programming available.

DTH Services in Latin America

During the third quarter of 1994, the Company announced its intention
to provide DTH services in Latin America. In connection therewith, the Company
and Televisa signed a binding memorandum of understanding (the "Original MOU")
to put into operation a digital DTH satellite television broadcasting business
covering Latin America, the Caribbean and certain areas of the southern United
States.

In November 1995, the Company announced that it would serve as a
satellite service provider for the Latin America DTH service to be offered by
Globo, Televisa, News Corp. and TCI3. On February 29, 1996, the Company signed
the 1996 Letter Agreement with Globo, Televisa and News Corp. to provide service
to the Latin America JVs on 48 transponders ultimately on PAS-5 and PAS-6, with
temporary service on PAS-3 pending the commencement of service on PAS-6. This
capacity would enable the Latin America JVs to broadcast to Latin America, the
Caribbean and certain areas of the southern United States approximately 500
digital channels to subscribers using small 24-36 inch (60-90 cm) antennas and
to permit distribution of program packages of approximately 120 digital channels
to specific market areas.

Under the 1996 Letter Agreement, Globo, Televisa, and News Corp. have
agreed to proportionally guarantee 100 percent of the fees for transponder
services to the Latin America JVs. These guarantee obligations may be assigned
to TCI3 and, with the Company's prior written consent, to new equity
participants in the Latin America JVs. The Company will receive minimum service
fees equivalent to the Company's best estimate of the cost per transponder to
the Company of designing, launching, operating and insuring each satellite for
transponders used by the Latin America JVs. The Company also will receive
additional revenue based on subscriber revenues of the Latin America JVs above a
certain threshold, except that the transponders that will be used by the Latin
America JV operating in Brazil will be charged on a fixed fee basis.

Under a verbal agreement in principle with Televisa, the Company would
be granted an option for ten years to obtain 10- to 15-percent interests from
Televisa in the Latin America JVs that would service Latin America, the
Caribbean and the southern United States, but not Brazil. The purchase price
would be equal to the Company's pro rata share of Televisa's aggregate
contributions to the Latin America JVs providing such service, less all
distributions by such Latin America JVs to Televisa, plus interest. The Company
has no agreements relating to ownership in the Latin America JV that will
provide DTH service in Brazil. Upon the execution of binding agreements
incorporating the verbal agreements in principle and relating to the Spain Joint
Venture, the Original MOU would be terminated.

Globo, Televisa and News Corp. plan to enter into one or more
definitive agreements to implement the terms agreed in and contemplated by the
1996 Letter Agreement. The Company's acquisition of an option to acquire equity
interests in certain of the Latin America JVs is subject to the execution by
such parties of such definitive agreements and to the Company's execution of a
definitive agreement with Televisa. No assurance can be given that such
definitive agreements will be consummated, or that the Latin America JVs will be
successful.

DTH Services in Spain

The Company and Televisa have announced their intention to provide DTH
services through the Spain Joint Venture with the capacity to broadcast
approximately 24 to 80 digital channels to subscribers in Spain using small
24-36 inch (60-90 cm) antennas. It is anticipated that the Company would
ultimately acquire up to 49% (subject to pro rata dilution with Televisa upon
admission of additional investors, if any) of the Spain Joint Venture for a
price equal to the pro rata aggregate amount of Televisa's contributions to the
Spain Joint Venture, less all distributions by the Spain Joint Venture to
Televisa, plus interest. It is further anticipated that the service fee per
transponder to be paid to the Company by the Spain Joint Venture would be
approximately equivalent to its cost per transponder to the Company of
designing, launching, operating and insuring each satellite for transponders
used by the Spain Joint Venture, plus a percentage of gross subscriber revenue
above a certain minimum threshold collected by the Spain Joint Venture.

The formation of the Spain Joint Venture and the Company's acquisition
of an interest therein are subject to the negotiation and execution of
definitive agreements by Televisa and the Company. No assurance can be given
that such definitive agreements will be consummated, or that, if consummated,
the Spain Joint Venture will be successful. See "--Cautionary Statement For
Purposes of The "Safe Harbor" Provisions of The Private Securities Litigation
Reform Act of 1995 - DTH Business" below.

Coverage Areas

PAS-1 and PAS-3 provide coverage of the Atlantic Ocean Region, and
PAS-2 provides, and PAS-8 will provide, coverage of the Pacific Ocean Region.
PAS-5 and PAS-6 will provide additional coverage of the Atlantic Ocean Region
and PAS-4 provides, and PAS-7 will provide, coverage of the Indian Ocean Region.
The Company is the first private company to provide global satellite services.
Accordingly, customers are able to contract solely with the Company for all of
their global satellite needs.

PAS-5 and PAS-6 are under construction. The design of PAS-6 is complete
and the design of PAS-5 is near completion. The coverage areas of PAS-7 and
PAS-8 are in the design stage and therefore are subject to change. The coverage
areas of a satellite are determined by the shape of the satellite beams and are
not alterable after launch. However, certain of the transponders on PAS-2,
PAS-3, PAS-4, PAS-5 and PAS-6 can be transferred from one beam to another if
market conditions warrant.

PAS-1

PAS-1 provides four separate C-band coverage beams for all or parts of
Latin America and two Ku-band beams, one for the United States and one for
Europe.

One PAS-1 C-band beam provides nearly complete coverage of Latin
America and reaches the southern United States. Until March 1993, when the
Company began to use CDV technology, all of the long-term capacity on this beam
was sold out. See "Services--Broadcasting" above. As of December 31, 1995,
full-time broadcasters and programmers who use this beam include CNN(R),
ESPN(R), MTV(R) and Televisa(R).

The three other PAS-1 C-band beams focus coverage on different parts of
Latin America. As of December 31, 1995, programmers using these beams on a
full-time basis included Cinecanal, Discovery(TM), HBO Ole(R), Televisa(R),
Television Nacional de Chile, channels 2, 4, 5 and 13 (Peru), Sony(R), Telefe
(Argentina) and USA Network. These C-band beams are also used for business
communications services by Citicorp(R), Reuters(R), Credit Suisse(R), Pacific
National Bank and others. Carriers that use PAS-1 include Telegan, S.A. of
Colombia and Impsat(TM) of Argentina. The PAS-1 Ku-band beams are used for
broadcasting and business communication services between the United States and
Europe. Customers for this service include BBC(R), CBS News and NHK(TM).

Upon the commencement of PAS-3 services on February 19, 1996, the
Company started implementing a plan to migrate some broadcast customers from
PAS-1 to PAS-3, thereby providing additional PAS-1 capacity for business
communications services.

PAS-2

The PAS-2 satellite contains two C-band beams. These beams enable
broadcasters to distribute programming throughout Asia, Australia and New
Zealand. One of these beams also reaches across the Pacific Ocean to the western
coasts of Canada and the United States. Prior to the launch of PAS-2, United
States programmers had to use one satellite to cross the Pacific Ocean and
another to distribute programming within Asia. North American broadcasters can
now distribute programming directly via PAS-2 from the United States to Asia,
and Asian broadcasters can distribute their programming throughout Asia to North
America. For instance, ESPN(R) and Viacom(R) are using PAS-2 for U.S.-to-Asia
program distribution, while ABS-CBN(R) (Philippines) is using PAS-2 for
intra-Asian distribution and access to the U.S. cable market. The ability to
distribute programming directly from the United States was an important factor
in establishing PAS-1 as the leading satellite for television programming
distribution in Latin America.

Three Ku-band beams on PAS-2 provide high-powered coverage that is
focused on Korea, Japan, China, including Hong Kong and Taiwan, Australia and
New Zealand. For instance, Television Broadcasting International(TM) is using
PAS-2 Ku-band capacity for high-power program distribution services throughout
Taiwan.

PAS-3

The Company's strategy is to establish PAS-3 as a leading satellite for
television programming distribution in Latin America. Certain broadcasting
customers on PAS-1 will move to PAS-3, and the resulting available capacity on
PAS-1 will be used primarily for broadcasting and business communications
services in Latin America. PAS-3's two C-band beams will provide nearly total
coverage of North America, South America, Western Europe and Africa. This
coverage will create new options for broadcast distribution among these four
continents.

As of the commencement of PAS-3 services on February 19, 1996, PAS-3
customers for Pan-American C-band broadcast services included Artear
(Argentina), Canal 4, 9 and 13 (Paraguay), Caracol, China Central Television,
Cinemax, Country Music Television(TM), Discovery(TM), ESPN(R), 20th Century
Fox(R), HBO Ole(R), Liberty(TM), NBC(R), SiTV(TM), Televisa(R), TVN(R), TV-5 and
Universidad Catolica. In addition, PAS-3 will serve as an initial platform for
the introduction of Latin America DTH services offered by the Latin America JVs.
It is also anticipated that PAS-3 will serve as the platform for Spain DTH
services offered by the Spain Joint Venture.

PAS-4

The PAS-4 satellite provides extensive coverage of the Indian Ocean
Region with three C-band and five Ku-band beams. The three C-band and five
Ku-band beams provide coverage of most of Europe, Africa, India and Asia, the
Middle East and Australia. The Ku-band transponders offer communications
services to key regions of economic activity including southern Africa, Far East
Asia, Europe, India and the Middle East. Due to the satellite's strategic
orbital location and the satellite's design, the Company's customers are able to
access the satellite from as far east as Tokyo and as far west as Great Britain.

PAS-4 links together key regions of the world for broadcast
distribution, business communications and telephony services. For instance,
broadcasters in Europe using PAS-4 are able to reach the Far East and Australia
directly over one satellite.

Broadcast customers that use C-band capacity on PAS-4 for program
distribution in south Asia include Asia Business News, the BBC, China Central
Television(TM), Discovery(TM), Doordarshan, Disney(R), HBO(R), Liberty(TM),
Sony(R), Turner Broadcasting(TM) and Viacom(R). Customers that will use C-band
capacity for pan-African program distribution include M-Net/MultiChoice(R) and
Viacom(R). In addition, M-Net/MultiChoice(R), SABC/Sentech(R) and Viacom(R) use
PAS-4 Ku-band capacity to provide DTH services in South Africa.

PAS-5

PAS-5 will be a high-powered satellite and is currently designed with
24 Ku-band and 24 C-band transponders. The Company expects that the satellite's
Ku-band transponders will be used, in part, to carry 96 to 120 digital program
channels for digital DTH service in certain areas of the southern United States,
Mexico, the Caribbean and Central America, and that the C-band transponders will
be designed to provide coverage for broadcast distribution and other services in
North America, South America and Europe. It is anticipated that PAS-5 will serve
as the main platform for the Latin America DTH services offered by the Latin
America JVs.

PAS-6

The Company has designed PAS-6 to provide DTH services in Latin
America. The Company expects PAS-6 will carry 36 Ku-band transponders which will
be able to transmit 288 to 360 digital program channels over all of Latin
America. Subject to FCC approval, the Company plans to co-locate PAS-6 with
PAS-3. It is anticipated that PAS-6 will also serve as a platform for the Latin
American JVs.

PAS-7

PAS-7 will be a high-powered satellite providing service over the
Indian Ocean Region. The PAS-7 satellite is expected to contain 14 C-band and 30
Ku-band transponders. The Company's strategy with PAS-7 is to expand upon the
broadcast and business communications services that are offered on PAS-4. PAS-7
is in the design stages and subject to change.

PAS-8

PAS-8 will be a high-powered satellite providing service over the
Pacific Ocean Region. The PAS-8 satellite is expected to contain 24 C-band and
24 Ku-band transponders. The Company's strategy with PAS-8 is to expand upon the
broadcast and business communications services that are offered on PAS-2. PAS-8
is in the design stages and subject to change.

The Satellites

The PAS Global System will consist of eight satellites which are or
will be located as follows:

Ocean Location Expected
Satellite Region (Orbital Slot) Launch Date

PAS-1 Atlantic 45(Degree) West Longitude Operational(1)
PAS-2 Pacific 191(Degree) West Longitude Operational(2)
PAS-3 Atlantic 43(Degree) West Longitude Operational(3)
PAS-4 Indian 68.5(Degree) East Longitude Operational(4)
PAS-5 Atlantic 58(Degree) West Longitude(5) 1997
PAS-6 Atlantic 43(Degree) West Longitude(5)(6) 1996
PAS-7 Indian 68.5(Degree) East Longitude(7) 1997
PAS-8 Pacific 194(Degree) West Longitude(7) 1998

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(1) PAS-1 was launched in June 1988 and commenced commercial service in
November 1988.

(2) PAS-2 was launched in July 1994 and commenced commercial service in
August 1994.

(3) PAS-3 was launched on January 12, 1995 and commenced commercial service
on February 19, 1996.

(4) PAS-4 was launched August 3, 1995 and commenced commercial service on
September 5, 1995.

(5) The applications for PAS-5 and PAS-6 are pending with the FCC.

(6) The Company has requested FCC approval to co-locate PAS-6 with PAS-3.

(7) The Company plans to co-locate PAS-7 with PAS-4. The Company tentatively
plans to locate PAS-8 at 194(degree) West Longitude and has an
application for that orbital slot pending with the FCC. The Company has
received conditional regulatory approval for the orbital slot of
72(Degree) East Longitude for PAS-7 from the FCC, which approval is
subject to a full financial showing and demonstration of consultation
with Intelsat. The Company has requested approval to co-locate PAS-7
with PAS-4.

PAS-1 is a GE Series 3000 satellite with 12 36-MHz and six 72-MHz
transponders at C-band and six 72-MHz transponders at Ku-band. The satellite
offers coverage of the Americas and Europe. PAS-1 was launched in June 1988 and
has an expected in-orbit life of 13.25 years from the date of launch. PAS-1 has
not experienced any anomalies that have affected or which are expected to affect
the satellite's continued operation through its projected end-of-life. In late
1989, PAS-1 experienced a loss of approximately one-half of the power on one
transponder. A spare amplifier was switched over to the transponder which
effectively restored the lost power. No problems occurred during the switchover,
and this transponder currently meets all performance specifications. In November
1992, PAS-1 experienced a loss of approximately one-half the power on another
transponder in the same transponder bank. A spare amplifier was not available
because the spare amplifier assigned to the transponder bank had already been
switched to the transponder which experienced power loss in late 1989. However,
the transponder which experienced the power loss in November 1992 continues to
meet the performance requirements under the Company's contracts with the two
customers which are using this transponder, and the Company has given these
customers a nominal one-time credit related to this loss of power. See
"Insurance" below.

PAS-2 and PAS-3 are Hughes HS-601 satellites each with 12 54-MHz and
four 64-MHz transponders at C-band and 12 54-MHz and four 64-MHz transponders at
Ku-band. PAS-2 offers coverage of Asia and western North America. PAS-3 offers
coverage of the Americas, Europe and Africa. PAS-2 was launched in July 1994 and
has an expected in-orbit life of 15 years from the date of launch. PAS-2 has not
experienced any anomalies that have affected or which are expected to affect the
satellite's continued operation through its projected end-of-life. In February
1995, the satellite experienced a brief outage on one transponder amplifier and
a spare amplifier was switched over. An additional amplifier experienced a loss
of gain in January 1996 and a spare amplifier was switched over. No problems
occurred during these switchovers, and these transponders currently meet all
performance specifications. PAS-3 was successfully launched on January 12, 1996,
and commenced service on February 19, 1996. PAS-3 has an in-orbit expected life
of 14 to 15 years from the date of launch. During in-orbit testing, a Ku-band
amplifier on PAS-3 was determined to be defective and a spare amplifier was
switched over.

PAS-4 is a Hughes HS-601 satellite with 12 54-MHz and four 64-MHz
transponders at C-band and 16 27-MHz and eight 54-MHz transponders at Ku-band.
PAS-4 offers coverage of Europe, Africa, India and Asia, the Middle East, and
Australia. PAS-4 was successfully launched on August 3, 1995 and commenced
service on September 5, 1995. PAS-5 is also a Hughes HS-601 satellite designed
to meet the Company's operational requirements. PAS-6 is being constructed by
Space Systems/Loral, Inc. ("SS/Loral").

The design of PAS-5 is near completion. PAS-5 is expected to carry 24
36-MHz transponders at Ku-band and 24 36-MHz transponders at C-band. The Company
expects that the satellite will be able to carry 96 to 120 digital program
channels over Ku-band transponders for reception within the satellite's coverage
area by households equipped with 24-36 inch (60-90 cm) antennas. The satellite
also can be used for other broadcast and business communications services
employing small, low-cost antennas on the ground. The design of PAS-6 is
complete. PAS-6 is expected to carry 36 36-MHz transponders at Ku-band that will
be able to carry 288 to 360 digital program channels. The Company has selected
SS/Loral to build PAS-7 and PAS-8. PAS-7 is expected to contain 14 36-MHz C-band
and 30 36-MHz Ku-band transponders. PAS-8 is expected to contain 24 36-MHz
C-band and 24 36-MHz Ku-band transponders. PAS-7 and PAS-8 are in the design
stages and subject to change.

When launched, each of the Company's new satellites will have at least
five times (twelve times in the case of PAS-6) the transmission power of PAS-1.
This added power will allow the Company and its customers to reduce their ground
segment costs significantly by allowing the use of smaller earth stations.

The new satellites will offer a high powered, multi-beam design. The
provision of both C-band and Ku-band capacity on each satellite, except for
PAS-6, will give the Company flexibility to meet its customers' needs for
domestic, regional and international communications services. These satellites
also have extensive cross-strapping capabilities, which permit signals to be
uplinked at Ku-band and downlinked at C-band or vice versa.

The C-band frequency is widely used for the distribution of television
programming. C-band is optimal for areas with relatively low levels of microwave
interference or relatively high levels of rainfall and in markets which have a
tolerance for a range of earth station sizes. C-band is currently widely used in
South America, Asia, Africa and the United States.

The Ku-band frequency is widely used for DTH television broadcasting,
satellite news gathering applications and on-site business communications
networks that require the use of very small antennas. Ku-band is optimal for
areas with high levels of terrestrial microwave interference and where small
earth stations are required due to zoning or other physical considerations or
market needs. Ku-band is utilized throughout Europe, Australia and Japan and,
increasingly, in North America.

The Hughes PAS-5 Contract

The Company contracted with Hughes Aircraft Company ("Hughes") for the
construction and delivery of PAS-5 (the "Hughes PAS-5 Contract"). The Hughes
PAS-5 Contract calls for the delivery of PAS-5 in the spring of 1997. Payments
representing approximately 80% of the total cost of the satellite will be made
during the period of the satellite's construction and upon completion of the
satellite's in-orbit testing, with the remainder of such costs to be paid in the
form of incentive payments made over the 15-year period following launch based
upon the satellite's orbital performance. The Company has the option of
prepaying the incentive obligations at any time. The incentive obligations are
subject to reduction or refund if the satellite fails to meet specific technical
operating standards. The Hughes PAS-5 Contract provides for a limited pre-launch
warranty by Hughes which requires Hughes to correct or replace any
non-conforming goods with conforming goods, if such correction or replacement
can be reasonably accomplished as determined by Hughes. There are limited
liquidated damages of up to $1.0 million payable by Hughes in the event of a
late delivery which is the fault of Hughes. If the delivery is delayed due to
the fault of the Company, the Company will be obligated to pay to Hughes its
reasonable costs incurred as a result of the delay plus a 15% profit component.

The SS/Loral Satellite Contracts

The Company has contracted with SS/Loral for the construction and
delivery of PAS-6, PAS-7 and PAS-8, and for the option to purchase up to two
additional satellites and up to four spare satellites (the "SS/Loral Satellite
Contract"). The SS/Loral Satellite Contract calls for the delivery of PAS-6,
PAS-7 and PAS-8 no later than November 10, 1996, August 4, 1997 and February 21,
1998, respectively. There are limited liquidated damages of up to $2.1 million
per satellite payable by SS/Loral in the event of a late delivery which is the
fault of SS/Loral. Payments representing approximately 80% of the total cost of
the satellite will be made during the period of the satellite's construction and
upon completion of the satellite's in-orbital testing with the remainder of such
costs will be paid in the form of incentive payments based on orbital
performance which will be made over the 15-year period following launch. The
Company has the option of prepaying the incentive obligations at any time. The
incentive obligations are subject to reduction or refund if the satellite fails
to meet specific technical operating standards. The SS/Loral Satellite Contract
provides for a pre-launch warranty by SS/Loral which requires that the satellite
be free from defects and perform in accordance with technical specifications.

The Company has a memorandum of understanding with SS/Loral for the
construction and delivery of PAS-7 and PAS-8, with options to purchase
additional satellites and/or replacement satellites for PAS-6, PAS-7 or PAS-8.
The memorandum of understanding contemplates delivery of PAS-7 and PAS-8 in
1997. As of March 20, 1996, the Company was in final negotiations with SS/Loral
of a definitive contract. SS/Loral has procured certain components that would be
used for construction of PAS-7 and PAS-8.

The Launch Arrangements

Launch Services for PAS-5, PAS-6, PAS-7, PAS-8 and Future Satellites

The Company expects to launch PAS-5 and PAS-8 on a Proton launcher and
PAS-6 and PAS-7 on an Ariane V launch vehicle. The Ariane V is Arianespace's
latest-generation launch vehicle and is capable of carrying heavier payloads.
The Ariane V is scheduled to conduct its first launch in May 1996. Ariane has
had a successful launch rate of approximately 93% since it began operations in
May 1984 and an approximately 95% success rate with the Ariane IV launch
vehicle.

The Company has entered into a contract (the "Arianespace Launch
Contract") with Arianespace S.A. ("Arianespace") for the launch of PAS-6, which
is expected to be launched from Arianespace's launch base in French Guiana.
Under the contract, the Company may, in the event of a launch failure, require
Arianespace to launch a replacement satellite within 12-14 months at a fixed
price subject to inflation adjustment. In December 1995, the Company signed a
multi-launch service contract with Arianespace for one firm launch, which the
Company currently plans to use for PAS-7, and rights for additional launches.

PanAmSat has entered into an agreement (the "LKE Launch Contract") with
Lockheed-Khrunichev-Energia International, Inc. (now known as International
Launch Services) ("LKE") which provides for launch services on the Proton launch
vehicle. The Proton, which is built in Russia and launched in Khazakhstan, has a
reliability rate of 96% over the last 50 launches and an overall reliability of
approximately 94%. If the Proton is unavailable due to technical, regulatory, or
other factors, LKE would provide launch services for at least one launch using
an alternative launch vehicle. See "Business Considerations"--Risks Pertaining
to Russian Launch Provider." The LKE Launch Contract provides for the launch of
three of the Company's satellites and gives the Company an option for additional
launches. It is anticipated that two of these launches will be used for PAS-5
and PAS-8.

The launch contracts provide that the Company may terminate such
contracts at its option, and the contracts include termination liability
schedules that increase in magnitude as the timing of any such termination
approaches the date of launch. The maximum liability, calculated in accordance
with such schedules, for launch services that have been ordered in connection
with any individual launch (including postponement fees) is approximately $45.0
million. Payments made by the Company prior to the Company's election to
terminate any such launch contract are offset against any such liability owed.
The launch contracts also contain rights for replacement launches in the event
of launch failures within specified periods following request for relaunch.

