Joe Titlebaum - Secretary and General Counsel Hugh Panero - CEO Nate Davis - President and COO Joe Euteneuer – EVP, CFO

Mark Wienkes – Goldman Sachs Jonathan Jacoby – Banc of America Securities Analyst for Bob Peck – Bear Stearns BJ Gallant - Lehman Brothers Bryan Kraft - Credit Suisse Craig Moffat – Sanford Bernstein Eileen Furukawa – Citigroup Barton Crockett - JP Morgan

At this time I would like to welcome everyone to the XM Satellite Radio third quarter 2006 financial results conference call. (Operator Instructions) Now I would like to turn the call over to Mr. Joe Titlebaum, General Counsel. Sir, you may begin your conference.

Before we begin our prepared remarks, I would like to remind everyone that certain information on this call may contain forward-looking statements. Due to a number of factors our actual results may differ materially from those projected in such forward-looking statements. Those factors include future demand for the company's service, the company's dependence on technology and third-party vendors, and the potential need for additional financing as well as other risks described in XM Satellite Radio Holdings Inc. Form 10-K filed with the SEC on March 3, 2006 Copies of this filing are available online and upon request from XM Radio's investor relations department. I will now turn the call over to Hugh Panero, CEO of XM Satellite Radio.

Thanks, Joe. Good morning and welcome everyone to our third quarter conference call. On the call with me is Gary Parsons, Chairman; Nate Davis, President and COO; Joe Euteneuer, CFO; and Joe, who you just heard from. In September, XM marked the fifth anniversary of our initial roll-out behind a visionary business plan. This coming Sunday, November 12th is the fifth anniversary of XM's nationwide launch. So for the moment at least, it is important to remember that Satellite Radio is not simply about each quarter’s results, it is also about pioneering a whole new generation of radio that leverages next generation satellite and digital technology to offer millions of consumers unparalleled choice, unprecedented range of compelling programming across a spectrum of content including news, information, sports and music; convenience and portability, high quality audio and of course, exceptional value. It is easy to forget how far we have come in five short years, but we are understandably proud of many accomplishments. Over 7 million subscribers and 15 million listeners, and a brand that has come to define satellite radio. Over 5.5 million XM-equipped vehicles on the road from our automotive partners; a far reaching retail network of more than 35 partners, including nearly all of the biggest names in retail consumer electronics, big box stores and online outlets. Top consumer electronics partners and industry-leading products like the first portable players that combine XM and MP3; a robust satellite and terrestrial infrastructure, providing industry-leading broadcast signal availability to consumers, highlighted with the launch of XM 4 that give us signal distribution for the next decade-and-a-half. Also, a diverse programming line-up that ranges from music icons like Bob Dylan to Major League Baseball; from Opie & Anthony and Bob Edwards, and commercial-free music from classical to contemporary, including the channels Top 20 on 20 and Highway 16, which today are among the nation's most listened to radio stations in their respective formats. Exactly five years after we signed up our first customer, we added Oprah & Friends, providing a powerful new inroad to women listeners and to a broader mass market. The model is in place and it is increasingly being validated. Our addition of 2.8 million gross subscribers so far this year underscores the appeal of and the demand for our product. National blue chip advertisers such as Johnson & Johnson, General Electric and Unilever are increasingly recognizing the opportunity to effective target more than 15 million listeners from our nationwide platform. When we launched XM in 2001, there were no cars with factory-installed XM radios. Today, there are more then 5.5 million vehicles on the road with factory-installed XM. Our early strategy of bringing on GM and Honda as strategic partners led to additional partnerships with Toyota, Hyundai, Nissan and Porsche, which together represent nearly 60% of the auto industry. Now we need to fully exploit our model and those opportunities as we continue to grow. We have got it built, we have proven it is popular, now we have to generate positive cash from our customer base and accelerate our growth into the mass market of new customers. The specific challenges are to cost effectively market our service to drive demand, to convert many more of the millions of customers we touch through our new car market activities, and to retain more existing subscribers by satisfying their wants and stimulating their interests. Addressing those challenges is a tall order each day, as XM gets bigger and more complex, with more moving parts. Our very success is generated challenges to our business from competing interests that don't want us to grow and succeed. To drive this increasingly complex operational process, this summer we brought in Nate Davis as our President and Chief Operating Officer. He is an executive with a superb track record in leading rapidly expanding subscription-based services to become substantial, large scale enterprises. Nate is also a long-time member of the board. I can tell you that Nate has hit the ground running in his first 90 days since he's joined XM. He is already changed the organization's structure. He has added management and he is addressing the right issues in order to improve performance in our next stage of growth. Today, Nate is going to give you his 90-day status report, including his appraisal of the company and the actions he has already taken to scale and operationalize the vision we shared with you five years ago.

