Overview

We were the first company to establish an operational satellite-based digital radio system, commonly known as Digital Audio Radio Service (DARS) and today are the only licensed DARS provider outside of North America, South Korea and Japan.

Through the end of December 2007, we have spent approximately $1.7 billion in connection with the development and launch of our business. With the signing of a major distribution arrangement with Fiat Group Automobiles S.p.A. (Fiat), we are close to launching in Italy our first mobile service; we expect to launch this mobile service in early 2009. In 2009, in addition to Italy, we are planning to launch a mobile service first in Bahrain and then in the United Arab Emirates (UAE) and potentially in Switzerland; in each of these jurisdictions we now have the regulatory authorizations to establish a mobile service. We have delayed previously scheduled launches in the Middle East in order to take advantage of the enhancements to our planned mobile system provided by our European standard technical development activities undertaken for Italy and other countries in the European Union. These enhancements include, among other things, a new generation of satellite receivers, which will receive broadcasts from our networks of terrestrial repeaters as well as from our satellites. We are planning similar system enhancements in India, where we initiated a non-mobile service in 2005, subject to the resolution of the satellite radio regulatory issues and the formation of a strategic alliance with a local partner.

Our operational system consists of four main elements: two geostationary satellites, AfriStar and AsiaStar; the associated ground systems that provide content to and control satellites; a terrestrial repeater network to be built out (subject to regulatory approval) in each of our target jurisdictions, commencing in Italy, in order to facilitate a mobile service; and the receivers owned by our customers. Each of our satellites can service three large geographic areas through three beams capable of carrying up to 50-60 channels each, based upon the waveform and other changes we are making in implementing our European technology. As a result, we will have the technical capacity to broadcast a tailored mix of up to 50-60 channels on a subscription basis in each of six target areas.

We are focusing our current efforts on Europe beginning with our launch in 2009 in Italy. During the period 2005-07, we concentrated substantial efforts on marketing our non-mobile services in India where we have, beginning in 2007, reduced spending and marketing and sales activities pending the issuance of a terrestrial repeater license and the completion of a strategic alliance with a local party. In China, although we continue to work with a local partner to obtain the regulatory approvals necessary for service launch, we are not confident of a breakthrough in the near term.

We currently continue to offer a subscription package for non-mobile services in India for $3.75 (Rs.150) per month, a subscription package for non-mobile services in Africa and the Middle East for $5.00 per month and a premium package for non-mobile services targeted to English-speaking expatriates living throughout our current broadcast area for $9.99 per month. As of December 31, 2007, we had more than 174,000 paying subscribers, including approximately 163,000 subscribers in India, and over 11,000 subscribers in the rest of the world, including Europe, the Middle East, and Africa. We have ceased, however, traditional marketing and promotional activities for our non-mobile services in these areas.

Our strategy is to keep a narrow focus and establish a strong set of local alliances and strategic partnerships to assist in funding operations and provide support for distribution, content procurement, regulatory compliance and the build-out of a terrestrial infrastructure prior to embarking on a full roll-out in a particular market.

We continue to face severe problems in financing our development and operations. See “Risk Factors—We have faced in the past and may face in the future, challenges and constraints to obtaining financing” and “Management’s Discussion and Analysis and Results of Operations—Future Operating Liquidity and Capital Resource Requirements” and “—Capital Expenditures.‘

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Our Markets

Within our broadcast coverage area, we believe that Europe, India, the Middle East and, possibly China, are the most attractive target markets for the launch of our service. Other markets we may pursue opportunistically include Africa, the expatriate communities within our coverage area and government agencies.

Our European business plan

We currently offer service in parts of Europe through satellite receivers and have a relatively small number of subscribers. Mobile reception there, however, requires the implementation of complementary terrestrial repeaters. These repeaters would operate within our assigned frequency band and would be used to fill gaps in satellite coverage, particularly in urban zones.

Following our establishment in 2006 of an Italian joint venture with minority partner Class Editori, a media company based in Milan, the joint venture company, WorldSpace Italia, S.p.A., received a license from the Italian government to establish a repeater network in Italy and provide a mobile service. WorldSpace Italia concluded the Fiat transaction in July 2007 and based upon Fiat’s commitment to OEM distribution and after-market support we have accelerated implementation for a scheduled roll-out in early 2009. We have installed terrestrial repeaters in Milan currently used for the testing of various components of the system. Chipset and receiver development, repeater network deployment, and the integration of a robust conditional access system are all moving towards the launch next year. We are also in discussions with content providers and other potential partners. In early 2008, we signed a development agreement with Delphi Corporation, one of the leading satellite radio providers, to design an after-market receiver for the Italy launch. Fiat is working with Delphi to develop an OEM receiver.