Control of Satellites After Launch

Once a satellite is placed at its orbital location, ground stations
control it until the end of its in-orbit lifetime. PAS-1 is controlled under a
long-term TT&C agreement by GE Capital Spacenet Services, Inc. from the
Company's earth station facility located in Ellenwood, Georgia. The Company has
agreements with Hughes and Hughes Communications whereby Hughes Communications
will provide TT&C services for PAS-2, PAS-3 and PAS-5 from Hughes
Communications' facilities, which will employ, in some cases, earth station
facilities to be supplied by the Company. Hughes Communications presently
provides TT&C services for twelve satellites in orbit. The Company has an
agreement with Optus Networks Pty Limited ("Optus"), a leading supplier, for the
provision of TT&C for PAS-4. Optus is a recognized provider of such services
with experience in maintaining Hughes' satellites in orbit at locations that are
outside of the look angle of Hughes' U.S. facilities. The Company and SS/Loral
have an agreement pursuant to which SS/Loral would provide TT&C service for
PAS-6, PAS-7 and PAS-8.

Insurance

Under the satellite construction contracts, the contractor generally
bears the risk of loss of a satellite during the construction phase up to the
delivery, at which time title and risk of loss pass to the Company (at which
time the launch insurance will become operative).

In January 1996, the Company obtained launch insurance for the
construction, launch and insurance costs for future satellites at contracted
premium rate of 16.0% for PAS-5, PAS-6, PAS-7 and PAS-8. The contracted premium
rate for PAS-3 launch insurance was 18.4% (or $39.3 million) of the $214.0
million launch insurance coverage for PAS-3. The Certificate of Designation (the
"Certificate of Designation") for the Company's 12-3/4% Mandatorily Exchangeable
Senior Redeemable Preferred Stock (the "Preferred Stock") contains, and the
Indenture (the "Exchange Indenture") relating to the Company's 12-3/4% Senior
Subordinated Notes due 2005 (the "Exchange Debentures") would contain, covenants
requiring the Company to obtain launch insurance for PAS-5 and PAS-6 sufficient
to cover the estimated cost of construction, launch and launch insurance for a
replacement satellite in the event of a total launch failure up to a maximum of
$255.0 million. Coverage under the Company's launch insurance will include
claims arising from occurrences up to 180 days after the launch. As a general
matter, however, the Company anticipates that the insurance coverage will
include not only catastrophic loss of a satellite during launch but also the
failure of a satellite to obtain proper orbit or to perform in accordance with
specifications once in orbit. If 50% or more of a satellite's capability is
lost, then a constructive total loss is deemed to have occurred, and the full
amount of insurance would become due and payable. If the satellite is able to
achieve more than 50% but less than 85% of its performance specifications, the
Company will be entitled to a portion of the amount of the insurance after
taking into account a deductible equivalent to no more than 15% of the
satellite's capability. Losses are measured in transponder years with Ku-band
transponders weighted as 1.25 times the value of C-band transponders.

The insurance policies include standard commercial launch insurance
provisions and customary exclusions including (i) military or similar actions,
(ii) laser, directed-energy or nuclear anti-satellite devices, (iii)
insurrection and similar acts or governmental action to prevent such acts, (iv)
governmental confiscation, (v) nuclear reaction or radiation contamination, (vi)
willful or intentional acts of the Company or its contractors, (vii) loss of
market, loss of revenue, extra expenses, incidental and consequential damages
and (viii) third-party claims against the Company.

Once properly deployed and operational, the risk of premature failure
of a satellite historically has been less than 1%. In-orbit insurance is
typically purchased after a satellite has been satisfactorily tested in-orbit,
and coverage would commence upon expiration of the launch insurance. The
covenants under the Indenture dated as of August 5, 1993 (the "Senior Secured
Note Indenture"), among PanAmSat, PanAmSat Capital Corporation ("PanAmSat
Capital") and First Trust National Association, as trustee, pursuant to which
the Company's 9 3/4% Senior Secured Notes due 2000 (the "Senior Secured Notes")
were issued, and the Indenture dated as of August 5, 1993 (the "Discount Note
Indenture," and together with the Senior Secured Note Indenture, the "1993
Indentures"), among PanAmSat, PanAmSat Capital and United States Trust Company
of New York, as trustee, pursuant to which the Company's 113/8% Senior
Subordinated Discount Notes due 2003 (the "Discount Notes", and together with
the Senior Secured Notes, the "1993 Notes") require the Company to maintain
in-orbit insurance for PAS-1, PAS-2, PAS-3 and PAS-4 in specified amounts. The
Certificate of Designation requires, and the Exchange Indenture would require,
the Company to maintain in-orbit insurance for PAS-1, PAS-2, PAS-3, PAS-4, PAS-5
and PAS-6. As of December 31, 1995, the Company carried approximately $60.0
million of in-orbit insurance for PAS-1, $203.9 million of in-orbit insurance
for PAS-2 (which amount decreases on a straight-line basis over the estimated
useful life of the satellite) and $227.2 million of in-orbit insurance for PAS-4
(which amounts will decrease, commencing 180 days after the launch, on a
straight-line basis over the estimated useful life of the satellite). The
Company is presently exploring its insurance options with respect to in-orbit
coverage of each of PAS-3 (which is required as of August 1996), PAS-5, and
PAS-6 and intends to obtain in-orbit insurance initially for approximately 96%
of the construction, launch, and insurance costs of each satellite, as well as
for PAS-7 and PAS-8. The Company renewed its in-orbit insurance on PAS-1 in 1995
at an increased contracted annual premium rate of 3.75% of the coverage provided
thereby. This increase is attributable to certain anomalies which appeared in
1995, in the performance of one of the command receivers on PAS-1. The Company
has put in place certain operational procedures which are designed to prevent
the recurrence of these anomalies. The contracted annual premium rate for PAS-2
and PAS-4 in-orbit insurance is 2.15% of the coverage provided thereby.

Coverage under the Company's in-orbit insurance will include claims
arising from occurrences subsequent to 180 days after the launch. The insurance
coverage includes the failure of a satellite to continue to perform in
accordance with specifications. If 50% or more of a satellite's remaining
capability is lost, then a constructive total loss is deemed to have occurred,
and the full amount of insurance would become due and payable. If the satellite
is able to maintain more than 50% but less than 90% of its performance
specifications, the Company will be entitled to a portion of the amount of the
insurance after taking into account a deductible equivalent to no more than 10%
of the satellite's capability.

Sales and Marketing

The Company's sales and marketing department is divided into two
groups, one of which serves the broadcasting market and the other of which
serves the business communications and long-distance telephony markets. The
senior executive officers of the Company have been directly involved in
marketing to key broadcasting and business communications customers.

The Company has sales and marketing offices in Coral Gables, Florida,
Sydney, Australia, London, England and Tokyo, Japan.

Competition

The Company competes with companies and organizations which own or
utilize satellite or terrestrial transmission facilities. Many of such entities
have greater financial resources than the Company.

Other Satellite Operators

The Company's largest competitor in the international satellite
communications industry is Intelsat. Intelsat's mandate, established by
international treaty, is to provide international satellite capacity on a
non-discriminatory basis to countries around the world. Since its formation in
1964, Intelsat's primary business has been the provision of satellite capacity
for long-distance telephony circuits. Historically, Intelsat has made available
only a small fraction of its transponders on each of its satellites for
broadcasting services. Comsat is the U.S. signatory of Intelsat and is the
exclusive wholesale marketer of Intelsat satellite capacity in the United
States.

Intelsat's satellites have historically been general purpose,
lower-powered satellites designed to serve large areas with public telephone
service transmitted between large and expensive gateway earth stations. The
technical features of Intelsat's satellites have not been well suited for
services such as programming distribution and business communications networks,
which involve large numbers of small earth stations. Intelsat's marketing
flexibility is limited because it generally provides capacity directly to its
signatories who then market such capacity to their customers. This marketing
structure has hindered Intelsat from marketing directly to customers and has
greatly increased the administrative procedures and costs involved in obtaining
satellite services from Intelsat.

In recent years, Intelsat has responded to international and regional
competition from private satellite systems by purchasing higher power satellites
and offering some focused regional coverage and is considering arrangements
which are designed to permit broader marketing of its services. In February
1996, Comsat and the U.S. government agreed to a joint proposal on Intelsat
restructuring that would divide Intelsat into two separate entities through the
creation of a new Intelsat affiliate company. According to a Comsat press
release, Comsat intends to request adoption of the proposal at the next meeting
of Intelsat's 138 member governments in 1997. As of March 1996, the United
States was the only member government to endorse the proposal. According to a
March 1996 press report, Intelsat's board of governors is reviewing three
restructuring proposals. There can be no assurance that Intelsat will not become
an effective competitor of the Company for broadcasting and business
communications services. "--Latin American DTH" below.

For regional television distribution outside of the United States,
broadcasters use Arabsat (Middle East), Eutelsat (Europe), Astra (Europe),
AsiaSat and APStar (Asia), Columbia Communications Corp., Orion Network Systems,
Inc. ("Orion") and Palapa (Southeast Asia) and, to a lesser extent, Intelsat.
While these entities are active in regions in which the Company plans to provide
facilities and services, only Intelsat is a global system. Countries that have
domestic satellite systems include Argentina, Australia, Brazil, Canada, China,
France, Germany, India, Italy, Japan, Malaysia, Mexico, Russia, South Korea,
Spain, Thailand, Turkey and the United States. Argentina, Brazil, Malaysia,
Mexico and Thailand also provide regional services on their domestic satellites.

For example, AsiaSat, a private regional satellite operator based in
Hong Kong, has granted an exclusive right for international program distribution
on its current AsiaSat-1 satellite to one broadcaster, StarTV. StarTV requires
broadcasters to distribute their programming under the StarTV name and also
requires broadcasters to share a portion of their revenues with StarTV.
AsiaSat-1 also offers satellite capacity for business communications and voice
services. In 1995, AsiaSat launched the AsiaSat-2 satellite on a Chinese rocket
and published reports indicate that AsiaSat has entered into a lease for
satellite capacity with StarTV which was also granted an exclusive right for
international programming distribution on AsiaSat-1 and AsiaSat-2.

Proposed Satellite Systems

Other companies have announced plans to operate regional or
transoceanic satellite systems. The international satellite communications
industry, however, imposes significant barriers to entry. The construction and
launch of a satellite comparable to the Company's new satellites usually takes
approximately three or more years and costs approximately $200.0 million to
$250.0 million. In addition, there are a limited number of orbital slots. The
operation of an international satellite communications system also requires
approvals from national telecommunications authorities and Intelsat and, in
certain cases, from regional satellite authorities, such as Eutelsat. See
"Government Regulation" below. While the trend around the world is to liberalize
these regulatory requirements, at present obtaining the necessary licenses
involves significant time, expense and expertise.

Orion has announced plans to construct and launch an additional
satellite in late 1997 in the Atlantic Ocean Region and a satellite in 1998 in
the Asia-Pacific region.

Two Japanese domestic satellite operators plan to provide regional
service throughout the Pacific Ocean Region. The first of three satellites was
launched in August 1995. In January 1996, GE Capital Satellites International
Inc. announced that the government of Gibraltar had filed applications on its
behalf with the ITU for 12 orbital slots in which to operate satellites serving
Africa, Asia and the Pacific Rim.

Countries planning to launch domestic satellites include Egypt, Laos
and the Philippines.

Service Providers

U.S.-based service providers which offer business communications
services in competition with the Company through satellite capacity provided by
the signatories of Intelsat include AT&T, MCI and Sprint. These carriers do not,
however, compete in the broadcasting market. In addition, MCI and Sprint are
users of the Company's satellites when they seek to use satellites for part or
all of the network services they offer their customers. Certain service
providers, such as Keystone Communications, utilize leased satellite capacity to
provide limited services to broadcasters, primarily for ad hoc applications.

Optical Fiber Cables

Optical fiber cables generally do not compete with the Company's
services. The primary use of optical fiber cables is to carry high-volume
telephony communications on a point-to-point basis--a market the Company does
not intend to enter. Based on current trends, it is expected that in the future,
transcontinental optical fiber cables will carry video traffic; however, this
service will be largely for point-to-point traffic (e.g., New York to London).
Optical fiber cables are not readily usable for point-to-multipoint broadcast
applications or for the transmission of ad hoc events which require short-term
satellite capacity and transportable uplink earth stations. These areas are
expected to constitute the largest segments of the Company's broadcasting
services.

Latin American DTH

DTH services currently are not available throughout Latin America.
Limited DTH service in Brazil is provided over C-band transponders on the
Brazilsat domestic satellites. This service requires the use of larger, more
expensive antennas and offers 12 to 24 channels of programming. DTH services
also are being planned on domestic satellites in Argentina and Mexico.

In December 1995, Hughes Communications Inc. launched the Galaxy 3R
satellite, which will be used in part to provide DTH services in Latin America.
According to published reports, the DTH service on Galaxy 3R will start in the
spring of 1996. Additionally, on July 15, 1994, Hughes Communications Galaxy,
Inc. filed an application with the FCC requesting authority to construct, launch
and operate Galaxy VIII(I), a separate international fixed communications
satellite to be located at 95(Degree) West Longitude. The satellite is intended
to be used primarily for video distribution between and among the United States
and Mexico, the Caribbean, Central America and South America. According to this
published report, Galaxy VIII(I) would be launched in 1996-1998. On March 5,
1995, Hughes Communications, Inc., announced a partnership with three Latin
American media companies to provide DTH television and radio services in Mexico,
Central and South America and the Caribbean.

Intelsat currently operates satellites that are capable of providing
DTH services in Latin America. Intelsat is considering the purchase and launch
of a dedicated DTH satellite to serve Latin America. In October 1994, Intelsat's
assembly of parties decided on a classification of its proposed DTH services
that will make it easier for Intelsat to provide DTH services. It is unclear,
however, whether Intelsat will take action on a DTH satellite procurement in the
near future.

U.S. Domestic Satellites

The FCC traditionally has not permitted U.S. domestic satellites to
provide international service except in limited circumstances. However, on
January 22, 1996, the FCC released a decision permitting all U.S. geostationary
satellites to provide both domestic and international services without regard to
whether the satellites initially had been licensed as domestic satellites or
separate systems satellites. The FCC's decision also authorized direct broadcast
satellite systems licensed by the FCC to provide international service.

Government Regulation

The international communications environment is highly regulated. As an
operator of a privately owned international satellite system, the Company is
subject to the regulatory authority of the U.S. government (primarily the FCC)
and the national communications authorities of the countries in which it
operates. In addition, the Company is subject to the Intelsat and Eutelsat
consultation process as described below which can result in the imposition of
operational restrictions on the Company. While the Company has all necessary
licenses and governmental approvals for the construction, launch and operation
of PAS-1, PAS-2, PAS-3 and PAS-4, there can be no assurance that the Company
will succeed in obtaining all requisite regulatory approvals for PAS-5, PAS-6,
PAS-7 and PAS-8 and for the orbital slots planned for these satellites without
the imposition of operational restrictions on the Company.

United States Regulation

The FCC is the governmental body with primary authority in the United
States over all satellite carriers.

1. Licensing Terms

Unlike carriers like AT&T, which are subject to extensive regulation as
common carriers, the Company is not regulated as a common carrier. As a
non-common carrier the Company is free to set prices and serve customers
according to its business judgment, without rate of return or price cap
regulation or requirements not to discriminate among customers, and with minimal
governmental scrutiny of its business decisions. The Company is subject to the
FCC's review primarily for (i) the licensing of individual satellites and earth
stations (e.g., meeting minimum financial, legal, and technical standards); (ii)
avoidance of interference with other radio stations; and (iii) compliance with
rules the FCC has established specifically for U.S. international satellite
companies.

The Company's original license from the FCC prohibited it from carrying
any traffic to or from the United States that interconnected with a public
telephone network. This restriction was designed to protect Intelsat's public
switched telephone services business from competition and broadly precluded any
separate international satellite company, such as the Company, from any
connection, direct or indirect, into the public switched telephone network
("PSTN") on either side of a circuit that enters or leaves the United States.
Thus, a customer could not terminate a private line carried by the Company into
a switchboard that would switch the call into the PSTN, either in the United
States or at the other end of the circuit. (The restriction did not apply to
switched services that neither entered nor left the United States.)

In subsequent decisions, the FCC authorized the Company to provide a
wide range of services involving the PSTN. In response to a petition filed by
the Company with the FCC, and in recognition of changed conditions, the FCC in
March 1992 modified this restriction to permit carriage of 1,250 64-kbps bearer
circuits of fully connected telephone traffic per satellite and stated its
intention to eliminate this restriction entirely by January 1, 1997. In October
1994, Intelsat increased the threshold below which Intelsat presumes private
international satellite systems do not cause economic harm to 8,000 64-kbps
bearer circuits per satellite. The FCC recently brought its policies into line
with this new standard, and the Company expects that the number of circuits it
is allowed to connect to the public network will continue to increase
progressively until January 1, 1997. The Company does not expect its public
telephony traffic to grow at a rate that would be limited by the U.S.
government's limitation on such traffic before the expected expiration of such
limitation in 1997. In March 1994, the FCC reaffirmed the 1,250 64-kbps bearer
circuit standard for public switched services and authorized the Company to
provide an unlimited number of private lines that are connected to the PSTN. The
interconnected private lines are subject to resale restrictions and to
restrictions against using the interconnected private lines to provide public
switched telephone service. The FCC's separate system policies have prevented
the Company from providing U.S. domestic service, subject to certain exceptions.
On January 22, 1996, however, the FCC released a decision permitting U.S.
separate systems to provide U.S. domestic service. The decision also permits
U.S. domestic satellites to provide international service.

The FCC has granted PanAmSat Carrier Services, Inc. ("PCSI"), a wholly
owned subsidiary of the Company, authority pursuant to Section 214 of the
Communications Act of 1934, as amended (the "Communications Act"), to provide
international private line and public switched services via the PAS-1 satellite
on a common carrier basis. Although PCSI is a common carrier, the Company will
continue to operate as a non-common carrier.

2. Authorization to Construct, Launch and Operate Satellites

The Company has conditional or final authorization from the FCC for a
total of five satellites. The U.S. government has filed with the ITU for, among
other things, all of the Company's orbital slots for PAS-1 through PAS-8. See
"--International Telecommunications Union" below.

The Company is licensed by the FCC to operate PAS-1 in geosynchronous
orbit at 45(Degree) West Longitude. The Company is required to engage in
frequency coordination with other satellite operators. These include Orion
Satellite Corporation, which has an FCC authorization for an international
satellite in the orbital location adjacent to PAS-1. Orion has taken the
position that the Company must accept interference from Orion's satellite
because PAS-1 does not have "full frequency reuse," and the Company has disputed
this position. The FCC has suggested that Orion's position is incorrect, but
stated that it will not rule definitively on the issue unless the parties are
unable to resolve their differences by frequency coordination. Orion announced
in 1993 that it had canceled its contract for construction of the satellite
which was intended for this orbital slot but reaffirmed its intention to build
such satellite at an unspecified later date.

The Company is licensed to operate PAS-2 in geosynchronous orbit at
191(Degree) West Longitude. PAS-2 was launched in July 1994.

The Company is licensed to operate PAS-3 in geosynchronous orbit at
43(Degree) West Longitude. PAS-3 was launched in January 1996.

The Company is licensed to operate PAS-4 at 68.5(Degree) East
Longitude. PAS-4 was launched in August 1995.

The Company has obtained conditional regulatory approvals from the FCC
to construct, launch and operate PAS-7 and to locate it at 72(Degree) East
Longitude (over the Indian Ocean Region), subject to a full financial showing
and demonstration of consultation with Intelsat. The Company has requested
approval to co-locate PAS-7 with PAS-4. The Company has requested a waiver that
would enable its PAS-7 application to be processed under the pre-existing
separate system policies, rather than under recently-adopted new FCC processing
policies under which the FCC would not process the application until it had
completed processing of all domestic satellite and separate system applications
that were pending when the FCC adopted the new processing policies on January
19, 1996. If these policies were to apply, then after the FCC had finished
processing pending applications it would issue a public notice establishing a
new processing round including PAS-7 and any other applications filed in
response to the public notice. Absent a waiver, therefore, processing could be
substantially delayed beyond the anticipated PAS-7 launch, which is scheduled
for the third quarter of 1997. No delay would occur if the Company elects to
position PAS-7 at 72(degree) East Longitude.

None of these final or conditional authorizations, as appropriate, is
subject to further administrative or judicial reconsideration or review. The FCC
reserves the right to require the repositioning of a satellite's orbital slot if
the FCC determines that it is in the national interest that such a change be
made. The FCC has rarely used this authority.

The Company's conditional construction authorizations, by themselves,
do not entitle the Company to expend funds toward the construction of its
satellites. Accordingly, from time to time the Company has requested and
received waivers pursuant to Section 319(d) of the Communications Act from the
FCC permitting such expenditures in specified amounts.

The Company also has pending FCC applications for the following
satellites: PAS-8, to be located at 194(Degree) West Longitude (over the Pacific
Ocean Region), PAS-6 at 43(Degree) West Longitude (to be co-located with PAS-3,
over the Atlantic Ocean Region, in order to provide DTH television services
throughout Latin America) and PAS-5 at 58(Degree) West Longitude (to supplement
the capacity of PAS-1 and PAS-3). The Company may request approval to co-locate
PAS-8 with PAS-2.

Final FCC authorization for each of the Company's satellites and
orbital slots is subject to demonstration that the Company has sufficient funds
to construct, launch, and operate the satellite for one year and completion of
the Intelsat consultation process with at least one country in addition to the
United States. The FCC recently revised its financial qualification requirements
for separate system applicants, requiring that such applicants make a full
financial showing at the time they file. The FCC's decision gives applicants
whose applications are already on file an opportunity to amend their
applications to conform to the new financial requirements. Applicants that filed
prior to April 25, 1995 are "grandfathered," and need not comply. Applicants
that filed after that date and that specified "uncongested" portions of the
orbital arc may, upon "appropriate request," defer their full financial showing
pursuant to the two-step financial standard that previously was applicable to
separate systems. PAS-5 and PAS-8 are grandfathered under the new rules, and the
Company has requested that PAS-6 and PAS-7 be processed under the pre-existing
two-step financial standard. The Company therefore believes that these new
financial requirements will not materially affect its ability to obtain final
authority for PAS-5, PAS-6, PAS-7 and PAS-8. There can be no assurance, however,
that these new requirements will not materially affect the ability of the
Company to obtain final authority for any future satellites.

The Company also has filed applications for satellites at 79(degree)
West Longitude and 93(degree) West Longitude. These applications, as well as the
applications and authorizations discussed above for PAS-1 through PAS-8, all
involve operations on C-band and Ku-band frequencies. In addition, the Company
has filed applications for nine Ka-band satellites. Two of the nine applications
were filed within the deadline for the first Ka-band "processing group" and the
FCC tentatively has assigned to the Company the orbital locations it requested
in the two applications. The remaining seven applications were filed after the
deadline, and the FCC's International Bureau recently denied the Company's
request to reopen the initial Ka-band processing round. Unless that decision is
reversed on review or appeal, the seven applications might not be processed
until the FCC commences a second Ka-band processing round. The FCC has an
ongoing rulemaking to determine on what basis it will authorize applicants to
construct, launch, and operate satellites in the Ka-band.