Thank you, Hugh. On our second quarter conference call, I had only been with XM in an executive capacity for four days, but I promised you greater insight into our progress and priorities on this quarter's call. I also promised I would reach out to shareholders to hear your feedback and suggestions, as well as to better explain our program. Now as I have met with many of you, one consistent question you asked was, what makes me confident that this industry is in a temporary slowdown, versus reaching saturation sooner than anticipated? Now to answer that question for myself, I met with our automotive partners, I met with several of our retail partners, of course I met with our own internal team and we have gone through some planning processes. While no one can guarantee the future industry trends, I do believe this industry should experience strong growth in the future. I believe that because the automotive partners will drive significant growth in the next two to three years. I also believe that retail will respond to stimulation from both satellite radio providers, although perhaps not to the peak levels of late 2005. Both XM and Sirius will have to introduce new devices and advertise more than we did this past summer when both significantly reduced the spending media. Putting the FCC issues behind us will also help the industry growth. The net is that I'm confident in the growth potential for Satellite Radio in general, and for XM in particular. But it is also clear to me that there are areas where improvement is necessary. At XM we need to remind consumers why they should buy Satellite Radio. We need to excite the stores and we have to give customers a great experience when they buy our service. We have already started to address those areas. In the last 90 days we have not only identified key priorities, we have moved decisively to act on them. While Joe Euteneuer will cover specific results and specific numbers for the third quarter, my operational update will cover the period starting with the last two months of the third quarter and extending into the first month of the fourth quarter. Here is what we accomplished in the last 90 days. We brought in new executive talent in key business functions such as marketing, business operations, government affairs and FCC compliance. We hired a new ad agency , launched a new brand strategy, rolled out a new ad campaign. By the way, by the end of the quarter we will have reached more than 95% of adults on TV an average of nine times with this new campaign. We will do it without incremental dollars being spent because we simply shifted our marketing spend. We have created a dedicated OEM marketing group and announced two new agreements: an exclusive agreement with Porsche and a certified, pre-owned program with Acura. We dedicated senior executives to our retail relationships to make sure that we improve our attention to detail at retail outlets. Getting back to the basics, we had to make sure that demo radios worked; that the reps in all stores were better trained; promotions are responsive to the industry inventory levels that we manage and that shelves were properly stocked. We implemented our XM sure connect plug and play solution, providing consumers with a reliable and convenient way to get XM through their FM radio. Also, we received FCC certification and have begun manufacturing and shipping to ensure inventory is strong for the holidays. We launched XM 4, a powerful new satellite combined with XM 3, which will solidify our satellite networks and deliver robust broadcast for 15 years. As of November 3rd, this past Friday, we completed the first of a three phase redesign of our website that will make it more useful and friendly to subscribers. Take a look for yourself and remember, more improvements are coming in future months. We launched our first streaming content offering with Alltel Wireless, and today we are expanding our position in the wireless market under a new deal with Cingular, the nation's largest wireless carrier. As Hugh mentioned we put in place the last major piece of our programming portfolio, Oprah & Friends. That's only the beginning. I would like to highlight a few of our top objectives and where we stand on those. Our first key objective is to maximize the effectiveness of our marketing resources. XM has built a strong brand name, an impressive channel line-up and extensive OEM and retail distribution channels. We are determined to leverage all of these assets to attract and retain millions of new additional subscribers. During the third quarter, we added 868,000 gross subscribers. We believe that in this quarter, we once again added more gross subscribers than our competitors, as we have the last 20 consecutive quarters. Gross subscriber additions are the best measure of new sales, industry share and consumer preference. For the third quarter, we added approximately 286,000 net subscribers -- at the low end of the analyst-expected range, but this did bring us to an overall subscriber base of more than 7.185 million at quarter end. More important than the precise number of new subscribers, however, is that XM has once again continued to add subscribers in a cost-effective manner, thus building a positive economic business for the future. On this front, XM has strong positive third quarter performance in a number of key metrics that we will now cover. Most notably, we are pleased with the cost effectiveness of subscriber additions during the quarter. As we did in my first 90 days, we will continue to redeploy marketing dollars in the fourth quarter. We will move from equipment subsidies and underperforming marketing programs to marketing campaigns that communicate the value of XM service and to customer promotions that drive longer term service agreements with customers. To drive that process, we recently announced the appointment of Vernon Irvin as the Chief Marketing Officer to oversee all of marketing and retail distribution. Vernon comes to XM from VeriSign where under his leadership, the revenues for the communications services group doubled in two years. Vernon completes the new marketing team assembled over the past several months, including experienced executives in marketing, brand management and product development. Our marketing team is working hard to create new momentum in the marketplace. The early indication of that momentum is our dynamic new ON advertising campaign. This multiplatform marketing and branding initiative is our first from Lowe New York, our new ad agency. Our new ads capture the breadth of XM programming while creating an emotional connection with consumers. I invite all of you to view our ads on our website. The approach lends itself well to a consistent and innovative way to communicate more about XM service in the future. Watch the new ads in the coming weeks. The ON campaign is fully integrated across marketing platforms. Beyond the TV