UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2006

OR

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

For the transition period from                      to                     

Commission file number 000-50262

Intelsat, Ltd.

(Exact Name of Registrant as Specified in Its Charter)

Bermuda	98-0346003
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
Wellesley House North, 2nd Floor 90 Pitts Bay Road Pembroke, Bermuda	HM 08
(Address of principal executive offices)	(Zip Code)

(441) 294-1650

Registrant’s telephone number, including area code

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  þ    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non- accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨                Accelerated filer  ¨                Non-accelerated filer  þ

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

As of May 9, 2006, 12,000 ordinary shares, par value $1.00 per share, were outstanding.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements:
	Consolidated Balance Sheets as of December 31, 2005 and as of March 31, 2006 (Unaudited)	3
	Unaudited Consolidated Statements of Operations for the period January 1, 2005 to January 31, 2005 (predecessor entity) and for the period February 1, 2005 to March 31, 2005 (successor entity) and for the Three Months Ended March 31, 2006	4
	Unaudited Consolidated Statements of Cash Flows for the period January 1, 2005 to January 31, 2005 (predecessor entity), the period February 1, 2005 to March 31, 2005 (successor entity) and for the Three Months Ended March 31, 2006	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37
Item 4.	Controls and Procedures	37
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults upon Senior Securities	40
Item 4.	Submission of Matters to a Vote of Security Holders	40
Item 5.	Other Information	40
Item 6.	Exhibits	41

INTRODUCTION

References in this quarterly report to “Intelsat,” the “Company,” “we,” “us” and “our” refer to Intelsat, Ltd. and, unless the context requires otherwise, to its subsidiaries. Intelsat, Ltd. is a limited liability company incorporated under the laws of Bermuda.

On January 28, 2005, we were acquired by Intelsat Holdings, Ltd., or Intelsat Holdings, a Bermuda company formed at the direction of funds advised by or associated with Apax Partners Worldwide LLP and Apax Partners, Inc., Apollo Management V, L.P., MDCPIV Global Investments, LLP and Permira Advisers LLC through an amalgamation transaction. References to our business and operations following this amalgamation refer to the business and operations of the company continuing from this amalgamation.

Unless otherwise indicated, discussion herein does not give effect to our planned acquisition of PanAmSat Holding Corporation, which, if the conditions to such acquisition are satisfied or waived (to the extent permitted by applicable law), is expected to be consummated in the second or third quarter of 2006.

Our principal executive offices are located at Wellesley House North, 2nd Floor, 90 Pitts Bay Road, Pembroke HM 08, Bermuda. Our telephone number is (441) 294-1650.

FINANCIAL AND OTHER INFORMATION

Unless otherwise indicated, all references to “dollars” and “$” in this quarterly report are to, and all monetary amounts in this quarterly report are presented in, U.S. dollars. Unless otherwise indicated, the financial information contained in this quarterly report has been prepared in accordance with accounting principles generally accepted in the United States.

Certain monetary amounts, percentages and other figures included in this quarterly report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.

In this Quarterly Report, we refer to and rely on publicly available information regarding our industry and our competitors. Although we believe the information is reliable, we cannot guarantee the accuracy and completeness of the information and have not independently verified it.

FORWARD-LOOKING STATEMENTS

Some of the statements in this quarterly report constitute forward-looking statements that do not directly or exclusively relate to historical facts. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements as long as they are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements.

When used in this quarterly report, the words “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential” and “continue,” and the negative of these terms, and other similar expressions are intended to identify forward-looking statements. Examples of these forward-looking statements include, but are not limited to, statements regarding the following: the trends that we believe will impact our revenue and operating expenses in the future; our current expectation that the IA-7 anomaly and the total loss of the IS-804 satellite will not result in the acceleration of capital expenditures to replace the IA-7 and IS-804 satellites, respectively; our plans for satellite launches in the near term; our expected capital expenditures in 2006 and during the next several years; the impact on our financial position or results of operations of pending

legal proceedings; the impact of the Acquisition Transactions, the Transfer Transactions and the timing of, our ability to consummate and the impact (including on our strategy and plans) of the PanAmSat Acquisition Transactions, each as defined in this Quarterly Report.

In connection with our acquisition of PanAmSat Holding Corporation as described in this Quarterly Report under Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—The PanAmSat Acquisition Transactions, factors that may cause results or developments to differ materially from the forward-looking statements made in this Quarterly Report include, but are not limited to:

• the failure to complete the proposed Merger Transaction (as defined in Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—The PanAmSat Acquisition Transaction) within the time period specified in the Merger Agreement or at all or the need to modify aspects of the proposed Merger Transaction in order to obtain regulatory approvals or satisfy other conditions specified in the Merger Agreement (as defined in Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—The PanAmSat Acquisition Transactions);

• the possibility that a third party may file an opposition action or an objection with one or more regulatory agencies and authorities reviewing the proposed Merger Transaction;

• our inability to obtain regulatory approvals or sufficient funds on reasonable and acceptable terms in order to consummate the proposed Merger Transaction;

• a change in the health of, or a catastrophic loss during the in-orbit operations of, one or more of, the PanAmSat satellites to be acquired;

• the failure to achieve our strategic objectives for the acquisition of PanAmSat; and

• the failure to successfully integrate or to obtain expected synergies from our acquisition of PanAmSat on the expected timetable or at all.

The forward-looking statements made in this quarterly report reflect our intentions, plans, expectations, assumptions and beliefs about future events. These forward-looking statements are not guarantees of future performance or results and are subject to risks, uncertainties and other factors, many of which are outside of our control. These factors could cause actual results or developments to differ materially from the expectations expressed or implied in the forward-looking statements and include known and unknown risks. Known risks include, among others, the risks discussed under Item 1A.—Risk Factors and “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2005, the political, economic and legal conditions in the markets we are targeting for communications services or in which we operate and other risks and uncertainties inherent in the telecommunications business in general and the satellite communications business in particular.

Other factors that may cause results or developments to differ materially from the forward-looking statements made in this quarterly report include, but are not limited to:

• the quality and price of comparable communications services offered or to be offered by other satellite operators; and

• the perceptions of our business, operations and financial condition and the industry in which we operate by the financial community and ratings agencies in connection with our ability to obtain financing for our future plans.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee our future results, level of activity, performance or achievements. Because actual results could differ materially from our intentions, plans, expectations, assumptions and beliefs about the future, you are urged not to rely on forward-looking statements in this quarterly report and to view all forward-looking statements made in this quarterly report with caution. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

2

Item 1. Financial Statements

INTELSAT, LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

	As of December 31, 2005			As of March 31, 2006
				(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	360,070		$	359,005
Receivables, net of allowance of $26,342 in 2005 and $25,749 in 2006		203,452			195,255
Deferred income taxes		10,752			10,752
Total current assets		574,274			565,012
Satellites and other property and equipment, net		3,327,341			3,209,445
Amortizable intangible assets, net		493,263			483,912
Non-amortizable intangible assets		560,000			560,000
Goodwill		111,388			111,388
Other assets		228,178			232,356
Total assets	$	5,294,444		$	5,162,113
LIABILITIES AND SHAREHOLDER’S DEFICIT
Current liabilities:
Current portion of long-term debt	$	11,097		$	16,039
Accounts payable and accrued liabilities		332,907			295,906
Deferred satellite performance incentives		7,418			7,852
Deferred revenue		30,143			23,017
Total current liabilities		381,565			342,814
Long-term debt, net of current portion		4,790,016			4,795,689
Deferred satellite performance incentives, net of current portion		36,027			34,945
Deferred revenue, net of current portion		157,580			143,686
Accrued retirement benefits		107,778			108,492
Other long-term liabilities		27,743			27,029
Total liabilities		5,500,709			5,452,655
Shareholder’s deficit:
Ordinary shares, 12,000 shares authorized, issued and outstanding		12			12
Paid-in capital		9,104			14,937
Accumulated deficit		(215,558	)		(305,668	)
Accumulated other comprehensive income
Unrealized gain on available-for-sale securities, net of tax		177			177
Total shareholder’s deficit		(206,265	)		(290,542	)
Total liabilities and shareholder’s deficit	$	5,294,444		$	5,162,113

See accompanying notes to unaudited consolidated financial statements.

3

INTELSAT, LTD.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

	Predecessor Entity			Successor Entity
	Period January 1 to January 31, 2005			Period February 1 to March 31, 2005			Three Months Ended March 31, 2006
Revenue	$	97,917		$	195,257		$	280,446
Operating expenses:
Direct costs of revenue		26,939			43,837			55,111
Selling, general and administrative		55,443			26,481			39,814
Depreciation and amortization		39,184			95,953			154,604
Impairment of asset value		69,227			—			—
Restructuring costs		263			—			—
Total operating expenses		191,056			166,271			249,529
Income (loss) from operations		(93,139	)		28,986			30,917
Interest expense		13,241			67,964			109,473
Interest income		191			1,092			3,352
Other income (expense), net		863			(453	)		(5,411	)
Loss from operations before income taxes		(105,326	)		(38,339	)		(80,615	)
Provision for income taxes		4,400			3,586			9,495
Net loss	$	(109,726	)	$	(41,925	)	$	(90,110	)

See accompanying notes to unaudited consolidated financial statements.

4

INTELSAT, LTD.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Predecessor Entity			Successor Entity
	Period January 1 to January 31, 2005			Period February 1 to March 31, 2005			Three Months Ended March 31, 2006
Cash flows from operating activities:
Net loss	$	(109,726	)	$	(41,925	)	$	(90,110	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		39,184			95,953			154,604
Impairment charge for IS-804 satellite		69,227			—			—
Provision for doubtful accounts		(5,799	)		(264	)		(758	)
Foreign currency transaction (gain) loss		75			46			(220	)
Deferred income taxes		585			1,790			—
Stock-based compensation		—			—			81
Compensation cost paid by parent		—			—			5,832
Amortization of bond discount and issuance costs		430			9,879			17,089
Share in losses of affiliate		402			1,229			6,270
Changes in operating assets and liabilities, net of effects of acquisitions:
Receivables		(32,168	)		(5,132	)		8,955
Other assets		3,194			217			(13,275	)
Accounts payable and accrued liabilities		51,722			34,762			(42,959	)
Deferred revenue		(2,388	)		(4,072	)		(21,020	)
Accrued retirement benefits		(27	)		1,914			714
Other long-term liabilities		(3,327	)		150			(714	)
Net cash provided by operating activities		11,384			94,547			24,489
Cash flows from investing activities:
Payments for satellites and other property and equipment		(953	)		(5,255	)		(21,479	)
Proceeds from insurance receivable		38,561			19,759			—
Net cash provided by (used in) investing activities		37,608			14,504			(21,479	)
Cash flows from financing activities:
Repayment of long-term debt		—			(200,875	)		(1,750	)
Proceeds from bond issuance		—			305,348			—
Proceeds from credit facility borrowings		—			200,000			—
Principal payments on deferred satellite performance incentives		(475	)		(771	)		(648	)
Principal payments on capital lease obligations		—			(1,809	)		(1,897	)
Dividends to shareholders		—			(305,913	)		—
Net cash used in financing activities		(475	)		(4,020	)		(4,295	)
Effect of exchange rate changes on cash		(75	)		(46	)		220
Net change in cash and cash equivalents		48,442			104,985			(1,065	)
Cash and cash equivalents, beginning of period		141,320			194,682			360,070
Cash and cash equivalents, end of period	$	189,762		$	299,667		$	359,005

Note: The increase in cash between the predecessor entity ending balance and the successor entity opening balance is due to the retention by Intelsat, Ltd. of approximately $5 million in acquisition financing proceeds.

See accompanying notes to unaudited consolidated financial statements.

5

INTELSAT, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except percentages)

Note 1    General

Basis of presentation

The unaudited consolidated financial statements of Intelsat, Ltd. and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of these financial statements. The results of operations for the periods presented are not necessarily indicative of operating results for the full year.

These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Intelsat, Ltd.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005 on file with the Securities and Exchange Commission (“Intelsat’s Form 10-K”).

On January 28, 2005, Intelsat, Ltd. (“Intelsat” or the “Company”) was acquired by Intelsat Holdings, Ltd. (“Intelsat Holdings,” formerly known as Zeus Holdings, Limited), a Bermuda company formed at the direction of funds advised by or associated with a group of private equity investors (the “Sponsors”). The acquisition and related financings are referred to collectively as the Acquisition Transactions and are discussed in more detail in Note 3 to the audited consolidated financial statements included in Intelsat’s Form 10-K. As a result of the Acquisition Transactions, the 2005 financial results of Intelsat have been separately presented for the “Predecessor Entity” for the period January 1, 2005 through January 31, 2005 and for the “Successor Entity” for the period February 1, 2005 through March 31, 2005. Although the effective date of the Acquisition Transactions was January 28, 2005, due to the immateriality of the results of operations for the period between January 28, 2005 and January 31, 2005, we have accounted for the Acquisition Transactions as if they had occurred on January 31, 2005.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Examples include the allocation of fair value to assets acquired and liabilities assumed with the acquisition transactions, the allowance for doubtful accounts, pension and post-retirement benefits, income taxes and the estimated useful lives of satellites and other property and equipment.

New Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued a revised Statement of Financial Accounting Standard (“SFAS”) No. 123, “Share-Based Payment.” SFAS No. 123R eliminates the intrinsic value method as an alternative method of accounting for stock-based awards under Accounting Principles Board (“APB”) No. 25 by requiring that all share-based payments to employees be recognized in the financial statements based on their fair values. It also revises the fair-value based method of accounting for share-based payment liabilities, forfeitures and modifications of stock-based awards and clarifies the guidance under SFAS No. 123 related to measurement of fair value, classifying an award as equity or as a liability and attributing compensation to reporting periods.

The Company adopted SFAS No. 123R using the modified prospective method as of January 1, 2006. Under this method, compensation cost will be recognized based on the requirements of SFAS No. 123R for all share-based awards granted subsequent to January 1, 2006, and for all awards granted, but not vested, prior to January 1, 2006. The adoption of SFAS No. 123R did not materially impact the Company’s results of operations.

6

INTELSAT, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

(in thousands, except percentages)

During the three months ended March 31, 2006, there were no other significant changes in the Company’s accounting policies.

Note 2    The PanAmSat Acquisition Transactions

On August 28, 2005, Intelsat (Bermuda), Ltd. (“Intelsat Bermuda”), a wholly-owned subsidiary of Intelsat, entered into a Merger Agreement (the “Merger Agreement”) with PanAmSat Holding Corporation (“PanAmSat”) and Proton Acquisition Corporation, a wholly owned subsidiary of Intelsat Bermuda. Pursuant to the Merger Agreement, Intelsat Bermuda agreed to acquire PanAmSat for total cash consideration of approximately $3.2 billion. As part of this transaction, approximately $3.2 billion in debt of PanAmSat and its subsidiaries will either be refinanced or remain outstanding.

Intelsat Bermuda has received financing commitments from a group of financial institutions for the full amount of the purchase price and for the full amount, if required, to repurchase and replace existing PanAmSat debt. The funding of the commitments is subject to certain conditions, including satisfaction of the conditions to the Merger Agreement. A substantial portion of the financing for the PanAmSat acquisition transactions is expected to be raised by Intelsat Bermuda, with additional financing expected to be raised by PanAmSat, PanAmSat Corporation (a direct subsidiary of PanAmSat) and Intelsat Subsidiary Holding Company, Ltd., referred to as Intelsat Sub Holdco.

Consummation of the merger is subject to various closing conditions, including but not limited to, the satisfaction or waiver of conditions regarding the receipt of requisite regulatory approvals, the receipt of financing by Intelsat Bermuda and the adoption of the Merger Agreement by a majority of PanAmSat’s stockholders. On October 26, 2005, PanAmSat informed the Company that a majority of its stockholders approved and adopted the Merger Agreement. If the Merger Agreement is terminated under specified circumstances relating to Intelsat’s inability to obtain financing or requisite regulatory approvals, Intelsat may be required to pay PanAmSat a termination fee of $250,000. Assuming the conditions to the acquisition are satisfied or waived (to the extent permitted by applicable law), the merger is expected to be consummated in the second or third quarter of 2006.

Note 3    Stock-based compensation

Prior to the consummation of the Acquisition Transactions, the Company had two stock-based employee compensation plans, the 2001 Share Option Plan (the “2001 Plan”) and the 2004 Share Incentive Plan (the “2004 Plan”) which are described more fully in Note 16 to the audited consolidated financial statements included in Intelsat’s Form 10-K. Had the Company applied the fair value recognition provisions of SFAS 123 to its stock based compensation expense for the period January 1, 2005 to January 31, 2005, compensation expense would have decreased $5,580.

At the closing of the Acquisition Transactions, all outstanding awards under the 2001 Plan vested, and in the money awards were cashed out, and all other awards were cancelled. All outstanding awards made under the 2004 Plan were cancelled as part of the Acquisition Transactions, and unvested awards were converted into deferred compensation accounts. As of March 31, 2006, up to $10,435 in deferred compensation remains payable, with vesting through June 2007. The Company records compensation expense over the remaining vesting period following the conversion to deferred compensation. $1,395 was expensed for the successor period ended March 31, 2005 and $663 was expensed for the three months ended March 31, 2006.

The Board of Directors of Intelsat Holdings adopted the Intelsat Holdings, Ltd. 2005 Share Incentive Plan (the “2005 Share Plan”) with an effective date of January 28, 2005, pursuant to which up to 1,124,296 ordinary

7

INTELSAT, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

(in thousands, except percentages)

shares were reserved for grant to employees and directors of Intelsat Holdings and its direct and indirect subsidiaries. The 2005 Share Plan permits granting of awards in the form of incentive share options, nonqualified share options, restricted shares, restricted share units, share appreciation rights, phantom shares and performance awards and is described more fully in Note 16 to the consolidated financial statements included in Intelsat’s Form 10-K.

During the first quarter of 2005, the Company granted both time vesting and performance vesting restricted shares under the 2005 Share Plan. The restricted share grants are liability classified under SFAS No. 123R. The Company has recorded compensation expense over the service period for the time vesting shares based on the intrinsic value (which equalled fair value) at the date of the grant of $2.15 per share. No compensation expense was recorded for performance vesting shares since it was not probable that the performance criteria would be met.

Since awards made consisted of shares of the Company’s parent, Intelsat Holdings, compensation costs for vested awards and the cost to repurchase shares are reflected as capital contributions in the Company’s financial statements. The Company recognized no compensation costs during the period February 1, 2005 to March 31, 2005. During the three months ended March 31, 2006, the Company recorded $81 of compensation costs for vesting of restricted shares.

A summary of the status of Intelsat Holdings’ non-vested shares as of March 31, 2006, and the changes during the three months ended March 31, 2006 are set forth below:

	Number of shares		Weighted-Average Grant-Date Fair Value
Restricted shares
Non-vested restricted shares outstanding as of January 1, 2006	830,785		$	2.15
Restricted shares forfeited and repurchased at par value	(116,594	)		2.15
Shares repurchased by Intelsat Holdings	(26,954	)		2.15
Vested	(17,307	)		2.15
Total non-vested restricted shares at March 31, 2006	669,930		$	2.15

The non-vested restricted shares have a remaining weighted-average vesting period of 46 months and the performance shares will remain outstanding for approximately seven years.

Note 4    Receivables

Receivables are comprised of the following:

	As of December 31, 2005			As of March 31, 2006
Service charges:
Unbilled	$	66,079		$	65,576
Billed		155,778			145,951
Other		7,937			9,477
Allowance for doubtful accounts		(26,342	)		(25,749	)
Total	$	203,452		$	195,255

8

INTELSAT, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

(in thousands, except percentages)

Unbilled satellite utilization charges represent amounts earned and accrued as receivable from customers for their usage of the Intelsat satellite system prior to the end of the period. These amounts were billed at the beginning of the following period.

Note 5    Satellites and other property and equipment

Satellites and other property and equipment are comprised of the following:

	As of December 31, 2005			As of March 31, 2006
Satellites, launch vehicles and services	$	3,293,863		$	3,316,388
Information systems and ground segment		358,555			362,657
Washington, D.C. building and other		173,142			173,872
Total cost		3,825,560			3,852,917
Less: accumulated depreciation		(498,219	)		(643,472	)
Total	$	3,327,341		$	3,209,445

Satellites and other property and equipment as of December 31, 2005 and March 31, 2006 included construction-in-progress of $97,007 and $124,366, respectively. These amounts relate primarily to the IA9 satellite under construction and related launch services. Interest costs of $92, $538 and $2,388 were capitalized during the period January 1, 2005 to January 31, 2005, the period February 1, 2005 to March 31, 2005 and the three months ended March 31, 2006, respectively.

Note 6    Satellite developments

On January 14, 2005, the Company’s IS-804 satellite experienced a sudden and unexpected electrical power system anomaly that resulted in the total loss of the satellite. The Company recorded a net non-cash impairment charge of $69,227 in the period January 1, 2005 to January 31, 2005 to write off the value of the IS-804 satellite, which was not insured, and related deferred performance incentive obligations. The actions and analysis taken by the Company are described more fully in Note 9 to the audited consolidated financial statements included in Intelsat’s Form 10-K.

Note 7    Launch vehicle agreement and deposit

In connection with the termination of a satellite order in 2002, the Company entered into an agreement (as amended) with a launch vehicle provider for a credit to be used towards a future launch vehicle. On January 30, 2006, the Company further amended its agreement with the launch vehicle provider to provide for the launch of a future satellite, with a launch period between October 1, 2007 and December 1, 2007, unless an earlier launch period were to become available between April 1, 2007 and September 30, 2007 under specified circumstances, in which case the Company would have the option to use such earlier launch period. The Company paid an additional $24,300 deposit on March 15, 2006 as required under the amendment and a final payment of $24,300 is due one month after the launch of the satellite. The total deposit for the launch vehicle, including the credit, was $50,800 as of March 31, 2006 and $32,300 as of December 31, 2005.

Note 8    Investment in Affiliate

The Company has an investment of approximately 30% in WildBlue Communications, Inc. (“WildBlue”), a company offering broadband Internet access services in the continental United States via satellite. The Company

9

INTELSAT, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

(in thousands, except percentages)

accounts for its investment using the equity method of accounting. Intelsat’s share of losses of WildBlue are included in other income (expense), net in the accompanying consolidated statements of operations and were $402, $1,229 and $6,270 in the period January 1, 2005 to January 31, 2005, the period February 1, 2005 to March 31, 2005 and the three months ended March 31, 2006, respectively. The investment balances of $39,931 and $33,662 as of December 31, 2005 and March 31, 2006 are included within other assets in the accompanying consolidated balance sheets.

Note 9    Goodwill and Other Intangible Assets

The carrying amount and accumulated amortization of acquired intangible assets subject to amortization consists of the following:

	As of December 31, 2005			As of March 31, 2006
Customer relationships	$	138,188		$	138,188
Backlog		380,000			380,000
Technology		10,000			10,000
Subtotal		528,188			528,188
Less: accumulated amortization		(34,925	)		(44,276	)
Total	$	493,263		$	483,912

Customer relationships have estimated lives ranging from four to twenty years. Backlog has an estimated life of 15 years, and technology has an estimated life of 8 years. The Company recorded amortization expense of $936, $6,350 and $9,351 for the period January 1, 2005 to January 31, 2005, for the period February 1, 2005 to March 31, 2005 and for the three months ended March 31, 2006, respectively.

Scheduled amortization charges for the intangible assets as of March 31, 2006 are as follows:

	As of March 31, 2006
2006		28,039
2007		37,390
2008		36,582
2009		32,540
2010		32,540
2011 and thereafter		316,821
Total	$	483,912

The carrying amount of acquired intangible assets not subject to amortization consisted of the following:

	As of December 31, 2005		As of March 31, 2006
Goodwill	$	111,388	$	111,388
Tradename	$	30,000	$	30,000
Orbital locations	$	530,000	$	530,000

10

INTELSAT, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

(in thousands, except percentages)

Note 10    Notes payable, long-term debt and other financing arrangements

The carrying amounts of notes payable and long-term debt were as follows:

	As of December 31, 2005			As of March 31, 2006
Senior Secured Credit Facilities, 6.3125% interest rate as of March 31, 2006, due July 2011	$	347,375		$	345,625
5.25% Senior Notes due November 2008		400,000			400,000
Unamortized discount on 5.25% Senior Notes		(19,038	)		(17,395	)
Floating Rate Senior Notes, 9.614% interest rate as of March 31, 2006, due January 2012		1,000,000			1,000,000
7.625% Senior Notes due April 2012		600,000			600,000
Unamortized discount on 7.625% Senior Notes		(50,062	)		(48,155	)
8.25% Senior Notes due January 2013		875,000			875,000
6.50% Senior Notes due November 2013		700,000			700,000
Unamortized discount on 6.50% Senior Notes		(105,957	)		(102,839	)
8.625% Senior Notes due January 2015		675,000			675,000
9.25% aggregate principal at maturity of $478,700 Senior Discount Notes due February 2015		330,824			338,417
7% Note payable to Lockheed Martin Corporation, $5,000 due annually from 2007 to 2011		20,000			20,000
Capital lease obligations		27,971			26,075
Total long-term debt	$	4,801,113		$	4,811,728
Less:
Current portion of capital lease obligations		7,597			7,539
Current portion of long-term debt		3,500			8,500
Total current portion		11,097			16,039
Total long-term debt, excluding current portion	$	4,790,016		$	4,795,689

No amounts were outstanding under the $300,000 revolving loan facility as of March 31, 2006; however, $20,012 in letters of credit issued and outstanding under the facility and limitations under covenants contained in the credit agreement governing the senior secured credit facilities of Intelsat Sub Holdco (the “Credit Agreement”) reduced borrowing availability under the revolving loan facility to $158,244. The senior secured credit facilities are secured by a substantial portion of the Company’s assets. In addition, the Credit Agreement contains financial and operating covenants that, among other things, require Intelsat Sub Holdco to maintain financial coverage ratios, limit Intelsat Sub Holdco’s ability to pledge assets as security for additional borrowings and limit Intelsat Sub Holdco’s ability to pay dividends on its ordinary shares.