3. Intelsat Consultation

Prior to receiving final licensing and launch authority, and prior to
offering services between the United States and any overseas point, the Company
has to complete a consultation with Intelsat under Article XIV of the Intelsat
Agreement. This requires arranging for the U.S. government and the appropriate
governmental authority in at least one overseas point to consult with Intelsat
to assure that use of the new satellite will cause Intelsat neither technical
harm arising from signal interference nor "significant economic harm."
Thereafter, in order to provide services involving additional countries, those
countries have had to associate with the prior Article XIV consultation. In
September 1994, Intelsat's board of governors eliminated the association
requirement. To provide domestic services in any country other than the United
States, the Company need only make the technical showing. For PAS-1, the first
private international satellite to go through the process, the consultation
process was extremely difficult, as Intelsat initially took the view that any
separate system would cause significant economic harm. Over time, however,
Intelsat has modified its views. In November 1992, Intelsat adopted a resolution
indicating that it will no longer scrutinize for significant economic harm any
satellite services that do not connect with the public telephone network or
which do not provide more than 1,250 64-kbps bearer circuits connecting to the
PSTN per satellite, and that this limitation will be reduced progressively and
phased out by January 1, 1997. In October 1994, Intelsat approved an increase in
this limitation to 8,000 64-kbps bearer circuits per satellite. The FCC is
responsible for assuring that the Company has undergone the necessary
consultation and that it operates in accordance with the technical parameters
forming the basis for an Article XIV consultation. If the Company changes the
terms (either technical or service) of its operation in a significant way, it
may need to reconsult with Intelsat.

Overseas National Telecommunications Authorities

The Company is the first private company to provide global satellite
services. Most countries where the Company operates are signatories of Intelsat.
As a result, their national telecommunications authorities may require
confirmation that the Company successfully completed technical coordination with
Intelsat before providing services on a given satellite. Beyond this
consultation, the Company may be subject to national communications and/or
broadcasting laws. While these vary from country to country, national
telecommunications authorities have not typically required the Company to obtain
licenses or regulatory authorizations in order to provide space segment capacity
to licensed entities. The Company believes that Argentina is the single country
in which the Company currently operates that requires a license for the
provision of space services to licensed carriers. The Company obtained
authorization from the Argentina National Telecommunications Commission to
provide services on PAS-1 and the original PAS-3. The Company has applied for
authorization to provide services on PAS-3.

National laws and regulatory practices governing access to satellite
systems vary substantially among countries. Many countries have liberalized
their national communications market, allowing multiple entities to seek
licenses to provide voice, data or video services for their own use or for
third-party use; to own and operate privately earth station equipment; and to
choose a provider of satellite capacity. Many countries allow licensed radio and
television broadcasters and cable television providers to own their own
transmission broadcast facilities and purchase satellite capacity without
restriction. In such environments, customer access to the Company's services can
be a relatively simple procedure. The Company may provide services through one
or many licensed carriers or to end-users of private network services directly.
Such liberalization policies have been adopted in most Latin American countries
and, increasingly, in Europe, Africa and Asia.

In several countries, the Company has chosen to apply to national
telecommunications authorities to obtain licenses for provision of services
directly to end users. In Ecuador, France, Germany, the United Kingdom and
Japan, the Company has obtained licenses covering its operations which permit
the Company to provide services directly to end users. In Peru, the Company has
requested from the national telecommunications authorities its own licenses to
service customers directly.

Other countries, however, have maintained strict monopoly regimes, so
that end-users may be required to access the Company's services through a
single, government owned entity. In such markets, the entity (often the Posts,
Telephone and Telegraph authority, or the "PTT") may hold a monopoly on
ownership and operation of facilities or on the provision of communications
and/or broadcasting services to, from and within a country, including via
satellite. In order to provide services in such environments, the Company may be
required to negotiate an operating agreement with the PTT that describes the
types of services offered by each party, the contractual terms for service and
each party's rates. Depending on the national regulatory requirements, these
operating agreements may require that the Company's services be obtained through
the PTT alone at a pre-arranged markup, with all associated ground services
provided by the PTT; or the operating agreement may allow customers to own and
operate their own facilities but purchase the Company's services through the PTT
at a rate reflecting the pre-arranged markup.

Notwithstanding the wide variety of regulatory regimes extant in the
countries where the Company currently provides service, the Company believes
that the Company and its customers are in compliance in all material respects
with all applicable laws and regulations governing its operations.

International Telecommunications Union

Nations are required to register their proposed use of orbital slots
with the Radio Regulations Board (formerly the International Frequency
Registration Board) (the "ITU Radio Regulations Board") of the International
Telecommunications Union (the "ITU") to assure that there is an orderly process
for accommodating each country's needs for orbital locations. After a nation has
advised the ITU Radio Regulations Board of its desire to use a given orbital
location at a given frequency, other nations may give notice of their use or
intended use in a manner that would conflict with the first proposal. The
nations are then obligated to negotiate in an effort to coordinate the proposed
uses and resolve interference concerns. The FCC takes responsibility for filing
and coordinating the Company's orbital slots with the ITU Radio Regulations
Board. If all disputes are resolved, the proposed users can be formally
notified, which, theoretically, provides interference protection from subsequent
or nonconforming uses. The ITU Radio Regulations Board has no dispute resolution
or enforcement mechanisms, however, and if the nations cannot agree upon a
coordination or upon resolution of an interference problem, there are not clear
remedies under international law. Although PAS-1 has been operating since 1988,
Brazil has not yet withdrawn certain objections which it raised to PAS-1's
orbital slot, and, accordingly, the FCC has never received final notification
from the ITU Radio Regulations Board that PAS-1's orbital slot has been finally
registered. The Company believes that Brazil's objections will not adversely
affect the Company's ability to continue to operate PAS-1.

The government of Papua New Guinea and the government of Tonga have
filed notices of intended use that potentially conflict with the registration
for PAS-2 and PAS-4. The government of Tonga has filed conflicting claims for
orbital slots with regard to other ITU Radio Regulations Board filings in the
past, but neither the government of Tonga nor the government of Papua New Guinea
(whose filing that potentially conflicts with PAS-2 dates back to the mid-1980s)
has ever launched a satellite. On September 12, 1994, however, an agreement was
announced between an agent of Tonga and APT Satellite to locate APStar-1 at
138(Degree) East Longitude, an orbital location that Tonga has filed for at the
ITU. Moreover, Tonga has entered into a series of agreements with a start-up
company, Rimsat, that provides Rimsat access to the orbital locations claimed by
Tonga. Rimsat, in turn, has arranged to acquire various Russian satellites to
place in such locations. The Company believes Rimsat placed two Russian-built
satellites over the Pacific Ocean at 134(Degree) East Longitude and 130(Degree)
East Longitude, neither of which conflicts with orbital locations reserved for
the Company. Tonga and Rimsat, however, have announced similar arrangements that
would place Russian satellites at 70(Degree) East Longitude, which could
conflict with PAS-4's slot of 68.5(Degree) East Longitude, and at 189.25(Degree)
West Longitude, which could conflict with PAS-2 at 191(Degree) West Longitude.
Rimsat reportedly has defaulted on its payments to Tonga and to the vendor of
its Russian satellites, and courts in Indiana and the island of Nevis,
respectively, have appointed a bankruptcy trustee and a receiver to manage
Rimsat's affairs. The Russian company from which Rimsat obtained its satellites
reportedly has taken back control of the satellites. In addition, a Russian
government satellite operates at 70(degree) East Longitude. Up to one-half of
the C-band transponders on PAS-4 overlap in frequency with the Russian
satellite. The Company, under the auspices of the U.S. government, has attempted
to coordinate the two satellites with Russian authorities. The Russian
authorities, however, have not been prepared to discuss the measures that are
necessary for a successful coordination of the two satellites. They claim merely
that PAS-4 interferes with the Russian satellite and request that U.S.
authorities require the Company to cease the alleged interference. The U.S.
government has rejected the Russian claim that the U.S. is solely responsible
for the elimination of possible interference and has urged the Russian
authorities to move forward quickly to complete the coordination process through
mutual accommodation. In this regard, the Company believes that PAS-4 and the
Russian satellite can be coordinated successfully with minimal adverse effects
on PAS-4 capacity, as long as the Russian authorities make a good faith effort
to coordinate. Although the Company has been able to coordinate all of its
satellites to date without material difficulty, there can be no assurance that a
satisfactory accommodation with Russian authorities will be achieved. Moreover,
until coordination is completed successfully, the Company's ability to provide
services in Russia or to Russian customers will be affected adversely.

Papua New Guinea filed with the ITU prior to the time that the FCC
filed on the Company's behalf for PAS-2. The Company believes the Papua New
Guinea registration has expired but Papua New Guinea claims its registration
will remain valid for several years. On June 16, 1993, the Company filed an
application with the FCC to change the orbital location of PAS-2 from
192(Degree) West Longitude to 191(Degree) West Longitude, in part to gain an
additional degree of separation from the location claimed by Papua New Guinea.
Pacific Satellite, Inc. ("Pacstar"), a company that is owned in part by Papua
New Guinea and that claims rights to Papua New Guinea's orbital location, filed
a "Petition to Deny or in the Alternative to Condition Approval on Showing of No
Interference" against PanAmSat's application. The FCC has denied the Pacstar
petition. Pacstar's appeal to the U.S. Court of Appeals for the District of
Columbia was dismissed because it was untimely.

In addition, after the registration for PAS-4 had been filed, Intelsat
filed in August 1993 with the ITU Radio Regulations Board for an orbital
location that could conflict with PAS-4's then-intended slot and Intelsat
subsequently announced plans to place a satellite near its end-of-life at that
location. The Company reached an agreement with Intelsat pursuant to which the
Company was able to occupy 68.5(Degree) East Longitude; Intelsat can locate its
end-of-life satellite at 72(Degree) East Longitude for a limited period and, at
the conclusion of that period, the Company may bring a satellite into service at
72(Degree) East Longitude.

The Company's FCC applications for PAS-5 and PAS-6 include requests to
use the so-called "planned band" frequencies. The ITU returned to the FCC the
materials that had been submitted for registration of the Company's use of
planned band frequencies for PAS-5 and PAS-6. Representatives of the Company and
the FCC have discussed this matter with ITU officials. As a result, the Company
is preparing additional materials for the ITU and anticipates a successful
resolution of this matter. If, however, use of planned band frequencies is not
possible, the Company believes it could provide service from PAS-5 and PAS-6
using traditional Ku-band frequencies. In this case, the Company would have to
consult with Intelsat concerning use of those frequencies on PAS-5 or PAS-6 and
there is no assurance that the Intelsat consultation would be successful.
Moreover, the use of traditional Ku-band frequencies would result in a delay of
the construction and launch program of the affected satellite.

The U.S. government has filed with the ITU for nine orbital slots for
Ka-band geostationary satellites, substantially all of which are sought by
the Company and other U.S. applicants as well.

All of the registrations for the Company's satellites are or will be
subject to the ITU coordination process. The filings described above that
conflict with the Company's registered slots may delay the receipt of final
registration for PAS-2's and PAS-4's orbital locations with the ITU Radio
Regulations Board.

Employees

At December 31, 1995, the Company had 173 full-time employees. The
Engineering and Operations department consists of 97 employees, all of whom,
with the exception of the senior vice-president of engineering and three
marketing support engineers, are based full-time at the Company's teleports in
Ellenwood, Georgia, Homestead, Florida and Sylmar, California. The broadcasting,
business communications and new business development departments consist of 37
people. There are 39 employees involved in providing administrative, accounting,
regulatory and public relations services. Significant increases in the number of
personnel are expected in connection with launching the remainder of the PAS
Global System. The Company believes its relations with its employees are good.

Cautionary Statement For Purposes Of The "Safe Harbor"
Provisions Of The Private Securities Litigation Reform Act of 1995

The Private Securities Litigation Reform Act of 1995 provides a new
"safe harbor" for certain forward-looking statements. The following factors,
among others, could cause actual results to differ materially from those
contained in forward-looking statements made in this report, including, without
limitation, in "Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases and in oral
statements made by authorized officers of the Company. When used in this Form
10-K and the documents incorporated by reference herein, the words "estimate,"
"project," "anticipate," "expect," "intend," "believe" and similar expressions
are intended to identify forward-looking statements. In addition, the following
important factors should be considered in connection with any investment
decision made with respect to the Company's securities.

Risk of Satellite Loss or Reduced Performance. Satellites are subject
to significant launch risks, including launch failure, destruction and damage
which prevents proper commercial operation, and incorrect orbital placement.
Since January 1986, approximately 12% of all commercial geosynchronous
satellites experienced a launch failure, failure to achieve geosynchronous orbit
from transfer orbit or failure to operate upon reaching orbit. On December 1,
1994, the Company's third satellite, the original PAS-3, was destroyed upon
launch as a result of a malfunction of the Ariane IV launch vehicle. On January
12, 1996, the Company's replacement PAS-3 was launched for service over the
Atlantic Ocean Region. The Company earned no revenues under its agreements with
customers for service on PAS-3 during the period of the delay. No assurance can
be made that the launch of any of the Company's future satellites will be
successful. Launch insurance typically does not cover lost operating revenues or
customers, and, depending on individual customer contracts, the delay of service
caused by launch failure may result in the loss of customers that pre-booked
transponder capacity. A launch failure, to the extent that insurance proceeds
are inadequate to compensate for losses resulting therefrom, could have a
material adverse effect on the Company and any such failure could significantly
delay the ability of the Company to expand its satellite fleet.

The Company expects to launch PAS-5 and PAS-8 on a Russian-built Proton
rocket and PAS-6 and PAS-7 on an Ariane V rocket. The Ariane V rocket is
currently under development with its first launch scheduled for the spring of
1996. In the event that the launch of Ariane V is delayed, the Company has
contractual rights to other launches that could be used to maintain the launches
of PAS-6 and PAS-7 substantially on schedule. The Company's existing launch
contracts may be terminated by the Company at any time prior to launch upon the
payment of a termination fee which, in any one instance, will not exceed
approximately $45.0 million.

Risk that DTH Business Will Not Be Successful. The Company anticipates
that the 1996 Letter Agreement will be replaced by one or more customary
full-scale transponder agreements. Until full scale transponder agreements have
been entered into with respect to the DTH business, there is a risk that
disputes which would be resolved by a full-scale transponder agreement could
arise. Globo, Televisa and News Corp. plan to enter into one or more definitive
agreements to implement the terms agreed in and contemplated by the 1996 Letter
Agreement. The Company's acquisition of an option to acquire equity interests in
certain of the Latin America JVs is subject to the execution by such parties of
such definitive agreements. In addition, the Company's agreement to provide
transponder services contemplates the execution of definitive agreements. There
can be no assurance that such definitive agreements will be executed or that if
such definitive agreements are executed that the terms may not vary from those
currently contemplated. Further, no assurance can be given that the Latin
America JVs will be successful.

Under a verbal agreement in principle with Televisa, the Company has an
option to acquire from Televisa an equity interest in certain of the Latin
American JVs. This option is subject to the negotiation and execution of a
written agreement with Televisa. No assurance can be given that such agreement
will be executed or that if such agreement is executed that the terms will not
vary from those currently contemplated.

The formation of the Spain Joint Venture and the Company's acquisition
of an interest therein are subject to the negotiation and execution of a written
agreement with Televisa. No assurance can be given that such agreement will be
executed or that if such agreement is executed that the terms will not vary from
those currently contemplated.

Risk of Delays or Cost Overruns. A significant delay in the delivery or
launch of any of the Company's future satellites would adversely affect the
Company's marketing plan for such satellite. In addition, although the Hughes
PAS-5 Contract, the Arianespace Launch Contract, the LKE Launch Contract and the
SS/Loral Satellite Contract are fixed-price contracts with firm schedules for
construction, delivery and launch, there can be no assurance that increases in
costs due to change orders or delay will not occur. If such additional costs are
incurred, and if internally generated cash flow is not sufficient to fund such
costs, the Company may need to obtain additional financing. There can be no
assurance that such financing will be available. In addition, the 1993
Indentures and the Certificate of Designation restrict, and the Exchange
Indenture would restrict, the amount of additional indebtedness which may be
incurred by the Company.

Competition and Market Demand. The international telecommunications
industry is highly competitive. The Company faces competition from Intelsat and
regional and domestic satellite companies and from other communications
companies which offer competing services using satellites or terrestrial
facilities. Some of these competitors have substantially greater resources than
the Company. The Company faces competition for international services from U.S.
domestic satellites, pursuant to a recent FCC decision. The Company designs its
satellites on the basis of anticipated future demand for its services. As a
result, the Company expects that at the time of launch of a satellite,
notwithstanding its pre-launch marketing efforts, there will remain available
capacity on that satellite. If the expanding supply of international
telecommunications facilities, including those of the Company, exceeds the
demand for such services, such overcapacity could have a negative impact on the
Company's operating results.

Regulatory Risks. The Company is subject to the regulatory authority of
the U.S. government (primarily the FCC) and the national communications
authorities of the countries in which it operates. The business prospects of the
Company could be adversely affected by the adoption of new laws, policies or
regulations, or changes in the interpretation or application of existing laws,
policies and regulations, that modify the present regulatory environment. While
the Company has generally been successful in obtaining the necessary licenses
with respect to PAS-1, PAS-2, PAS-3 and PAS-4, there can be no assurance that
the Company will succeed in obtaining all requisite regulatory approvals for the
construction, launch and operation of any of the Company's future satellites and
for the orbital slots planned for these satellites or, if obtained, that such
licenses will not impose operational restrictions on the Company. The Company's
FCC applications for PAS-5 and PAS-6 include requests to use the so-called
"planned band" frequencies. The ITU returned to the FCC the materials that had
been submitted for registration of the Company's use of planned band frequencies
for PAS-5 and PAS-6. Representatives of the Company and the FCC have discussed
this matter with ITU officials. As a result, the Company is preparing additional
materials for the ITU and anticipates a successful resolution of this matter.
If, however, use of planned band frequencies is not possible, the Company
believes it could provide service from PAS-5 and PAS-6 using traditional Ku-band
frequencies. In this case, the Company would have to consult with Intelsat
concerning use of those frequencies on PAS-5 or PAS-6 and there is no assurance
that the Intelsat consultation would be successful. Moreover, the use of
traditional Ku-band frequencies would result in a delay of the construction and
launch program of the affected satellite.

As part of the regulatory process for orbital slot allocation, the
Company is required to engage in frequency coordination with other satellite
operators. Although the Company has been able to coordinate PAS-1, PAS-2 and
PAS-3, there can be no assurance that satisfactory coordination will be achieved
for PAS-4 or any of the Company's future satellites. In addition, a Russian
government satellite operates at 70(degree) East Longitude. Up to one-half of
the C-band transponders on PAS-4 overlap in frequency with the Russian
satellite. The Company, under the auspices of the U.S. government, has attempted
to coordinate the two satellites with Russian authorities. The Russian
authorities, however, have not been prepared to discuss the measures that are
necessary for a successful coordination of the two satellites. They claim merely
that PAS-4 interferes with the Russian satellite and request that U.S.
authorities require the Company to cease the alleged interference. The U.S.
government has rejected the Russian claim that the U.S. is solely responsible
for the elimination of possible interference and has urged the Russian
authorities to move forward to quickly complete the coordination process through
mutual accommodation. In this regard, the Company believes that PAS-4 and the
Russian satellite can be coordinated successfully with minimal adverse effects
on PAS-4 capacity, as long as the Russian authorities make a good faith effort
to coordinate. Although the Company has been able to coordinate all of its
satellites to date without material difficulty, there can be no assurance that a
satisfactory accommodation with Russian authorities will be achieved. Moreover,
until coordination is completed successfully, the Company's ability to provide
services in Russia or to Russian customers will be affected adversely. The
governments of Tonga and Papua New Guinea have filed notices of intended use
which conflict with the registrations for PAS-2 and PAS-4. The Company believes
that these notices are not likely to have any material impact on its ability to
provide service on PAS-2 and PAS-4. The Company is also required to coordinate
its satellites with Intelsat and PAS-7 with Russian authorities if PA-7 is
co-located with PAS-4.

Regulatory schemes in countries in which the Company operates, or may
seek to operate, may impose impediments on the Company's operations. The
Company, its customers or companies with which the Company does business must
have authority for each country in which the Company provides services. Although
the Company believes that it, its customers and/or such companies presently hold
the requisite licenses and approvals for the countries in which the Company
currently provides services, the regulatory schemes in each country are
different and thus there may be instances of non-compliance of which the Company
is not aware. In addition, portions of the Company's future satellites are being
designed to provide service to countries in which regulatory impediments
continue to exist. Although the Company believes these regulatory schemes will
not prevent the Company from pursuing its business plan, there can be no
assurance that any current regulatory approvals held by the Company are or will
remain sufficient in the view of foreign regulatory authorities, or that any
additional necessary approvals will be granted on a timely basis in all
jurisdictions in which the Company wishes to operate its new satellites or that
restrictions applicable thereto will not be unduly burdensome.

Risks Pertaining to Russian Launch Provider. The Company plans to
launch PAS-5, PAS-8 and possibly future satellites utilizing a Russian-built
Proton rocket provided by LKE. A U.S.-constructed satellite that is to be
launched outside of the United States requires an export license from the U.S.
government. Additionally, launches by a Russian launch company, including those
by LKE, are governed by a U.S.-Russia launch agreement, which contains certain
restrictions as to the number and pricing of Russian launches. Either of these
requirements could result in denial of permission, or unacceptable delay in
granting permission, to launch a satellite in a republic of the former Soviet
Union.

In addition, the governmental, political, social and legal structures
within Russia are evolving. Changes in policies of the Russian government or the
political leadership of the Russian government may have a significant adverse
impact on the political and economic environment in Russia. Because the
governmental and legal systems in Russia are evolving and untested, there is and
will continue to be uncertainty concerning the value, transferability and
enforceability of the contract rights which the Company may acquire. Moreover,
economic reforms could result in further political or social instability. Any
political or social instability could affect the cost, timing and overall
advisability of using a Russian-built Proton rocket or a Russian launch
provider.

In the event that a launch scheduled with a Russian launch provider
becomes unavailable or impractical, the Company believes that alternative launch
arrangements would be available. There can be no assurance, however, such
alternative launch would not result in delay or additional expense to the
Company.

Risk of Satellite Damage or Loss from Acts of War, Electrostatic Storm
and Space Debris. The loss, damage or destruction of any of the Company's
satellites as a result of military actions or acts of war, anti-satellite
devices, electrostatic storm or collision with space debris would have a
material adverse effect on the Company. The Company's insurance policies include
customary exclusions, including for (i) military or similar actions, (ii) laser,
directed-energy or nuclear anti-satellite devices and (iii) insurrection and
similar acts or governmental action to prevent such acts.

Risks from International Operations. The Company derives and expects to
continue to derive substantial revenues by providing international communication
services. Such operations are subject to certain risks such as changes in
domestic and foreign government regulations and telecommunications standards,
licensing requirements, tariffs or taxes and other trade barriers, exchange
controls and political and economic instability, including fluctuations in the
value of foreign currencies which may make payment in U.S. dollars more
expensive for foreign customers.