Our regulatory franchise, including radio frequency assignments and the associated orbital location of our AfriStar satellite as well as our Italian and Swiss licenses, position us to initiate our DARS service in Europe. However, for countries other than Italy and Switzerland, we will need to obtain additional local regulatory approvals for the deployment of our mobile DARS service. We are in discussions with potential partners and regulatory authorities in a number of other European countries, including Germany, the United Kingdom, France, and Spain, among others. We expect to achieve positive regulatory results in at least two additional countries in 2008. Accordingly, we plan to launch our hybrid mobile service in Europe in two phases. The first phase would offer mobile services in a single national market, Italy, while the second phase would focus on adding selected other targeted countries. Phase One would utilize the west beam of our AfriStar satellite, which has sufficient capacity to provide an attractive product offering in at least one European country (Italy), and a complementary terrestrial repeater network in that market’s urban zones. We are also evaluating the potential reconfiguration of our AfriStar satellite payload to provide additional capacity for a second European market. In Phase Two, we plan to provide a pan-European service through the launch of a third co-located L-band satellite (AfriStar-2) and the deployment of complementary terrestrial repeater networks in urban zones within additional service countries. We have received authorization from the FCC to launch and operate an additional satellite at the same orbital location as our AfriStar satellite. We plan to launch this additional satellite, which is fully assembled and in storage, subject to receiving required terrestrial repeater approvals in additional countries in Europe and arranging financing.

We intend to offer multiple country-specific program packages, consisting, respectively, of various European language programming, together with a number of English language pan-European channels. We anticipate each country package would contain around thirty to fifty channels including music, talk and sports, as well as niche services such as a mixed audio and data nautical channel. The content offering will include original and exclusive channels targeting different population segments that have been identified by our market studies. Although the intended primary focus of our plan is to target the automobile market, other potential applications such as the home reception or commercial vehicle markets would also be implemented.

In preparing for the launch of a mobile DARS in Europe, we continue to pursue strategic relationships with automobile OEMs, media groups, content providers, receiver manufacturers and technology providers.

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Our India business plan

India has proved to be a difficult market to achieve the level of subscriber additions we were expecting when we launched our commercial service in 2005 with marketing and promotional spending. We still believe the India market fundamentals are attractive, but we have continued to reduce spending pending the approval of our request for licenses to support the launch of our hybrid mobile service and the completion of a strategic alliance with a local partner. We plan to use 2008 to work to meet these two objectives and plan for the launch of a mobile service. We plan to introduce a terrestrially augmented mobile service in India after receiving appropriate regulatory approvals and are currently studying the use of our technology developed for Europe to that end. We believe a terrestrially augmented signal along with next generation receivers will not only make a mobile service possible, but will also eliminate a number of the challenges consumers face with our current service, such as antenna installation and manual password insertion.

We currently offer subscribers in India to our non-mobile service 45 channels of music, entertainment and information programming in twelve languages, and may introduce additional channels in the near future. This programming ranges from regional to national and international in its focus. The basic subscription package that we offer in India consists of international news (such as NPR, BBC and CNN International); WorldSpace-branded English language channels playing a full range of international music; Indian niche genre channels such as Gandharv, Shruti and Farishta; Indian news channels such as CNN/IBN and CNBC TV-18; Indian regional music channels such as Sparsha, Spandana, Tunak, Umang, Surabhi, Falak, Sonar, KL Radio and Madhuri; and lifestyle and meditation channels such as Moksha and the Art of Living. We have also featured the WorldSpace-created channel PLAY, which is the first all-sports, talk radio channel in India and provides comprehensive coverage of cricket and other sports for the Indian market. The channels are broadcast 24 hours a day . In 2007 we launched a comedy channel (Punchline), an 80’s-90’s pop hit channel (Retro Radio), a channel featuring Christmas/Holiday music which ran for a six week period in November and December (Holly) and the CNN/IBN and CNBC TV-18 channels. In 2007 we also added additional live programs on a number of WorldSpace branded channels. Our long term strategy focuses on live music broadcasting, the creation of unique, compelling and exclusive content events that can be leveraged on one or more WorldSpace channels, as well as increasing channels of both music and talk that target a mass audience.

We plan to use India’s extensive electronics and automobile aftermarket networks to sell our early automobile-mountable mobile receivers. We are working to establish partnerships with automobile manufacturers so that they can offer factory-installed WorldSpace receivers in their new cars. We also plan to establish distribution relationships with auto accessories store chains, which play an important role in the Indian aftermarket.

Our Middle Eastern business plan

In light of the regulatory success we have experienced in markets in the Middle East, we have been targeting the launch of our mobile service in markets such as Bahrain and the UAE. These target segments will include the local Arabic population as well as South Asian and western expatriates. We are implementing a mobile service based upon authorizations received from the telecommunications regulatory authorities of Bahrain and the UAE, and intend to roll out our mobile service initially in Bahrain, followed by the UAE. We expect to launch the service with our Europe standard technology, which we expect to be ready in early 2009. We have added two dedicated Arabic channels, Ranin (new Arabic hits) and Min Zaman (Arabic retro/classical), concluded on agreement with CNBC Arabia, and have begun efforts to launch additional Arabic channels covering key genres of Arabic music. We plan to leverage our Indian content to provide a “voice from home” for the large number of expatriates from India, Pakistan, Sri Lanka and Bangladesh. We believe the South Asian expatriates, as well as the western expatriates who are interested in receiving reliable news, information and entertainment from sources and in formats that they are used to receiving at home, provide an attractive market with a high disposable income and strong ties to their homeland.