Note 11    Retirement plans and other retiree benefits

(a) Pension and other post-retirement benefits

As was disclosed in Note 14 to the consolidated financial statements included in Intelsat’s Form 10-K, the Company was not required to make any additional contributions in 2005 to the defined benefit retirement plan, and it does not currently expect that it will be required to make any such contributions during 2006. Furthermore, it did not expect to make any contributions to its post-retirement health insurance plan, which is an unfunded plan.

11

INTELSAT, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

(in thousands, except percentages)

Net periodic pension benefits costs include the following components for the periods January 1, 2005 to January 31, 2005 and February 1, 2005 to March 31, 2005 and for the three months ended March 31, 2006:

	Pension Benefits
	Predecessor Entity			Successor Entity
	Period January 1 to January 31, 2005			Period February 1 to March 31, 2005			Three Months Ended March 31, 2006
Service cost	$	373		$	788		$	1,020
Interest cost		1,583			3,110			4,754
Expected return on plan assets		(1,823	)		(4,260	)		(6,148	)
Amortization of unrecognized prior service cost		3			—			—
Amortization of unrecognized net loss		424			—			—
Amortization of unrecognized transition asset		3			—			—
Total costs (benefit)	$	563		$	(362	)	$	(374	)

Net periodic other post-retirement benefits costs include the following components for the periods January 1, 2005 to January 31, 2005 and February 1, 2005 to March 31, 2005 and for the three months ended March 31, 2006:

	Other Post-retirement Benefits
	Predecessor Entity			Successor Entity
	Period January 1 to January 31, 2005			Period February 1 to March 31, 2005		Three Months Ended March 31, 2006
Service cost	$	313		$	625	$	890
Interest cost		338			679		1,152
Amortization of unrecognized prior service cost		(89	)		—		—
Amortization of unrecognized net loss		—			—		44
Total costs	$	562		$	1,304	$	2,086

(b) Other retirement plans

Intelsat maintains two defined contribution retirement plans for employees in the United States, one for employees who were hired before July 19, 2001 and another plan for employees hired on or after July 19, 2001. The company recognized compensation expense of $130, $539 and $487 for the period January 1, 2005 to January 31, 2005, the period February 1, 2005 to March 31, 2005 and for the three months ended March 31, 2006, respectively. Intelsat also maintains an unfunded deferred compensation plan for executives; however, benefit accruals under the plan were discontinued during 2001. The accrued liability for the deferred compensation plan for executives was $1,572 as of December 31, 2005 and as of March 31, 2006. Intelsat maintains other defined contribution retirement plans in several non-U.S. jurisdictions.

Note 12    Contingencies

(a) Insurance

As of March 31, 2006, Intelsat did not maintain in-orbit insurance coverage for its 27 satellites. The satellites had a net book value in aggregate of $2,768,879 as of December 31, 2005 and $2,654,189 as of March 31, 2006.

12

INTELSAT, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

(in thousands, except percentages)

(b) Litigation and claims

The Company is subject to litigation in the normal course of business, but management does not believe that the resolution of any pending proceedings would have a material adverse effect on the Company’s financial position or results of operations.

Two putative class action complaints that were filed against Intelsat, Ltd. and Intelsat Global Service Corporation in 2004 in the U.S. District Court for the District of Columbia by certain named plaintiffs who are Intelsat retirees, spouses of retirees or surviving spouses of deceased retirees, were consolidated into a single case. The complaint, which has been amended several times, arose out of a resolution adopted by the governing body of the IGO prior to privatization regarding medical benefits for retirees and their dependents. The plaintiffs allege that Intelsat wrongfully modified health plan terms to deny coverage to surviving spouses and dependents of deceased Intelsat retirees, thereby breaching the fiduciary duty obligations of the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the “contract” represented by the IGO resolution. In addition, the plaintiffs allege fraudulent misrepresentation and promissory estoppel. They seek a declaratory ruling that putative class members would be entitled to unchanged health plan benefits in perpetuity, injunctive relief prohibiting any changes to these benefits, a judgment in the amount of $112,500, compensatory and punitive damages in the amount of $1,000,000, and attorneys’ fees and costs. The court has granted the Company’s motion to dismiss most of the fraud claims, although in subsequent amendments plaintiffs have restated them. The court authorized very limited discovery, which is underway, and the Company filed a motion for summary judgment on January 31, 2006. The plaintiffs’ response was filed on February 27, 2006, and the Company filed its reply on March 21, 2006. The plaintiffs also filed a motion for partial summary judgment motion on March 23, 2006, seeking a ruling that Intelsat may not rely as a defense upon the immunity of its predecessor IGO, and the Company filed its opposition on April 11, 2006.

It is the Company’s position that the IGO resolution does not create obligations that are enforceable against Intelsat, Ltd. or Intelsat Global Service Corporation. The Company intends to continue to defend vigorously against all allegations made in the amended and consolidated complaint.

(c) MFC and LCO protections

Most of the customer service commitments entered into prior to the privatization were transferred to Intelsat pursuant to novation agreements. These agreements contain provisions, including provisions for most favoured customer (“MFC”) and lifeline connectivity obligation (“LCO”) protections, which constrain Intelsat’s ability to price services in some circumstances. MFC protection, which continues until July 18, 2006, entitles eligible customers to the lowest rate Intelsat charges after July 18, 2001 for satellite capacity having substantially the same technical and commercial terms, subject to limited exceptions. Intelsat management does not believe that the MFC terms significantly restrict the Company’s ability to price services competitively. Intelsat’s LCO contracts require the Company to provide customers with the right to renew their service commitments covered by LCO contracts at prices no higher than the prices charged for those services on the privatization date. Under some circumstances, Intelsat may also be required by an LCO contract to reduce the price for a service commitment covered by the contract. LCO protection may continue until July 18, 2013. As of March 31, 2006, Intelsat has not been required to reduce prices for its LCO-protected service commitments. However, there can be no assurances that Intelsat will not be required to reduce prices in the future under its MFC and LCO commitments.

Note 13    Business Segment and Geographic Information

Intelsat operates in a single industry segment, in which it provides satellite services to its communications customers around the world.

13

INTELSAT, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

(in thousands, except percentages)

The geographic distribution of Intelsat’s revenue was as follows:

	Predecessor Entity		Successor Entity
	January 1 to January 31, 2005		February 1 to March 31, 2005		January 1 to March 31, 2006
North America	44	%	41	%	40	%
Europe	19	%	20	%	21	%
Africa and Middle East	19	%	20	%	21	%
Asia Pacific	9	%	10	%	9	%
Latin America and Caribbean	9	%	9	%	9	%

Revenue by region is based on the locations of customers to which services are billed. Intelsat’s satellites are in geosynchronous orbit, and consequently are not attributable to any geographic location. Of Intelsat’s remaining assets, substantially all are located in the United States.

For the period January 1, 2005 to January 31, 2005, the period February 1, 2005 to March 31, 2005 and the three months ended March 31, 2006, revenues were derived from the following services:

	Predecessor Entity		Successor Entity
	January 1 to January 31, 2005		February 1 to March 31, 2005		Three Months Ended March 31, 2006
Lease	$	63,727	$	126,335	$	189,825
Channel		22,261		38,067		48,632
Managed solutions		7,303		17,338		31,330
Mobile satellite services and other		4,626		13,517		10,659
Total	$	97,917	$	195,257	$	280,446

Note 14    Related Party Transactions

(a) Shareholders agreement

The shareholders of Intelsat Holdings, including recipients of restricted stock awards of Intelsat Holdings, entered into a shareholders agreement relating to Intelsat Holdings on January 28, 2005. The shareholders agreement and the by-laws of Intelsat Holdings provide, among other things, for the governance of Intelsat Holdings and its subsidiaries and provide specific rights to and limitations upon the holders of Intelsat Holdings’ share capital with respect to shares held by such holders.

(b) Monitoring fee agreement and transaction fee

In connection with the closing of the Acquisition Transactions, Intelsat Bermuda entered into a monitoring fee agreement (“MFA”) with Intelsat Holdings and the Sponsors, or affiliates of, or entities advised by, designated by or associated with, the Sponsors, as the case may be (collectively, the “MFA parties”), pursuant to which the MFA parties provide certain monitoring, advisory and consulting services to Intelsat. Pursuant to the MFA, Intelsat Sub Holdco is obligated to pay an annual fee equal to the greater of $6,250 and 1.25% of adjusted EBITDA (as defined in the indenture governing the $1,000,000 of Floating Rate Senior Notes due 2012, the $875,000 of 8 ¹/4% Senior Notes due 2013 and the $675,000 of 8 ⁵/8% Senior Notes due 2015, referred to collectively as the acquisition finance notes), and to reimburse the MFA parties for their out-of-pocket expenses.

14

INTELSAT, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

(in thousands, except percentages)

Intelsat Sub Holdco has also agreed to indemnify the MFA parties and their directors, officers, employees, agents and representatives for losses relating to the services contemplated by the MFA and the engagement of the MFA parties pursuant to, and the performance by them of the services contemplated by, the MFA. To the extent permitted by the agreements and indentures governing indebtedness of Intelsat Sub Holdco and its subsidiaries, on a change of control or qualified initial public offering, the Sponsors may at their option receive a lump sum payment equal to the then present value of all then current and future monitoring fees payable, assuming a termination date of January 28, 2017. Intelsat recorded expense for services associated with these fees of $9,501 during the period January 1, 2005 to January 31, 2005, $2,041 during the period February 1, 2005 to March 31, 2005 and $3,000 during the three months ended March 31, 2006.

As payment for certain structuring and advisory services rendered, Intelsat paid an aggregate transaction and advisory fee of $50,000 to the MFA parties upon the closing of the Acquisition Transactions. On May 13, 2005, the MFA parties waived a portion of the annual fee they were entitled to receive under the MFA with respect to fiscal year 2004.

(c) Sponsor investment

In April 2005, SkyTerra Communications, Inc. (“SkyTerra”), an affiliate of Apollo, one of the Sponsors, indirectly acquired 50% of the Class A units of Hughes Network Systems, LLC (“HNS”), one of the Company’s corporate network services customers. On December 31, 2005, Hughes Communications, Inc. (“Hughes Communications”) acquired these Class A units pursuant to a separation agreement under which SkyTerra contributed to Hughes Communications certain of SkyTerra’s assets and liabilities, including the 50% Class A membership interest in HNS owned at that time by SkyTerra. On January 1, 2006, Hughes Communications acquired the remaining 50% of HNS Class A membership interests. On February 21, 2006, SkyTerra and Hughes Communications separated into two publicly owned companies when SkyTerra, which then owned all of the outstanding shares of Hughes Communications common stock, distributed those shares to each holder of SkyTerra’s common, non-voting common and preferred stock and its Series 1-A and 2-A warrants. As a result of the distribution, Apollo, the controlling stockholder of SkyTerra, became the controlling stockholder of Hughes Communications.

(d) Dividends

On February 11, 2005, Intelsat and one of its subsidiaries, Zeus Special Subsidiary Limited, which we refer to as Finance Co., issued the 9¼% Senior Discount Notes due 2015, referred to as the discount notes, which yielded $305,348 in proceeds. Following certain transactions, including the amalgamation of Finance Co. with Intelsat Bermuda, which are referred to collectively as the Transfer Transactions, and discussed in more detail in Note 13 to the audited consolidated financial statements included in Intelsat’s Form 10-K, these proceeds were distributed by Intelsat Bermuda to its parent, Intelsat. This distribution plus other cash on hand, was distributed by Intelsat to Intelsat Holdings, for a total distribution of $305,913. Intelsat Holdings used those funds to repurchase a portion of the outstanding preferred shares of Intelsat Holdings, some of which were held by certain members of Intelsat management.

Note 15    Supplemental Consolidating Financial Information

In connection with the Acquisition Transactions and subsequent amalgamations, Intelsat Sub Holdco issued $2.55 billion of acquisition finance notes. The acquisition finance notes are fully and unconditionally guaranteed, jointly and severally, by the Company, its wholly owned direct subsidiary, Intelsat Bermuda (Parent Guarantor), and certain other wholly owned indirect subsidiaries of the Company (the Subsidiary Guarantors). Separate

15

INTELSAT, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

(in thousands, except percentages)

financial statements of the Parent Guarantors and the Subsidiary Guarantors are not presented because management believes that such financial statements would not be material to investors. Investments in subsidiaries in the following condensed consolidating financial information are accounted for under the equity method of accounting. Consolidating adjustments include the following:

• Elimination of investment in subsidiaries

• Elimination of intercompany accounts

• Elimination of intercompany sales between guarantor and non-guarantor subsidiaries; and

• Elimination of equity in earnings of subsidiaries.