Substantial Leverage. At December 31, 1995, the aggregate principal
amount and liquidation preference of the Company's long-term indebtedness and
preferred stock was approximately $876.3 million (excluding vendor financing
that the Company intends to incur if permitted by the terms of its outstanding
indebtedness and preferred stock as satellites are launched and become
operational) and, as a result, the Company is highly leveraged. The aggregate
annual interest expense and payments due under the Senior Notes are $17 million
for each of 1996, 1997, 1998 and 1999, and $10 million for 2000, the year that
the Senior Notes mature. The aggregate annual interest expense under the
Discount Notes is $40.3 million for 1996, $45 million for 1997 and $50.5 million
for 1998. After August 1, 1998, at which time the principal outstanding on the
Discount Notes will be approximately $460.2 million, interest on the Discount
Notes will be payable semi-annually on February 1 and August 1 of each year,
commencing on February 1, 1999. Interest expense and payments on the Discount
Notes is expected to be $52.3 million in each of 1999 and 2000. Until 1999, when
interest payments on the Discount Notes will begin, interest expense accreted
under the Discount Notes will not impact the Company's cash flow. The impact of
interest expense on the Company's results of operations will be offset in part
by amounts capitalized relating to construction in progress of satellites. The
Company expects to be able to fund interest payments through vendor financing,
future cash flow from operations and cash on hand, although there can be no
assurance that the Company will be able to do so. See "--Additional Capital
Requirements."

The 1993 Indentures and the Certificate of Designation contain, and the
Exchange Indenture would contain, various financial and operating covenants,
which, among other things, restrict the Company's ability to borrow funds,
restrict the payment of dividends, other distributions or the redemption of
capital stock and other restricted payments, restrict transactions with
affiliates, restrict the use of proceeds from the sale of assets and restrict
the merger, consolidation or sale of the Company or substantially all the assets
of the Company. Cash dividends on the Preferred Stock may be paid in the
discretion of the Board of Directors of the Company, but are subject to
substantial restrictions contained in the 1993 Indentures. The 1993 Indentures
prohibit the Company or any subsidiary from paying dividends unless (i) no Event
of Default (as defined in the Indentures) has occurred or is continuing; (ii)
the Company's Indebtedness to Cash Flow Ratio (as defined in the Indentures)
would not have exceeded 5 to 1; and (iii) the aggregate of such payments is less
than 50% of the Consolidated Net Income of the Company from August 5, 1993 to
the most recent ended fiscal quarter plus 100% of the aggregate net cash
proceeds received by the Company from the issue or sale of Equity Interests of
the Company (as defined in the Indentures). The Company expects that dividends
on the Preferred Stock, currently payable in-kind, will not have an impact on
cash flows until such restrictions would permit cash dividends on the Preferred
Stock to be paid. These restrictions, in combination with the leveraged nature
of the Company, could limit the ability of the Company to respond to market
conditions or to engage in certain business activities. The ability of the
Company to meet its debt and preferred stock obligations depends on the success
of the Company's business strategy. The success of this strategy is subject to
uncertainties and contingencies, many of which are beyond the Company's control,
and no assurance can be given that the Company's strategy will be successful.

Additional Capital Requirements. The Company believes that the net
proceeds to the Company from the offering of its Common Stock in September 1995,
vendor financing, future cash flow from operations (assuming PAS-5 and PAS-6 are
successfully launched and commence service on the schedule currently
contemplated) and cash on hand will be sufficient to fund the Company's
operations, its remaining costs for the construction and launch of PAS-5 and
PAS-6, its anticipated minimum contractual commitments for the construction and
launch of PAS-7 and PAS-8, as well as to pursue international opportunities for
DTH services which may be identified by the Company in the future. Any
additional costs due to cost overruns, delays or other unanticipated expenses
are expected to be funded from additional vendor financing and future cash flow
from operations. There can be no assurance, however, that the Company's
assumptions with respect to PAS-5, PAS-6, PAS-7 or PAS-8 will be correct, that
under the terms of the Company's then-outstanding indebtedness and preferred
stock it will be permitted to incur all of the vendor financing available to it,
or that additional vendor financing and the Company's future cash flow from
operations will be sufficient to cover any shortfall in funding for PAS-5,
PAS-6, PAS-7 and PAS-8, or any such additional costs, or to pursue international
opportunities for DTH services. Accordingly, the Company may be required to
raise additional capital through debt or equity financing. The ability of the
Company to incur any such additional debt will be subject to the terms of the
Company's outstanding indebtedness and preferred stock. There can be no
assurance that the Company will be successful in obtaining such additional
financing in the amounts or on terms acceptable to the Company. The failure to
obtain such financing could have a material adverse effect on the Company's
operations and its ability to accomplish its business plan.

Effect of Loss of Key Personnel. The success of the Company's business
will be partially dependent upon the performance of Frederick A. Landman,
President and Chief Executive Officer, and Lourdes Saralegui, Executive Vice
President. The loss of such executives could have an adverse effect on the
Company's business. The Company is not the beneficiary of any keyman life
insurance policies for either Mr. Landman or Ms. Saralegui. See "Management."
The loss of key members of senior management could have an adverse effect on the
Company's business.

Risk of Technological Changes. The Company believes that, based upon
technology presently available to commercial users, its new satellites, at the
time of launch, will be "state of the art." However, because the
telecommunications industry continues to experience substantial technological
changes, there can be no assurance that technological changes will not adversely
affect the operating results of the Company.

Control by the Principal Stockholders. The Anselmo Group owns all of
the outstanding shares of the Class A Common Stock (which comprise approximately
97.0% of the combined voting power of the Class A Common Stock and the Common
Stock, voting as a single class, and approximately 40.5% of the outstanding
common stock of the Company), and USHI owns all of the outstanding shares of the
Class B Common Stock (which will comprise approximately 97.0% of the combined
voting power of the Class B Common Stock and the Common Stock, voting as a
single class, and approximately 40.5% of the outstanding common stock of the
Company). The Principal Stockholders will generally be able to control the vote
on all matters submitted to a vote of the holders of the Company's outstanding
common stock, including the election of the Company's directors, amendments to
the Certificate of Incorporation and the By-Laws and approval of significant
corporate transactions and other actions pertaining to the Company which require
approval of the Company's common stockholders. In addition, subject to certain
conditions, the Certificate of Incorporation requires the affirmative vote of
the holders of a majority of each of the Class A Common Stock and Class B Common
Stock, voting as separate classes, for the Company to engage in certain
extraordinary transactions and to take certain other actions. If the holders of
a majority of either the Class A Common Stock or the Class B Common Stock do not
approve any such transaction or action, a deadlock between such stockholders
could result, which, if not resolved, would prevent the Company from engaging in
such transaction or action and could have a material adverse effect on the
Company.

In connection with the Conversion, the holders of the Class A Common
Stock entered into a voting trust agreement (the "Voting Trust Agreement")
pursuant to which all of the issued and outstanding shares of Class A Common
Stock were put into trust (the "Voting Trust") for the benefit of such holders.
Prior to his death, Rene Anselmo served as voting trustee of the Voting Trust.
Upon his death, Mary Anselmo (Rene Anselmo's widow), Reverge Anselmo (Rene
Anselmo's son), Frederick A. Landman and Lourdes Saralegui became joint voting
trustees. As such, they have the ability to vote all of the shares of Class A
Common Stock and therefore have the ability to determine the outcome of all
matters submitted for a vote of the Class A Common Stock. Pursuant to the Voting
Trust Agreement, they are entitled to act by majority vote, except for the
designation of successor trustees which must be by unanimous vote of the
original successor trustees. In the event of a tie vote, Mary Anselmo's vote
would control as long as she is a voting trustee; thereafter, Reverge Anselmo's
vote would control in a tie as long as he is a voting trustee. The prior
approval of the FCC may be required in connection with any change in control of
the Voting Trust, including changes of the voting trustee whose vote controls in
a tie vote.

Litigation. On or about March 11, 1996 an action was commenced by
Comsat against the Company, News Corp. and Televisa in the United States
District Court for the District of Maryland. The complaint alleged that News
Corp. wrongfully terminated an agreement with Comsat for the use of transponders
on an Intelsat satellite in the amount of $261,240,000 over the term of a
five-year agreement and breached its alleged obligations under a tariff filed by
Comsat with the FCC. As to the Company, the complaint alleges that the Company,
alone and in conspiracy with others, interfered in a manner which would subject
the Company to liability with the alleged contract and News Corp.'s alleged
obligations under the tariff. The complaint sought compensatory damages of
$250,000,000 and unspecified punitive damages. On April 30, 1996, the Company
and the other defendants filed motions to dismiss the complaint on numerous
grounds, including lack of personal jurisdiction. By order dated October 10,
1996 the District Court dismissed the complaint without prejudice on the ground
that the Court lacked personal jurisdiction over all of the defendants. On or
about October 25, 1996, Comsat commenced a similar action against the Company,
News Corp. and Televisa in the United States District Court for the Central
District of California. The complaint alleges that News Corp. wrongfully
terminated an agreement with Comsat for the lease of transponders on an Intelsat
satellite over the term of a five-year lease, breached certain alleged promises
related to such agreement, and breached its alleged obligations under a tariff
filed by Comsat with the FCC. As to the Company, the complaint alleges that the
Company, alone and in conspiracy with Televisa, intentionally interfered with
the alleged agreement and with Comsat's economic relationship with News Corp..
The complaint in the present action seeks actual and consequential damages, and
punitive or exemplary damages, in an amount to be determined at trial but which
Comsat alleges exceeds $50,000. On December 11, 1996 the Company, News Corp. and
Televisa filed motions to dismiss the action on various grounds, including that
the FCC has primary jurisdiction over the dispute, that Federal law preempts the
claims asserted against the Company and Televisa, that the claims asserted
against Televisa and the Company are not recognized by Federal law, that the
claims against the Company and Televisa fail to state a cause of action and that
because the claims against the Company and Televisa depend upon the existence of
enforceable rights under the tariff Comsat filed with the FCC, the claims fail
if the Commission determines that Comsat has no such rights. In this regard, in
April 1996, News Corp. filed a complaint with the FCC challenging Comsat's
tariff. Thereafter Comsat filed a motion with the Commission to hold that
proceeding in abeyance pending resolution of Comsat's civil suit. By letter
ruling dated December 6, 1996, the FCC denied Comsat's motion and established a
schedule to resolve the issues raised by News Corp.'s complaint. The Company
believes the claims against it are without merit and intends to vigorously
contest any further prosecution of these claims, although there can be no
assurance that the Company will prevail.

ITEM 2. PROPERTIES

The Company's executive offices are located in Greenwich, Connecticut.
The Company leases its executive offices pursuant to a lease that will expire on
March 21, 2003. The Company currently operates three teleports in conjunction
with the PAS Global System. The Company operates its primary teleport in
Ellenwood, Georgia and operates regional teleports in Homestead, Florida for
PAS-1 and PAS-3 and Sylmar, California for PAS-2. All of such teleports are
manned 24 hours a day. The Company owns its Homestead, Florida teleport and
leases its Sylmar, California facility pursuant to a lease that expires in
December 1996. The Company is currently constructing a permanent Pacific Ocean
Region teleport in Napa, California, to replace its teleport in Sylmar,
California. The Company does not expect to renew its Sylmar, California lease.

The Company also leases office space for its sales and marketing
offices in Coral Gables, Florida, Sydney, Australia, London, England and Tokyo,
Japan. The Company's leases for its foreign offices have been entered into upon
terms that the Company deems to be reasonable and customary.

ITEM 3. LEGAL PROCEEDINGS

In July 1989, the Company and its chairman, Rene Anselmo, filed an
antitrust lawsuit against Comsat, the United States signatory to Intelsat, in
United States District Court for the Southern District of New York. In September
1990, the District Court dismissed the complaint, primarily on the ground that
Comsat is immune from suit for actions taken "in its role as the United States
representative to Intelsat." The Company filed an appeal of the dismissal with
the United States Court of Appeals for the Second Circuit. In September 1991,
the Second Circuit reversed the dismissal and remanded the case to the District
Court to permit the filing of an amended complaint alleging conduct not shielded
by immunity. The amended complaint which seeks substantial damages and
injunctive relief was filed on November 15, 1991. Comsat moved to dismiss the
amended complaint, and on March 30, 1993, the court denied Comsat's motion and
allowed the Company to proceed on all points it had raised in its amended
complaint. The amended complaint alleges anticompetitive conduct by Comsat, as
well as actions by Comsat in concert with others, to prevent or delay the
Company's entry into various markets. On December 16, 1994, Comsat filed a
summary judgment motion and on March 1, 1995 the Company filed papers in
opposition to Comsat's motion. On September 4, 1996, the District Court granted
Comsat's motion for summary judgment against the Company. The Company filed a
notice of appeal on October 2, 1996.

On or about October 25, 1996, an action was commenced by Comsat against
the Company, News Corp. and Televisa in the United States District Court for the
Central District of California. The complaint alleges that News Corp. wrongfully
terminated an agreement with Comsat for the lease of transponders on an Intelsat
satellite over the term of a five-year lease, breached certain alleged promises
related to such agreement, and breached its alleged obligations under a tariff
filed by Comsat with the FCC. As to the Company, the complaint alleges that the
Company, alone and in conspiracy with Televisa, intentionally interfered with
the alleged agreement and with Comsat's economic relationship with News Corp.
Comsat had previously filed a similar action in the United States District Court
for the District of Maryland. By order dated October 10, 1996, the District
Court dismissed without prejudice the complaint in that action on the ground
that the court lacked personal jurisdiction over all of the defendants. The
complaint in the present action seeks actual and consequential damages, and
punitive or exemplary damages, in an amount to be determined at trial but which
Comsat alleges exceeds $50,000. On December 11, 1996 the Company, News Corp. and
Televisa filed motions to dismiss the action on various grounds, including that
the FCC has primary jurisdiction over the dispute, that Federal law preempts the
claims asserted against the Company and Televisa, that the claims asserted
against Televisa and the Company are not recognized by Federal law, that the
claims against the Company and Televisa fail to state a cause of action and that
because the claims against the Company and Televisa depend upon the existence of
enforceable rights under the tariff Comsat filed with the FCC, the claims fail
if the Commission determines that Comsat has no such rights. In this regard, in
April 1996, News Corp. filed a complaint with the FCC challenging Comsat's
tariff. Thereafter Comsat filed a motion with the Commission to hold that
proceeding in abeyance pending resolution of Comsat's civil suit. By letter
ruling dated December 6, 1996, the FCC denied Comsat's motion and established a
schedule to resolve the issues raised by News Corp.'s complaint.

The Company and its affiliates are often engaged in proceedings before
the FCC. These proceedings relate to applications to construct, launch, and
operate additional satellites, petitions and waiver requests relating to the
public switched telephone network and other restrictions imposed on separate
satellite systems, applications and other proceedings relating to the Company's
competitors and other entities, and rulemaking proceedings of general
applicability.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

During the fourth quarter of fiscal 1995, no matters were submitted to
a vote of stockholders through the solicitation of proxies or otherwise.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Common Stock commenced trading on the Nasdaq National Market on
September 21, 1995 under the symbol "SPOT." The Common Stock was listed in
connection with the Company's initial public offering

The following table sets forth, for the calendar periods indicated, the
high and low closing sales price per share for the Common Stock, as reported by
the Nasdaq National Market and the Dow Jones News Retrieval Service.

High Low
------- -------
1995 Fourth Quarter (from September 21, 1995).... 22 1/16 14
1996 First Quarter............................... 33 7/8 20 1/2

On September 21, 1995, the Company consummated an initial public
offering of 18,920,000 shares of Common Stock at a price to the public of $17.00
per share, of which 14,324,324 shares were sold by the Company and 4,595,676
shares were sold by certain selling stockholders.

At March 29, 1996, there were approximately 84 holders of record of the
Common Stock.

The Company has never declared or paid cash dividends on the Common
Stock. The Company presently intends to retain future earnings to support the
growth of its business and, therefore, does not anticipate paying cash dividends
in the near future. The payment of any future dividends on the Common Stock will
be determined by the Company's Board of Directors in light of conditions then
existing, including the Company's earnings, financial condition and capital
requirements, restrictions in financing agreements, business conditions, the
dividend payment requirements of the Preferred Stock and other factors. In
addition, the 1993 Indentures and the Certificate of Designation restrict, and
the Exchange Indenture would restrict, the ability of the Company to pay cash
dividends on the Common Stock, and the payment of dividends requires the consent
of holders of a majority of the outstanding shares of each of the Class A Common
Stock and the Class B Common Stock, voting as separate classes.

Prior to the Conversion, the Partnership was obligated to distribute to
its partners each year quarterly distributions equal to taxes on the net taxable
income of the Partnership for such year for U.S. federal income tax purposes
(without taking into account any carry forwards from a prior year) at the
highest effective combined U.S. federal, state, local and foreign rate of tax
that is imposed on any partner (or if the partner is itself a partnership, its
partners) that is a U.S. person. Accordingly, tax distributions of $12.3 million
were made for the year ended December 31, 1993 and a tax contribution of $1.3
million was made for the year ended December 31, 1994. There were no tax
distributions or contributions in 1995.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data for and as of each year in the
five-year period ended December 31, 1995 have been derived from the financial
statements of the Company and predecessor entities, audited by Arthur Andersen
LLP, independent public accountants. This selected financial data should be read
in conjunction with the financial statements and related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." See Item 7.

<TABLE>
Year Ended December 31,
--------------------------------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statement of Operations Data: (dollars in thousands, except per share data)

Total Revenues.................. $31,971 $40,328 $50,798 $63,744 $116,155
Operating expenses
Direct expenses.............. 1,623 2,175 3,424 4,254 5,729
Sales and marketing.......... 2,190 2,599 4,461 7,179 9,543
Engineering and technical.... 3,098 3,918 3,841 5,811 10,659
General and administrative... 4,220 5,554 7,066 9,768 15,688
Depreciation and amortization 6,653 6,990 8,231 16,331 33,412
Other expenses............... -- -- 737 -- --
Corporate reorganization
compensation(1)............ -- -- -- -- 8,341
Total operating expenses... 17,784 21,236 27,760 43,343 83,372
------- ------- ------- ------- ------
Income from operations....... 14,187 19,092 23,038 20,401 32,783
Interest and other expense
(income), net................ 1,361 1,984(2) 6,103(3) 2,403(3) (1,592)(3)
------- ------ ------- ------- ------
Income before taxes....... 12,826 17,108 16,935 17,998 34,375

Income taxes(4)................. -- -- -- -- 16,829
------- ------ ------- ------- ------
Net income .................. 12,826 17,108 16,935 17,998 17,546

Preferred stock dividend -- -- -- -- 25,976
requirement.................. ------- ------ ------- ------- ------

Net income (loss) to common
shares..................... $12,826 $17,108 $16,935 $17,998 $(8,430)
======= ======= ======= ======= ========
Pro Forma Data:(5)
Pro forma adjustment to income tax provision (benefit)....................... $(1,207)
Pro forma net income ......................................................... 18,753
Pro forma (loss) to common shares............................................. (7,223)
Pro forma net (loss) per common share......................................... (0.08)
Pro forma weighted average common shares outstanding.......................... 89,678,638
Other Financial Data:
EBITDA(6)....................... $20,840 $25,306 $31,269 $36,732 $74,536(7)
EBITDA margin................... 65% 63% 62% 58% 64%(7)
Capital expenditures for
satellite systems under
development.................. $4,169 $22,555 $260,134 $300,217 $333,052
Payments due from customers
under long-term contracts(8). 178,300 239,700 764,500 1,270,000 1,928,200
Customers under long-term
contracts at end of period... 65 89 108 121 177
Balance Sheet Data (at end of
period):
Working capital (deficit)....... $(4,253) $ 27,039 $ 51,179 $ 21,992 $(889)
Total assets.................... 67,955 136,594 731,660 820,255 1,438,820
Long-term debt (less current
portion)(9).................. 5,952 5,474 455,727 510,202 575,284
Long-term debt (less current
portion) plus Preferred
Stock(9)..................... 5,952 5,474 455,727 510,202 862,932
Partner's interest--conditionally
redeemable(10)............... -- 50,000 193,936 194,591 --
Partners'/stockholders'
equity(11)................... 48,388 49,098 59,847 80,935 476,862

</TABLE>
(footnotes on the following page)

<PAGE>
- ------------
(1) Reflects expenses related to the assumption by the Company of phantom stock
plans of a predecessor company and the grant of a limited partnership
interest in the Partnership to the Executive Vice President of the Company
in connection with the corporate reorganization of the Company. See Note 11
to Notes to Financial Statements.
(2) In 1992, includes costs (net of insurance reimbursement) arising from
damage caused by Hurricane Andrew to the Company's teleport in Homestead,
Florida.

(3) Net of capitalized interest of $9.0 million, $41.0 million and $37.8
million for the years ended December 31, 1993, 1994 and 1995,
respectively.
(4) As a partnership, the Partnership was not subject to federal or state
income taxes. Accordingly, no income taxes were deducted from net income on
the Partnership's financial statements. However, the Partnership was
obligated under its Partnership Agreement to make certain tax distributions
to its partners. On March 2, 1995, the Partnership converted to corporate
form and, accordingly, is now subject to income taxes.
(5) The pro forma data give effect to the Conversion as if it had occurred at
January 1, 1995. The pro forma income taxes for the periods indicated are
based on a pro forma statutory tax rate of 40.3%. See "Business-Conversion
and Initial Public Offering" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Income Taxes."
(6) Represents earnings before net interest expense, income taxes, depreciation
and amortization. EBITDA is commonly used in the communications industry to
analyze companies on the basis of operating performance, leverage and
liquidity. EBITDA should not be considered as a measure of profitability or
liquidity as determined in accordance with generally accepted accounting
principles in the statements of operations and cash flows.
(7) Excludes expenses related to the assumption by the Company of phantom stock
plans of a predecessor company and the grant of a limited partnership
interest in the Partnership to the Executive Vice President of the Company
in connection with the corporate reorganization of the Company of $8.3
million for the year ended December 31, 1995. EBITDA and EBITDA margin
including such corporate reorganization compensation expense were $66.2
million and 57% for the year ended December 31, 1995. See Note 11 to Notes
to Financial Statements.
(8) Represents future payments due from customers under long-term contracts at
the end of the periods indicated, excluding arrangements for satellite
capacity for the DTH services in Latin America. At December 31, 1995,
approximately $14.2 million of PAS-1 customer payments, $70.2 million of
PAS-2 customer payments, $17.9 million of PAS-3 customer payments and $70.4
million of PAS-4 customer payments are under contracts which are terminable
by the customer under certain circumstances. Such contracts may also be
terminated if certain technical performance specifications contained in the
agreements, including useful life, are not achieved or, at the customer's
option, after a minimum service period. Future cash payments expected from
customers may be reduced for outage or transponder failure and may be
further reduced for "lowest price" provisions for like transponder capacity
given to similarly situated customers. The terms of the Company's long-term
contract range from one year to the life of the satellite.
(9) Excludes, as to each of PAS-3, PAS-4, PAS-5 and PAS-6, a portion of the
respective purchase prices which will become payable after such satellite
is delivered and which amount may be paid immediately in cash or deferred
over periods of up to 15 years with interest rates ranging from 8.0% to
10.0% per annum. At December 31, 1995, these amounts aggregated
approximately $49.5 million. A portion of the respective purchase prices of
PAS-7 and PAS-8 may also be deferrable. The Company presently intends to
defer such payments at the time they become payable to the extent such
deferral is permitted under the terms of its then-outstanding indebtedness
and preferred stock. The Company anticipates that if, at the time such
payments become payable, the Company is prohibited from incurring such
indebtedness under the terms of its outstanding indebtedness or preferred
stock, it will either seek the consent of the holders thereof to incur such
indebtedness or will obtain funds from sources permitted thereunder to make
such payments. There can be no assurance that such consent will be obtained
or that funds will be available to the Company from sources permitted under
the terms of its outstanding indebtedness or preferred stock. See Notes 8
and 9 to Notes to Financial Statements.
(10) Under the Partnership Agreement of the Partnership, if the launches of
PAS-2, PAS-3, and PAS-4 were not all successfully completed by December 31,
2001, USHI would have had the right to redeem its $200.0 million investment
in the Company in 2004 for $200.0 million, less certain distributions paid
to USHI, plus a yield thereon of 6.0% per annum. In the Conversion, USHI's
redemption rights with respect to its interest in the Partnership were
extinguished.
(11) Net of distributions of $8.7 million, $16.4 million and $6.2 million for
the years ended December 31, 1991, 1992 and 1993, respectively, and a
contribution of $.7 million for the year ended December 31, 1994. There
were no distributions or contributions in 1995.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW

At December 31, 1995, the Company's long-term contracts provided for
future payments of approximately $1.9 billion, consisting of $195 million for
PAS-1, $438 million for PAS-2, $435 million for PAS-3 and $861 million for
PAS-4, excluding arrangements for satellite capacity for the DTH service in
Latin America. At December 31, 1995, approximately $14.2 million of PAS-1
customer payments, $70.2 million of PAS-2 customer payments, $17.9 million of
PAS-3 customer payments and $70.4 million of PAS-4 customer payments are under
contracts which may be terminable by the customer if certain technical
performance specifications contained in the agreements, including useful life,
are not achieved or, at the customer's option, after a minimum service period.
The estimated useful life of each of PAS-1, PAS-2, PA-3 and PAS-4 is 13, 14, 15
and 15 years from launch, respectively. The Company signed the 1996 Letter
Agreement to provide services to the Latin America JVs and the Spain Joint
Venture on 48 transponders on the PAS-5 and PAS-6 satellites at a minimum value
of $1.3 billion, which represents the minimum total backlog of payments expected
to be made over the life of the contracts entered into in connection with the
1996 Letter Agreement and the Spain Joint Venture. For most of the transponders,
the amounts to be paid reflect service fees that are equal to the Company's best
estimate of the cost to design, construct, launch, insure and operate the
satellites and for the balance of the transponders, the amounts to be paid
reflect service fees that are based on a fixed price. On the cost-based
transponders, the Company also could receive revenue sharing from the Latin
America JVs and the Spain Joint Venture. Future cash payments expected from
customers may be reduced for outage or transport failure and may be further
reduced for "lowest price" provisions for like transponder capacity given to
similarly situated customers. The terms of the Company's long-term contracts
range from one year to the life of the satellite.