Our China business plan

While we have in place our satellite infrastructure for China, we have not yet begun to offer DARS in China. The path to the launch of a commercial business in China remains unclear, even though we continue to work with our local partner to structure an arrangement that will receive government approval. Pursuant to a

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series of agreements and approval documents issued by relevant governmental authorities, China Satellite Communications Corporation (ChinaSat), our agent and one of six state-owned telecommunications operators in China, has acquired satellite spectrum allocation and certain other approvals to operate complementary terrestrial retransmission services in China. ChinaSat has installed four repeaters in Beijing and two repeaters in Tianjin to conduct the experimental L-band network operations. Additionally, our agent, ChinaSat, has established an uplink station in Beijing for our AsiaStar satellite.

We have developed a “China-Only” version of our receivers, which is programmed to decode only those broadcasts intended for listeners within China. This feature will ensure that programming from outside China will not be decoded by China-Only receivers within China. To facilitate local low-cost production in China, we have an active agreement with China-based receiver producer Tongshi.

We believe we are well positioned to offer an initial DARS system to the Chinese market, subject to the required government approvals. Through WorldSpace China, we have established relationships with several third-party providers of content relating to these services, including China National Radio, China Radio International, SEEC Media Group, Ltd., and Hunan Radio & TV and we expect to activate these relationships upon receiving government approval.

Programming and Content

Consumer radio

Our content is a key differentiating factor in attracting subscribers and increasing our subscription revenue. Our approach to content comprises three key strategies: (i) to form relationships with the best international, national and regional content providers; (ii) to create high-quality unique content, including content that has not been available through the local radio providers in a particular market; and (iii) to aggregate in each of our markets the most appealing mix of audio programs. The mix of audio content provided in each market is tailored to the needs and preferences of major, as well as niche, target listener segments within such market. Each of our satellites can broadcast three beams of information covering different parts of the satellite’s footprint. Each beam will have the capability to broadcast 50-60 channels with its own individual mix of programming.

Overall, we currently broadcast a total of 90 separate digital channels, delivering music and multilingual news, sports, information and data. Currently, 39 channels are provided by international, national and regional third parties and 35 are WorldSpace-branded channels produced by us, or by third parties uniquely for us. The balance are data and First Voice channels. In 2007, we introduced six new channels, a comedy channel (Punchline), an 80’s-90’s pop hit channel (Retro Radio), Hosanna (Christian) a channel featuring Christmas/Holiday music which ran for a six week period in November and December (Holly), CNN/IBN (Indian News) and CNBC TV-18 (Indian and global Business News). We are exploring ways of enhancing our talk, entertainment and sports related programming in a cost-effective way.

On our WorldSpace branded channels we generate exclusive, compelling and unique content by creating events or partnering with existing events in the entertainment world. An example of this is the UPop Sessions @ Abbey Road in which we brought in over 30 bands for live recording sessions. We broadcast this three day event live on our UPop channel as well as archived all the content for future playback. In 2008, we expect to create a special channel “WorldSpace Live” to showcase all of the Abbey Road content we have collected over the last three years as well as other live content we have recorded in the WorldSpace studios over the years. In addition to WorldSpace-created events, we also partnered with existing events such as the Brit Awards, Live Earth, the Virgin Mobile Festival and many others to deliver the most current, exciting entertainment content to our subscribers. We use encryption technology to mitigate signal piracy and to protect access to, copying of and tampering with the manner and method through which our content is offered as well as the content itself. Our next generation receivers will use improved compression technology, eventually allowing a greater number of channels to be sent over our existing bandwidth.

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We have agreed to provide free of charge 5% of the capacity of each of our satellites to First Voice International (First Voice) through the life of such satellites and to provide uplink service for First Voice’s content at least through June 2005. At present, we continue to provide uplink service to First Voice at no charge. First Voice is a nonprofit organization whose establishment was inspired by our Chairman and Chief Executive Officer, Noah Samara, and which provides free informational and educational programming to local communities within our broadcast coverage area. Mr. Samara is also the Chairman of First Voice.

AsiaStar

The northwest beam of our AsiaStar satellite offers 45 channels to our primary market of India. Some of our channels are available free-to-air, but most require subscription service.

The other two beams on the AsiaStar satellite are configured to broadcast in China and Southeast Asia.

AfriStar

Our AfriStar satellite offers 59 channels, most of which are available on two of the three beams, the west beam having been substantially cleared for testing preliminary to the launch of our mobile service in Italy. The programs offered on these channels are broadcast into Africa, the Mediterranean basin countries, the Middle East and parts of Europe.

Receivers and Multimedia and Data Devices

Technology and Waveforms

WorldSpace has developed for Europe and other markets a satellite-terrestrial broadcast technology based on the Satellite Digital Radio (SDR) standard approved in September 2006 by the European Telecommunications Standards Institute (ETSI).