16

INTELSAT, LTD. AND SUBSIDIARIES

UNAUDITED CONSOLIDATING BALANCE SHEET

AS OF MARCH 31, 2006

(in thousands)

	Intelsat, Ltd.			Intelsat Bermuda		Subholdco			Subsidiary Guarantors			Non-Guarantors			Eliminations			Consolidated
	(Parent Guarantor)			(Parent Guarantor)
ASSETS:
Current assets:
Cash and cash equivalents	$	57,983		$	—	$	287,953		$	17,173		$	13,069		$	(17,173	)	$	359,005
Receivables		—			—		168,706			167,880			23,922			(165,253	)		195,255
Deferred income taxes		—			—		6,334			6,334			4,418			(6,334	)		10,752
Intercompany receivables		—			—		1,013,534			—			—			(1,013,534	)		—
Total current assets		57,983			—		1,476,527			191,387			41,409			(1,202,294	)		565,012
Satellites and other property and equipment, net		—			—		3,161,779			3,158,332			47,666			(3,158,332	)		3,209,445
Amortizable intangible assets, net		—			—		483,912			—			—			—			483,912
Non-amortizable intangible assets, net		—			—		560,000			—			—			—			560,000
Goodwill		—			—		111,388			—			—			—			111,388
Investment in affiliate		2,092,150			2,430,968		(46,588	)		(46,588	)		—			(4,396,282	)		33,660
Other assets		3,391			13,514		175,884			81,377			8,532			(84,002	)		198,696
Total assets	$	2,153,524			2,444,482	$	5,922,902		$	3,384,508		$	97,607		$	(8,840,910	)	$	5,162,113
LIABILITIES AND SHAREHOLDER’S EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt	$	—		$	—	$	16,039		$	12,539		$	—		$	(12,539	)	$	16,039
Accounts payable and accrued liabilities		57,900			650		222,882			138,710			14,475			(138,711	)		295,906
Deferred satellite performance incentives		—			—		7,852			7,852			—			(7,852	)		7,852
Deferred revenue		—			—		21,177			21,177			1,840			(21,177	)		23,017
Intercompany payables		849,683			13,265		—			593,844			150,586			(1,607,378	)		—
Total current liabilities		907,583			13,915		267,950			774,122			166,901			(1,787,657	)		342,814
Long-term debt, net of current portion		1,531,611			338,417		2,925,661			33,536			—			(33,536	)		4,795,689
Deferred satellite performance incentives, net of current portion		—			—		34,945			34,945			—			(34,945	)		34,945
Deferred revenue, net of current portion		—			—		143,686			143,686			—			(143,686	)		143,686
Accrued retirement benefits		—			—		108,492			108,492			—			(108,492	)		108,492
Other long-term liabilities		4,872			—		11,200			14,526			10,955			(14,524	)		27,029
Total liabilities		2,444,066			352,332		3,491,934			1,109,307			177,856			(2,122,840	)		5,452,655
Shareholder’s equity (deficit):
Ordinary shares		12			—		12			—			25			(37	)		12
Other shareholder’s equity (deficit)		(290,554	)		2,092,150		2,430,956			2,275,201			(80,274	)		(6,718,033	)		(290,554	)
Total shareholder’s equity (deficit)		(290,542	)		2,092,150		2,430,968			2,275,201			(80,249	)		(6,718,070	)		(290,542	)
Total liabilities and shareholder’s equity (deficit)	$	2,153,524			2,444,482	$	5,922,902		$	3,384,508		$	97,607		$	(8,840,910	)	$	5,162,113

(Certain totals may not add due to the effects of rounding)

17

INTELSAT, LTD. AND SUBSIDIARIES

CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2005

(in thousands)

	Intelsat, Ltd.			Intelsat Bermuda		Subholdco			Subsidiary Guarantors			Non-Guarantors			Eliminations			Consolidated
	(Parent Guarantor)			(Parent Guarantor)
ASSETS:
Current assets:
Cash and cash equivalents	$	65		$	—	$	341,204		$	7,501		$	18,801		$	(7,501	)	$	360,070
Receivables		—			—		172,171			171,304			30,680			(170,703	)		203,452
Deferred income taxes		—			—		6,334			6,334			4,418			(6,334	)		10,752
Intercompany receivables		—			—		1,005,471			—			—			(1,005,471	)		—
Total current assets		65			—		1,525,180			185,139			53,899			(1,190,009	)		574,274
Satellites and other property and equipment, net		—			—		3,277,809			3,274,112			49,531			(3,274,111	)		3,327,341
Amortizable intangible assets, net		—			—		493,263			—			—			—			493,263
Non-amortizable intangible assets, net		—			—		560,000			—			—			—			560,000
Goodwill		—			—		111,388			—			—			—			111,388
Investment in affiliate		2,187,132			2,518,357		(40,267	)		(40,267	)		—			(4,585,024	)		39,931
Other assets		725			12,864		167,990			78,307			7,271			(78,910	)		188,247
Total assets	$	2,187,922		$	2,531,221	$	6,095,363		$	3,497,291		$	110,701		$	(9,128,054	)	$	5,294,444
LIABILITIES AND SHAREHOLDER’S EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt	$	—		$	—	$	11,097		$	7,597		$	—		$	(7,597	)	$	11,097
Accounts payable and accrued liabilities		28,938			—		288,043			159,779			15,927			(159,780	)		332,907
Deferred satellite performance incentives		—			—		7,418			7,418			—			(7,418	)		7,418
Deferred revenue		—			—		23,518			23,518			6,625			(23,518	)		30,143
Intercompany payables		834,820			13,265		—			465,619			157,386			(1,471,090	)		—
Total current liabilities		863,758			13,265		330,076			663,931			179,938			(1,669,403	)		381,565
Long-term debt, net of current portion		1,524,943			330,823		2,934,250			40,375			—			(40,375	)		4,790,016
Deferred satellite performance incentives, net of current portion		—			—		36,027			36,027			—			(36,027	)		36,027
Deferred revenue, net of current portion		—			—		157,580			157,580			—			(157,580	)		157,580
Accrued retirement benefits		—			—		107,778			107,778			—			(107,778	)		107,778
Other long-term liabilities		5,486			—		11,296			14,623			10,960			(14,622	)		27,743
Total liabilities		2,394,187			344,088		3,577,007			1,020,314			190,898			(2,025,785	)		5,500,709
Shareholder’s equity (deficit):
Ordinary shares		12			—		12			—			25			(37	)		12
Other shareholder’s equity (deficit)		(206,277	)		2,187,133		2,518,344			2,476,977			(80,222	)		(7,102,232	)		(206,277	)
Total shareholder’s equity (deficit)		(206,265	)		2,187,133		2,518,356			2,476,977			(80,197	)		(7,102,269	)		(206,265	)
Total liabilities and shareholder’s equity (deficit)	$	2,187,922		$	2,531,221	$	6,095,363		$	3,497,291		$	110,701		$	(9,128,054	)	$	5,294,444

(Certain totals may not add due to the effects of rounding)

18

INTELSAT, LTD. AND SUBSIDIARIES

UNAUDITED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2006

(in thousands)

	Intelsat, Ltd.			Intelsat Bermuda			Subholdco			Subsidiary Guarantors			Non- Guarantors			Eliminations			Consolidated
	(Parent Guarantor)			(Parent Guarantor)
Revenue	$	—		$	—		$	260,379		$	260,379		$	51,584		$	(291,896	)	$	280,446
Operating expenses:
Direct cost of revenue		—			—			62,324			293,897			44,354			(345,464	)		55,111
Selling, general and administrative		9,364			—			7,262			2,302			3,138			17,748			39,814
Depreciation and amortization		—			—			152,558			142,956			2,046			(142,956	)		154,604
Total operating expenses		9,364			—			222,144			439,155			49,538			(470,672	)		249,529
Income (loss) from operations		(9,364	)		—			38,235			(178,776	)		2,046			178,776			30,917
Interest expense		46,774			7,594			69,512			27,927			2,634			(44,968	)		109,473
Interest income		285			—			19,977			17,067			131			(34,108	)		3,352
Subsidiary income (loss)		(34,257	)		(26,665	)		(51	)		(51	)		—			61,024			—
Other income (expense), net		—			—			(5,697	)		(5,694	)		286			5,694			(5,411	)
Income (loss) before income taxes		(90,110	)		(34,259	)		(17,048	)		(195,381	)		(171	)		256,354			(80,615	)
Provision for income taxes		—			—			9,616			9,374			(121	)		(9,374	)		9,495
Net income (loss)	$	(90,110	)	$	(34,259	)	$	(26,664	)	$	(204,755	)	$	(50	)	$	265,728		$	(90,110	)

(Certain totals may not add due to the effects of rounding)

19

INTELSAT, LTD. AND SUBSIDIARIES

UNAUDITED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE PERIOD FEBRUARY 1, 2005 TO MARCH 31, 2005

(in thousands)

	Intelsat, Ltd.			Intelsat Bermuda			Subholdco			Subsidiary Guarantors			Non-Guarantors			Eliminations			Consolidated
	(Parent Guarantor)			(Parent Guarantor)
Revenue	$	—		$	—		$	176,508		$	176,508		$	40,913		$	(198,672	)	$	195,257
Operating expenses:
Direct cost of revenue		—			—			34,855			199,169			36,869			(227,056	)		43,837
Selling, general and administrative		3,824			—			15,133			3,750			1,800			1,974			26,481
Depreciation and amortization		—			—			94,355			92,288			1,598			(92,288	)		95,953
Total operating expenses		3,824			—			144,343			295,207			40,267			(317,370	)		166,271
Income (loss) from operations		(3,824	)		—			32,165			(118,699	)		646			118,698			28,986
Interest expense		29,869			3,832			39,877			17,876			1,565			(25,055	)		67,964
Interest income		94			—			7,910			6,536			218			(13,666	)		1,092
Subsidiary income (loss)		(8,326	)		(4,494	)		(1,286	)		(1,286	)		—			15,392			—
Other income (expense), net		—			—			(460	)		(100	)		56			51			(453	)
Income (loss) before income taxes		(41,925	)		(8,326	)		(1,548	)		(131,425	)		(645	)		145,530			(38,339	)
Provision for income taxes		—			—			2,944			1,036			642			(1,036	)		3,586
Net income (loss)	$	(41,925	)	$	(8,326	)	$	(4,492	)	$	(132,461	)	$	(1,287	)	$	146,566		$	(41,925	)

(Certain totals may not add due to the effects of rounding)

20

INTELSAT, LTD. AND SUBSIDIARIES

UNAUDITED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE PERIOD JANUARY 1, 2005 TO JANUARY 31, 2005

(in thousands)

	Intelsat, Ltd.			Subholdco			Guarantors			Non-Guarantors		Eliminations			Consolidated
Revenue	$	—		$	86,449		$	86,449		$	19,524	$	(94,505	)	$	97,917
Operating expenses:
Direct cost of revenue		—			31,833			98,769			15,545		(119,208	)		26,939
Selling, general and administrative		47,584			(5,421	)		(5,421	)		897		17,804			55,443
Depreciation and amortization		—			38,384			37,924			800		(37,924	)		39,184
Impairment of asset value		—			69,227			69,227			—		(69,227	)		69,227
Restructuring costs		—			263			263			—		(263	)		263
Total operating expenses		47,584			134,286			200,762			17,242		(208,818	)		191,056
Income (loss) from operations		(47,584	)		(47,837	)		(114,313	)		2,282		114,313			(93,139	)
Interest expense		12,685			553			553			3		(553	)		13,241
Interest income		191			—			—			—		—			191
Subsidiary income (loss)		(49,648	)		2,011			2,011			—		45,626			—
Other income (expense), net		—			734			734			77		(682	)		863
Income (loss) before income taxes		(109,726	)		(45,645	)		(112,121	)		2,356		159,810			(105,326	)
Provision for income taxes		—			4,052			462			348		(462	)		4,400
Net income (loss)	$	(109,726	)	$	(49,697	)	$	(112,583	)	$	2,008	$	160,272		$	(109,726	)

(Certain totals may not add due to the effects of rounding)

21

INTELSAT, LTD. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2006

(in thousands)