During the construction period of each of its new satellites, and
thereafter, the Company may incur increased operating expenses, including
expenditures for sales and marketing in excess of the levels previously
incurred, increased engineering and technical expenses, as well as increased
general and administrative expenses, which increased expenses may not be offset
by additional revenues until the new satellites are successfully launched and
commence service. As a result, the Company's operating income and EBITDA margins
were lower in 1994 than in 1993. However, in 1995, EBITDA margin increased due
to a significant growth in revenues, and operating income margin would have
increased except for the $8.3 million corporate reorganization and compensation
expense related to the assumption by the Company of phantom stock plans of a
predecessor company and the grant of a limited partnership interest in the
Partnership to the Executive Vice President of the Company. The Company's income
from operations and EBITDA in 1995 were also adversely affected by the corporate
reorganization compensation expense. Also, commencing at the in-service date of
any successfully-launched satellite, all satellite construction, launch, launch
insurance, capitalized interest and development costs for such satellite will be
depreciated on a straight-line basis over the estimated useful life of the
satellite. Further, after the in-service date of any successfully-launched
satellite (or upon a launch failure), the Company will be required to expense,
and no longer will be able to capitalize, interest allocable to such satellite's
construction, launch and development costs. Interest capitalized in future
periods is dependent on the level of satellites under construction, which is
expected to vary.

The Company is not a party to any material currency or interest rate
hedging transactions, and substantially all of the Company's long-term customer
contracts and vendor obligations are denominated in U.S.
dollars.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the
percentage of total revenues represented by certain revenue and expense items in
the Company's Statements of Operations.

Year Ended December 31,
----------------------------
Statement Of Operations Data: 1995 1994 1993
---- ---- ----

Total revenues(1)............................. 100% 100% 100%
Operating expenses
Direct expenses............................ 5 7 7
Sales and marketing........................ 8 11 9
Engineering and technical.................. 9 9 8
General and administrative................. 14 15 14
Depreciation and amortization.............. 29 26 16
Corporate reorganization compensation...... 7 -- --
Other expenses .......................... -- -- 1
-------- -------- --------
Total operating expenses................. 72 68 55
-------- -------- --------
Income from operations........................ 28% 32% 45%
======== ======== ========
Other Operating Data:

EBITDA Margin(2).............................. 64%(3) 58% 62%
======== ======== ========

- -------------

(1) Revenues from PAS-2 for the fiscal years ended December 31, 1994 and 1995
were $3.7 million and $29.2 million, respectively. Revenues for PAS-4 for
the fiscal year ended December 31, 1995 were $21.4 million.

(2) EBITDA represents earnings before net interest expense, income taxes,
depreciation and amortization. EBITDA is commonly used in the
communications industry to analyze companies on the basis of operating
performance, leverage and liquidity. EBITDA should not be considered as a
measure of profitability or liquidity as determined in accordance with
generally accepted accounting principles in the statements of operations
and cash flows.

(3) Excludes expenses of $8.3 million in 1995 related to the assumption by the
Company of phantom stock plans of a predecessor company and the grant of a
limited partnership interest in the Partnership to an Executive Vice
President of the Company in connection with the corporate reorganization of
the Company. EBITDA Margin including such corporate reorganization
compensation expense was 57% for 1995.

The Company provides satellite services primarily to the broadcasting
and business communications markets. The Company also provides services to the
long-distance telephony market. The Company's broadcasting services include the
provision of satellite capacity and services for (i) television programming
distribution, (ii) "backhaul" operations (i.e., the transmission of video feeds
from one location to another) and (iii) ad hoc services such as the transmission
of special events and live news reports from the scene of an event. The
Company's business communications services include (a) the provision of
satellite capacity to communications carriers that provide private business
networks for data, voice and corporate video communications and (b) the
provision of such networks and related services by the Company directly to
end-users. The Company's long-distance telephony services provide satellite
capacity for use in domestic (non-U.S.) and international public telephone
networks. The Company's total revenues in each of these markets, and the
revenues in these markets as a percentage of total revenues, for the periods
indicated below were:

<TABLE>
Year Ended December 31,
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Statement Of Operations Data: 1995 1994 1993
------ ------ ------
(dollars in thousands)

Broadcasting................. $83,876 72% $ 38,905 61% $32,194 63%
Business communications...... 30,135 26 22,369 35 17,138 34
Long-distance telephony...... 2,144 2 2,470 4 1,466 3
-------- ------- -------- ------- -------- -------
Total revenues............ $116,155 100% $63,744 100% $50,798 100%
======== ======= ======== ======= ======== =======
</TABLE>

1995 COMPARED TO 1994

Revenues. Total revenues for the year ended December 31, 1995 were
$116.2 million, an increase of $52.5 million, or 82%, over 1994. The increase in
total revenues was due primarily to the growth in broadcasting services.

Broadcasting services revenue was $83.9 million in the year ended
December 31, 1995, an increase of $45.0 million, or 116%, over 1994. The growth
in broadcasting services revenue during 1995 was due primarily to revenues from
video services on PAS-2 and the commencement of revenues from video services on
PAS-4.

Business communications services revenue was $30.1 million in 1995, an
increase of $7.7 million, or 34%, over 1994. The increase was due primarily to
commencement of service for several new International Digital Services network
and carrier service data contracts which originated during the past year.

Long-distance telephony services revenue was $2.2 million in 1995, a
decrease of $.3 million, or 12%, from 1994.

Direct Expenses. Direct expenses were $5.7 million and $4.3 million in
the years ended December 31, 1995 and 1994, respectively. Direct expenses were
5% and 7% of total revenues in 1995 and 1994, respectively.

Sales and Marketing Expenses. Sales and marketing expenses were $9.5
million in the year ended December 31, 1995, an increase of $2.3 million, as
compared to $7.2 million in 1994. Sales and marketing expenses were 8% and 11%
of total revenues in the years ended December 31, 1995 and 1994, respectively.
The dollar increase in sales and marketing expenses during 1995 was primarily
attributable to the Company's efforts in marketing capacity on its new
satellites.

Engineering and Technical Expenses. Engineering and technical expenses
were $10.7 million in the year ended December 31, 1995, an increase of $4.9
million, as compared to $5.8 million in 1994. Engineering and technical expenses
were 9% of total revenues for both 1995 and 1994. The dollar increase in
engineering and technical expenses during 1995 was due primarily to increased
personnel costs associated with its new teleport facilities and tracking,
telemetry and control costs associated with PAS-2 and PAS-4.

General and Administrative Expenses. General and administrative
expenses were $15.7 million in the year ended December 31, 1995, an increase of
$5.9 million, as compared to $9.8 million in 1994. General and administrative
expenses were 14% of total revenues in 1995 as compared to 15% of total revenues
in 1994. The dollar increase in general and administrative expenses during 1995
was due primarily to increased costs of $4.6 million associated with in-orbit
insurance on PAS-2 and PAS-4. The remaining increase of $1.3 million primarily
results from additional personnel and other administrative costs associated with
the Company's expansion.

Depreciation and Amortization. Depreciation and amortization was $33.4
million in the year ended December 31, 1995, an increase of $17.1 million, or
105%, as compared to $16.3 million for the year ended 1994. Depreciation and
amortization was 29% of total revenues in 1995 as compared to 26% of total
revenues in 1994. The dollar increase in 1995 was due primarily to depreciation
expense associated with PAS-2 and PAS-4, the latter being placed in service
during 1995.

Corporate Reorganization Compensation. Compensation expense related to
corporate reorganization of $8.3 million in 1995 related to the assumption by
the Company of the phantom stock plans of a predecessor company and the grant of
a limited partnership interest in the Partnership to the Executive Vice
President of the Company.

Income From Operations. Income from operations was $32.8 million for
the year ended December 31, 1995, an increase of $12.4 million, as compared to
$20.4 million in 1994. Income from operations was 28% and 32% of total revenues
in the years ended December 31, 1995 and 1994, respectively. The dollar increase
in income from operations during 1995 was due primarily to the increase in
broadcasting services revenue.

Interest. Interest income was $20.6 million for the year ended December
31, 1995 compared to $7.2 million in the prior year. The dollar increase in
interest income during 1995 is a result of interest earned on proceeds from the
offerings of the Preferred Stock and the Common Stock in 1995 that had not been
applied to satellite systems under development. Interest expense, net of
capitalized interest, increased from $9.6 million in the year ended December 31,
1994 to $19.0 million during the year ended December 31, 1995. This increase in
interest expense is due to interest expense incurred on satellite incentive
obligations and additional accretion of the Discount Notes, coupled with
decreased amounts of interest eligible for capitalization on construction in
progress in 1995.

Income Before Income Taxes. Income before income taxes was $34.4
million for the year ended December 31, 1995, an increase of $16.4 million, as
compared to $18.0 million in 1994. Income before income taxes was 30% and 28% of
total revenues in the years ended December 31, 1995 and 1994, respectively. The
dollar increase in income before income taxes during 1995 was due primarily to
the increase in broadcasting services revenue.

Income Taxes. The Company had an income tax provision of $16.8 million
for the year ended December 31, 1995 and did not have any income tax provision
for the prior year. The 1995 provision is the result of the Conversion of the
Company from a partnership to a corporation on March 2, 1995.

Net Income. Net income was $17.5 million for the year ended December
31, 1995, a decrease of $5 million, as compared to $18.0 million in 1994. Net
income was 15% and 28% of total revenues in the years ended December 31, 1995
and 1994, respectively.

Preferred Stock Dividend. The Company had preferred stock dividends of
$26.0 million for the year ended December 31, 1995 and did not have any
preferred stock dividends for the prior year. The preferred stock dividends in
1995 are a result of the issuance of the Preferred Stock on April 21, 1995.

Net Income (Loss) To Common Shares. Net income (loss) to common shares
was $(8.4) million for the year ended December 31, 1995, a decrease of $26.4
million, as compared to $18.0 million in 1994. Net income (loss) to common
shares was (7%) and 28% of total revenues in the years ended December 31, 1995
and 1994, respectively. The dollar decrease in net income (loss) to common
shares during 1995 was due primarily to the Company's Preferred Stock dividend
requirement.

Pro Forma Net Income. Pro forma net income was $18.8 million for the
year ended December 31, 1995, an increase of $8.0 million, as compared to $10.8
million in 1994. Pro forma net income was 16% and 17% of total revenues in the
years ended December 31, 1995 and 1994, respectively.

Pro Forma Net Income (Loss) To Common Shares. Pro forma net income
(loss) to common shares was $(7.2) million for the year ended December 31, 1995,
a decrease of $18.0 million, as compared to $10.8 million in 1994. Net income
(loss) to common shares was (6%) and 17% of total revenues in the years ended
December 31, 1995 and 1994, respectively. The dollar decrease in pro forma net
income (loss) to common shares during 1995 was due primarily to the Company's
Preferred Stock dividend requirement.

EBITDA. EBITDA, excluding the $8.3 million corporate reorganization
compensation charge, was $74.5 million for the year ended December 31, 1995, an
increase of $37.8 million, or 103%, as compared to $36.7 million in 1994.
EBITDA, excluding the $8.3 million corporate reorganization compensation charge,
was 64% of total revenues in 1995 as compared to 58% of total revenues in 1994.
The dollar increase in EBITDA was due primarily to the increase in broadcasting
services revenue.

1994 COMPARED TO 1993

Revenues. Total revenues for the year ended December 31, 1994 were
$63.7 million, an increase of $12.9 million, or 25%, over 1993.

Broadcasting services revenue was $38.9 million in the year ended
December 31, 1994, an increase of $6.7 million, or 21%, over 1993. The growth in
broadcasting services revenue during 1994 was due primarily to commencement of
services for new full-time digital video contracts on PAS-1, commencement of
services on PAS-2 which was placed in service in August 1994, and additional
ad-hoc revenues resulting from the 1994 World Cup Soccer Games and the 1994
Winter Olympic Games.

Business communications services revenue was $22.4 million in 1994, an
increase of $5.3 million, or 31%, over 1993. The increase was due primarily to
commencement of service for several new International Digital Services network
and carrier service data contracts which originated during the past year.

Long-distance telephony services revenue was $2.5 million in 1994, an
increase of $1.0 million, or 67%, from 1993, primarily as a result of eight new
telephony contracts originated during the past year.

Direct Expenses. Direct expenses were $4.3 million and $3.4 million in
the years ended December 31, 1994 and 1993, respectively. Direct expenses were
7% of total revenues in both 1994 and 1993.

Sales and Marketing Expenses. Sales and marketing expenses were $7.2
million in the year ended December 31, 1994, an increase of $2.7 million, or
60%, as compared to $4.5 million in 1993. Sales and marketing expenses were 11%
and 9% of total revenues in the years ended December 31, 1994 and 1993,
respectively. The dollar increase in sales and marketing expenses during 1994
was primarily attributable to the Company's efforts in marketing capacity on its
new satellites.

Engineering and Technical Expenses. Engineering and technical expenses
were $5.8 million in the year ended December 31, 1994, an increase of $2.0
million, or 53%, as compared to $3.8 million in 1993. Engineering and technical
expenses were 9% and 8% of total revenues for 1994 and 1993, respectively. The
dollar increase in engineering and technical expenses during 1994 was due
primarily to increased personnel costs associated with its new teleport
facilities.

General and Administrative Expenses. General and administrative
expenses were $9.8 million in the year ended December 31, 1994, an increase of
$2.7 million, or 38%, as compared to $7.1 million for the year ended December
31, 1993. General and administrative expenses were 15% of total revenues in 1994
as compared to 14% of total revenues in 1993. The dollar increase in general and
administrative expenses during 1994 was due primarily to increased costs of $0.7
million associated with obtaining increased in-orbit insurance for PAS-1 and
$0.9 million associated with the Company's pursuit of antitrust litigation. See
"Business--Legal Proceedings." The remaining increase of $1.1 million primarily
results from additional personnel and other administrative costs associated with
the Company's expansion.

Depreciation and Amortization. Depreciation and amortization was $16.3
million in the year ended December 31, 1994, an increase of $8.1 million, or
99%, as compared to $8.2 million for the year ended December 31, 1993.
Depreciation and amortization was 26% of total revenues in 1994 as compared to
16% of total revenues in 1993. The dollar increase in 1994 was due primarily to
depreciation expense associated with PAS-2 being placed in service, and the
amortization of the issuance costs of the 1993 Notes, which are being amortized
over the life of the 1993 Notes under the interest method.

Income From Operations. Income from operations was $20.4 million for
the year ended December 31, 1994, a decrease of $2.6 million, as compared to
$23.0 million in 1993. Income from operations was 32% and 45% of total revenues
in the years ended December 31, 1994 and 1993, respectively. The decrease in
income from operations during 1994 was due primarily to increased depreciation
costs related to the PAS-2 satellite.

Interest. Interest income was $7.2 million for the year ended December
31, 1994 compared to $5.0 million for the prior year. The dollar increase in
interest income during 1994 is a result of interest earned on proceeds of the
1993 Notes that had not been applied to the development, construction and launch
of PAS-2, PAS-3 and PAS-4 and on amounts from working capital. Interest expense,
net of capitalized interest, decreased from $11.1 million in the year ended
December 31, 1993 to $9.6 million during the year ended December 31, 1994. This
decrease in interest expense is due to increased amounts of construction
interest eligible for capitalization in 1994.

Net Income. Net income was $18.0 million for the year ended December
31, 1994, an increase of $1.1 million, as compared to $16.9 million in 1993. Net
income was 28% and 33% of total revenues in the years ended December 31, 1994
and 1993, respectively.

EBITDA. EBITDA was $36.7 million in the year ended December 31, 1994,
an increase of $5.4 million, or 17%, as compared to $31.3 million in 1993.
EBITDA was 58% of total revenues in 1994 as compared to 62% of total revenues in
1993. The dollar increase in EBITDA was due primarily to the increase in total
revenues.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, the Company and its predecessors have financed their
operations through a combination of debt and equity financing, vendor financing,
bank financing, equipment leases and cash flow from operations. On August 5,
1993, the Company completed the sale of $175 million aggregate principal amount
of the Senior Notes and $460.2 million aggregate principal amount of the
Discount Notes in a public offering and received net proceeds of approximately
$425.5 million. The original PAS-3 satellite was destroyed during a launch
failure on December 1, 1994. The Company collected in 1995 the insurance
proceeds in the amount of $214.0 million for the original PAS-3 satellite. On
April 21, 1995, the Company completed the sale of 275,000 shares of the
Preferred Stock in a public offering and received net proceeds of approximately
$261.8 million. On September 27, 1995, the public offering of 18,920,000 shares
of the Common Stock was completed. Of such shares, 14,324,324 shares of Common
Stock were sold by the company and 4,595,676 shares of Common Stock were sold by
certain selling stockholders. The Company received net proceeds of approximately
$229.1 million from its sale of shares of Common Stock, but did not receive any
of the proceeds from the sale of shares by the selling stockholders.

The total cost for the construction and launch of PAS-5 and PAS-6,
including launch insurance, certain components for spare satellites, ground
facilities and related development expenses is estimated to be approximately
$425 million. The Company expects to fund $296.3 million of such costs with the
net proceeds of the offering of the Preferred Stock and $70.0 million of vendor
financing. The balance of such costs and any additional costs due to cost
overruns, delays or other unanticipated expenses is anticipated to be funded
from future cash flow from operations and cash on hand.

The total cost for the construction and launch of PAS-7 and PAS-8,
including launch insurance, ground facilities and related development expenses
(but excluding capitalized interest expense) is estimated to be approximately
$420.0 million. The Company expects to fund $224.6 million of such costs with
the net proceeds to it from the offering of the Common Stock. The balance of
such costs and any additional costs due to cost overruns, delays or other
unanticipated expenses is expected to be funded from vendor financing and future
cash flow from operations.

The Company believes that the net proceeds to it from the offerings of
Preferred Stock and Common Stock, vendor financing, future cash flow from
operations (assuming PAS-5 and PAS-6 are successfully launched and commence
service on the schedule currently contemplated) and cash on hand will be
sufficient to fund the Company's operations, its remaining costs for the
construction and launch of PAS-5 and PAS-6, its anticipated minimum contractual
commitments for the construction and launch of PAS-7 and PAS-8, as well as to
pursue international opportunities for DTH services which may be identified by
the Company in the future. Any additional costs due to cost overruns, delays or
other unanticipated expenses are expected to be funded from additional vendor
financing and future cash flow from operations. There can be no assurance,
however, that the Company's assumptions with respect to the construction and
launch costs for PAS-5, PAS-6, PAS-7 or PAS-8 will be correct, that under the
terms of the Company's then-outstanding indebtedness and preferred stock it will
be permitted to incur all of the vendor financing available to it, or that
additional vendor financing and the Company's future cash flow from operations
will be sufficient to cover any shortfall in funding for PAS-5, PAS-6, PAS-7 and
PAS-8, or any such additional costs, or to pursue international opportunities
for DTH services. The ability of the Company to incur any additional debt
financing will be subject to the terms of the Company's outstanding indebtedness
and preferred stock. There can be no assurance that the Company will be
successful in obtaining such additional financing in the amounts or on terms
acceptable to the Company. The failure to obtain such financing could have a
material adverse effect on the Company's operations and its ability to
accomplish its business plan.

Cash flows provided by operating activities increased to $95.0 million
in the year ended December 31, 1995, from $26.1 million in the year ended
December 31, 1994, a decrease from $38.0 million in the year ended December 31,
1993. The increase in cash flows in 1995 was due primarily to increases in
prepaid service revenue related to service contracts for PAS-4 and PAS-2 and to
non-cash charges. The decrease in cash flows in 1994 was due primarily to
capitalized interest.

Net cash used in investing activities increased to $594.3 million in
the year ended December 31, 1995 from $63.1 million for the year ended December
31, 1994, a decrease from $565.6 million in the year ended December 31, 1993.
The 1995 increase primarily reflects the insurance proceeds received in the
amount of $191.1 million (net of payments made directly to the satellite vendor)
and the net proceeds of the offering of Preferred Stock and Common Stock used to
fund $333.1 million in expenditures for the new satellite system under
development and $488.8 million in expenditures used to purchase marketable
securities. This compares to $300.2 million in expenditures for the satellite
system under development during 1994 funded with $247.8 million from maturity of
marketable securities. The 1994 decrease primarily reflects the sale and
maturity of $247.8 million in marketable securities used to fund $300.2 million
in expenditures on the new satellites and development of the PAS global
satellite system during the year ended December 31, 1994, compared to the
purchase of $298.9 million in marketable securities and $260.1 million in
expenditures on the new satellites and development of the PAS global satellite
system during the year ended December 31, 1993. Expenditures on other property
and equipment, primarily at the Company's teleports in Homestead, Florida,
Ellenwood, Georgia and Sylmar, California were $13.5 million, $10.5 million, and
$6.8 million in 1995, 1994, and 1993, respectively.