exposure, it extends to online, outdoor, to retail packaging, OEM displays, to initiatives with marketing partners such as Major League Baseball, Jet Blue and AirTrans. I'm confident we can further build our brand and drive purchase consideration through the ON campaign while keeping the 2006 full year cost per gross add under $110. While the marketing campaign clearly benefits the OEM channel, the campaign is particularly important in reenergizing our activities at retail consumer level. The after market for satellite radio has, in fact, remained softer than anticipated during the past few quarters. We attracted 316,000 gross subscribers in the retail segment during the third quarter 2006. Now, since we've been largely off the air with media until our recent ad campaign and we haven't introduced new radios, we simply have not been stimulating the retail segment. The inventory for some of our existing products is also low as we awaited new FCC certification, and our merchandising displays are admittedly weak. As I stated, we already moved aggressively in the last 90 days to address these areas and get started on generating more retail subscriber additions by leveraging our new marketing campaign, the buzz of Oprah and Friends" and our primetime ads in October, we believe we will drive an improvement in retail subscriber additions. Now turning to the stronger automotive OEM market, XM added 552,000 OEM gross subscribers in the third quarter. Those gross additions led to 217,000 net new subscribers. OEM gross adds for the quarter beat our performance last year, even though the third quarter last year was one of GM's best in two decades. We also achieved several other important OEM milestones in recent months: An initiative with GM to reduce the cost of XM radios to buyers of GM cars; the elevation of XM to standard equipment on all Acura models; the first factory installations of Toyota's flagship Lexus LS line; and Hyundai produced its first vehicles with standard factory-installed XM. These vehicles mark the beginning of Hyundai's aggressive roll out of XM as standard equipment in all audio systems in its U.S. vehicles. As we anticipated and discussed on our second quarter call, our post-trial conversion rate is 52.2% during the quarter. This should improve modestly in the fourth quarter. Still, as OEM continues to ramp, we wanted to do even better at penetration and at conversion in order to fully capitalize on the fact that our automotive partners represent nearly 60% of all new automobile sales in the U.S. One step in this direction is to exploit the lucrative opportunities that will arise as our more than 5 million factory-installed vehicles begin to work their way through the used car market. An example of the kickoff of this recently-announced campaign is that Acura and XM announced Acura's certified pre owned program. Under this program, used car buyers will receive three months of complimentary service when they purchase a certified pre-owned Acura. The second key to accelerating our growth is to optimize the end-to-end customer experience to reduce deactivation. Our churn, or deactivation rate, has trended upward in the last few quarters. but was held constant during the third quarter of '06 at 1.82%, thanks to focused attention. Now we're all too aware that keeping an existing subscriber is cheaper than acquiring a new one. Now that we have stemmed the growth in churn, we're fully focused on the goal of bringing our deactivation rate down. The key to reducing deactivation rate is delivering an overall customer experience that exceeds customer expectation. From the time a consumer sees one of our ads, visits a showroom or visits a retail outlet, calls to activate service, contacts us here, signs on to our new website or simply turns on an XM Radio, we need to do everything well to maximize customer satisfaction to keep them longer. To lead this effort we brought in Joe Zarella. He came in October from Constellation Energy and from MCI as our new executive vice president of our business operations. Joe is spearheading an effort to reengineer our business ops both through efficiency and to make it easier for customers to do business with us. In particular, we are addressing all of the root causes of why customers elect to leave our service and find ways to keep them. For example, we have now instituted programs to engage every single customer who requests to deactivate and take action to address their concerns. We're also trialing multiple retention offers in order to optimize the economic of saving any customer who calls to cancel. We'll be reducing the types of calls and number of calls that we handle offshore with potential language barriers. We're creating new programs in the call centers to encourage customers to sign up for long-term payment plans and to sign up with credit cards, which will help us reduce churn, not to mention quarterly and monthly marketing costs. Now all of this will take time, but I wanted to you know that we have a renewed and keen focus on the operational improvements that will make the customer experience a positive one at XM. Our third major priority is to improve our product offering .To ensure we stay consumer focused, we've established a new product marketing group and appointed Blair Kutrow, who has 20 years of experience developing products as the Head of Product Development for companies like Nextel and Vanguard. Here too, we're well along the way with a pipeline of new products. The first new product out of the box will be SkyFi3, which is scheduled to begin arriving at retailers later this month. This plug and play radio is the latest addition to the best-selling family of satellite radios, and it leverages our technology to reduce hardware subsidies compared to the previous SkyFi2. The SkyFi3 features a nine-line display, 30 minutes of replay, ten hours of integrated storage for XM content, and a micro ST card slot for MP3, which will allow customers to import up to 500 hours of their MP3 music. This product will appear at retail for an MSRP of $199. The Pink Inno also is going through some opportunity for introduction. In response to retail partners' requests and in conjunction with the Susan G. Komen Breast Cancer Foundation XM made a special limited edition Pink Inno. This product's connects our flagship XM-to-go product with a worthy cause, as well as with women consumers during the media buzz surrounding the Oprah and Friends launch. Stay tuned for specific announcements for future product developments in stores at the Consumer Electronics show in January. So to reiterate our three key business objectives, we will maximize our marketing resources, we will optimize end-to-end customer experience, and we will improve our product offering. Now to present a more detailed picture of the numbers for our third quarter financial results, allow me to present our Chief Financial Officer, Joe Euteneuer.