	Intelsat, Ltd.			Intelsat Bermuda			Subholdco			Subsidiary Guarantors			Non-Guarantors			Eliminations			Consolidated
	(Parent Guarantor)			(Parent Guarantor)
Cash flows from operating activities	$	(19,334	)	$	—		$	42,526		$	43,381		$	28,122		$	(70,206	)	$	24,489
Cash flows from investing activities:
Payments for satellites and other property and equipment		—			—			(21,299	)		(21,299	)		(180	)		21,299			(21,479	)
Advances to/from subsidiaries, net		13,552			—			(6,483	)		(9,865	)		(33,894	)		36,690			—
Investment in subsidiaries		63,700			63,700			—			—			—			(127,400	)		—
Net cash used in investing activities		77,252			63,700			(27,782	)		(31,164	)		(34,074	)		(69,411	)		(21,479	)
Cash flows from financing activities:
Repayments of long-term debt		—			—			(1,750	)		—			—			—			(1,750	)
Principal payment on deferred satellite performance incentives		—			—			(648	)		(648	)		—			648			(648	)
Principal payments on capital lease obligations		—			—			(1,897	)		(1,897	)		—			1,897			(1,897	)
Dividends to shareholder		—			(63,700	)		(63,700	)		—			—			127,400			—
Net cash provided by (used in) financing activities		—			(63,700	)		(67,995	)		(2,545	)		—			129,945			(4,295	)
Effect of exchange rate changes on cash		—			—			—			—			220			—			220
Net change in cash and cash equivalents		57,918			—			(53,251	)		9,672			(5,732	)		(9,672	)		(1,065	)
Cash and cash equivalents, beginning of period		65			—			341,204			7,501			18,801			(7,501	)		360,070
Cash and cash equivalents, end of period	$	57,983		$	—		$	287,953		$	17,173		$	13,069		$	(17,173	)	$	359,005

(Certain totals may not add due to the effects of rounding)

22

INTELSAT, LTD. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE PERIOD FEBRUARY 1, 2005 TO MARCH 31, 2005

(in thousands)

	Intelsat, Ltd.			Intelsat Bermuda			Subholdco			Subsidiary Guarantors			Non-Guarantors			Eliminations			Consolidated
	(Parent Guarantor)			(Parent Guarantor)
Cash flows from operating activities	$	(23,073	)	$	—		$	103,711		$	84,731		$	13,959		$	(84,781	)	$	94,547
Cash flows from investing activities:
Payments for satellites and other property and equipment		—			—			(5,255	)		(5,255	)		—			5,255			(5,255	)
Advances to/from subsidiaries, net		223,798			—			(223,032	)		(98,304	)		(766	)		98,304			—
Investment in subsidiaries		305,348			—			—			—			—			(305,348	)		—
Proceeds from insurance receivable		—			—			19,759			19,759			—			(19,759	)		19,759
Net cash used in investing activities		529,146			—			(208,528	)		(83,800	)		(766	)		(221,548	)		14,504
Cash flows from financing activities:
Repayments of long-term debt		(200,000	)		—			(875	)		—			—			—			(200,875	)
Proceeds from bond issuance		—			305,348			—			—			—			—			305,348
Proceeds from credit facility borrowings		—			—			200,000			—			—			—			200,000
Principal payment on deferred satellite performance incentives		—			—			(771	)		(771	)		—			771			(771	)
Principal payments on capital lease obligations		—			—			(1,809	)		(1,809	)		—			1,809			(1,809	)
Dividends to shareholder		(305,913	)		(305,348	)		—			—			—			305,348			(305,913	)
Net cash provided by (used in) financing activities		(505,913	)		—			196,545			(2,580	)		—			307,928			(4,020	)
Effect of exchange rate changes on cash		—			—			—			—			(46	)		—			(46	)
Net change in cash and cash equivalents		160			—			91,728			(1,649	)		13,147			1,599			104,985
Cash and cash equivalents, beginning of period		57			—			189,438			9,295			5,137			(9,245	)		194,682
Cash and cash equivalents, end of period	$	217		$	—		$	281,166		$	7,646		$	18,284		$	(7,646	)	$	299,667

(Certain totals may not add due to the effects of rounding)

23

INTELSAT, LTD. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE PERIOD JANUARY 1, 2005 TO JANUARY 31, 2005

(in thousands)

	Intelsat, Ltd.			Subholdco			Guarantors			Non-Guarantors			Eliminations			Consolidated
Cash flows from operating activities	$	(8,085	)	$	61,087		$	42,008		$	1,813		$	(85,439	)	$	11,384
Cash flows from investing activities:
Payments for satellites and other property and equipment		—			(953	)		(953	)		—			953			(953	)
Advances to/from subsidiaries, net		(5,133	)		5,133			—			—			—			—
Investment in subsidiaries		(155,800	)		155,800			—			—			—			—
Proceeds from insurance receivable		38,561			(38,561	)		(38,561	)		—			77,122			38,561
Net cash provided by (used in) investing activities		(122,372	)		121,419			(39,514	)		—			78,075			37,608
Cash flows from financing activities:
Principal payment on deferred satellite performance incentives		—			(475	)		(475	)		—			475			(475	)
Net cash provided by (used in) financing activities		—			(475	)		(475	)		—			475			(475	)
Effect of exchange rate changes on cash		—			—			—			(75	)		—			(75	)
Net change in cash and cash equivalents		(130,457	)		182,031			2,019			1,738			(6,889	)		48,442
Cash and cash equivalents, beginning of period		130,514			7,407			7,276			3,399			(7,276	)		141,320
Cash and cash equivalents, end of period	$	57		$	189,438		$	9,295		$	5,137		$	(14,165	)	$	189,762

(Certain totals may not add due to the effects of rounding)

24

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated financial statements and their notes included elsewhere in this quarterly report. Unless otherwise indicated, the following discussion and analysis does not give effect to, nor reflect the impact of, the PanAmSat Acquisition Transactions, as defined below.

Overview

We are a leading provider of fixed satellite communications services worldwide, supplying voice, data and video connectivity in over 200 countries and territories for over 700 customers, many of which we have had relationships with for over 30 years. Our global communications network includes 27 satellites in orbit, leased capacity on one additional satellite owned by another satellite operator in the Asia-Pacific region and ground facilities related to the operation and control of our satellites. We believe that we have one of the largest, most flexible and reliable satellite fleets in the world, which covers 99% of the world’s population. Our satellite fleet is operated via ground facilities used to monitor and control our satellites and is complemented by a terrestrial network of teleports, points of presence and leased fiber links for the provision of our managed solutions.

Impact of the Acquisition Transactions and the Transfer Transactions

On January 28, 2005, Intelsat Holdings acquired Intelsat, Ltd., as part of a series of transactions referred to as the Acquisition Transactions, for total cash consideration of approximately $3.2 billion, with pre-acquisition debt of approximately $1.9 billion remaining outstanding. In connection with the Acquisition Transactions, on January 28, 2005, Intelsat (Bermuda), Ltd., referred to as Intelsat Bermuda, established a new $300 million revolving credit facility and a new $350 million term loan facility, referred to together as the senior secured credit facilities, and issued $1 billion of floating rate senior notes due 2012, $875 million of 8 ¹/4% senior notes due 2013 and $675 million of 8 ⁵/8% senior notes due 2015, referred to collectively as the acquisition finance notes.

The Acquisition Transactions have been accounted for under the purchase method of accounting. In accordance with applicable accounting guidelines, the purchase price paid by Intelsat Holdings to acquire Intelsat, Ltd. and related purchase accounting adjustments have been “pushed down” and recorded in Intelsat, Ltd. and its subsidiaries’ financial statements and resulted in a new basis of accounting for the “successor” period beginning after the Acquisition Transactions were consummated. Due to the immateriality of the results of operations for the period between January 28, 2005 and January 31, 2005, we have accounted for the consummation of the Acquisition Transactions as if they had occurred on January 31, 2005.

Following the Acquisition Transactions, Intelsat, Ltd. formed a new wholly owned subsidiary, Zeus Special Subsidiary Limited, referred to as Finance Co., and Intelsat Bermuda formed a new wholly owned subsidiary, Intelsat Subsidiary Holding Company, Ltd., referred to as Intelsat Sub Holdco. On February 11, 2005, Finance Co. issued $478.7 million aggregate principal amount at maturity of 9 ¹/4% Senior Discount Notes due 2015, referred to as the discount notes, which yielded approximately $305 million of proceeds at issuance.

Following the issuance of the discount notes and the deposit of the gross proceeds by Finance Co. in a special account established by Finance Co., the following transactions took place:

• we filed applications with the U.S. Federal Communications Commission, referred to as the FCC, for approval of the pro forma indirect transfer of control of, and the change in indirect foreign ownership of, the five subsidiaries of our company holding FCC authorizations;

• on March 3, 2005, Intelsat Bermuda transferred substantially all of its assets to Intelsat Sub Holdco and Intelsat Sub Holdco assumed substantially all of the then-existing liabilities of Intelsat Bermuda, including the acquisition finance notes; and Intelsat Bermuda also became a guarantor of the senior secured credit facilities and the acquisition finance notes upon the consummation of the Transfer Transactions; and

25

• Finance Co. amalgamated with Intelsat Bermuda, with the resulting company being named Intelsat (Bermuda), Ltd. and Intelsat Bermuda becoming an obligor on the discount notes.

Following consummation of these transactions, the proceeds of the offering of the discount notes, together with cash on hand, were used to pay a dividend from Intelsat Bermuda to its parent, Intelsat, Ltd., which Intelsat, Ltd. used to make a return of capital distribution equal to the amount of the dividend to its parent, Intelsat Holdings, which in turn used those funds to repurchase a portion of the outstanding preferred shares of Intelsat Holdings. The repurchased preferred shares were held by the Investors and certain members of our management. We refer to all of these transactions collectively as the Transfer Transactions.

As a result, the purchase price and related costs were allocated to the estimated fair values of the assets acquired and liabilities assumed at the time of the acquisition based on management’s best estimates, which were based in part on the work of third-party appraisers. More specifically, our assets and liabilities were adjusted to fair value as of the closing date of the Acquisition Transactions. As a result of these adjustments, our depreciation and amortization expense increased significantly, primarily due to increases in the fair value of our amortizable intangible assets. Also, our interest expense increased due to interest on the acquisition finance notes, interest accrued with respect to the discount notes issued in connection with the Transfer Transactions and interest accrued from the amortization of the net discount applied to the face value of Intelsat, Ltd.’s outstanding long-term debt. This discount resulted from a lower estimated fair value of this long-term debt under purchase accounting.

We are a highly leveraged company. As part of the Acquisition Transactions, Intelsat Bermuda incurred substantial debt, which has been assumed by Intelsat Sub Holdco in connection with the Transfer Transactions, including debt under the senior secured credit facilities and the acquisition finance notes, which resulted in a significant increase in our interest expense. In addition, Intelsat, Ltd. and Intelsat Bermuda incurred significant additional indebtedness on February 3, 2005, in connection with the issuance of the discount notes, which further increased our interest expense. Payments required to service all of this indebtedness substantially increased our liquidity requirements in 2005 as compared to prior years, and will do so in 2006 and future years.

The PanAmSat Acquisition Transactions

On August 28, 2005, we entered into a Merger Agreement with PanAmSat Holdings Corporation, referred to as PanAmSat, under the terms of which Intelsat Bermuda will acquire all outstanding shares of PanAmSat for $25.00 per share in cash, or a total cash consideration of approximately $3.2 billion pursuant to a merger, referred to as the Merger Transaction. The Merger Transaction is subject to a number of conditions and could be completed in the second or third quarter of 2006. In connection with the Merger Transaction, it is expected that Intelsat Bermuda, Intelsat Sub Holdco, PanAmSat and PanAmSat Corporation will incur substantial additional debt, the aggregate principal amount of which is not expected to exceed $3.267 billion. We refer to these transactions and the Merger Transaction collectively as the PanAmSat Acquisition Transactions. The amount of new debt is based on current expectations and is subject to change. In addition, as part of these transactions, approximately $3.2 billion in debt of PanAmSat and its subsidiaries will either be refinanced or remain outstanding. If the PanAmSat Acquisition Transactions are completed, we will become a significantly more highly leveraged company than we currently are, which will result in a significant increase in our interest expense in future periods.

Unless otherwise indicated, the following discussion and analysis, including capital spending expectations, liquidity requirements, and other trends, do not give effect to, nor reflect the impact of, the PanAmSat Acquisition Transactions.

26

Results of Operations

As a result of the consummation of the Acquisition Transactions, the financial results for the first three months of 2005 have been separately presented for the “Predecessor Entity” for the period January 1, 2005 through January 31, 2005 and for the “Successor Entity” for the period February 1, 2005 through March 31, 2005. For comparative purposes, we combined the period from January 1, 2005 through March 31, 2005 in our discussion below, as we believe this combination is useful to provide the reader a more accurate comparison. This combination is not a GAAP measure and it is provided to enhance the reader’s understanding of the results of operations for the periods presented.