This waveform uses state-of-the-art error correction codes (turbo-codes) together with highly adaptable time interleavers. In addition, the product implements a flexible modulation scheme that addresses low-power and high-power satellites. Furthermore, the standard’s built-in quality of service (QoS) capabilities optimizes bandwidth utilization by enabling bandwidth allocation based on the class of service required. This feature enables real-time audio and video service and product implementations that need bandwidth resources reserved and/or protected while also enabling less bandwidth intensive data services that can benefit from retransmission techniques at the application layer. The terrestrial component of our SDR system uses carriers of 1.5 MHz each, thereby facilitating frequency coordination and planning at the pan-European level.

The WorldSpace SDR technology will also use the following:

Partnerships to implement the new ETSI waveform

WorldSpace has entered into a contract with the Fraunhofer Institute (Germany) for the development of an SDR receiver reference design. This design will:

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WorldSpace has recently concluded agreements with ST Microelectronics, a major chipset development company, and Delphi Corporation, a leading satellite radio system developer to develop the ETSI chip-set, OEM, and After-Market products for Europe (see below— Consumer audio receivers ).

WorldSpace has awarded a contract to Certicom—an experienced conditional access (CA) vendor with a proven track record in the satellite radio space. The CA system delivers entitlements to receive over-the-air and enables pre-activation of OEM and After-Market receivers at the factory. This capability, in turn, enables WorldSpace to offer and better manage customer trial periods without unduly burdening the call centers/dealers, which we anticipate should improve the service adoption rate by users.

Following an international competitive bid, WorldSpace awarded in June 2006 a contract to Sodielec (France)—a leading company in DVB-T transmitters—for the development and delivery of eight repeaters. The initial compatibility tests between repeaters and receivers were performed successfully in December 2006 and repeaters were installed in Toulouse (France), Erlangen (Germany) and Milan (Italy) for field trials. Following the field trials, in 2008, we have commenced activities to install the repeater network required to launch service in Italy.

Consumer audio receivers

Until now, we made available for our markets satellite reception only receivers, which, although many were portable, were used primarily for fixed reception, since we had not built out any terrestrial repeater networks that are needed for mobile reception. These receivers have been available in a range of individual, home and office models. In anticipation of our upcoming launches of our mobile services first in Europe and then in the Middle East, we have been working with key vendors to have ready a mobile reception receiver to work in conjunction with our newly developed European technology. We expect to use this technology for all our European market launches and our launch in the Middle East and are studying its introduction into India once we have secured a repeater network license there. In order to take full advantage of the new capabilities of the European technology, we will have to broadcast our signal in a new waveform; which our current generation of receivers will not be able to interpret. As we introduce new technology and market our next generation receivers in markets where there are significant numbers of current subscribers with first generation receivers, we are developing transition plans that could involve, among other things a promotional program to address replacement of the older receivers. Another potential plan under evaluation may include a period during which we could broadcast in both waveforms. Under this potential plan, at some point in the future as our next generation receivers achieve broad market acceptance, we expect that we will discontinue broadcasting the signal used by our current generation of receivers.

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WorldSpace has recently concluded an agreement with Delphi Corporation, a leading satellite radio receiver product developer to develop the after-market products for Europe. The first such agreement to develop two generations of the first after-market SDR receiver was signed with Delphi in January 2008. In addition, WorldSpace and Delphi are in the final stages of negotiating the development agreement for the first generation OEM receiver implementing the new ETSI Technology.

Europe & Middle-East

Products: WorldSpace intends to provide a wide range of receivers to its subscribers in Europe and the Middle East. The primary focus is the automotive market which is expected to drive the growth in the early stages. Within the automotive space, two markets will be addressed:

OEM (Original Equipment Manufacturers):

Addressed by the following two kinds of receivers

After-market: Addressed by “plug and play” (PnP) receivers that are removable from the car. The initially planned PnP receiver will be positioned in the mid to high end for the market and may include a color screen and enough memory to appeal to tech-savvy, early adopter consumers.

All the above mentioned receivers will be capable of supporting advanced data and data-enabled media applications through easy integration with existing and emerging sources of data in cars, including navigation (GPS) and telematic systems. Advanced data applications and premium services geared towards motorists will enable consumers to view in real time a wide range of relevant information including up-to-date traffic conditions, weather forecast, parking space availability, and other valuable information.

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Some receiver models may feature capabilities that include pause and rewind, preview of next artist, and many other attractive services, including push download services.

Networks

After WorldSpace obtained a license to build and operate the first L-band satellite radio repeater network in Italy, WorldSpace signed an agreement with Telecom Italia to design and deploy the terrestrial repeater network throughout Italy for the launch of its first service in Europe. We are currently considering a plan for Switzerland where we recently received a license to deploy terrestrial repeaters.