Thanks, Nate. Good morning, everyone. As we review the results of our third quarter, I want you to take notice that the fundamental building blocks of the Company continue to move in a positive direction, despite the challenges we faced over the past four quarters and including moderate subscriber growth. I will now review the building blocks of the solid financial performance for the third quarter. At the center of our financial performance is the continuous improvement of pre-marketing EBITDA, which for the third quarter of 2006 was nearly $80 million. This represents a $56 million or 43% increase versus the same period last year, and a $19 million increase versus the second quarter of 2006. Pre-marketing EBITDA is derived by adding back total marketing expenses, excluding retention and support, to adjusted EBITDA as defined in the financial attachments to the earnings press release. The overall increase in pre-marketing EBITDA was achieved as a result of continued growth in ARPU, improving subscription margin and flat fixed costs for the third consecutive quarter. In addition, our third quarter produced near breakeven adjusted EBITDA of negative $2 million versus a loss of $70 million in the third quarter of 2005, and a loss of $46 million in the second quarter of 2006. This improvement is indicative of the inherent leverage of our business model. The two key contributors to this performance are the growth in pre-marketing EBITDA, which we've just discussed,, and our cost-effective CPGA of $93 for the third quarter of 2006, versus $89 for the third quarter 2005, and $112 for the second quarter of 2006. Building on the strong performance in adjusted EBITDA, our net loss improved in the third quarter of 2006 to $84 million from $132 million in the third quarter 2005, a 36% improvement; and $229 million in the second quarter of 2006. Allow me to take the next few minutes to provide more in-depth analysis of these financial results. I refer you to the financial attachments to the earnings press release. Total revenue in the third quarter of 2006 grew 57% to $240 million from $153 million in the same period in 2005, and 6% from $228 million in the second quarter of 2006. Subscription revenue for the third quarter increased to $215 million during the quarter, which increased XM's annualized subscription revenue run rate for the third quarter of 2006 to $859 million. The two key components of our subscription revenue growth are subscribers and ARPU. XM ended the third quarter with 7.2 million subscribers, an increase of 43% over the same period last year. This result was achieved by adding 868,000 gross new subscribers and 286,000 net new subscribers. Nate has already discussed at length the reasons for our third quarter performance for subscriber growth, churn, and conversion rate. Therefore, I won't repeat the details of what he's already covered. The second component of our revenue growth is subscription ARPU, which in the third quarter of 2006 was $10.15, up $0.37 compared to the $9.78 during the third quarter 2005 and up $0.07 compared to the second quarter of 2006. Family plan subscribers have grown to 21.2% of our subscriber base, compared to 16.5% at the end of the third quarter of 2005 and 20.7% at the end of the second quarter of 2006. Although growth in the $6.99 family plan subscriber demonstrates the attractive nature of our service within a household,, it does result in a reduction of our ARPU as a result of the discounted retail rate offered. In addition to family plan subs, subscribers acquired under our mail-in rebate marketing campaigns and promotions are accounted for as a reduction to revenue, and thereby reduce ARPU rather than increasing SAC. The second quarter subscription ARPU included $0.03 of mail-in rebate marketing campaigns and promotions. Total ARPU for third quarter was $11.36, of which $0.41 came from continued growth of our ad sales business. The higher subscription ARPU during the third quarter contributed to increase in subscription margin, which was approximately 72% versus 69% in the third quarter of 2005 and 68% in the second quarter of 2006. Fixed costs were $103 million during the third quarter 2006, roughly flat from the $102 million in the second quarter of 2006, and up from the $78 million in the same period last year. The increase over last year is primarily the result of content added to our channel lineup since 2005. I will now address SAC, or direct subscriber acquisition costs, which includes the negative margin from direct equipment sales. XM SAC for the third quarter of 2006 was $60, compared to $53 in the third quarter of 2005 and $64 in the second quarter of 2006. SAC in both the second and third quarters of 2006 included approximately $4 per unit in expenses associated with FCC remediation. The total cost to acquire a new subscriber, or CPGA is a broader, more fulsome measure of subscriber acquisition process, which includes SAC, which we just discussed; and all discretionary advertising and marketing costs. CPGA for the third quarter of 2006 was $93, compared to $89 in the third quarter of 2005 and $112 in the second quarter of 2006. CPGA expenses were lower than the second quarter of 2006 due in part to low media spending, as well as lower SAC. We purposely held back media spending in order to reposition the spend to support the launch of our new media campaign going into the remainder of the year. Third quarter 2006 CPGA is flat to the same period last year, if you normalize third quarter 2006 CPGA expenses for FCC remediation-related expenses. In addition to the positive operating performance, we have a solid balance sheet. Cash at the end of the third quarter was $285 million versus $711 million at the end of 2005 and $431 million in the second quarter of 2006. A portion of our liquidity comes from subscriber prepayment. Annual and multi-year prepayment plan subscriptions represented 43% of XM subscribers, compared to 41% at the end of the third quarter of 2005 and 42% in the second quarter of 2006. The average prepayment period for new subscribers remains at nine months. In addition, we now have full access to $400 million of our revolving credit facilities following the recent conversion of a portion of our outstanding 10% convertible notes, which I will discuss in more detail in a moment. Cash utilization of $146 million during the third quarter was approximately evenly split between operating activities and investing activities, of which the majority of the investing activities was related to satellite. We successfully launched XM-4 on October 30th. To recap, XM posted solid financial results for the third quarter, despite a series of challenges over the past several quarters. Our resilient performance during these quarters of challenges is indicative of the company's strong financial fundamentals, its capabilities to leverage the business model, and potential to generate positive cash flow and EBITDA on a going-forward basis, as we improve operational execution. So let me now transition to updating you on our year-end guidance and give you a preview of items to keep in mind going into the fourth quarter of 2006. Previously we provided you with a range of subs. Depending on the timing of late December activations, we expect to end 2006 between 7.7 million and 7.9 million subs, which is within the previously announced guidance range. Corresponding subscription revenue is expected to be in the $810 million to $815 million range, and adjusted EBITDA loss is expected to be in the $205 million to $215 million range. I have already indicated that cash flow from operations will be positive for the quarter. With respect to 2007, we will provide guidance, including subscribers, revenues, EBITDA and cash flows, when we provide our full year results for 2006. As a preview, and is normally the case in the fourth quarter, you can expect that various metrics will experience seasonal adjustments. For example, while the third quarter was not significantly impacted by mail-in rebate promotions, we expect this activity to seasonally increase in the fourth quarter and as a result, and when combined with the large percentage of subs activating in the last week of December, subscription ARPU may seasonally drop below $10 for the fourth quarter of 2006. We expect overall gross and net subscriber additions at retail to increase versus the third quarter, due to holiday sales. Like subscription ARPU, however, fourth quarter seasonality will lower subscription gross margin results, as the large influx of late-December subscribers drive call center and other costs without the corresponding full month of revenue. Since Oprah and Friends launched in late September, the full quarterly impact of this programming addition will be reflected in fixed expenses for the fourth quarter. SAC and CPGA will increase as a result of holiday promotional efforts, but still expect to finish the fiscal year under $110. We do expect both EBITDA and net loss for the fourth quarter of 2006 to improve over the same period last year. Our EBITDA and net loss will increase in the fourth quarter of 2006 compared to the third quarter of 2006 as a result of additional seasonal subscriber growth and de-leveraging losses on the 10% notes I will discuss in a moment. During this quarter, we will book capital expenses associated with the successful launch of XM-4, which took place last week. We expect cash flow from operations for the fourth quarter to be positive, partially as a result of new subscriber prepayment. In the fourth quarter you will also see de-leveraging charges associated with the conversion of at least a portion of our $100 million outstanding 10% senior secured discount convertible notes, which we expect to be complete in November. Because these notes are deeply in the money with a conversion price of $3.18 and are now cash-pay interest, we are incentivizing conversion into common stock. As outlined in our recent 8-K filing, assuming completion of the current tender offering with the notes tendered to date, XM will have reduced the balance of these notes to approximately $33 million by issuing 23 million shares of common stock. This transaction is expected to save approximately $23 million in future interest payments. The conversion is being completed on comparable terms to previous conversions of the 10% notes, and will lead to approximately $34 million of associated non-cash charges in the fourth quarter. Transactions completed to date give us full borrowing capacity under our recently obtained $250 million credit facility. We have also agreed with the holders of our 8.25% series C convertible redeemable preferred stock to exchange the outstanding balance of those shares for approximately 14.5 million shares of common stock. There will be no de-leveraging charge related to these series C transactions. Please note, beginning with our 2007 quarterly report, XM will no longer release subscriber information ahead of our earnings. Instead, we'll disclose subscribers and financial results on our earnings call to give a more complete picture of the company's performance. Overall, the fundamental economic performance of the company continues to improve, and we are well positioned to continue to leverage the business model in order to achieve profitability in the coming quarters and years. Back to Hugh.