	Predecessor Entity			Successor Entity			Combined			Successor Entity
	Period January 1 to			Period February 1 to			Three Months Ended			Three Months Ended
	January 31,			March 31 ,			March 31 ,			March 31,
	2005			2005			2005			2006
	(in thousands)
Revenue	$	97,917		$	195,257		$	293,174		$	280,446
Operating expenses:
Direct costs of revenue		26,939			43,837			70,776			55,111
Selling, general and administrative		55,443			26,481			81,924			39,814
Depreciation and amortization		39,184			95,953			135,137			154,604
Impairment of asset value		69,227			—			69,227			—
Restructuring costs		263			—			263			—
Total operating expenses		191,056			166,271			357,327			249,529
Income (loss) from operations		(93,139	)		28,986			(64,153	)		30,917
Interest expense		13,241			67,964			81,205			109,473
Interest income		191			1,092			1,283			3,352
Other income (expense), net		863			(453	)		410			(5,411	)
Loss from operations before income taxes		(105,326	)		(38,339	)		(143,665	)		(80,615	)
Provision for income taxes		4,400			3,586			7,986			9,495
Net loss	$	(109,726	)	$	(41,925	)	$	(151,651	)	$	(90,110	)

27

The following tables set forth our comparative statements of operations on a combined basis for the three months ended March 31, 2005 and for the three months ended March 31, 2006 with the increase (decrease) and percentage change between the periods presented:

	Combined						Three Months Ended March 31, 2006 Compared to Combined Three Months Ended March 31, 2005
	Three Months Ended			Three Months Ended
	March 31, 2005			March 31, 2006			Increase (Decrease)			Percentage Change
	(in thousands, except percentages)
Revenue	$	293,174		$	280,446		$	(12,728	)	(4	)%
Operating expenses:
Direct costs of revenue		70,776			55,111			(15,665	)	(22	)
Selling, general and administrative		81,924			39,814			(42,110	)	(51	)
Depreciation and amortization		135,137			154,604			19,467		14
Impairment of asset value		69,227			—			(69,227	)	(100	)
Restructuring costs		263			—			(263	)	(100	)
Total operating expenses		357,327			249,529			(107,798	)	(30	)
Income (loss) from operations		(64,153	)		30,917			95,070		148
Interest expense		81,205			109,473			28,268		35
Interest income		1,283			3,352			2,069		161
Other income (expense), net		410			(5,411	)		(5,821	)	(1,420	)
Loss from operations before income taxes		(143,665	)		(80,615	)		63,050		44
Provision for income taxes		7,986			9,495			1,509		19
Net Loss	$	(151,651	)	$	(90,110	)	$	61,541		41

The following table sets forth our revenue by service commitment type and percentage of our total revenue represented by each for the three months ended March 31, 2005 and 2006:

	Combined
	Three Months Ended March 31, 2005				Three Months Ended March 31, 2006
	(in millions, except percentages)
Lease	$	190.1	65	%	$	189.8	68	%
Channel		60.3	21			48.6	17
Managed solutions		24.6	8			31.3	11
Mobile satellite services and other		18.1	6			10.7	4
Total	$	293.2	100	%	$	280.4	100	%

Revenue

Revenue decreased $12.7 million, or 4%, to $280.4 million for the three months ended March 31, 2006 from $293.2 million for the three months ended March 31, 2005. Channel revenue decreased $11.7 million to $48.6 million for the three months ended March 31, 2006 from $60.3 million for the three months ended March 31, 2005. The decrease was primarily attributable to a decline in our legacy channel services revenue. The decline in channel services revenue was primarily due to a decline in the volume of capacity sold as channel services, which reflects the continued migration of point-to-point satellite traffic to fiber optic cables across transoceanic routes, the reduced capacity requirements of our customers due to economic factors in certain geographical regions, and the optimization of their networks. Mobile satellite services and other revenues declined by $7.4 million to $10.7 million for the three months ended March 31, 2006, as compared to $18.1 million in the three months ended March 31, 2005, primarily due to less use of mobile satellite services sold to government customers. These declines were partially offset by increases in managed solutions revenue which increased $6.7 million to $31.3

28

million for the three months ended March 31, 2006 from $24.6 million for the three months ended March 31, 2005. Lease revenue was relatively unchanged at $189.8 million for the three months ended March 31, 2006 as compared to $190.1 million in the three months ended March 31, 2005. We expect our revenue from channel services to continue to decline as channel customers continue migrating point-to-point satellite traffic to fiber optic cable, which is generally more cost effective.

Operating Expenses

Direct Costs of Revenue

Direct costs of revenue decreased $15.7 million, or 22%, to $55.1 million for the three months ended March 31, 2006 from $70.8 million for the three months ended March 31, 2005. The decrease was principally due to lower third party capacity costs of $9.4 million driven by a decline in mobile satellite services revenue and decreases in lease service sales to government customers. Additional decreases in costs were associated with lower insurance costs of $4.0 million and a decrease of $4.9 million associated with accelerated vesting of stock-based compensation plans in 2005 as a result of the Acquisition Transactions. These declines were offset by increased severance expense in 2006 of $4.3 million.

Selling, General and Administrative

Selling, general and administrative expenses decreased $42.1 million, or 51%, to $39.8 million for the three months ended March 31, 2006 from $81.9 million for the three months ended March 31, 2005. The decrease was due primarily to decreases in professional fees of $41.7 million incurred mainly in connection with the Acquisition Transactions, offset by recovery of previously written-off bad debts of $5.3 million in 2005. Additional decreases of $4.8 million associated with accelerated vesting of stock-based compensation plans in 2005 as a result of the Acquisition Transactions, decreases in costs associated with management bonuses, accruals under our corporate bonus plan of $3.5 million and $2.3 million of decreased salary and wages due to reductions in headcount between 2005 and 2006 were offset by $6.6 million of increased severance expenses.

Depreciation and Amortization

Depreciation and amortization increased $19.5 million, or 14%, to $154.6 million for the three months ended March 31, 2006 from $135.1 million for the three months ended March 31, 2005. This increase was primarily due to the increase in the fair value of our depreciable assets upon the closing of the Acquisition Transactions. The new fair values resulted in an increase in depreciation on our satellites and ground segment equipment of $6.5 million and an increase in amortization on our intangible assets of $2.2 million. Additionally, $5.1 million of the increase was due to accelerated depreciation for retiring assets, $4.0 million of the depreciation increase was associated with our IA-8 satellite, which went into service in July 2005 and for which no depreciation was recorded during the prior year period, and $1.4 million of the increase related to ground segment assets placed in service at the end of 2005.

Impairment of Asset Value

In January 2005, our IS-804 satellite experienced an unexpected electrical power system anomaly that resulted in the total loss of the satellite. As a result of this anomaly, we recorded a non-cash impairment charge of $69.2 million during the three months ended March 31, 2005 to write off the net book value of the IS-804 satellite of $73.3 million, net of satellite performance incentive obligations of $4.1 million. No impairment charges were recorded during the three months ended March 31, 2006.

Interest Expense

We incurred $111.9 million of gross interest costs during the three months ended March 31, 2006. Interest expense consists of the gross interest costs we incur less the amount of interest we capitalize related to capital assets under construction. Interest expense increased $28.3 million, or 35%, to $109.5 million for the three months ended March 31, 2006 from $81.2 million for the three months ended March 31, 2005. This increase was principally due to the impact of January 2005 interest costs associated with the approximately $2.55 billion of debt we incurred in connection with the Acquisition Transactions and the $478.7 million of debt we incurred in the form of the discount notes issued in February 2005. Furthermore, the non-cash portion of interest expense

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included the amortization and accretion of discounts recorded on existing debt of $14.3 million and an increase due to higher capitalized interest during the period as a direct result of the satellite under construction during 2006.

Interest Income

Interest income of $3.4 million for the three months ended March 31, 2006 increased by $2.1 million from $1.3 million for the three months ended March 31, 2005. This increase was due primarily to improved investment returns earned on higher cash investment balances during the first quarter of 2006 compared to the first quarter of 2005.

Other Income (Expense), Net

Other income (expense), net consists of non-operating income less non-operating expenses. Other expense, net was $5.4 million for the three months ended March 31, 2006, an increase of $5.8 million from other income of $0.4 million for the three months ended March 31, 2005. The increase was primarily due to an increase in losses from our investment in satellite-based broadband services provider, WildBlue Communications, Inc., or WildBlue, from $1.6 million during the first quarter of 2005 to $6.2 million in the first quarter of 2006.

Income Taxes

Our provision for income taxes totaled $9.5 million for the three months ended March 31, 2006, as compared to $8.0 million for the three months ended March 31, 2005. The increase in expense was principally due to higher earnings in our subsidiaries subject to U.S. tax compared to the prior year period. Because Bermuda does not currently impose an income tax, our statutory tax rate was zero. The difference between tax expense reported in our statements of operations and tax computed at statutory rates was attributable to the provision for foreign taxes, which were principally U.S. and U.K. taxes, as well as withholding taxes on revenue earned in many of our foreign markets.

Net loss

Net loss of $90.1 million for the three months ended March 31, 2006 reflected a decrease of $61.5 million from $151.7 million of net loss for the three months ended March 31, 2005. This decrease was primarily due to lower operating expenses during the former period, the IS-804 impairment charge and professional fees incurred in 2005 associated with the Acquisition Transactions.

EBITDA

EBITDA consists of earnings before interest, taxes and depreciation and amortization. EBITDA is a measure commonly used in the fixed satellite services sector, and we present EBITDA to enhance your understanding of our operating performance. We use EBITDA as one criterion for evaluating our performance relative to that of our peers. We believe that EBITDA is an operating performance measure, and not a liquidity measure, that provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies. However, EBITDA is not a measure of financial performance under U.S. GAAP, and our EBITDA may not be comparable to similarly titled measures of other companies. You should not consider EBITDA as an alternative to operating or net income, determined in accordance with U.S. GAAP, as an indicator of our operating performance, or as an alternative to cash flows from operating activities, determined in accordance with U.S. GAAP, as an indicator of cash flows, or as a measure of liquidity.

EBITDA of $180.1 million for the three months ended March 31, 2006 reflects an increase of $108.7 million, or 152% from $71.4 million for the same period in 2005. This increase was principally due to the $69.2 million impairment charge in 2005 and lower operating expenses in 2006, partially offset by lower revenue, as compared to the same period in 2005.

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A reconciliation of net loss to EBITDA is as follows:

	Three Months Ended March 31,
	2005			2006
	(in thousands)
Net loss	$	(151,651	)	$	(90,110	)
Add:
Interest expense		81,205			109,473
Provision for income taxes		7,986			9,495
Depreciation and amortization		135,137			154,604
Subtract: Interest income		1,283			3,352
EBITDA	$	71,394		$	180,110

Liquidity and Capital Resources

Cash Flow Items

Net cash provided by operating activities of $24.5 million for the three months ended March 31, 2006 reflected a decrease of $81.4 million, or 77%, from $105.9 million for the three months ended March 31, 2005. For the three months ended March 31, 2005, net cash provided by operating activities was principally comprised of $151.6 million in net loss, an impairment charge of $69.2 million, $135.1 million in depreciation and amortization, and an increase in cash flows from operating assets and liabilities of $46.6 million. For the three months ended March 31, 2006, net cash provided by operating activities was principally comprised of $90.1 million in net loss, $154.6 million in depreciation and amortization, $5.8 million in compensation costs associated with the repurchase of shares of Intelsat Holdings, $17.1 million of non-cash amortization of bond discount and issuance costs, and a decrease in cash flows from operating assets and liabilities of $68.3 million. Decreases in operating cash flows for the three months ended March 31, 2006 were driven by the payment of $115.0 million in interest for outstanding long-term debt, offset by other increases in working capital.

Net cash used in investing activities increased $73.6 million to $21.5 million for the three months ended March 31, 2006 from $52.1 million provided by investing activities for the three months ended March 31, 2005. This increase reflected our increased capital expenditures for a satellite under construction in 2006 and the absence of insurance proceeds in 2006 compared to insurance proceeds received in 2005 from the refund of insurance premiums.

Net cash used in financing activities decreased $0.2 million to $4.3 million for the three months ended March 31, 2006 from $4.5 million for the three months ended March 31, 2005. Our financing activities for the three months ended March 31, 2005 included $305.3 million of proceeds from issuance of the discount notes and $200.0 million of term loan borrowings under the senior secured credit facilities. Cash used for financing activities in the three months ended March 31, 2005 included a $305.9 million payment of a dividend to our sole shareholder, debt repayments of $200.9 million, and $3.0 million of payments for capital lease obligations and deferred satellite performance incentives. Excluding the new financing activities and dividend payments, net cash used in financing activities during the three months ended March 31, 2006 was consistent with the prior year.

Currency and Exchange Rates

Substantially all of our customer contracts, capital expenditure contracts and operating expense obligations are denominated in U.S. dollars. Consequently, we are not exposed to material currency exchange risk. However, our service contracts with our Brazilian customers provide for payment in Brazilian reais. Accordingly, we are subject to the risk of a reduction in the value of the Brazilian real as compared to the U.S. dollar in connection with payments made by Brazilian customers, and our exposure to fluctuations in the exchange rate for Brazilian reais is ongoing. However, the rates payable under our service contracts with most of our Brazilian customers are adjusted annually to account for inflation in Brazil, thereby mitigating our risk. For the three months ended March 31, 2006, our Brazilian customers represented approximately 1% of our revenue. Transactions in other currencies are converted into U.S. dollars using rates in effect on the dates of the transactions.

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Receivables

Our receivables, net totaled $195.3 million at March 31, 2006 and $203.5 million at December 31, 2005. Of these amounts, our gross trade receivables, consisting of total billed and unbilled service charges, were $221.9 million at December 31, 2005 and $211.5 million at March 31, 2006. The remaining balance in both periods represented the allowance for doubtful accounts and other receivables.