India & Rest of the World

Our existing receivers used in India are manufactured by BPL and are sold in the retail market at prices ranging from Rs.2,499 to Rs.3,599 (approximately, $60 to $90). Currently, the lowest cost BPL receiver is the One World, which is offered at a retail price of Rs.2,499 (approximately $60). To help achieve this price point, we currently provide a subsidy for this receiver. Substantially all receiver sales are of this low-cost BPL receiver. We continue to pursue all opportunities to reduce receiver costs.

We are considering plans to introduce our new ETSI receiver product line intended for automobile use in India, upon receiving the terrestrial license. Although this entails developing a transition plan for our current subscribers (since full introduction of this technology will result in the first generation receivers being unable to receive our signal), using this technology systemwide provides synergies and potential cost efficiencies that we expect will ultimately benefit our subscribers. For the automobile market initially, we plan to introduce after-market oriented products, which will be housed in a docking station on the automobile’s dashboard and will use an omni-directional antenna mounted on the automobile’s roof. Similar to the receivers used by Sirius and XM, these automobile receivers would access our satellite when in line of sight of our satellite or a terrestrial repeater network when line of sight to our satellite is blocked, which would generally only be the case when the receiver is in a major metropolitan area and large buildings, trees and other natural obstructions obscure the line of sight with our satellites.

The WorldSpace System

Our system is a complete digital audio, data and multimedia system comprising three major components: the space segment, the ground segment, which includes satellite control, content uplinking and terrestrial repeaters (when we complete the repeater network installation in Italy), and the user segment. The space segment is designed to cover most of the geographical areas of the world (except North America and Australia) using three geostationary satellites. We have spent approximately $747 million on required infrastructure, including the satellites and the earth stations. Presently, two of the satellites, AsiaStar and AfriStar and their associated ground control systems, are providing operational services to Asia, all of the Middle East and Africa, and parts of Europe. In addition, we have a fully assembled satellite in storage (which we plan to use to expand our mobile DARS in Europe) and the long lead parts for another (which may serve as a ground spare). The satellites are designed to provide digital audio, multimedia and data broadcasting to small fixed and portable L-band receivers in their line of sight anywhere in their broadcast coverage area. In order to provide a robust mobile service, we are implementing terrestrial repeater networks, initially in Italy, that will be part of our system in selected markets within our satellite broadcast coverage area. With the addition of suitably located terrestrial repeater networks, the system can provide more reliable urban broadcast services to receivers in automobiles (similar to the services provided by XM and Sirius in the United States).

We built our system working with industry leaders, including Alcatel Space (now Thales Alenia Space), EADS Astrium and Arianespace (France), SED (Canada), GSI (USA), Fraunhofer Institute (Germany), ST Microelectronics (Italy), Micronas (Germany) and others, to realize high quality and reliability of service.

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Space segment

Our orbiting satellites, AfriStar and AsiaStar, and our satellite in storage are Matra Marconi Eurostar 2000+ buses built by Alcatel Space and EADS Astrium, formerly known as Matra Marconi Space. Both are geostationary orbit satellites broadcasting programs in the L-band frequency (1452-1492 MHz range). Each of the two satellites has three downlink spot beams, with each beam covering approximately 14 million square kilometers of the earth. The AfriStar satellite, launched in October 1998, is located at the 21º East Longitude orbital location with beams covering all regions of Africa, the Mediterranean basin countries, the Middle East and parts of Europe. The AsiaStar satellite, launched in March 2000, is located at the 105º East Longitude orbital location with beams covering the most densely populated parts of Asia, including India, China and the southern part of Russia. The third satellite, which is fully assembled and ready for launch, is currently in storage at EADS Astrium’s and Thales Alenia Space facilities in Toulouse, France and Stevenage, U.K. A fourth satellite of identical design, for which long lead parts have been procured and partially assembled, is also maintained in storage in Toulouse, France and can be integrated and tested for launch in an abbreviated period of time.

Each satellite has a design life of twelve years, with an orbital maneuver life of 15 years, which means that each satellite has been designed and fueled to maintain its assigned orbital position (within 0.1 degrees) for 15 years. After that point, the satellite must be decommissioned. Our AfriStar satellite has developed a defect in its solar panels. As a result of this defect, the energy collected by those panels is less than intended. Based upon the past few years operational experience with this issue and consultations with Astrium, we believe the defect’s likely effect is limited to potential satellite power inadequacy during solar eclipses. We have adapted our satellite procedures accordingly and, in consultation with Astrium, we have implemented operational procedures that would extend the useful life of the satellite relevant to this solar array issue through careful management of the power generated by the solar arrays. Such procedures, which are expected to be invoked during the critical eclipse periods, may result in a temporary and relatively insignificant reduction of the power radiated by one or more of its beams with a resulting reduction of the broadcast coverage area of such beam(s).