Thanks, Joe. The takeaways that we want to leave you with are as follows: we have built our business model for a great entertainment medium. We have the technology, distribution network, the automotive partnerships, the programming and the consumer relationships. Now we are shifting the emphasis to building a great company and improving our execution. This has involved changing our organization and bringing in new executives like Nate, who you just heard from, and others with a different skill set and very experienced in scaling up large operations. We know where the challenges lie and are addressing them systematically; one by one, day by day, with an eye to making it easier to customers and partners to do business with us, generating profitable growth and, of course, value for our shareholders. Today we are also more aware than ever before where the opportunities are, and we are better positioned than anyone to create next-generation products and content that fulfill the growing needs and expectations of consumers and deliver improved performance for our investors. With that, we would like to open up the call for questions.

(Operator Instructions) Your first question comes from Mark Wienkes – Goldman Sachs. Mark Wienkes – Goldman Sachs: Nate mentioned that the plan is to move from equipment subsidies in underperforming campaigns to new programs with longer-term subscriptions. Can you provide an example of what we can expect in the fourth quarter along that line? Second, in the context of SAC and CPGA coming in much better than expectations this quarter, it looked like you could spend about the same in fourth quarter this year as you did last year and still come in below your target. Is that the plan, or is there just some conservatism built into that target? Thanks.

First of all, before we get started we need to make one correction to the text.

In pre marketing EBITDA, the growth over the 80 million that we achieved in the quarter is actually 238%, not 43%. I want to correct that number.

You hate to miss a good one like that.

I apologize.

Back to your question, Mark. An example would be we believe that we have been discounting radios and asking customers to sign up to three months of subscription associated with a discount on the radio. We're going to change our approach and try to give more discounts on service over longer periods and ask customers to sign up for longer periods. So an example might be a three or six-month free promotion on the service instead of the radio and asking them to sign up to one to three years for that subscription. So what I meant by that is, less subsidies on radio, more free months in free service and signing up for two to three years of service.

The next question was about SAC and CPGA and the fourth quarter. Basically I think if I heard your question right, you were basically saying that we had a lot of room in our SAC and CPGA number and that we were actually going to be spending in the fourth quarter what we spent in the third quarter; and I think you have that right. We have a plan on spending in terms of SAC and CPGA, which is in line which is to get us to a year end number of about $110 per CPGA. Mark Wienkes – Goldman Sachs: Actually it looks like you'd spend the same in 4Q '06 as you did in 4Q '05. Is that accurate?

No, I think we spent significantly more in the fourth quarter of '05. Mark Wienkes – Goldman Sachs: Okay. So the 4Q '06 is on track?

Fourth quarter '05 for CPGA we spent like $141. Fourth quarter '06 would be less.

A lot less than that. Mark Wienkes – Goldman Sachs: Thank you.