Sub Holdco Adjusted EBITDA and Indenture EBITDA

In addition to EBITDA, we calculate a measure called Sub Holdco Adjusted EBITDA, based on the definition in our credit agreement dated January 28, 2005 establishing the senior secured credit facilities. Sub Holdco Adjusted EBITDA consists of EBITDA as adjusted to exclude or include certain unusual items, certain other operating expense items and other adjustments permitted in calculating covenant compliance under our credit agreement as described in the table and related footnotes below. Sub Holdco Adjusted EBITDA as presented below is calculated only with respect to Intelsat Sub Holdco and its subsidiaries. Sub Holdco Adjusted EBITDA is a material component of certain covenant ratios in our credit agreement that apply to Intelsat Sub Holdco and its subsidiaries, such as the consolidated interest coverage ratio, senior secured leverage ratio and total leverage ratio.

Under our credit agreement, Intelsat Sub Holdco must maintain a pro forma consolidated interest coverage ratio of at least 1.50 to 1.00, and a pro forma secured leverage ratio not greater than 1.50 to 1.00, at the end of each fiscal quarter, and generally may not incur additional indebtedness (subject to certain exceptions) if the total leverage ratio calculated on a pro forma basis at the time of incurrence would exceed 4.75 to 1.00. In addition, under the investments and dividends covenants contained in the credit agreement, the ability of Intelsat Sub Holdco to make investments and pay dividends is restricted by formulas based on the amount of Sub Holdco Adjusted EBITDA measured from January 1, 2005.

A measure similar to Sub Holdco Adjusted EBITDA, which we refer to as Indenture EBITDA, is a material component of certain covenant ratios under our indentures governing the acquisition finance notes and the discount notes, such as the debt to Indenture EBITDA ratio and the secured indebtedness leverage ratio, and is used to test the permissibility of certain types of transactions under these indentures. Indenture EBITDA as calculated under the indentures is further adjusted by adding the amount of cash distributed by the issuer of the acquisition finance notes or the discount notes, as applicable, to its parent that is ultimately used by Intelsat, Ltd. to pay cash interest expense on its 2008 Senior Notes, 2012 Senior Notes, 2013 Senior Notes and 2005 Eurobond Notes. For indenture purposes, Indenture EBITDA is calculated with respect to the issuer (Intelsat Sub Holdco or Intelsat Bermuda) under the applicable indenture and its subsidiaries. Indenture EBITDA as presented below is calculated for Intelsat Sub Holdco and its subsidiaries. There is currently no difference in the calculation of Indenture EBITDA at Intelsat Sub Holdco as compared to Intelsat Bermuda.

Under our indentures governing the acquisition finance notes and discount notes, Intelsat Sub Holdco and Intelsat Bermuda generally may not incur additional indebtedness (subject to certain exceptions) if the debt to Indenture EBITDA ratio calculated on a pro forma basis at the time of such incurrence would exceed 4.75 to 1.00 in the case of an Intelsat Sub Holdco borrowing and 5.25 to 1.00 in the case of an Intelsat Bermuda borrowing, and each such issuer cannot incur certain liens on indebtedness (subject to certain exceptions) if the secured indebtedness leverage ratio, after giving effect to the incurrence, exceeds 2.00 to 1.00. In addition, under the indenture governing the acquisition finance notes (but not the indenture governing the discount notes), satisfaction of the debt to Indenture EBITDA ratio is generally (subject to certain exceptions) a condition to the making of restricted payments by Intelsat Sub Holdco. Furthermore, under the restricted payments covenants contained in the indentures (subject to certain exceptions), the ability of Intelsat Sub Holdco and Intelsat Bermuda, as applicable, to make restricted payments (including the making of investments and the payment of dividends) is restricted by a formula based on the amount of Indenture EBITDA measured from January 1, 2005 and calculated without making pro forma adjustments.

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Sub Holdco Adjusted EBITDA was $208.4 million for the three months ended March 31, 2005 and $205.9 million for the three months ended March 31, 2006. Indenture EBITDA was $239.1 million for the three months ended March 31, 2005 and $234.0 million for the three months ended March 31, 2006. A reconciliation of net cash provided by operating activities to net loss, net loss to EBITDA and EBITDA to Sub Holdco Adjusted EBITDA and Indenture EBITDA for the three months ended March 31, 2005 and March 31, 2006 is as follows:

	Combined
	Three Months ended March 31, 2005			Three Months ended March 31, 2006
	(in thousands)
Reconciliation of Intelsat, Ltd. net cash provided by operating activities to Intelsat, Ltd. net loss:
Net cash provided by operating activities	$	105,931		$	24,489
Depreciation and amortization		(135,137	)		(154,604	)
Satellite impairment charges		(69,227	)		—
Provision for doubtful accounts		6,063			758
Foreign currency transaction loss (gain)		(121	)		220
Deferred income taxes		(585	)		—
Stock-based compensation		—			(81	)
Compensation cost paid by Parent					(5,832	)
Amortization of bond discount and issuance costs		(10,309	)		(17,089	)
Share in loss of affiliate		(1,631	)		(6,270	)
Changes in assets and liabilities, net of effects of acquisitions		(46,635	)		68,299
Intelsat, Ltd. net loss	$	(151,651	)	$	(90,110	)
Add:
Interest expense		81,205			109,473
Provision for income taxes		7,986			9,495
Depreciation and amortization		135,137			154,604
Subtract:
Interest income		1,283			3,352
Intelsat, Ltd. EBITDA	$	71,394		$	180,110
Add (Subtract):
Parent and intercompany expenses, net (1)		4,370			4,507
Compensation and benefits (2)		10,946			983
Restructuring costs (3)		263			—
Acquisition related expenses (4)		48,979			3,000
Equity investment losses (5)		1,631			6,270
Satellite impairment charge (6)		69,227			—
Non-recurring and other non-cash items (7)		1,542			11,027
Sub Holdco Adjusted EBITDA	$	208,352		$	205,897
Add:
Intelsat, Ltd. notes interest paid (8)		30,771			28,063
Indenture EBITDA	$	239,123		$	233,960

(1) Represents expenses incurred at Intelsat, Ltd. for employee salaries and benefits and office operating costs including and other expenses incurred at Intelsat, Ltd. or at Intelsat Bermuda related to the Transfer Transactions.

(2) Reflects the portion of the expenses incurred relating to our equity compensation plans, defined benefit pension plan and other post-retirement benefits that are excludable under the definition of Sub Holdco Adjusted EBITDA.

(3) Reflects the severance costs associated with headcount reductions that were implemented during 2004.

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(4) Reflects expenses incurred in connection with the Acquisition Transactions, consisting of retention bonuses to key employees and legal and other professional fees, including the monitoring, advisory and consulting fees paid to the Sponsors (and their designated entities) pursuant to the monitoring fee agreement.

(5) Represents losses incurred under the equity method of accounting relating to our investment in WildBlue Communications, Inc.

(6) Represents the non-cash impairment charge recorded in the first quarter of 2005 to write off the net book value of the IS-804 satellite due to its failure in the first quarter of 2005.

(7) Reflects certain non-recurring gains and losses (principally severance expenses and costs incurred in connection with the PanAmSat Acquisition Transactions) and non-cash income related to the recognition of deferred revenue on a straight-line basis of certain prepaid capacity leases and performance incentive interest expense which is excluded from Sub Holdco Adjusted EBITDA by definition.

(8) Reflects cash interest paid during 2005 and 2006 on the 5.25% senior notes due 2008, the 7.65% senior notes due 2012, the 6.5% senior notes due 2013 and the 8.125% Eurobond notes due February 2005.

We use our Sub Holdco Adjusted EBITDA and Indenture EBITDA as additional criteria for evaluating our performance relative to that of our peers. We believe that the inclusion of Sub Holdco Adjusted EBITDA and Indenture EBITDA in this Quarterly Report is appropriate to provide additional information to investors about the calculation of certain covenants in our credit agreement and the indentures for the acquisition finance notes and the discount notes as mentioned above. As of March 31, 2006, we believe we were in compliance with the covenants under our credit agreement and the indentures for the acquisition finance notes and the discount notes. We believe that some investors may use Sub Holdco Adjusted EBITDA and Indenture EBITDA to evaluate our liquidity and our financial condition. Sub Holdco Adjusted EBITDA and Indenture EBITDA are not measures of financial performance under U.S. GAAP, and our Sub Holdco Adjusted EBITDA and Indenture EBITDA may not be comparable to similarly titled measures of other companies. You should not consider Sub Holdco Adjusted EBITDA or Indenture EBITDA as an alternative to operating or net income, determined in accordance with U.S. GAAP, as an indicator of our operating performance, or as an alternative to cash flows from operating activities, determined in accordance with U.S. GAAP, as an indicator of cash flows, or as a measure of liquidity.

Funding Sources and Uses

Our sources of liquidity include cash on hand, cash from operations and amounts available under the $300 million revolving portion of our senior secured credit facilities. These sources have been adequate for day-to-day expenditures, debt payments and capital expenditures. Other than in connection with the PanAmSat Acquisition Transactions, we expect our most significant cash outlays to continue to be the payment of interest on our outstanding debt.

We had significant cash outlays during the first quarter of 2005 in connection with the Acquisition Transactions, the dividend to Intelsat Holdings, repayment of the 8.125% Eurobond Notes due February 2005 which we refer to as the 2005 Eurobond Notes, and repayment of amounts borrowed under the term loan facility. On February 28, 2005, Intelsat Bermuda borrowed $200.0 million under the $350.0 million term loan facility, which was used to fund the repayment of the 2005 Eurobond Notes at their maturity. We currently anticipate that cash provided from operations and amounts available under our senior secured credit facilities will be sufficient to meet our liquidity needs, other than in connection with the PanAmSat Acquisition Transactions, for at least the next twelve months.

We have incurred substantial debt, with payments to service this indebtedness substantially increasing our liquidity requirements as compared to prior years. In connection with the Acquisition Transactions, Intelsat Bermuda issued the acquisition finance notes, which are comprised of $1.0 billion of Floating Rate Senior Notes due 2012, $875.0 million of 8.25% Senior Notes due 2013 and $675.0 million of 8.625% Senior Notes due 2015, and entered into the senior secured credit facilities. The interest rate on the Floating Rate Senior Notes is reset every six months, and the interest rate increased to 9.614% on January 15, 2006, the most recent reset date. The senior secured credit facilities, which are the obligation of Intelsat Sub Holdco, are comprised of a $350.0 million term loan facility maturing in July 2011 and a $300.0 million revolving credit facility maturing in January 2011.

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On February 28, 2005, Intelsat Bermuda borrowed $200.0 million under the $350.0 million term loan facility to fund the repayment at maturity of the $200.0 million outstanding 2005 Eurobond Notes. Due to $20.0 million in letters of credit that were outstanding under the facility, and limitations under covenants contained in the credit agreement governing the senior secured credit facilities, we had $158.2 million of borrowing availability under the revolving credit facility as of March 31, 2006. Following the Transfer Transactions, Intelsat Sub Holdco is now the obligor, and Intelsat Bermuda is a guarantor, of each of the acquisition finance notes and the senior secured credit facilities. The credit agreement governing the senior secured credit facilities contains financial and operating covenants that, among other things, require Intelsat Sub Holdco to maintain financial coverage ratios, limit Intelsat Sub Holdco’s ability to incur additional indebtedness and pledge assets as security for additional borrowings and limit Intelsat Sub Holdco’s ability to make investments and pay dividends on Intelsat Sub Holdco’s ordinary shares. On February 11, 2005, Intelsat and Finance Co. issued $478.7 million in aggregate principal amount at maturity of discount notes, which yielded $305.3 million of proceeds at issuance. The discount notes have no cash interest requirement for the first five years. In connection with the Transfer Transactions, Finance Co. was amalgamated with Intelsat Bermuda and Intelsat Bermuda became an obligor on the discount notes.

As part of the Transfer Transactions, the proceeds of the offering of the discount notes, together with cash on hand, were used to make a dividend of $305.9 million from Intelsat Bermuda to its parent Intelsat, Ltd., which Intelsat, Ltd. used to make a distribution to its parent Intelsat Holdings which in turn used those funds to repurchase a portion of the outstanding preferred shares of Intelsat Holdings. The repurchased shares were held by funds advised by or associated with the Sponsors and by certain members of our management.

We have historically had and currently have a substantial backlog, which provides some assurance regarding our future revenue expectations. Backlog is our expected actual future revenue under customer contracts, and includes both non-cancelable contracts and contracts that are cancelable. Our backlog was approximately $3.8 billion as of December 31, 2005 and March 31, 2006. This backlog and the predictable level of non-cash depreciation expense in the fixed satellite services sector reduce the volatility of the net cash provided by operating activities more than would otherwise be the case. However, we may have unplanned projects requiring significant capital expenditures or our capital requirements may be greater than we currently anticipate. Accordingly, we may be required to seek additional external financing to fund any unanticipated capital expenditures. In addition, the ongoing consolidation in the fixed satellite service sector may require that we obtain funding for currently unplanned strategic transactions.