Each of our satellites provides two types of channel capacity: transparent and processed. In the transparent mode, signals from ground stations are sent to the satellite in a time sequence known as time division multiplex (TDM). In this mode, different channels are brought to a central hub station for aggregation and uplink to the satellite. The satellite receives and broadcasts these channels to ground receivers within its coverage area. The three downlink beams receive programs from corresponding uplinks in different frequencies. In the processed mode, the satellite has the ability to process the received signals before transmission to its coverage area. This second mode allows individual broadcasters to uplink to the satellite directly from their respective sites. In the processed mode, any program uplinked on a single frequency can be broadcast in any or all of the downlink beams.

Ground segment

Operation of each satellite currently in-orbit is monitored and controlled by the ground control system, comprising a regional operations center (ROC), two telemetry, command and ranging (TCR) stations and one communications system monitoring (CSM) station that performs monitoring of the downlink signal quality and control of each satellite. Our regional operations centers are located in Silver Spring, Maryland for AfriStar and Melbourne, Australia for AsiaStar. The regional operating centers, through their satellite control centers, manage the performance and status of the satellite by controlling the satellite and monitoring the status of the onboard communications payload. In addition, the regional operations centers, through mission control centers, facilitate delivery and control the quality of the signals from the individual uplink stations to the satellites by assigning signals to the appropriate uplink frequencies and routing them to their appropriate downlink carriers. The system architecture is identical for each region.

The regional operating centers control the satellites via dedicated data lines to the TCR stations. Each satellite has two TCR stations with sufficient geographic distance between them so that if natural disasters or any unforeseen events were to make one inoperable, a back-up station will be available. TCR stations consist of an

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X-Band uplink command and control system and an L-band telemetry monitoring system. A backup mode has also been provided using an S Band link from Bangalore, India. The TCR stations for AfriStar are located in Bangalore, India and Port Louis, Mauritius and for AsiaStar in Melbourne, Australia and Port Louis, Mauritius.

In addition to the TCR stations, a CSM station is associated with each satellite to monitor continuously the quality of the downlink services. Our CSM facilities are located in Libreville, Gabon for AfriStar and Melbourne, Australia for AsiaStar.

Network management system

Our network management system provides the connectivity between the programming sources, the satellites and the receivers. The satellite transponders permit (i) a multiplicity of uplinks to the satellites directly from the broadcaster’s studio or from common hub feeder link stations (linked terrestrially to broadcasters through dedicated communication lines) and (ii) downlinks directly to receivers.

In the common hub mode, the WorldSpace-branded broadcast channels, all audio channels from external broadcasters and multimedia content are backhauled and aggregated to a broadcast operations center (BOC) and the content is fed directly to a transparent hub feeder link station (TFLS). The external broadcaster’s contents are backhauled to the BOC using off-the-shelf codec equipment and dedicated communication lines. The TFLS multiplexes all the incoming audio channels and data, and translates the encoded signal into the TDM format compatible with the receivers. The TFLS then uses a single carrier frequency to uplink transmissions to the satellite. Onboard the satellite, the signal is routed by the transparent transponder to a specific downlink beam and transmitted via L-band frequencies to the receivers. A TFLS located in Johannesburg provides the uplink to the AfriStar satellite. A station in Singapore provides the uplink for the west and south beams of the AsiaStar satellite. The north beam of the AsiaStar satellite is supported by a TFLS located in Beijing, China.

As an alternative to the TFLS, individual broadcasters may also uplink directly to the satellite from their own facilities or from a central location via a Processed Feeder Link Station (PFLS). The PFLS can be installed

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at the broadcaster’s location or a location central to several broadcasters (to which programming is transmitted by the broadcasters via dedicated communication lines). The PFLS, after coding, translates the signal into PRCs for onward transmission to the processed transponder onboard the satellite. The processed payload transponder receives multiple uplink signals and processes them for rebroadcast in L-band. PFLSs in London and Toulouse currently provide access to AfriStar; a new PFLS has been constructed in Dubai to replace a decommissioned Nairobi PFLS. PFLSs in Melbourne and Singapore provide access to AsiaStar. The TFLSs and the PFLSs are equipped with custom-built encryption nodes to encrypt any channel or a group of channels to support the subscription management service.

We will also introduce an over-the-air authorization capability, which will allow suitably equipped receivers to be activated or de-activated using a dedicated channel without requiring consumers to enter passwords directly into a receiver. This will facilitate quick and easy activation and deactivation of receivers over the air without requiring the manual entry of passwords into a receiver.

Terrestrial system

Since uninterrupted line of sight reception may be difficult in the urban areas in which we operate, we intend to install terrestrial repeating transmitters to rebroadcast our satellite signals in the largest metropolitan areas of our intended mobile DARS markets. Our next generation receivers will be capable of receiving this broadcast. The development and introduction of next generation mobile receivers will coincide with the launch of our first terrestrial repeater network in Italy and will follow in other markets in which we intend to offer a mobile service. The satellite component of the system will be based on the same TDM signal we currently use, but will use a modified waveform with several significant enhancements designed to improve in-vehicle reception in areas partially shadowed by trees or other obstructions.