Your next question comes from Jonathan Jacoby – Banc of America Securities. Jonathan Jacoby – Banc of America Securities: A few questions here, good morning. First, there is a lot of discussion about retail, and I am curious when you look out further down the road if you actually see the retail channel accelerating? From a category perspective, do you see yourselves at parity with Sirius at some point? Perhaps, do you sometimes think that maybe the retail channel is less important, and if that is so, why the continued focus on that channel? Maybe perhaps start shifting towards more OEM-focused marketing? The second question is, can you give us any further color on the Toyota rollout? Thanks.

First of all, let’s talk about the retail channel. We think the retail channel will remain important because there are a number of subscribers out there who want to experience XM radio in their home, or as they walk around. So there are people who are going to want to experience XM radio, even online. So we think retail is important because there are subscribers who won’t get the product in their OEM car. We don’t think we’d ever want to abandon that segment. Now, will it accelerate? I think it will accelerate beyond where it is today, but not accelerate perhaps back to the peak levels it was at late last year. So I don’t want to oversell the retail segment, I think it will always be an important segment for us but again, I am not sure it is going to be the high growth segment that it was last year. We think the OEM market, over the long run, is where the industry, not just XM but the industry, will experience a lot of growth because when you look at the plans for the automobile manufacturers, the number of manufacturers coming on in 2008 and 2009, including Toyota which we will talk about in a second, if you look at that you will see significant growth in the business. Now you also asked about parity between XM and Sirius. If you look at NCE data, our best estimates with no RadioShack – I mean, take RadioShack out for a minute, because RadioShack is an exclusive provider of Sirius. If you just look at the two, Wal-Mart, Circuit City, Best Buy, all of the small manufacturers, we are at parity today. As a matter of fact, we range anywhere from 51% share to 49% share in the last three or four quarters. So we are about 49% to 50% market share in those. What swings it towards Sirius is they have an exclusive provider in RadioShack, and if you add that in to the numbers, of course we fall down to a smaller share number. So when you look on a same-store basis, we are at parity but we are not going to overspend to try to gain to be significantly higher than Sirius, because obviously that drives up the COGS. I hope that answers the questions for you. You also wanted to talk about the Toyota rollout. I will address that one as well. Toyota is very engaged with us. I have met with Toyota three times now, and one thing I can say about the folks from Toyota, they are very focused on quality. As you look at all of their models, from the Lexus business and the rest of Toyota, you see a very high quality product. Not that the other manufacturers are not, but Toyota’s way of getting there is very methodical. That has affected the approach to our roll out. The good news is, if you have seen a Lexus LS, take a look at that car, you will see the integration is fantastic. It is well-integrated. Nobody else has integrated with Toyota except us in a factory-installed model. We’ve gotten the question over and over again, is Toyota really one of our partners. All I can say is, try not to get confused with a lot of noise. But take a look and see the integrated device, and see how well it is integrated. I think you will see that Toyota is very focused on engaging and integrating into their cars. We will see more and more models come on over the next two to three-and-a-half year. They have committed to it, we have seen the manufacturing process and so I am very confident that you will see more and more Toyotas with XM radios in them.

The only final thing that I would say on that is, if you are characterizing Toyota, there are two points. One, they are very engineering and quality driven; the other is, they are very insistent upon confidentiality and not disclosing details. We honor that, so they prefer us to not say anything more specific about exactly when they are going to roll out other particular models. Jonathan Jacoby – Banc of America Securities: Thank you so much.

Your next question comes from Bob Peck – Bear Stearns. Analyst for Bob Peck – Bear Stearns: A question on the high teens objective that you had for 2010. Is that still a valid number or should we look for something which is maybe lower, in the mid teens kind of range? Gary Parsons: Was this the question about say a 20 million by 2010 type of overall objective? Analyst for Bob Peck – Bear Stearns: Yes. I think on a previous call you had taken it down to the high teens. Gary Parsons: No, I don't think that we have. I think you find analyst models out there that have various ranges that goes from the high teens to the 20 million. If you really look at where the OEM energy is coming over the next couple of years, I frankly don't think it's appropriate to change our longer term goals. I do think, as Nate was indicating earlier, you will see this long, expected migration from retail heavy subscriber additions to OEM heavy subscriber additions, and that is accelerating a little bit faster, I think, than previous projections. And OEM subscribers are likely to end up being somewhat of a stronger portion of the long-term subscriber base when you get into those out years, but I think you're still generally in that same range. Analyst for Bob Peck – Bear Stearns: Gary, there are a lot of rumors about a potential merger, a lot of speculation going on, on that. What is it that you think could make it happen, and what are the regulatory challenges that you could face? Gary Parsons: Well, this is something we're asked pretty regularly over how many quarters in a row, so we haven't commented on it before, we won't start commenting on it now. You did appropriately characterize it as rumors, so for that I'd rather leave rumors lie. Analyst for Bob Peck – Bear Stearns: Thanks, Gary.

Your next question comes from BJ Gallant - Lehman Brothers. BJ Gallant - Lehman Brothers: First, given family plan is becoming a bigger piece of the mix, are there any thoughts of raising prices there? Second, to Hugh's comments earlier about everybody sort of gunning at us, given our success, what big steps has the industry together or XM on is own done to gain some listenership in Capitol Hill from regulators on its growth path? Why does it seem to be the victim? So if you could address that, it would be much appreciated. Thank you.