On August 28, 2005, we entered into a Merger Agreement with PanAmSat under the terms of which Intelsat Bermuda will acquire all outstanding shares of PanAmSat for $25.00 per share in cash. The Merger Transaction is subject to a number of conditions and could be completed in the second or third quarter of 2006. As part of the PanAmSat Acquisition Transactions, it is expected that Inteslat Bermuda, Intelsat Sub Holdco, PanAmSat and PanAmSat Corporation will incur substantial additional debt, the aggregate principal amount of which is not expected to exceed $3.267 billion. This amount of new debt is based on current expectations and is subject to change. In addition, as part of these transactions, approximately $3.2 billion in debt of PanAmSat and its subsidiaries will either be refinanced or remain outstanding. If the PanAmSat Acquisition Transactions are completed, we will become a significantly more highly leveraged company than we currently are. Either Intelsat Bermuda or Intelsat Sub Holdco also expects to pay a transaction fee to the MFA parties in connection with the closing of the PanAmSat Acquisition Transactions.

Our cost of satellite construction includes an element of deferred consideration to satellite manufacturers referred to as satellite performance incentives. We are contractually obligated to make these payments over the lives of the satellites, provided the satellites continue to operate in accordance with contractual specifications. We capitalize the present value of these payments as part of the cost of the satellites and record a corresponding liability to the satellite manufacturers. This asset is amortized over the useful lives of the satellites and the liability is reduced as the payments are made. Our total satellite performance incentive payment liability was $43.4 million as of December 31, 2005 and $42.8 million as of March 31, 2006.

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Capital Expenditures

Our capital expenditures depend on the means by which we pursue our business strategies and seek to respond to opportunities and trends in our industry. Our actual capital expenditures may differ from our expected capital expenditures. Levels of capital spending from one year to the next are also influenced by the nature of the satellite life cycle and by the capital-intensive nature of the satellite industry. For example, we incur significant capital expenditures during the years in which we have satellites under construction. We typically procure a new satellite within a timeframe that would allow the satellite to be deployed at least one year prior to the end of the orbital maneuver life of the satellite to be replaced. As a result, we frequently experience significant variances in our capital expenditures from year to year.

Payments for satellites and other property and equipment during the three months ended March 31, 2006 included $21.5 million for capital expenditures. We currently have one satellite under construction, the IA-9 satellite, and currently plan to launch the IA-9 satellite in late 2007. We currently expect our capital expenditures to approximate $120 million during 2006, mostly related to the construction and launch activities of our IA-9 satellite. We intend to fund these requirements through cash on hand, cash provided by operating activities and, if necessary, borrowings under the revolving facility of the senior secured credit facilities. If the PanAmSat Acquisition Transactions are completed, our plans are likely to change as PanAmSat Corporation is planning to launch a number of satellites over the next few years.

Disclosures about Market Risk

As of March 31, 2006, we had obligations related to our long-term debt agreements. These financial instruments are discussed further in Note 10 to our unaudited consolidated financial statements included elsewhere in this quarterly report.

We are subject to interest rate and related cash flow risk in connection with the $1.0 billion floating rate senior notes due 2012 issued in January 2005, which floating rate resets every six months, and borrowings under the senior secured credit facilities in connection with the Acquisition Transactions. Our interest rate on the $1.0 billion floating rate senior notes increased to 9.614% on January 15, 2006, an increase of 181 basis points since issuance. Any changes in interest rates on the floating rate debt will impact our results of operations and cash flows.

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Presented below is an analysis of our financial instruments as of March 31, 2006 that is sensitive to changes in interest rates. The table demonstrates the change in market value of the instruments calculated for an instantaneous parallel shift in interest rates, plus or minus 50 basis points, or BPS, 100 BPS and 150 BPS. With respect to our fixed-rate debt, the sensitivity table below illustrates “market values,” or the price at which the debt would trade should interest rates fall or rise in the range indicated, assuming similar terms and similar assessment of risk by our lenders. With respect to our $1.0 billion floating rate senior notes that were issued in January 2005, an increase or decrease of 100 BPS to our current interest rate would increase or decrease our interest expense by $10 million. Market values are determined using market rates on comparable instruments as of March 31, 2006. This sensitivity analysis provides only a limited, point-in-time view of the market risk sensitivity of certain of our financial instruments. The actual impact of market interest rate changes on our financial instruments may differ significantly from the impact shown in the sensitivity analysis.

	Interest Rate Risk (in millions) as of March 31, 2006
	Valuation of Securities Given an Interest Rate Decrease of X Basis Points						No Change in Interest Rates		Valuation of Securities Given an Interest Rate Increase of X Basis Points
	(150 BPS)		(100 BPS)		(50 BPS)		Fair Value		(50 BPS)		(100 BPS)		(150 BPS)
$478.7 million principal 9.25% senior notes due 02/01/15	$	355.0	$	345.6	$	336.6	$	327.9	$	319.5	$	311.4	$	303.7
$675 million principal 8.625% senior notes due 01/15/15	$	765.0	$	741.4	$	718.7	$	696.9	$	676.0	$	655.8	$	636.5
$700 million principal 6.5% senior notes due 11/01/13	$	570.8	$	555.0	$	539.7	$	525.0	$	510.8	$	497.0	$	483.8
$875 million principal 8.25% senior notes due 01/15/13	$	962.4	$	937.6	$	913.6	$	890.3	$	867.8	$	846.0	$	824.8
$600 million principal 7.625% senior notes due 04/15/12	$	528.6	$	516.6	$	504.9	$	493.5	$	482.4	$	471.7	$	461.2
$1 billion principal floating rate senior notes due 01/15/12	$	1,019.4	$	1,017.9	$	1,016.5	$	1,015.0	$	1,013.6	$	1,014.9	$	1,010.7
$400 million principal 5.25% senior notes due 11/01/08	$	390.6	$	386.0	$	381.5	$	377.0	$	372.6	$	368.3	$	364.0

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

See Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Disclosures about Market Risk

Item 4. Controls and Procedures

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and timely reported as provided in the Securities and Exchange Commission rules and forms. We periodically review the design and effectiveness of our disclosure controls and procedures and internal control over financial reporting worldwide, including compliance with various laws and regulations that apply to our operations both inside and outside the United States. We make modifications to improve the design and effectiveness of our disclosure controls and procedures and internal control structure, and may take other corrective action, if our reviews identify a need for such modifications or actions. In designing and

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evaluating the disclosure controls and procedures and internal control over financial reporting, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Evaluation of Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures,” as defined in, and pursuant to, Rule 15d-15 of the Exchange Act, as of March 31, 2006 under the supervision and with the participation of our management, including our Chief Executive Officer (the “CEO”) and our Chief Financial Officer (the “CFO”). Because of a material weakness in our internal control over financial reporting related to financial reporting processes described below, our CEO and CFO concluded that as of March 31, 2006 our disclosure controls and procedures were not effective. However, as described below under “Remediation Efforts Related to Current Material Weakness in Internal Control,” we are working to eliminate the weakness.

Material Weakness in Internal Control over Financial Reporting with Respect to Financial Reporting Processes

As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2005, because of a material weakness in our internal control over financial reporting related to financial reporting processes, our CEO and Acting Chief Financial Officer (the “Acting CFO”) concluded that as of December 31, 2005 our disclosure controls and procedures were not effective. The material weakness relates to the fact that we did not maintain effective controls over our period-end reporting processes. In particular, we had (i) ineffective controls over the documentation, authorization, and review of journal entries; (ii) ineffective controls to ensure the completeness of certain general ledger account reconciliations conducted in connection with the period-end financial reporting process; and (iii) ineffective controls to ensure the accuracy of condensed consolidating financial information for guarantors and non-guarantors of certain of the Company’s and its subsidiaries debt.

Remedial Efforts Related to the Material Weakness in Internal Control

In an effort to address the material weakness, since December 31, 2005 we have implemented, or are in the process of implementing, the following remedial steps:

• We appointed Jeffrey Freimark as permanent Chief Financial Officer effective in May 2006. Mr. Freimark is now reviewing the circumstances that led to the material weakness and is evaluating the accounting processes described below.

• We have engaged consultants to assist our accounting and finance department with the management and implementation of controls surrounding our accounting processes.

• We expect to hire additional experienced accounting personnel, and will continue to engage consultants until such personnel are hired.

• We have begun to conduct an assessment and review of our accounting general ledger system to determine what changes can be made to improve our overall control environment with respect to intercompany transactions and journal entries.

• We have begun to formalize the monthly account reconciliation process for all significant balance sheet accounts. We are also implementing a formal review of these reconciliations by senior accounting management and our accounting consultants.

• We have begun a process of implementing improved procedures for reviewing and documenting support for journal entries. The implementation of these procedures is expected to be completed in the second quarter of 2006.

• We will conduct training sessions during the second quarter of 2006 to provide training to our finance and accounting personnel to review procedures for timely and accurate preparation, and management review of, documentation to support our financial reporting and period-end close procedures.

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Other Changes in Internal Control over Financial Reporting

Other than as discussed above, no other changes occurred during the quarter ended March 31, 2006 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Future Assessment of Internal Control over Financial Reporting

Beginning with our Annual Report on Form 10-K for the fiscal year ending December 31, 2007, we will be subject to the provisions of Section 404 of the Sarbanes–Oxley Act of 2002 that require an annual management assessment of our internal control over financial reporting and related attestation by our independent registered public accounting firm.

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PART II. OTHER INFORMATION

Item 1. Legal proceedings

We are subject to litigation in the normal course of business, but we do not believe that the resolution of any pending proceedings will have a material impact on our financial position or results of operations.

Two putative class action complaints that were filed against Intelsat, Ltd. and Intelsat Global Service Corporation in 2004 in the U.S. District Court for the District of Columbia by certain named plaintiffs who are Intelsat retirees, spouses of retirees or surviving spouses of deceased retirees were consolidated into a single case. The complaint, which has been amended several times, arose out of a resolution adopted by the governing body of the IGO prior to privatization regarding medical benefits for retirees and their dependents. The plaintiffs allege that Intelsat wrongfully modified health plan terms to deny coverage to surviving spouses and dependents of deceased Intelsat retirees, thereby breaching the fiduciary duty obligations of the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the “contract” represented by the IGO resolution. In addition, the plaintiffs allege fraudulent misrepresentation and promissory estoppel. They seek a declaratory ruling that putative class members would be entitled to unchanged health plan benefits in perpetuity, injunctive relief prohibiting any changes to these benefits, a judgment in the amount of $112.5 million, compensatory and punitive damages in the amount of $1 billion, and attorneys’ fees and costs. The court has granted our motion to dismiss most of the fraud claims, although in subsequent amendments plaintiffs have restated them. The court authorized very limited discovery, which is underway, and we filed a motion for summary judgment on January 31, 2006. The plaintiffs’ response was filed on February 27, 2006, and our reply was filed on March 21, 2006. The plaintiffs also filed a motion for partial summary judgment on March 23, 2006, seeking a ruling that we may not rely as a defense upon the immunity of our predecessor IGO, and we filed our opposition to the motion for partial summary judgment on April 11, 2006.

It is our position that the IGO resolution does not create obligations that are enforceable against Intelsat, Ltd. or Intelsat Global Service Corporation. We intend to continue to defend vigorously against all allegations made in the amended and consolidated complaint.

Item 1A. Risk Factors

No material changes.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit Number	Exhibit
10.1	Employment Agreement, dated as of March 16, 2006, by and among Intelsat Holdings, Ltd., Intelsat, Ltd. and Jeffrey Freimark. *
10.2	Amendment and Acknowledgement, effective March 8, 2006, to Employment Agreement, dated as of January 28, 2005, between Intelsat Holdings, Ltd. and David McGlade. *
10.3	Amendment and Acknowledgement, effective March 8, 2006, to Employment Agreement, dated as of January 31, 2005, between Intelsat Holdings, Ltd., Intelsat, Ltd. and Phillip Spector. *
10.4	Amendment, dated January 31, 2006, to Engagement Contract, dated June 27, 2005, between Intelsat, Ltd. and FTI Palladium Partners, a division of FTI Consulting, Inc. *
10.5	Waiver to Credit Agreement, dated as of March 30, 2006 among Intelsat, Ltd., Intelsat Subsidiary Holding Company, Ltd., certain lenders party to the Credit Agreement referred to below, and Deutsche Bank Trust Company Americas, as Administrative Agent (incorporated by reference to Exhibit 99.1 to Intelsat, Ltd.’s Form 8-K filed on April 5, 2006 (Commission File Number 000-50262)).
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

* Filed herewith.

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SIGNATURES

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

INTELSAT, LTD.
By	/S/ DAVID MCGLADE
	David McGlade
	Chief Executive Officer
	Date: May 10, 2006
By	/S/ JEFFREY P. FREIMARK
	Jeffrey P. Freimark
	Chief Financial Officer
	Date: May 10, 2006

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