User segment

Users must purchase a receiver compatible with the L-band frequency in order to access our system. The radio receiver processes, decodes and descrambles the signals to allow users to receive our programming content. Our broadcast frequency and satellites require a special receiver design incorporating either a small patch antenna measuring approximately 6 to 8 cm (2.4 to 3.2 inches) which folds neatly into the receiver unit or a similarly sized omni-directional antenna mounted on the car rooftop. Each receiver is individually addressable via a unique identifier that can be used to unlock specially coded audio or multimedia signals. This capability provides us with the flexibility to deliver free, subscription and/or premium services to consumers.

The currently available receivers are manually coded for subscription authorization. A password, valid for varying periods of time depending upon the length of the subscription purchased and paid for, is provided to a subscriber and entered into the receiver. Currently passwords are re-validated on a quarterly basis. Upon subscription renewal, a new passcode is provided and similarly entered into the receiver. As new receiver products are introduced, we plan to provide for over-the-air activation of subscriptions.

Competition

We expect competition for our services from a diverse mix of audio, video and data providers ranging from traditional AM/FM and shortwave broadcasters to cable television and DTH satellite broadcasters, Internet-based radio broadcasters and other potential satellite DARS providers.

Traditional radio

We face competition from traditional AM/FM and shortwave radio broadcasters. The shortwave and AM/FM radio industries are well established and generally offer free-to-air reception paid for by commercial advertising. In addition, certain stations offer free-to-air programming without commercial interruption. Many

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shortwave and AM/FM radio stations also offer information programming of a local nature, such as local news or traffic, which we may not be able to offer. Radio stations compete for listeners and advertising revenue directly with other radio stations within their markets on the basis of a variety of factors, including program content, on-air talent, transmitter power, audience characteristics, local program acceptance and the number and characteristics of other radio stations in the market. AM/FM radio is deeply rooted in most European markets. And although there has recently been limited expansion of AM/FM radio in India, traditional AM/FM radio there is still not as important a source of competition as in other markets because of the poorer quality and narrow selection of programming currently offered.

Terrestrial Digital Broadcast Services

We may also face competition from terrestrial digital broadcast services in the future, such as Terrestrial Digital Radio (TDR) services. TDR is a digital technological upgrade of traditional radio that offers up to CD-quality radio in over-the-air broadcasts with text information such as song title, weather and news alerts included. TDR experimental services are being conducted in a number of countries worldwide, including China, parts of Europe, India and Israel. A few countries, including Canada, the U.K., Denmark and Germany, have started regular commercial TDR services, and France has announced its intention to launch a similar service in 2008. Standards for providing such services in the United States were authorized by the FCC in October 2002.

Other digital broadcast systems and services include technological upgrades which permit the service to provide digital TV and multimedia signals to mobile phones and other portable devices – or mobile TV. Experiments in terrestrial mobile TV services are being conducted in a number of countries worldwide, including Germany, the US and France, while Korea and Italy started offering regular commercial services in January 2005 and in 2006, respectively. It is possible that the anticipation of the 2008 Olympics may stimulate the introduction of similar services by the summer of 2008 in China and other European countries.

Satellite television and cable

Traditional cable operators and DTH satellite broadcasters programming television offer programming that may compete with ours. Many cable television operators provide a set of music channels as an ancillary service for cable subscribers. Delivery of television via DTH satellite transmission is a growing phenomenon worldwide, including in most of the countries we have targeted, and these satellites may broadcast audio channels. Many DTH satellite services provide a set of music channels accessible through fixed dish receivers mounted on a home or building as an ancillary service for customers investing in the television dish and receiver, and paying the monthly or annual subscription price. DTH and cable audio programs may offer high quality signals and a customer’s choice of available programming is considerably broadened by these offerings—both aspects common to our planned service. Cable services and DTH television, however, are not portable and can only be heard through televisions or stereo receivers wired into the satellite antenna or cable television system, so they will not compete with our portable satellite receivers or our intended mobile automotive service. In addition, most DTH and cable audio services are presently limited to packaged recorded music and are secondary in marketing emphasis to television. However, there are a few existing providers of DTH radio, such as Digital Music Express in the U.S., which offers over ninety channels of digital commercial free sound through a subscription service. However, such DTH radio services do not offer traditional radio type broadcasts, which include live DJs and up-to-the-minute news.

Internet radio broadcasts

There are large numbers of Internet radio broadcasts which can be accessed from any PC connected to the Internet anywhere in the world. In general, the audio quality of these broadcasts is dependent on the bandwidth available and the quality of the Internet connection. To the extent that higher quality sound is available, for the listener to experience a high quality broadcast they must have a broadband connection to the Internet and the listeners must connect their PC to quality speakers or earphones. It is unlikely that there will be a portable

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Internet solution in the markets we are targeting for some time to come. Much of the current radio broadcasts are pre-programmed music playlists, not traditional radio type broadcasts with live DJs or up-to-the-minute news programming.

PC users can download music in formats suitable for storage and playback on their PCs. In contrast to music that is played on a PC directly from the Internet, the sound quality of music that is downloaded from specialty Internet sites for future listening on PCs can be comparable to our broadcasts.