Let me first address the price increase question. The answer to your question is yes, we have thought about it. No, we are not going to announce a price increase. We are going through the process right now of looking at 2007 and looking at our plans. As we go through that process we'll examine all options. Price increase in the family plan is certainly one of the options, and we want to make sure we maximize that but also don't want to drive down sales, and that's the balance we have to be looking at. So the answer is, yes, we have thought about it, and this is probably not the place to announce it. I'm not telling you we're going do something. I'm only telling you we will examine it like we do every year, examine pricing.

With regard to your question about lobbying efforts, clearly we are battling against fairly significant lobbying groups, either from the record industry or NAB. What we have done is built a very, very professional and extensive lobbying group within the company. Gary and I spend a lot of time on the Hill to communicate our message, which is beginning to resonate. We did fairly well I think in the last session, in terms of trying to educate people. We work jointly with Sirius on many of these issues, and I think that you will see that our position as an entrepreneurial company that has invested an enormous amount of money in building an industry is reaching people on various different fronts in the legislative area.

Your next question comes from Bryan Kraft - Credit Suisse. Bryan Kraft - Credit Suisse: I just want to confirm that the process issue that drove the lower conversion rate in third quarter has been fully corrected and that there isn't going to be any residual impact in fourth quarter? If you could just speak to that. I know you've been making some improvements, or working on making some improvements on self-pay churn. Just wondering if you have any expectation as to how that trends over next one to two quarters? Thank you.

On the processing issue relative to conversion rates, yes, that processing issue is behind us. We will see a gradual, relatively soft increase in conversion rates, because that problem is behind us. I don't think you're going to see a step up, a major step-up in conversion rate. I want to manage the expectations here. It’s not going to have a major jump, but yes, that particular problem we talked about in previous calls is now behind us and is not really an issue. Now, on the churn, I believe you asked about self-pay churn. Self-pay churn, I talked about some of the day-to-day operational sort of things that we needed to do to improve self-pay churn. Again, I think we're going see some improvement in self-pay churn. I know we are because we have seen the actual trends month to month. I think we're also going to experience an increase in self-pay churn because of the fact that NASCAR is rolling off of the network and as it does there will be some subscribers who are NASCAR loyalists who will roll off as well. That may affect us late this quarter and early next quarter. I think you'll see a few things counter balance each other, and as I mentioned, churn should stay relatively flat and start to come down next year. Bryan Kraft - Credit Suisse: So on the first part of that when you say a gradual increase in conversion rate, does that say that you don't expect to get quite back to that 54% to 55% range, if I'm hearing you correctly, in the fourth quarter? It's going to take a little more time to get there?

Yes, it is not in one quarter. I don't think you’ll see a full jump in one quarter. Bryan Kraft - Credit Suisse: Thank you.

Your next question comes from Craig Moffat – Sanford Bernstein. Craig Moffat – Sanford Bernstein: Good morning. I know I've been asked to do one question only, but two if I could. First on churn rate, if you could help us understand per the last question, now that we're for the first time starting to have enough units out there long enough that some of those cars are being sold, how do we think about churn rate with respect to how much of it is voluntary, how much of it is involuntary due to credit card expiry and things like that, and how much of it is due to used cars? Then a separate question, as I think about the portables market, can you talk about your development with the Inno and the Helix and how that's gone relative to your expectations? How do you think about the potential for partnership or inclusion with the iPod as a potential partner as opposed to as a potential competitor?

First let's talk about voluntary and involuntary churn. We can talk about trends, we have not disclosed the detailed numbers on voluntary and involuntary and we don't want to start a new reg issue by disclosing, so I would just tell you that involuntary churn, the trend has actually been slightly down on the involuntary churn because of the operational issues we talked about before, particularly making sure that credit card dates are up to date, making sure that addresses for people who have moved are up to date so they don't show up as non-paid people instead. We track where they are and get them in. So involuntary churn I think is slightly trended downwards and I really can't go into the individual numbers. You also asked about the Inno. A lot of questions there. Asked about the Inno and the Helix and how they're doing and also iPod. Should there be an integration or a strategic alliance with Apple or iPod, which is also one of those, just like merger questions, we get it every few months. I'll talk about the Inno, and I'll let Hugh talk about the other items. The Inno and the Helix are doing well, I would say. We are selling right now at a rate that has been flat in the number of units we have been selling, it has been flat throughout the last three quarters. I don't think we're seeing an increase. We expect to see a slight increase in the number of units sold. We actually have a new promotion out on the sister product, the Nexus , and the Nexus a smaller device that is being sold actually right now with a mail-in rebate slightly below $150. So I expect to see some bump in sales from those devices. The Inno and the Helix themselves, however, I think we'll see a slight increase because of the holidays but again our plan is not built on selling a dramatic number of these devices. I don't think we give the information on exact sales, so I will tell you the number of sales in the last three quarters has been flat. I think we'll see a slight increase in the fourth quarter. That's where we are.

Your question about the iPod, clearly, one would look on partnering with somebody that has 70% penetration in the MP3 market as something that on its face, would seem to be an extremely potentially positive impact on your company. The issues that come about is what would the cost be, in terms of our company, in terms of being added to that platform. Over the years we've had conversations with iPod, as I believe Sirius has had in the past as well. The issue is just really what are the raw economics and what does it do to your business? It is something that we are always exploring, as we are exploring with other players. As you see, we have integrated MP3 capability into our devices, and you saw what's happening with the SkyFi3 and some of the devices that Nate just talked about. It is something that's always on your radar screen, and something you always want to think about. The issue is, what are the basic business economics of doing something like that, that could be positive for the company.