Cash flows from financing activities increased to $490.1 million in the
year ended December 31, 1995, from $48.5 million in the year ended December 31,
1994, a decrease from $536.5 million in the year ended December 31, 1993. The
1995 increase was primarily attributable to the issuance of 275,000 shares of
Preferred Stock by the Company in April 1995 for net proceeds of $263.5 million
(excluding related costs incurred in the prior year) and the issuance of
14,324,324 shares of Common Stock for net proceeds of $229.1 million. The 1994
decrease primarily reflects $50.0 million received from Televisa in 1994
compared to the receipt of the net proceeds from the issuance of the 1993 Notes
and $150.0 million received from Televisa in 1993.
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

Page
----
Report of Independent Public Accountants........................... F-2

Balance Sheets-- December 31, 1995 and 1994........................ F-3

Statements of Operations for Each of the Three Years Ended
December 31, 1995............................................... F-5

Statements of Stockholders' Equity and Partners' Equity for
Each of the Three Years Ended December 31, 1995................. F-6

Statements of Cash Flows for Each of the Three Years Ended
December 31, 1995............................................... F-7

Notes to Financial Statements...................................... F-8

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of PanAmSat Corporation:

We have audited the consolidated balance sheets of PanAmSat Corporation
(a Delaware Corporation) and subsidiaries and predecessor entity as of December
31, 1995 and 1994, and the related consolidated statements of operations,
stockholders' equity and partner's equity and cash flows for each of the three
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PanAmSat
Corporation and subsidiaries and predecessor entity as of December 31, 1995 and
1994 and the results of their operations and their cash flows for each of the
three years then ended in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP
Stamford, Connecticut,
March 27, 1996
<PAGE>
PanAmSat Corporation

BALANCE SHEETS

<TABLE>
December 31, December 31,
----------------- ----------------
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................... $ 13,562,113 $ 22,854,209
Accounts receivable, less allowance
for doubtful accounts of $100,000......... 4,881,255 2,935,112
Prepaid expenses and other current
assets.......................................... 5,594,999 3,756,377
Tax distribution receivable..................... - 6,671,967
------------- -------------
TOTAL CURRENT ASSETS................................. 24,038,367 36,217,665

SATELLITES AND OTHER PROPERTY AND
EQUIPMENT, AT COST............................. 609,927,311 336,024,281
Less: Accumulated Depreciation and
Amortization............................... (79,177,520) (48,148,548)
------------- -------------
530,749,791 287,875,733

MARKETABLE SECURITIES................................ 495,078,866 55,285,335

INSURANCE CLAIM RECEIVABLE........................... - 191,084,380

SATELLITE SYSTEMS UNDER DEVELOPMENT.................. 377,383,581 234,319,183

DEBT ISSUANCE COSTS (Net of amortization)............ 11,414,920 13,375,564

OTHER ASSETS......................................... 154,287 2,097,443
------------- -------------
TOTAL ASSETS......................................... $1,438,819,812 $820,255,303
============= =============
</TABLE>

The accompanying notes are an integral part of these financial statements

<PAGE>
PanAmSat Corporation

BALANCE SHEETS - (continued)
<TABLE>

December 31, December 31,
------------------ -----------------
1995 1994
LIABILITIES AND EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt........................ $ 3,287,250 $ 1,679,760
Accounts payable......................................... 834,405 1,671,653
Accrued interest......................................... 7,109,375 7,109,375
Accrued liabilities and taxes............................ 7,686,452 2,337,261
Deferred revenue......................................... 6,009,836 1,427,351
------------- ------------
TOTAL CURRENT LIABILITIES..................................... 24,927,318 14,225,400

LONG-TERM DEBT................................................ 575,283,661 510,202,286

DEFERRED INCOME TAXES......................................... 31,573,000 -

DEFERRED REVENUE.............................................. 41,656,778 19,194,066

OTHER LIABILITIES............................................. 867,934 1,107,934
------------- ------------
TOTAL LIABILITIES........................................ 674,308,691 544,729,686
============= ============

COMMITMENTS AND CONTINGENCIES

PREFERRED STOCK, 12-3/4% Mandatorily
Exchangeable Senior Redeemable Preferred
Stock, $0.01 par value, 20,000,000 shares
authorized, 292,208 shares issued and outstanding,
7,796 shares for accrued dividends....................... 287,648,667 -
------------- ------------
PARTNER'S INTEREST-CONDITIONALLY
REDEEMABLE............................................... - 194,590,623
------------- ------------
PARTNERS' EQUITY.............................................. - 80,934,994
------------- ------------
STOCKHOLDERS' EQUITY:
Class A Common Stock, $0.01 par value,
100,000,000 shares authorized, 40,459,432 404,594 -
shares issued and outstanding ......................
Class B Common Stock, $0.01 par value,
100,000,000 shares authorized, 40,459,431
shares issued and outstanding....................... 404,594 -
Common Stock, $0.01 par value, 400,000,000
shares authorized, 19,081,137 shares issued
and outstanding..................................... 190,812 -
Additional paid-in-capital............................... 477,297,753 -
Retained earnings........................................ (1,435,299) -
------------- ------------
Total Stockholders' Equity.................................... 476,862,454 -
------------- ------------
TOTAL LIABILITIES AND EQUITY............................. $1,438,819,812 $820,255,303
============== ============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
PanAmSat Corporation
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1995, 1994, and 1993

<TABLE>
------------------------------------------------------
1995 1994 1993
REVENUES: ---------- ---------- ----------
<S> <C> <C> <C>
Unaffiliated parties $112,231,953 $ 58,710,472 $ 46,625,022
Related parties 3,922,824 5 ,033,434 4,172,601
------------- ------------ ------------
116,154,777 63,743,906 50,797,623
OPERATING EXPENSES:
Direct expenses-service agreements 5,729,290 4,254,122 3,424,377
Sales and marketing 9,542,672 7,179,192 4,461,456
Engineering and technical services 10,659,106 5,811,516 3,840,514
General and administrative 15,687,798 9,767,705 7,065,592
Depreciation and amortization 33,411,878 16,330,674 8,230,533
Compensation expense related to
corporate reorganization 8,341,040 - -
Other - - 736,620
------------- ------------ ------------
83,371,784 43,343,209 27,759,092

INCOME FROM OPERATIONS 32,782,993 20,400,697 23,038,531

INTEREST INCOME (20,637,256) (7,186,549) (4,991,278)
INTEREST EXPENSE 19,044,771 9,589,322 11,094,364
------------- ------------ ------------
INCOME BEFORE INCOME TAXES 34,375,478

INCOME TAXES 16,829,000
-------------

NET INCOME 17,546,478 $ 17,997,924 $ 16,935,445
------------- ============ ============

PREFERRED STOCK DIVIDEND 25,976,655
-------------

NET (LOSS) TO COMMON SHARES $ (8,430,177)
=============

PRO FORMA NET INCOME AND EARNINGS
PER COMMON SHARE (UNAUDITED):
HISTORICAL NET INCOME $ 17,546,478 $ 17,997,924
PRO FORMA ADJUSTMENT TO INCOME TAX PROVISION (1,207,000) 7,245,000
------------- ------------

PRO FORMA NET INCOME 18,753,478 10,752,924

PREFERRED STOCK DIVIDEND 25,976,655 -
------------- ------------
PRO FORMA NET INCOME (LOSS) TO
COMMON SHARES $ (7,223,177) $10,752,924
============= ===========

PRO FORMA EARNINGS (LOSS) PER
COMMON SHARES $ (0.08) $ 0.13
============= ===========

PRO FORMA WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING 89,678,638 85,675,677
============= ===========
</TABLE>

The accompanying notes are an integral part of these financial statements

<PAGE>
PanAmSat Corporation
STATEMENTS OF STOCKHOLDERS' EQUITY AND PARTNERS' EQUITY

<TABLE>

Partner's Common Stock
Interest Par Value Additional
Limited General Partners' Conditionally ------------------- Paid-In- Retained
Partners Partners Equity Redeemable Shares Amount Capital Earnings
------------ --------- ---------- ----------- ---------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1993 $ 48,606,804 $ 490,977 $49,097,781 $ 50,000,000 - $ - $ - $ -
Net income 16,766,091 169,354 16,935,445 - - - - -
Distributions (6,063,750) (122,500) (6,186,250) (6,063,750) - - - -
Contribution of
partner's interest - - - 150,000,000 - - - -
------------ --------- ---------- ----------- ---------- --------- ------------ ---------

BALANCE, December 31,1993 59,309,145 537,831 59,846,976 193,936,250 - - - -
Net income 17,817,944 179,980 17,997,924 - - - - -
Issuance of common stock - - - - 100 1 999 -
Contributions, net 660,918 6,676 667,594 654,373 - - - -
Contribution of limited
partner's interest 2,422,500 - 2,422,500 - - - - -
----------- ---------- ------------ ----------- ---------- --------- ------------ ---------

BALANCE, December 31, 1994 80,210,507 724,487 80,934,994 194,590,623 100 1 999 -
Net (loss) for period
ending March 2, 1995 (6,924,930) (69,949) (6,994,879) - - - - -
Capital contribution of
equity interest granted
to an executive 3,849,300 - 3,849,300 - - - - -
Contribution of assets and
liabilities to PanAmSat
Corporation and issuance of
common stock (77,134,877) (654,538) (77,789,415) (194,590,623) 99,692,550 996,925 248,487,113 -
Cancellation of common
stock upon reorganization
to PanAmSat Corporation
(Note 2) - - - - (100) (1) (999) -
Issuance of preferred stock - - - - - - - -
Accretion and preferred
dividends payable in kind - - - - - - - (25,976,655)
Reverse stock split and
issuance of Common Stock - - - - 307,450 3,075 228,810,640 -
Net Income for the
period of March 3, 1995
through December 31, 1995 - - - - - - - 24,541,356
----------- ----------- ----------- ----------- ----------- ---------- ------------ ----------

BALANCE, December 31, 1995 $ - $ - $ - $ - 100,000,000 $1,000,000 $477,297,753 $(1,435,299)
=========== ========== =========== =========== =========== ========== =========== ==========

</TABLE>

The accompanying notes are an integral part of these financial statements

<PAGE>
PanAmSat Corporation
STATEMENTS OF CASH FLOWS
<TABLE>

Year Ended December 31,
--------------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income $ 17,546,478 $ 17,997,924 $ 16,935,445
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 33,411,878 16,330,674 8,230,533
Deferred income taxes 8,677,000 - -
Accretion of interest on senior subordinated
discount notes 36,128,588 32,355,546 12,463,063
Accretion of interest on marketable securities (1,004,072) (484,390) (3,625,676)
Interest expense capitalized (37,840,680) (8,999,916)
(41,038,656)
Compensation expense granted as equity interest 3,849,300 - -
Changes in assets and liabilities:
Increase in accounts receivable (1,946,143) (664,672) (36,262)
Increase in prepaid expenses and other current assets (1,838,622) (3,120,439) (50,807)
(Increase) decrease in tax distribution receivable 6,671,967 (6,671,967) -
(Decrease) increase in accounts payable (837,248) 996,779 (2,431,911)
Increase (decrease) in accrued liabilities and taxes 5,169,191 (1,208,956) 9,757,488
Increase in deferred revenue 27,045,197 11,603,136 5,786,692
Decrease in other liabilities (60,000) (11,000) (32,000)
Debt issuance costs - - (16,103,428)
------------ ------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 94,972,834 26,083,979 21,893,221
------------ ------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment (13,476,119) (10,474,642) (6,752,722)
Expenditures for satellite systems under development (333,051,711) (300,217,208) (260,133,861)
Purchase of marketable securities (488,789,459) - (298,928,907)
Proceeds from maturity of marketable securities 50,000,000 247,753,638 -
Proceeds from insurance claim receivable 191,084,380 - -
(Increase) decrease in other assets (83,217) (120,515) 256,779
-
------------ ------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (594,316,126) (63,058,727) (565,558,711)
------------ ------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable - - 440,000,421
Partner's conditionally redeemable capital contribution - 50,000,000 150,000,000
Capital contributions (distributions), net - 1,321,967 (12,250,000)
Proceeds from preferred stock offering, net 263,377,104 - -
Proceeds from issuance of Common Stock, net 228,813,715 - -
Deferred offering costs - (1,705,093) -
Repayments of long-term debt (2,139,623) (1,082,762) (2,188,317)
Repayments of notes and distributions payable - - (22,975,000)
------------ ------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 490,051,196 48,534,112 552,587,104
------------ ------------- --------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (9,292,096) 11,559,364 8,921,614

CASH AND EQUIVALENTS, beginning of year 22,854,209 11,294,845 2,373,231
------------ ------------- --------------
CASH AND EQUIVALENTS, end of year $ 13,562,113 $ 22,854,209 $ 11,294,845
============ ============= ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash received for interest $ 19,633,184 $ 10,497,017 $ 431,664
============ ============= ==============
Cash paid for interest $ 20,756,864 $ 18,015,432 $ 521,842
============ ============= ==============
Cash paid for taxes $ 8,845,000 $ - $ -
============ ============= ==============

</TABLE>

The accompanying notes are an integral part of these financial statements
<PAGE>
PanAmSat Corporation
NOTES TO FINANCIAL STATEMENTS

(1) Principles of Presentation:

On March 2, 1995, pursuant to the amended Exchange and Subscription
Agreement and Plan of Reorganization, PanAmSat Corporation (the "Company"),
PanAmSat, L.P. (the "Partnership") and its partners consummated various
transactions whereby the Company acquired the Partnership and converted it to
corporate form. In connection therewith, (i) Rene Anselmo and affiliated persons
and entities (the "Anselmo Group") exchanged their interests in the Partnership
for shares of Class A Common Stock representing approximately 49.66% of the
outstanding common stock of the Company, (ii) Univisa Satellite Holdings, Inc.
("Univisa") exchanged its interest in the Partnership for shares of Class B
Common Stock representing approximately 50.15% of the outstanding common stock
of the Company and (iii) a partner of the Partnership exchanged his interest in
the Partnership for shares of Common Stock representing approximately 0.19% of
the outstanding common stock of the Company. The Amended and Restated
Certificate of Incorporation of the Company provides, among other things, the
holders of the Class A Common Stock with the ability to elect a majority of the
Company's board of directors and the Anselmo Group and Univisa with a veto over
certain significant corporate transactions of the Company. On September 27,
1995, the Company completed an initial public offering of 18,920,000 shares of
common stock, including 4,595,676 shares held by certain selling stockholders,
and received net proceeds of approximately $229 million.

Prior to the conversion, the Partnership operated under terms of the
Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement") dated December 31, 1992. Univisa, a wholly owned subsidiary of Grupo
Televisa, S.A. ("Televisa") and a general partner in the Partnership, made cash
investments in partnership units of $200 million. Univisa had a right to redeem
its $200 million investment in the Partnership which right was extinguished in
connection with the conversion of the Partnership to corporate form. The general
partners of the Partnership were PanAmSat, Inc. and Univisa, each of which owned
2,000 general partnership units. The Anselmo Group and Univisa each held an
aggregate of 197, 258 and 198,000 limited partnership units, respectively.

All assets and liabilities transferred were reflected at historical
cost by the Company and the Partnership. Accordingly, the accompanying financial
statements reflect the combined assets, liabilities, equity and operations of
the Company and the Partnership as if they had operated as a single entity since
their respective dates of organization. The accompanying financial statements
include the accounts of the Company and its wholly owned subsidiaries. All
significant intercompany transactions and balances have been eliminated.

(2) Business description:

The business of the Company is to operate an international
telecommunications satellite system. The Company currently provides video, data
and voice telecommunications services in North America, South America, Europe
and Africa via its PAS-1 satellite ("PAS-1") and PAS-3 satellite ("PAS-3"), in
the Asia-Pacific region via its PAS-2 satellite ("PAS-2") and in Europe, Africa
and Asia via its PAS-4 satellite ("PAS-4"). PAS-1 was launched in June 1988,
PAS-2 in July 1994, PAS-4 in August 1995 and PAS-3 in January 1996. The Company
currently intends to construct and deploy additional satellites over the
Atlantic, Atlantic, Indian, and Pacific ocean regions, respectively, (see Note 6
). In addition, the Company intends to pursue direct to home ("DTH") services
internationally, and has various arrangements relating to the provision of DTH
services in Latin America and Spain (see Note 4). The development, launch and
operation of telecommunications satellites involve significant risks of
construction delays, launch delays, launch failure or damage to a satellite
following its launch which may reduce its performance or result in its
destruction. Such delays, launch failures or damage would adversely affect
operating results.

The Company holds a license from the Federal Communications Commission
("FCC") to operate PAS-1 in geostationary orbit at 45 degrees West longitude,
PAS-2 at 191 degrees West longitude, PAS-3 at 43 degrees West longitude and
PAS-4 at 68.5 degrees East longitude. The Company has obtained or applied for
authorizations from the FCC for additional C/Ku-band hybrid satellites and for
new Ka-band satellites. Conditional authority has been received for an
additional satellite at 72 degrees East longitude. The Company has also filed
applications with the FCC for additional C/Ku-band hybrid satellites at 194
degrees West longitude, 58 degrees West longitude, 43 degrees West longitude (to
be co-located with PAS-3), 68.5 degrees East longitude (to be co-located with
PAS-4), 79 degrees West longitude, and 93 degrees West longitude. The Company
has filed applications with the FCC for Ka-band satellites at 58 degrees, 79
degrees, 43 degrees, 45 degrees, and 103 degrees West longitude, and at 169
degrees, 166 degrees, 68.5 degrees, and 72 degrees East longitude. The Company's
wholly-owned subsidiary, PanAmSat Carrier Services, Inc., has an FCC
authorization to provide common carrier service via PAS-1. The Company also
holds licenses to provide domestic and international satellite communications
services in France, Germany, the United Kingdom, Ecuador, Argentina, and Japan.

The Company provides telecommunications services under long-term and
occasional (spot) booking arrangements, a majority of which are with foreign
entities, including Univisa affiliates.

The following summarizes the Company's foreign and domestic sales:

<TABLE>
December 31,
---------------------------------------------------------
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
Sales to unaffiliated customers:

United States................................. $49,936,228 $26,175,302 $15,534,710
Central and South America..................... 29,078,131 23,680,874 21,832,511
Other foreign................................. 33,217,594 8,854,296 9,257,801
------------- ------------ ------------
$112,231,953 $58,710,472 $46,625,022
============= ============ ============
</TABLE>

Future cash payments expected from customers under all long-term
arrangements for satellites in service, including PAS-3 (see Note 5), aggregate
approximately $1.9 billion as of December 31, 1995, excluding any DTH service
agreements described in Note 4. Such cash payments may be reduced for outage or
transponder failure and may be further reduced for "lowest price" provisions for
like transponder capacity given to similarly situated customers. Approximately
$173 million of such arrangements at December 31, 1995 are terminable at the
customer's option after a minimum service period.

(3) Summary of Significant Accounting Policies:

Use of Estimates--

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of certain estimates by
management in determining the reported amount of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ materially from
those estimates.

Revenue recognition--

The Company enters into contracts to provide satellite capacity and
related services. These contracts generally provide for the use of satellite
and, in certain cases, earth station and teleport facilities for periods ranging
from one year to the life of the satellite. Virtually all contracts stipulate
payment terms in U.S. dollars.

Service agreements and occasional (spot) services. Revenues under
service agreements and occasional (spot) services are recognized as services are
performed and billed. The Company has certain obligations, including providing
spare or substitute capacity if available, in the event of satellite service
failure under certain long-term agreements. If no spare or substitute capacity
is available, the agreements may be terminated. Except for certain deposits, the
Company is not obligated to refund payments previously made.

Transponder contracts. Long-term transponder contracts provide for use
of a transponder for the life of the transponder. Payments for the transponder
are made over a shorter period, usually seven years. Uncured transponder
failures during the payment period result in cessation of customer payments. The
Company is not required to refund any portion of customer payments if a
transponder fails. The economic risk of loss passes to the customer upon receipt
of final payment by the Company.

Revenue under transponder contracts is recognized ratably over the
payment period, and a pro rata share of the cost of the satellite system and a
pro rata share of future telemetry, tracking and control ("TT&C") costs for the
life of the satellite are expensed over the same period. Accordingly, no revenue
will be recognized beyond the payment period, usually seven years, and all
estimated costs related to these transponders will have been recognized as of
the final payment date. Revenues of approximately $3.6 million, $4.5 million,
and $4.5 million for the years ended December 31, 1995, 1994 and 1993,
respectively, are included in the accompanying statements of operations relating
to such contracts.

Cash and cash equivalents--

Cash and cash equivalents consists of cash on hand and highly liquid
investments with original maturities of three months or less.

Accounts receivable--

Accounts receivable include amounts earned under service agreements and
occasional (spot) services which are billable as performed.

Marketable securities --

Marketable securities consist of debt securities issued by the United
States Treasury and other U.S. government corporations and agencies, corporate
debt securities and other debt securities (primarily investments in money market
funds consisting of the aforementioned securities) and have maturity dates
within one year. The carrying amounts of these securities are approximately
$111.8 million, $124.8 million and $257.2 million, respectively. In 1994,
marketable securities consisted of securities issued by the United States
Treasury. The Company has classified all debt securities as held-to-maturity
and, accordingly, are recorded at amortized cost, which approximates fair value.
Money market funds are recorded at cost plus accrued interest, which
approximates fair value. Also included at December 31, 1995 and 1994 is
approximately $1.2 million and $4.4 million, respectively, of cash. Proceeds of
these securities and cash are intended to be used for the satellite systems
under development and, accordingly, are classified as long-term. Under terms of
certain long-term debt agreements, approximately $4.6 million and $55.3 million
as of December 31, 1995 and 1994, respectively, are restricted for this purpose.

Satellites and other property and equipment--

Satellites and other property and equipment are stated at historical
cost. The cost of the PAS-1, PAS-2, and PA-4 satellite system includes all
construction costs, incentive obligations, launch costs, launch insurance,
direct development costs, and capitalized interest. Substantially all other
property and equipment consists of the Company's teleport facilities.

Depreciation and amortization are provided using the straight-line
method over the estimated useful lives of the respective assets as follows:

Estimated Lives
PAS-1, PAS-2, PAS-3 and PAS-4 satellite ---------------
system...................................... 13,15
Communications equipment.................... 7
General support equipment................... 5-10
Buildings................................... 25

The estimated useful lives of the satellites were determined by an
engineering analysis performed at the in-service dates. The original estimated
useful lives are periodically reviewed using current TT&C data provided by
various service providers. To date, no significant change in the original
estimated useful lives has resulted. The telecommunications industry is subject
to rapid technological change which may require the Company to revise the
estimated useful lives of its satellites and communications equipment or to
adjust their carrying amounts.

Research and development costs and maintenance and repairs are charged
to operations as incurred.

Satellite systems under development--

Expenditures for satellite systems under development include
construction, launch and launch insurance progress payments, certain direct
development costs, capitalized interest, and components for a spare satellite
(see Note 6).

Cost of satellites which are lost at launch are carried, net of any
insurance proceeds, in satellite systems under development. The remaining net
amounts are depreciated proportionately over the estimated useful lives of
related satellites placed in service.

Debt issuance costs--

Debt issuance costs relate to the issuance of the Company's 9 3/4%
Senior Secured Notes ("Senior Secured Notes") and the Company's 113/8% Senior
Subordinated Discount Notes ("Discount Notes") in August 1993. These costs
totaled approximately $16.2 million at December 31, 1995, and are being
amortized over the life of the Notes using the interest method. The accumulated
amortization at December 31, 1995 is approximately $4.7 million. Also included
in other assets at December 31, 1994 are deferred costs of approximately $1.7
million incurred in connection with the offering of the Company's 12 3/4%
Mandatorily Exchangeable Senior Redeemable Preferred Stock ("Preferred Stock")
completed in April 1995.