The other thing to remember is that Apple is not the only MP3 provider out there, and should their competitors want to make sure that they are good competitors, we think there's an opportunity to put XM Radio capability into non-Apple MP3 devices. Not just put MP3 in our devices, but put XM into other MP3 devices. So we continue to have conversations with other people besides Apple. Craig Moffat – Sanford Bernstein: Thank you.

Your next question comes from Eileen Furukawa - Citigroup. Eileen Furukawa – Citigroup: Thanks for taking the question. Would your goal for CPGA to be under $110 in the fourth quarter, if you end up seeing a tougher than expected retail environment, are you more focused on reaching your sub guidance or your CPGA guidance? Also, can you give us a quick update on the music royalty front, how close or not you are to reaching an agreement and what you feel like the likely range of outcomes will be in terms of that negotiation? Thanks.

This is Nate. I will answer the first part, Hugh will answer the second part. I guess the best way to address that is to make sure, number one we correct the perception. What I said in my text was that the full year 2006 CPGA will be under $110. The fourth quarter is actually going to be slightly higher. Average that in with where we have been so far throughout the year, especially being under $100 in the third quarter, the full year should be at $100. So we will be slightly over $110 in the fourth quarter. I want to make sure that was clear. Now as to the priorities, it is a tough question because obviously we're focused on both. I don't want to lend anybody any belief here that we're not going to focus on subscriber growth. We focus on both. But if you pin me down and make me answer the question I'm going to say CPGA is more important. We want to cost effectively manage this business. We want to reach cash from operations being positive in the fourth quarter, and that remains our priority. But I know that we have to grow subscribers because that's the future of the business. So there's a strong emphasis on both, but I will not let cost per gross add get out of control in the fourth quarter. That is high priority.

On our issues with regard to the record labels, actually there are two issues that are at play at this point. One is the litigation regarding our devices and we have moved to dismiss that lawsuit and we also continue to have conversations with the record labels on a business negotiation. The other more recent activity as it relates to our CRB, which is the copyright issues that are going on where we have jointly filed a rate proposal with Sirius, and that's a very lengthy process that probably won't get resolved until late next year. Clearly the parties on either end of the spectrum in terms of what they would like, we believe that the rate proposal that was presented by the Sound Exchange, which represents those parties, you know, 10% to 23% is preposterous. As you may or may not know, there are various criteria in terms of the legislation that the arbitrators have to consider, one of the most important being what is the investment that the companies have made to build this medium, of which both Sirius and XM have made very significant investments, the billions of dollars and infrastructure. They have to take into account the promotional value that is provided to the artist, they have to take into account the value in getting subscribers that comes from our news, sports and talk programming, and also right now XM at its current rate would pay alone over $100 million over the next six years to artists and labels and continue to be one of the biggest payors for digital royalties going forward. So we think that we have a lot of respect for the proposal we have put in and for how we are meeting the criteria, and this thing is just going to play out as most negotiations and arbitrations do over the next year or so. Eileen Furukawa - Citigroup: Okay. Thank you very much. I appreciate it.

Your final question comes from Barton Crockett - JP Morgan. Barton Crockett - JP Morgan: Great. Thank you very much for taking the question. I wanted to ask you a question related to retail. It does seem just from our checks with stores, there's a lot more retailers that are pushing to their customers professional installation as opposed to relying on an FM transmitter or maybe a cassette or tape deck connection. Can you give us a sense of how many of your new subs are getting professional installation versus what it was before? On a related note, your sub guidance, can you give us a sense of what that presumes to be from the gross additions of retail? Is that up or down and is this professional installation affecting that? Thank you.

First let me address the plug and play FM mod versus professional install. We, in fact, believe as the retailers do, that professional install is a better way to go. There's a less chance of having any kind of problem with a professional install. However, we believe the Sure Connect product gives a quality install approach. So we, in fact, would like to see more professional installs. The retailers obviously make more money on it because that's a labor issue for them, and as a labor issue, they like to make money on labor in all of their bays. So together we both have encouraged more professional installs. We have not yet gotten the statistics back to tell us that we're actually seeing more professional installs than we would have seen maybe three or four months ago. So I can't really tell you the numbers because we don't have reports back from them yet. I expect that by the time we reach December, end of the year timeframe, they will be able to report back the trend. So that's what we're seeing and I would just say we both would like to encourage more professional installs. Barton Crockett - JP Morgan: And then as for the retail sub growth in the quarter? Is your guidance up or down? Is that what's included in there?

First of all, retail sub growth is affected by the seasonality. So we will see greater retail sub growth in the fourth quarter. The majority of that increase in growth will come from the fact that the Christmas holiday period happens, and so between the late November timeframe and when the Christmas shopping starts all the way to the end of the year, especially during the last week of the year, we're going see a significant bump in retail because of that.

We also don't break out those numbers for the quarter. We basically report them as trends in our next earnings call.

Right. So rather than give you guidance for the fourth quarter broken out by retail versus OEM, we're just giving overall guidance, and when we report at the end of the fourth quarter, we'll report on what we see. Just general trends, yes, retail will get better because of Christmas holidays. Barton Crockett - JP Morgan: My question was looking year over year, but that's fine. Thank you very much. I appreciate it.

All right. Thanks a lot.

That was our last question, so we thank you for joining us, and we look forward to having a good fourth quarter.

This concludes today's XM Satellite Radio third quarter 2006 financial results conference call.