Income taxes--

As a result of the conversion of the Partnership to a corporation on
March 2, 1995, the Company files corporate federal and state income tax returns.
This change in tax status was recognized by establishing deferred tax assets and
liabilities for temporary differences between the tax basis of assets and
liabilities and amounts reported in the accompanying balance sheet (see Note 9).

The current provision for income taxes represents actual or estimated
amounts payable or refundable on tax returns filed or to be filed for each year.
Deferred tax assets and liabilities are recorded for the estimated future tax
effects of temporary differences between the tax basis of assets and liabilities
and amounts reported in the balance sheets. The overall change in deferred tax
assets and liabilities for the period measures the deferred tax expense for the
period. Effects of changes in enacted tax laws on deferred tax assets and
liabilities are reflected as adjustments to tax expense in the period of
enactment.

Pro forma earnings per share--

The unaudited proforma earnings per share have been calculated and
presented on a pro forma basis (i) to reflect the proforma adjustments to the
income tax provision as if the Company had been incorporated and (ii) as if the
shares issued to effect the conversion of the Partnership to corporate form and
to effect a .859399 for 1 reverse split of the Company's common stock on
September 15, 1995 were outstanding for all periods presented and (iii) to
reflect the weighted average number of common shares issued in the Company's
initial public offering. Common stock equivalents which are antidilutive have
been excluded from the calculations.

Net income (loss) allocation--

The Partnership Agreement had provided that profits and losses of the
Partnership be allocated among the partners' percentage interests.

Newly Issued Accounting Standards--

In March 1995, Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", was issued. The Company plans to adopt SFAS No. 121
in 1996, and believes that this accounting standard will not have a material
impact on the Company's financial position and its results of operations.

In October 1995, Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation" was issued. The Company plans to
adopt the disclosure requirements of SFAS No. 123 in 1996.

(4) DTH Service Agreements and Joint Ventures:

During the third quarter of 1994, the Company announced its intention
to provide DTH services in Latin America. In connection therewith, the Company
and Televisa signed a binding memorandum of understanding in the first quarter
of 1995 (the "Original MOU") to put into operation a digital DTH satellite
television broadcasting business covering Latin America, the Caribbean and
certain areas of the southern United States.

In November 1995, the Company announced that it would serve as a
satellite service provider for the Latin America DTH service ("Latin America
DTH") to be offered by the Globo Organization ("Globo"), Televisa, The News
Corporation Limited ("News Corp.") and Tele-Communications International, Inc.
("TCI").

On February 29, 1996, the Company signed a binding letter agreement
with Globo, Televisa and News Corp. (the "1996 Letter Agreement") to provide
service to a series of joint ventures (the "Latin America JVs") to be formed by
them and TCI on 48 transponders ultimately on PAS-5 and PAS-6, with temporary
service on PAS-3 pending the commencement of service on PAS-6. This capacity
would enable the Latin America JVs to broadcast to Latin America, the Caribbean,
and certain areas of the southern United States approximately 500 digital
channels and to permit distribution of program packages of approximately 120
digital channels to specific market areas. Also under the 1996 Letter Agreement,
Globo, Televisa, and News Corp. have agreed to proportionally guarantee 100
percent of the fees for transponder services to the Latin America JVs. These
guarantee obligations may be assigned to TCI and, with the Company's prior
written consent, to new equity participants in the Latin America JVs. The
Company will receive minimum service fees equivalent to the Company's best
estimate of the cost per transponder to the Company of designing, launching,
operating and insuring each satellite for the transponders used by the Latin
America JVs. The Company also will receive additional revenue based on
subscriber revenues of the Latin America JVs above a certain threshold, except
that the transponders on PAS-3 and PAS-6 that will be used by the Latin America
JV operating in Brazil will be charged on a fixed fee basis.

Under a verbal agreement with Televisa, the Company would be granted an
option for ten years to obtain 10- to 15-percent interests from Televisa in the
Latin America JVs that would service Latin America, the Caribbean and the
southern United States, but not Brazil. The purchase price would be equal to the
Company's pro rata share of Televisa's aggregate contributions to the Latin
America JVs providing such service, less all distributions by such Latin America
JVs to Televisa, plus interest. The Company has no interest nor any options to
acquire an interest in the Latin America JV that will provide DTH service in
Brazil. Upon the execution of binding agreements incorporating the verbal
agreements in principle and relating to the Spain joint venture with Televisa
described below, the Original MOU will be terminated.

The Company and Televisa have also announced their intention to provide
DTH services through a joint venture in Spain with the capacity to broadcast
approximately 24 to 80 digital channels to subscribers in Spain using small
24-36 inch (60-90 cm) antennas. It is anticipated that the Company will
ultimately acquire up to 49% (subject to pro rata dilution with Televisa upon
admission of new investors, if any) of this venture for a price equal to the pro
rata aggregate amount of Televisa's contributions to the venture, less all
distributions by the venture to Televisa, plus interest.

The Company also has significant investments in and commitments for
PAS-5 and PAS-6 (see Note 6) which it intends to use in the proposed DTH
business. Globo, Televisa and News Corp. plan to enter into one or more
definitive agreements to implement the terms agreed in and contemplated by the
1996 Letter Agreement. The Company's acquisition of an option to acquire equity
interests in certain of the Latin America JVs and the joint venture in Spain is
subject to the execution by such parties of such definitive agreements and to
the Company's execution of definitive agreements with Televisa. No assurance can
be given that such definitive agreements will be consummated, or that the Latin
America JVs or the joint venture in Spain will be successful.

(5) Satellites and Other Property and Equipment:

The Company's principal operating assets consist of PAS-1, PAS-2 and
PAS-4. The Company has in-orbit insurance coverage of $60 million for PAS-1
through August 26, 1996. In-orbit insurance coverage for PAS-2 and PAS-4 of $204
million and $227 million, respectively, expires on May 21, 1997. In-orbit
insurance for PAS-3 is covered under its launch insurance policy for 180 days
subsequent to its launch in January 1996. Thereafter, the Company intends to
obtain in-orbit insurance similar to that obtained for the other satellites in
service. The Company operates terrestrial sites and network control centers in
Homestead, Florida, Ellenwood, Georgia and Sylmar, California.

Satellites and other property and equipment balances are as follows:

<TABLE>
December 31,
-------------------------------
1995 1994
--------------- -------------
<S> <C> <C>
Satellites in service (PAS-1, PAS-2 and PAS-4)....... $568,338,771 $307,810,877
Buildings and leasehold improvements................. 14,554,391 9,791,328
Communications and support equipment................. 25,057,147 17,173,510
Land................................................. 1,977,002 1,248,566
--------------- -------------
609,927,311 336,024,281

Less: Accumulated depreciation and amortization...... (79,177,520) (48,148,548)
--------------- -------------
$ 530,749,791 $ 287,875,733
=============== =============
</TABLE>

Upon the successful launch of PAS-2 in July 1994, a consultant was
granted a limited partnership interest in the Partnership from the Anselmo
Group. As a result, the Partnership recognized an increase to the cost of PAS-2
of approximately $2.4 million with an offsetting increase to capital reflecting
its best estimate of fair value. Such additional non-cash costs are being
depreciated over the estimated useful life of PAS-2. On February 19, 1996 the
PAS-3 satellite was placed in service. As a result, approximately $228.0 million
of costs included in satellite systems under development at December 31, 1995
was transferred to satellites in service during the first quarter of 1996.

(6) Satellite Systems Under Development:

The Company has contracted with Hughes Aircraft Company ("Hughes") to
construct a satellite, PAS-5, to be deployed over the Atlantic Ocean region. The
Company has also contracted with Space Systems/Loral ("Loral") for the
construction of an additional satellite, PAS-6, to be deployed over the Atlantic
Ocean region. PAS-5 and PAS-6 will be suitable for DTH broadcast purposes and
are scheduled to be delivered in 1997 and 1996, respectively.

The Hughes PAS-5 and Loral PAS-6 contract terms include progress
payments payable monthly during the period of the satellites' construction and
incentive obligations payable monthly with interest at 10% and 9.5% per annum,
respectively, over a period of 10-15 years, scheduled to commence after the
delivery and launch of the satellites. The incentive obligations are subject to
reduction or refund (as applicable) if the satellites fail fully to meet
specific technical operating standards. The contracts contain rights to
cancellation, which would result in the forfeiture of all progress payments with
escalating termination payments.

The Company has a binding memorandum of understanding with Loral for
the construction and delivery of two satellites, PAS-7 and PAS-8, with options
to purchase additional satellites and/or replacement satellites for PAS-6, PAS-7
or PAS-8. The Company is in final negotiations with Loral of a definitive
contract. Loral has procured certain components that would be used for
construction of PAS-7 and PAS-8.

The Company has entered into launch contracts with
Lockheed-Khrunichev-Energia International, Inc. (now know as International
Launch Services) ("LKE") for the launch of three satellites and Arianespace S.A.
("Arianespace") for the launch of one satellite. The Company expects to launch
PAS-5 and PAS-8 under the LKE contract from Khazakhstan using Proton rockets and
PAS-6 using an Ariane V launcher. The Company has also entered into a
multi-launch agreement ("Multi-Launch Agreement") with Arianespace which
provides for the launch of PAS-7 with an option to launch up to three additional
satellites. The launch contracts provide that the Company may terminate such
contracts at its option, and the contracts include termination liability
schedules that increase in magnitude as the timing of any such termination
approaches the date of launch. The maximum liability, calculated in accordance
with such schedules, for launch services that have been ordered in connection
with any individual launch (including postponement fees) is approximately $45.0
million. Payments made by the Company prior to the Company's election to
terminate any such launch contract are offset against any such liability owed.

The Company has obtained a policy for up to $230 million of launch
insurance for both PAS-5 and PAS-6, respectively.

The Company expects the total cost (including costs for engineering,
construction, launch, launch insurance, direct development costs and certain
components for a spare satellite) of PAS-5, PAS-6, PAS-7, and PAS-8 to be
approximately $845 million, of which the Company has paid $135 million at
December 31, 1995. The Company has contracted commitments for approximately $533
million excluding amounts paid through December 31, 1995 related to its
satellite systems under development.

(7) Long-Term Debt:

<TABLE>
December 31,
------------------------------------
1995 1994
---------------- ---------------
<S> <C> <C>
9 3/4% Senior Secured Notes due 2000 (a)................... $175,000,000 $175,000,000

113/8% Senior Subordinated Discount Notes due 2003--
accreting to $460,206,000 in August 1998 (including
accreted interest of $80,947,197 and $44,818,609 at
December 31, 1995 and 1994, respectively) (b)........... 345,947,618 309,819,030

Incentive obligations--payable to Hughes Aircraft
Company, Inc. in monthly installments including
interest at 10% collateralized by a security
interest in three transponders on PAS-2 and PAS-4,
respectively........................................... 55,111,069 23,799,687

Deferred satellite performance incentive-payable to
GE Astro in equal monthly installments of $66,075
including interest at 10%, maturing September 1998;
collateralized by a security interest in the
proceeds of future transponder sales from PAS-1....... 1,899,661 2,471,208

Note payable--payable to Hughes Network Systems, Inc.
in monthly installments including interest at 8.5%
collateralized by communications equipment............ 612,563 792,121
---------------- ---------------
578,570,911 511,882,046

Less--Current maturities................................. 3,287,250 1,679,760
---------------- ---------------
$575,283,661 $510,202,286
================ ===============
</TABLE>
- -------------------
(a) Interest on the Senior Secured Notes is payable semi-annually on
February 1 and August 1 of each year, commencing February 1, 1994.
Interest incurred for the years ended December 31, 1995 and 1994
totaled approximately $17 million per year. The Senior Secured Notes
are redeemable after August 1, 1998, in whole or in part, at the option
of the Company, at a price of 101.625% declining to 100% of principal
plus accrued and unpaid interest, if any, to the date of redemption.
The Senior Secured Notes rank senior in right of payment to all
subordinated indebtedness of the Company and pari passu in right of
payment with all Senior Debt (as defined in the indenture for the
Senior Secured Notes). The Senior Secured Notes are secured by liens on
certain assets of the Company, including PAS-1, PAS-2, PAS-3 and PAS-4.

(b) Interest on the Discount Notes accretes prior to August 1, 1998 at
which time the principal outstanding will be approximately $460.2
million. Interest accreted for the year ended December 31, 1995 and
1994 totaled approximately $36.1 million and $32.3 million,
respectively. After August 1, 1998, interest on the Discount Notes will
be payable semi-annually on February 1 and August 1 of each year,
commencing on February 1, 1999. The Discount Notes are not redeemable
prior to August 1, 1998. Thereafter, the Discount Notes are redeemable,
in whole or in part, at the option of the Company, at a price of
104.266% declining to 100% of principal plus accrued and unpaid
interest, if any, to the date of redemption. The Company will be
required to redeem 25% of the original aggregate principal amount of
the Discount Notes at a redemption price equal to 100% of the principal
amount thereof together with accrued and unpaid interest each of August
1, 2001 and August 1, 2002. The Discount Notes are unsecured and are
subordinated in right of payment to all present and future Senior Debt
of the Company, including the Senior Secured Notes.

The indentures relating to the Senior Secured Notes and Discount Notes
contain restrictive covenants that, among other things, impose limitations on
the Company and its subsidiaries with respect to their ability to (i) incur
additional indebtedness; (ii) make certain investments; (iii) sell assets or
apply the proceeds therefrom; (iv) enter into transactions with affiliates and
(v) pay dividends. Under the financial covenants included in these restrictions
the Company is not currently permitted to incur additional indebtedness, except
as described below, or to make certain investments or pay dividends.

Under terms of the Senior Secured and Discount Notes, the Company is
limited to borrowing up to $30 million of additional bank debt and/or $15
million of debt in connection with the purchase of certain communications
equipment, excluding satellite incentive obligations for PAS-1, PAS-2, PAS-3,
and PAS-4. No such indebtedness or availability of such indebtedness existed at
December 31, 1995.

Annual maturities of long-term debt are as follows:

Year Ending December 31, Amount
----------------------------- ----------------
1997............................................... $ 3,628,287
1998............................................... 3,777,872
1999............................................... 3,317,123
2000............................................... 178,664,480
2001 and thereafter................................ 385,895,899
----------------
$ 575,283,661
================

The fair value of the Company's debt exceeded the carrying value by
approximately $29.4 million at December 31, 1995. Capitalized interest totaled
approximately $37.8 million and $41.0 million in 1995 and 1994, respectively,
and is included in satellite systems under development.

(8) Preferred Stock:

On April 21, 1995, the Company consummated the sale of 275,000 shares
of Preferred Stock and received proceeds of approximately $261.5 million, net of
underwriting discounts and commissions of approximately $10.7 million and
offering expenses of approximately $2.5 million. The Company anticipates that
all of such net proceeds will be applied to the development, construction and
launch of PAS-5 and PAS-6.

Dividends on the Preferred Stock are payable quarterly in arrears
commencing on July 15, 1995. On or before April 15, 2000, the Company may, at
its option, pay dividends in cash or in additional fully paid and non-assessable
shares of Preferred Stock having an aggregate liquidation preference equal to
the amount of such dividends. After April 15, 2000, dividends may be paid only
in cash. As of December 31, 1995, 300,004 shares have been issued and accrued.

The Preferred Stock is not redeemable prior to April 15, 2000. On or
after April 15, 2000, the Preferred Stock is redeemable at the option of the
Company, in whole or in part from time to time at a redemption price of 106.375%
declining to 100% of liquidation value plus accrued and unpaid dividends. The
Preferred Stock is subject to mandatory redemption in whole on April 15, 2005 at
a price equal to the liquidation preference thereof plus accrued and unpaid
dividends. Subject to certain conditions, the Company will be required to
exchange all the outstanding shares of Preferred Stock into the Company's 12
3/4% Senior Subordinated Notes due 2005 as soon as practicable following the
date that such exchange is permitted by the terms of the Senior Secured Notes
and the Discount Notes.

The fair value of the Company's Preferred Stock exceeded the carrying
value by approximately $39.6 million at December 31, 1995.

(9) Income Taxes:

Prior to the conversion, the Partnership was not subject to federal or
state income taxes. The partners were required to report their share of income
or loss in their respective income tax returns. Under terms of the Partnership
Agreement, quarterly distributions were required for income taxes for each year
that the Partnership had taxable income. Such distributions were calculated
using the highest effective combined U.S. federal, state, local and foreign tax
rate that was imposed on any partner which was a U.S. person with respect to
such partner's allocable share of taxable income of the Partnership for such
taxable year. Such tax distributions totaled approximately $12.3 million for the
year ended December 31, 1993. At December 31, 1994, the Partnership was owed
approximately $6.7 million from its partners for quarterly tax distributions
made prior to the launch of PAS-2, which resulted in a loss for the year ended
December 31, 1994. Such amounts were repaid in 1995.

Taxable income (loss) for the Company and its predecessor entities was
approximately $3.4 million, $(5.5 million) and $29.0 million for 1995, 1994 and
1993, respectively. Substantially all of the difference between the Company's
and its predecessors' book income and taxable income (loss) is attributable to
differences in depreciation for tax and financial reporting purposes and
customer deposits. As a result of the Partnership conversion, a net deferred tax
liability of approximately $22.9 million was recorded March 2, 1995, the
conversion date.

The temporary differences that give rise to the net deferred tax
liability and their approximate tax effects as of December 31, 1995 are as
follows (in thousands):

Satellites and other property and equipment.................. $52,199
Customer deposits............................................ (16,694)
Other........................................................ (3,932)
---------
Net deferred tax liability................................ $31,573
=========

The components of the provision for income taxes for the period March
2, 1995 through December 31, 1995 are as follows (in thousands):

Current provision
Federal.............................................. $ 7,191
State................................................ 961
Deferred provision...................................... 8,677
----------
Total provision................................ $16,829
==========

The principal difference between the tax provision computed by applying
the statutory federal tax rate and the actual provision is due to state income
and net worth taxes. Substantially all the difference between the Company's
income for financial reporting purposes and taxable income is attributable to
differences in depreciation and customer deposits for tax and financial
reporting purposes. Subject to review by the Internal Revenue Service, the
Company has approximately $3.0 million of alternative minimum tax credit
carryforwards which have no expiration date.

Pro Forma Tax Effects (unaudited)--

The accompanying statements of operations present, on an unaudited pro
forma basis, net income for the years ended December 31, 1995 and 1994 as if the
Company had been taxed at corporate federal and state tax rates and as if the
conversion occurred on January 1, 1994. The pro forma tax effects assume the net
deferred tax liability as described above would have been provided as the
related temporary differences arose.

The components of the pro forma provisions for income taxes for the
years ended December 31, 1995 and 1994 are as follows (in thousands):

<TABLE>
Year Ended Year Ended
December 31, 1995 December 31, 1994
--------------------- -------------------
<S> <C> <C>
Current (benefit) provision
Federal.................................. $ 5,444 $ (1,997)
State.................................... 832 (218)
Deferred provision.......................... 9,346 9,460
------------ ------------
Total pro forma provision.......... $ 15,622 $ 7,245
============ ============

</TABLE>

The pro forma provisions for income taxes for the years ended
December 31, 1995 and 1994 are reconciled to the amounts computed by applying
the statutory federal tax rate to income before taxes as follows (in thousands):

<TABLE>
Year Ended Year Ended
December 31, 1995 December 31, 1994
-------------------- --------------------
<S> <C> <C>
Statutory rate.............................................. $ 12,031 $ 6,299
Permanent differences....................................... 1,371 --
State income taxes, net of federal benefit.................. 2,220 946
------------ ------------
Total pro forma provision for income taxes......... $ 15,622 $ 7,245
============ ============
</TABLE>

Substantially all of the difference between the Company's income for
financial reporting purposes and pro forma taxable income is attributable to the
difference in depreciation and customer deposits for tax and financial reporting
purposes, and, in 1995, the permanent difference created by a $3.8 million
charge related to a grant of a limited partnership interest in the Partnership
to the Executive Vice President of the Company, for which the income tax benefit
was specially allocated to the Anselmo Group.

(10) Related Party Transactions:

The Company has employment agreements with Frederick A. Landman and
Robert Bednarek which terminate December 31, 1996 and June 6, 1996,
respectively, subject to automatic annual renewal. Total annual compensation is
$820,000 under these agreements.

The Company has earned revenues of approximately $3.9 million, $5.0
million, and $4.2 million for 1995, 1994 and 1993, respectively, from entities
affiliated with Univisa. In addition, approximately $41 million and $18 million
of the Company's expected future cash payments at December 31, 1995 and 1994 for
PAS-1 and PAS-3 under long-term arrangements are from the same entities.
Included in other assets is $600,000 due from Univisa for certain reimbursable
fees paid by the Company.

The Company had a commitment to purchase certain equipment for a
minimum of $2.2 million in connection with the DTH venture described above. This
commitment has been canceled by the Company and any costs associated with this
termination will be reimbursed by Televisa under a separate indemnification
agreement.

Certain engineering and technical services are provided by Rubin
Bednarek & Associates, a firm in which an executive of the Company, Robert
Bednarek, was a principal until December 31, 1995. Fees paid to this firm were
approximately $1,435,000, $1,097,000 and $524,000 for each of the three years in
the period ended December 31, 1995.

(11) Employee Benefit Plans:

Non-Qualified Plans--

In December 1991, a predecessor company adopted non-qualified phantom
stock plans. In connection with the conversion of the Partnership into a
corporation, the plans were assumed by the Company and the Partnership recorded
a compensation charge and a liability of approximately $2.8 million, which was
the estimated fair value of the phantom shares at that time. The Company was
obligated to adjust this liability at each balance sheet date to the then
current estimate of fair value. Accordingly, the Company recorded additional
charges of $1.7 million in 1995. The liability was paid in connection with the
Company's initial public offering.

Also in connection with the conversion of the Partnership, the
Executive Vice President of the Company was granted a Partnership interest from
the Anselmo Group which was exchanged for Class A common stock upon the
consummation of the conversion. As a result, the Partnership recorded a
non-recurring compensation charge of approximately $3.8 million with an
offsetting increase to capital.

1995 Stock Plan--

Effective March 2, 1995, the Company adopted the PanAmSat Corporation
Long-Term Stock Investment Plan (the "Stock Plan"), which provides for the
granting of non-qualified stock options, incentive stock options, alternate
appreciation rights, restricted stock, performance units and performance shares
to executive officers and other key employees of the Company, and to other
service providers, including independent contractors of the Company. Restricted
stock, performance units and performance shares may be granted in the discretion
of the Committee (as defined below) on such terms as the Committee may decide.
The maximum number of shares of common stock which may be issued under the Stock
Plan is 5,000,000, and the maximum number of shares of common stock which may be
issued to any grantee pursuant to the Stock Plan is 2,000,000. The Stock Plan is
administered by a committee of the Board of Directors (the "Committee")
consisting of at least two directors of the Company. As of December 31, 1995,
options for 1,047,800 shares of common stock have been granted under the Stock
Plan, including options for 100,000 shares granted to non-employees. At March
29, 1996, 1,040,975 options are exercisable at $17.00 per share beginning on
September 21, 1996 and vest ratably over five years and 50,000 options are
exercisable at $23.375 per share beginning in January 1997 and vest ratably over
five years.

(12) Commitments and Contingencies:

Orbital control of satellites in service is maintained by various
service providers under long-term TT&C agreements. Total annual TT&C costs for
satellites in service is approximately $5.2 million per year. TT&C costs are
included in Engineering and Technical Services and are generally expensed on a
straight-line basis over the term of the agreement.

The Company has commitments for operating leases primarily relating to
equipment and its executive office facilities in Greenwich, Connecticut. These
leases contain escalation provisions for increases in rental due to increased
real estate taxes and operating expenses. Minimum annual rentals of all leases,
exclusive of increases in real estate taxes and operating assessments, are as
follows (000's):

1996................................................ $ 685,359
1997................................................ 629,811
1998................................................ 610,361
1999................................................ 607,060
Thereafter.......................................... 1,859,281
------------
$ 4,391,872
============

Total rent expense approximated $825,000, $546,000 and $485,000 for
the years ended December 31, 1995, 1994 and 1993, respectively.

In March 1996, Comsat Corporation ("Comsat") initiated an action
seeking compensatory damages of $250 million and unspecified punitive damages
against the Company, Televisa and News Corp. The complaint alleges that the
Company interfered with the alleged termination, by News Corp., of an alleged
contract between Comsat and News Corp.
The Company believes this action is without merit and intends to vigorously
contest this matter.

<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Company's Board of Directors is currently fixed at five members.
Directors' terms currently extend until the next annual meeting of stockholders
or until their earlier death, resignation or removal. Executive officers and
other officers are elected or appointed by, and serve at the pleasure of, the
Board of Directors of the Company.

The following table sets forth information concerning the Company's
directors and executive officers as of April 2, 1996:

Name Age Position

Frederick A. Landman..... 48 President, Chief Executive Officer and Director
Lourdes Saralegui........ 34 Executive Vice President and Director
Patrick J. Costello...... 39 Chief Financial Officer
Robert A. Bednarek....... 38 Senior Vice President, Engineering and Operations
James W. Cuminale........ 43 Senior Vice President and General Counsel
Reverge Anselmo.......... 33 Director
Lawrence W. Dam.......... 49 Director
Guillermo Canedo White... 36 Director

Frederick A. Landman has been President and Chief Executive Officer of
the Company since September 1995. From October 1994 to September 1995, Mr.
Landman was President and Chief Operating Officer of the Company. Mr. Landman
has also been a Class A Director of the Company since October 1994. He has been
associated with the Company and its predecessors in an executive capacity since
1984. Prior to 1984, Mr. Landman was Executive Vice President at Galavision,
Inc., the pay cable television service of Spanish International Network, Inc.
(now known as Univision) ("SIN"). As Executive Vice President of SIN, Mr.
Landman supervised the successful transition from terrestrial to satellite
delivery of SIN's television programming. SIN was the first U.S. commercial
network to utilize satellite distribution for all of its programming. Mr.
Landman began his 11-year career at SIN in 1973 in the research department. Rene
Anselmo was Mr. Landman's father-in-law.

Lourdes Saralegui has been Executive Vice President and a Class A
Director of the Company since October 1994. Ms. Saralegui has been associated
with the Company and its predecessors since 1984. Prior to becoming Executive
Vice President, Ms. Saralegui served as Assistant to the Chairman, Director of
Development Broadcast Transponder Sales and Fixed International Broadcast
Services, and Vice President.

Reverge Anselmo has been a Class A Director of the Company since
September 1995. He has held several positions with the Company, including
Regional Vice President, Latin America, from 1993 to 1995, and Regional Vice
President, Europe, from 1991 to 1993. Mr. Anselmo is the son of the late Rene
Anselmo, the Company's founder and former Chairman of the Board.

Lawrence W. Dam has been a Class B Director of the Company since
October 1994. Mr. Dam has been President of USHI and Univisa, Inc., subsidiaries
of Televisa, since September 1993 and a member of the Board of Directors of
Univisa, Inc., since 1987. From 1987 to 1993, he was Vice President and General
Counsel of Univisa, Inc. Mr. Dam is a member of the Board of Directors of
Verdugo Banking Company and has been a member of the Board of Directors of PTI
Holdings, Inc. and a member of the Management Committee of Univision Network,
L.P. since September 1993.

Guillermo Canedo White has been a Class B Director of the Company since
July 1995. Mr. Canedo White has been a member of the Board of Directors of
Televisa since 1990 and its Vice President of Finance and Corporate Planning
since 1994. From 1990 to 1994, Mr. Canedo served in various capacities at
Televisa, including as Chief Financial Officer and as Vice President of
Strategic Planning.

Patrick J. Costello joined the Company in 1992 as Chief Financial
Officer. From 1985 through 1992, Mr. Costello was a practicing Certified Public
Accountant. Mr. Costello provided tax, accounting and management advisory
services to the Company from 1987 to May 1992.

Robert A. Bednarek has been Senior Vice President, Engineering and
Operations of the Company since January 1996. He joined the Company in 1990 as a
Vice President. Mr. Bednarek was formerly Vice President of Rubin, Bednarek &
Associates, a communications engineering consulting firm, of which he is a
co-founder. Prior to co-founding Rubin, Bednarek & Associates, he was Deputy
Chief Scientist at the Corporation for Public Broadcasting. As a member of
Rubin, Bednarek & Associates, Mr. Bednarek provided services to the Company from
1984 to 1990.

James W. Cuminale joined the Company as General Counsel in March 1995.
In January 1996, Mr. Cuminale was elected Senior Vice President and General
Counsel. From 1983 to 1995, Mr. Cuminale was a partner in the law firm of Ivey,
Barnum & O'Mara. As a partner of Ivey, Barnum & O'Mara, Mr. Cuminale provided
legal services to the Company from 1991 to 1995.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to
the Company's Proxy Statement (to be filed not later than 120 days after the end
of the Company's fiscal year) for the 1996 Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

See Index to Financial Statements on Page 39.

2. Financial Statement Schedules

Financial Statement schedules are omitted because of
the absence of the conditions under which they are
required, or because the information is set forth in
the financial statements or notes thereto.

(b) Reports on Form 8-K

During the last quarter of fiscal 1995, the Company
did not file any Reports on Form 8-K with the Securities and Exchange
Commission.

2.1 Exchange and Subscription Agreement and Plan of Reorganization,
dated as of October 5, 1994.3

2.2 Amendment No. 1 to Exchange and Subscription Agreement and Plan of
Reorganization, dated as of February 28, 1995.7

3.1 Amended and Restated Certification of Incorporation of the
Registrant.12

3.2 By-Laws of the Registrant.2

4.1 Indenture (including form of note) among PanAmSat, L.P., PanAmSat
Capital Corporation and First Trust National Association, as
Trustee, relating to the 9 3/4% Senior Secured Notes due 2000,
dated as of August 5, 1993.3

4.2 Indenture (including form of note) among PanAmSat, L.P., PanAmSat
Capital Corporation and United States Trust Company of New York, as
Trustee, relating to the 11 3/8% Senior Subordinated Discount Notes
due 2003, dated as of August 5, 1993.3

4.3 Pledge Agreement by PanAmSat, L.P., in favor of First Trust
National Association, dated as of August 5, 1993.3

4.4 Security Agreement between First Trust National Association and
PanAmSat, L.P., dated as of August 5, 1993.3

4.5 Escrow and Disbursement Agreement among The Chase Manhattan Bank of
Connecticut, N.A., First Trust National Association, United States
Trust Company of New York, PanAmSat L.P. and PanAmSat Capital
Corporation, dated as of August 5, 1993.3

4.6 Mortgage Deed of PanAmSat, L.P. to First Trust National
Association, as Trustee dated July 27, 1993.3

4.7 First Supplemental Indenture among PanAmSat, L.P., PanAmSat Capital
Corporation, PanAmSat Licensee Corp. and First Trust National
Association, Trustee, dated as of February 2, 1994, relating to the
9 3/4% Senior Secured Notes due 2000.3

4.8 First Supplemental Indenture among PanAmSat, L.P., PanAmSat Capital
Corporation, PanAmSat Corporation and United States Trust Company
of New York, as Trustee, dated as of February 28, 1995 relating to
the 11 3/8% Senior Subordinated Discount Notes due 2003.3

4.9 Second Supplemental Indenture among PanAmSat, L.P., PanAmSat
Capital Corporation, PanAmSat Corporation and First Trust National
Association, as Trustee, dated as of February 28, 1995, relating to
the 9 3/4% Senior Secured Notes due 2000.6

4.10 Form of Indenture (including form of Exchange Debenture) between
PanAmSat Corporation and The First National Bank of Boston, as
Trustee, relating to the 12 3/4% Senior Subordinated Notes due
2005.8

4.11 Certificate of Designation of the 12 3/4% Mandatorily Exchangeable
Senior Redeemable Preferred Stock.8

9 Voting Trust Agreement.1

10.1.1 Letter Agreement between Hughes Aircraft Company and PanAmSat, L.P.
dated December 22, 1992. (Portions of this exhibit have been
omitted subject to an order granting confidential treatment dated
July 28, 1993.)4

10.1.2 Letter of Intent by Hughes Aircraft Company dated November 4, 1991
addressed to Alpha Lyracom Space Communications, Inc., a
predecessor to PanAmSat, L.P.4

10.1.3 Amendment No. 2, dated January 14, 1994, to the Satellite Purchase
Contract, dated as of November 3, 1991, as amended, between Hughes
Aircraft Company and PanAmSat, L.P., a successor to Alpha Lyracom
Space Communications, Inc. (Portions of this exhibit have been
omitted subject to an order granting confidential treatment dated
June 9, 1994.)5

10.1.4 Amendment No. 3 to the Satellite Purchase Contract. (Portions of
this exhibit have been omitted subject to an order granting
confidential treatment dated June 9, 1994.)4

10.1.5 Letter Amendment, dated as of September 7, 1993, to the Satellite
Purchase Contract.2

10.1.6 Amendment No. 5, executed September 15, 1994, to the Satellite
Purchase Contract.2

10.1.7 Letter Agreement dated as of August 19, 1993 by and between Hughes
Aircraft Company and PanAmSat, L.P. (Portions of this exhibit have
been omitted subject to an order granting confidential treatment,
dated June 9, 1994.)5

10.1.8 Amendment, dated December 14, 1993 to the Letter Agreement.
(Portions of this exhibit have been omitted subject to an order
granting confidential treatment dated June 9, 1994.)5

10.1.9 Intentionally omitted.

10.1.10 Satellite Purchase Contract Security Agreement dated as of March
14, 1993 between Hughes Aircraft Company and PanAmSat, L.P.4

10.1.11 Satellite Purchase Contract Security Agreement dated as of March
22, 1994, between Hughes Aircraft Company and PanAmSat, L.P.2

10.1.12 Satellite Purchase Contract Security Agreement dated as of July 12,
1994, between Hughes Aircraft Company and PanAmSat, L.P.2

10.1.13 PAS-2 Satellite Purchase Contract between Hughes Aircraft Company
and PanAmSat, L.P. entered into as of November 2, 1991. (Portions
of this exhibit have been omitted subject to an order granting
confidential treatment dated December 9, 1994.)2

10.1.14 PAS-3 and PAS-4 Satellite Purchase Contract between Hughes Aircraft
Company and PanAmSat, L.P. entered into as of January 4, 1993.
(Portions of this exhibit have been omitted subject to an order
granting confidential treatment dated December 9, 1994.)2

10.1.15 Amendment Number 1 to the PAS-3 and PAS-4 Satellite Purchase
Contract between Hughes Aircraft Company and PanAmSat, L.P. entered
into August 9, 1993. (Portions of this exhibit have been omitted
subject to an order granting confidential treatment dated December
9, 1994.)2

10.2.1 Launch Services Agreement dated as of June 5, 1992, as amended,
between Arianespace S.A. and PanAmSat, L.P., a successor to Alpha
Lyracom Space Communications, Inc. (Portions of this exhibit have
been omitted subject to an order granting confidential treatment
dated July 28, 1993.)4

10.2.2 Side Letter dated June 5, 1992 between Arianespace and PanAmSat,
L.P.4

10.2.3 Amendment to the Launch Services Agreement dated December 9, 1992.4

10.2.4 Amendment No. 3, dated July 7, 1993, to the Launch Services
Agreement dated as of June 5, 1992, as amended, between Arianespace
S.A. and PanAmSat, L.P. a successor to Alpha Lyracom Space
Communications, Inc.5

10.2.5 Amendment No. 5, dated December 16, 1993, to the Launch Services
Agreement. (Portions of this exhibit have been omitted subject to
an order granting confidential treatment dated June 9, 1994.)4

10.2.6 Side Letter No. 2, dated December 16, 1993, to the Launch Services
Agreement between Arianespace S.A. and PanAmSat, L.P. (Portions of
this exhibit have been omitted subject to an order granting
confidential treatment dated June 9, 1994.)5

10.2.7 Intentionally omitted.

10.2.8 Amendment No. 4 to Launch Services Agreement, executed August 13,
1993. (Portions of this exhibit have been omitted subject to an
order granting confidential treatment dated December 9, 1994.)2

10.3.1 Service Agreement, dated as of October 26, 1988 between Eurovisa
B.V. and PanAmSat, L.P., successor to Alpha Lyracom Space
Communications, Inc. (Portions of this exhibit have been omitted
subject to an order granting confidential treatment dated July 28,
1993.)4

10.3.2 Assignment dated July 31, 1989 by Eurovisa B.V. to Televisa, S.A.
of its rights in the October 26, 1988 Service Agreement between
Eurovisa and Alpha Lyracom Space Communications, Inc.4

10.3.3 Letter dated March 16, 1990 from Televisa S.A. and Eurovisa B.V. to
PanAmSat, L.P., successor to Alpha Lyracom Space Communications,
Inc. (Portions of this exhibit have been omitted subject to an
order granting confidential treatment dated July 28, 1993.)4

10.3.4 Letter dated June 18, 1991 from PanAmSat, L.P., successor to Alpha
Lyracom Space Communications, Inc., regarding operational
requirements for television transmission via PAS-1.4

10.3.5 Amendment to Service Agreement dated as of November 18, 1991
between Eurovisa B.V. and PanAmSat, L.P., successor to Alpha
Lyracom Space Communications, Inc. (Portions of this exhibit have
been omitted subject to an order granting confidential treatment
dated July 28, 1993.)4

10.4.1 Service Agreement dated as of February 9, 1990 between Televisa,
S.A. and PanAmSat, L.P., successor to Alpha Lyracom Space
Communications, Inc. (Portions of this exhibit have been omitted
subject to an order granting confidential treatment dated July 28,
1993.)4

10.4.2 Letter dated March 19, 1990 from Alpha Lyracom Space Communications
confirming uplink service to Televisa, S.A. (Portions of this
exhibit have been omitted subject to an order granting confidential
treatment dated July 28, 1993.)4

10.4.3 Letter dated May 18, 1990 from Televisa, S.A. to Alpha Lyracom
Space Communications, Inc., advising that Televisa will not be
exercising its option to provide uplink equipment to Alpha
Lyracom.4

10.5. Intentionally omitted.

10.6 PanAmSat Long-Term Stock Investment Plan.6*

10.7 Contract between PanAmSat, L.P. and Space Systems/Loral, Inc. for
PanAmSat Program entered into as of October 12, 1994. (Portions of
this exhibit have been omitted subject to an order granting
confidential treatment dated December 9, 1994.)2

10.7.2 Memorandum of Understanding between the Company and Space
System/Loral, Inc. effective August 1, 1995. (Portion of this
Exhibit has been omitted subject to a request for confidential
treatment by the Securities and Exchange Commission.)10

10.8 Form of Indemnification Agreement between the Company and its
directors and executive officers.1*

10.9 Agreement for the launching into Geostationary Transfer Orbit of
the PanAmSat 3R Satellite by an Ariane Launch Vehicle between
PanAmSat, L.P. and Arianespace, executed on February 28, 1995.
(Portions of this exhibit have been omitted subject to an order
granting confidential treatment dated April 10, 1995.)6

10.10.1 Launch Services Agreement between Lockheed-Khrunichev-Energia
International, Inc. and PanAmSat, L.P., effective November 14,
1994. (Portions of this exhibit have been omitted subject to an
order granting confidential treatment dated April 10, 1995.)6

10.10.2 First Amendment to Launch Services Agreement, dated March 30, 1995,
between the Company and Lockheed-Khrunichev-Energia International,
Inc. (Portions of this Exhibit have been omitted subject to a
request for confidential treatment by the Securities and Exchange
Commission).10

10.10.3 Second Amendment to Launch Services Agreement, dated June 9, 1995.
(Portions of this Exhibit have been omitted subject to a request
for confidential treatment by the Securities and Exchange
Commission).10

10.11.1 Employment and Non-Compete Agreement between PanAmSat, Inc. and
Frederick A. Landman, dated as of December 31, 1992.6*

10.11.2 Amendment No. 1 to the Employment and Non-Compete Agreement between
PanAmSat, Inc. and Frederick A. Landman.7*

10.11.3 Employment Agreement between the Company and Robert A. Bednarek,
dated as of June 6, 1995.9*

10.11.14 Form of letter agreement regarding the termination of the interest
of certain executive officers in the Company's phantom stock
plan.11*

10.12.1 Agreement for the launching into Geostationary Transfer Orbit of
the PanAmSat 5 Satellite by an Ariane Launch Vehicle between
PanAmSat, L.P. and Arianespace, executed November 21, 1994.
(Portions of this exhibit have been omitted subject to an order
granting confidential treatment dated April 10, 1995.)7

10.12.2 Amendment No. 1 to the Agreement for the launching into
Geostationary Transfer Orbit of the PanAmSat 6 Satellite by an
Ariane Launch Vehicle between the Company and Arianespace, executed
May 1995. (Portions of this Exhibit have been omitted subject to a
request for confidential treatment by the Securities and Exchange
Commission).11

10.13 DTH System in Latin America Memorandum of Understanding between
Grupo Televisa, S.A. and the Company, dated as of March 27, 1995.
(Portions of this exhibit have been omitted subject to an order
granting confidential treatment dated April 10, 1995.)7

10.14 Satellite Purchase Contract between Hughes Aircraft Company and
PanAmSat Corporation entered into as of March 31, 1995. (Portions
of this exhibit have been omitted subject to an order granting
confidential treatment dated April 10, 1995.)8

21 Subsidiaries of the Registrant.2

23 Consent of Independant Public Accountants. +

27 Financial Data Schedule

<PAGE>
- ----------------
+ Filed herewith.

1 Filed with the Securities and Exchange Commission as an Exhibit to
Amendment No. 2 to Registration Statement No. 33-84836 on December
5, 1994 and incorporated herein by reference.

2 Filed with the Securities and Exchange Commission as an Exhibit to
Amendment No. 1 to Registration Statement No. 33-84836 on November
18, 1994 and incorporated herein by reference.

3 Filed with the Securities and Exchange Commission as an Exhibit to
Registration Statement No. 33-84836 on October 6, 1994. and
incorporated herein by reference.

4 Filed with the Securities and Exchange Commission as an Exhibit to
Amendment No. 6 to Registration Statement No. 33-63284 on July 28,
1993 and incorporated herein by reference.

5 Filed with the Securities and Exchange Commission as an Exhibit to
the Company's Form 8-K dated March 24, 1994 and incorporated herein
by reference.

6 Filed with the Securities and Exchange Commission as an Exhibit to
Amendment No. 3 to Registration Statement No. 33-84836 on March 9,
1995 and incorporated herein by reference.

7 Filed with the Securities and Exchange Commission as an Exhibit to
Amendment No. 4 to Registration Statement No. 33-84836 on March 29,
1995 and incorporated herein by reference.

8 Filed with the Securities and Exchange Commission as an Exhibit to
Amendment No. 5 to Registration Statement No. 33-84836 on April 13,
1995 and incorporated herein by reference.

9 Filed with the Securities and Exchange Commission as an Exhibit
Registration Statement No. 33-95396 on August 4, 1995.

10 Filed with the Securities and Exchange Commission as an Exhibit to
Amendment No. 1 to Registration Statement No. 33-95396 on August 17,
1995.

11 Filed with the Securities and Exchange Commission as an Exhibit to
Amendment No. 2 to Registration Statement No. 33-95396 on August 29,
1995.

12 Filed with the Securities and Exchange Commission as an Exhibit to
Amendment No. 3 to Registration Statement No. 33-95396 on September
18, 1995.

- ---------------

A copy of any of the exhibits included in this Annual Report on Form 10-K, other
than those as to which confidential treatment is pending or has been granted by
the Securities and Exchange Commission, upon payment of a fee to cover the
reasonable expenses of furnishing such exhibits, may be obtained by written
request to the Company, at the address set forth on the front cover, attention
General Counsel.

Exhibits indicated with a * symbol are an executive contract or compensatory
plan or arrangement filed pursuant to Item 14 of Form 10-K.

<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, each registrant has duly caused this amended
report to be signed on its behalf by the undersigned, thereunto duly authorized
in the Town of Greenwich, State of Connecticut.

PANAMSAT CORPORATION

By: /s/ Patrick J. Costello
-----------------------------------
Patrick J. Costello
Chief Financial Officer

PANAMSAT CAPITAL CORPORATION

By: /s/ Patrick J. Costello
-----------------------------------
Patrick J. Costello
Chief Financial Officer

December 20, 1996

Pursuant to the requirements of the Securities Exchange Act of 1934,
this amended report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

<TABLE>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Frederick A. Landman President and Chief Executive December 20, 1996
- ------------------------- Officer and Director
Frederick A. Landman

/s/ Lourdes Saralegui Executive Vice President and December 20, 1996
- ------------------------- Director
Lourdes Saralegui

/s/ Patrick J. Costello Chief Financial Officer and Director December 20, 1996
- ------------------------- (Principal Financial and Accounting
Patrick J. Costello Officer)

Director December 20, 1996
- -------------------------
Lawrence W. Dam

Director December 20, 1996
- -------------------------
Guillermo Canedo White

</TABLE>

<PAGE>
EXHIBIT INDEX

Exhibit 23. Consent of Independant Public Accountants.

Exhibit 27. Financial Data Schedule.

CONSENT OF INDEPENDANT PUBLIC ACCOUNTANTS

As independant public accountants, we hereby consent to the incorporation
of our report included in this form 10-K/A, into the Company's previously filed
Registration Statement on Form S-8, File No. 333-12317.

ARTHUR ANDERSEN LLP

December 20, 1996

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PANAMSAT
FORM 10-K/A FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 13,562,113
<SECURITIES> 495,078,866
<RECEIVABLES> 4,981,225
<ALLOWANCES> (100,000)
<INVENTORY> 0
<CURRENT-ASSETS> 24,038,367
<PP&E> 609,927,311
<DEPRECIATION> (79,177,520)
<TOTAL-ASSETS> 1,438,819,812
<CURRENT-LIABILITIES> 24,927,318
<BONDS> 575,283,661
287,648,667
0
<COMMON> 1,000,000
<OTHER-SE> 475,862,454
<TOTAL-LIABILITY-AND-EQUITY> 1,438,819,812
<SALES> 116,154,777
<TOTAL-REVENUES> 116,154,777
<CGS> 0
<TOTAL-COSTS> 83,371,784
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,044,771
<INCOME-PRETAX> 34,375,478
<INCOME-TAX> 16,829,000
<INCOME-CONTINUING> 17,546,478
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,546,478
<EPS-PRIMARY> (.08)
<EPS-DILUTED> 0

</TABLE>