Other satellite service providers

Direct satellite DARS competition in the L-band is limited by the digital satellite radio spectrum allocation established by the 1992 WRC, referred to as WARC-92, and by our current use of this allocation. Although a number of countries have since submitted filings to the ITU for potential use of the same unique L-band frequencies allocated to satellite radio, we are not aware of any other satellite DARS providers in the L-band. While new competitors could emerge, particularly if our service proves to be a commercial success, any potential satellite users of the L-band are required to protect our receivers from harmful interference. Moreover, our two satellites currently occupy most of the L-band spectrum allocation in our target regions.

In addition to direct satellite DARS competition in the L-band, we may face competition from satellite “Digital Multimedia Broadcasting”, or DMB, service providers in one or more of our target markets. Satellite DMB consists primarily of delivering TV programs and multimedia content, including audio, to mobile phones. While the service is aimed primarily at the mobile phone market, it is also possible to provide in-vehicle reception of the service. While satellite DMB is currently available only in Japan and South Korea, similar services have also been proposed for provision in different S-band allocations in other parts of the world, including Europe, India, the Middle East and China. Since satellite DMB consists mainly of delivering video channels, while satellite DARS is tailored to provide multiple audio channels, especially to automobiles, we believe any potential competition from future satellite DMB operators is likely to be mainly indirect.

Music players

In addition, listeners increasingly have additional choices for high quality music reproduction, such as CDs, cassettes and MP3 players. Prices for devices to play these media may be lower than the price for our receivers. However, CDs, cassettes and MP3 players cannot provide the “real-time” news and public affairs programming offered on radio. The vast majority of mass-produced, portable MP3 players do not have any AM, FM or satellite radio capability.

Intellectual Property/Trademarks/Patents

We use and hold intellectual property rights for a number of trademarks, service marks and logos for our system and services and for our receivers. We have two main marks—“WORLDSPACE” and the “Orbital Logo”—both of which are registered in over 25 countries in the international categories for satellite communications or radio and data business. We have under consideration certain modifications to our main marks and expect to make a decision in the near term. We also hold, in various jurisdictions, a small number of regional taglines or channel brand names including but not limited to “AmeriSpace”, “AmeriStar”, “AfriStar”, and “AsiaStar”. In addition, we currently own or have applied for more than 40 patents in more than 40 countries relating to various aspects of our system and receivers, and at any time we may file additional patent applications in the appropriate countries for various aspects of our system. Our patents cover various aspects of the satellite direct radio broadcast system and terrestrial repeaters with formatting of broadcast data, and the processing thereof by the satellite and reception by remote radio receivers. In India we have six patents pending, and in China we have been issued two patents and have five additional patents pending. We also have exclusive rights in various Fraunhofer Gesellschaft patents.

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We believe that all intellectual property rights used in our system were independently developed or duly licensed by us, by those we license the rights from or by the technology companies who supplied portions of our system. We cannot assure you, however, that third parties will not bring suit against us for patent or other infringement of intellectual property rights.

We have granted XM, a royalty-free, non-exclusive and irrevocable license to use and sublicense all improvements to our technology made up to January 1, 2003. This license renews automatically on an annual basis unless terminated for a breach which has not been or cannot be remedied.

The recording rights federation, International Federation of the Phonographic Industry (IFPI), and we have entered into a global blanket license for sound recording rights that is expected to cover those rights for our soon to be launched service in Italy. We are currently exploring the licensing of composers rights for that market. For the India market, we entered into a license agreement with Phonographic Performance Ltd. (PPL) for the equivalent rights granted by IFPI for the India catalogue once PPL opted out of the global arrangement with IFPI. The term of this agreement expired at the end of 2007 and we remain in good faith negotiations with PPL for a renewal.

We also hold a blanket license granted by the Composers and Authors Society of Singapore (COMPASS), to broadcast, perform, transmit and otherwise use all musical works which COMPASS has or will have the right to license. The license is deemed to continue from year to year unless terminated by notice in writing by either party at least 60 days before the end of the prior covered year. It was granted concurrently with the launch of transmissions through our AsiaStar satellite. The license covers our transmission of music contained in the COMPASS catalog to and from AsiaStar on a direct-to-receiver basis only, but does not cover third-party retransmissions. With respect to certain music works not contained in the COMPASS catalog and which we may wish to include in future programming, we may approach the rights-holders directly for licenses, which may result in increased costs.

Although we believe the license granted by COMPASS covers all necessary broadcasting rights for transmissions from our Singapore uplink station to India, China and other countries within the AsiaStar broadcast coverage area, its sister rights societies in other jurisdictions within the AsiaStar broadcast coverage area may not recognize such license and may seek to require separate licenses for broadcasts into their jurisdictions. This could increase our cost of broadcasting in such jurisdictions. Indeed, the society in India, India Performing Rights Society (IPRS), has recently announced that it is opting out of the COMPASS arrangement with respect to its India catalogue. We are in good faith negotiations with IPRS and expect to reach agreement on terms in the near future.

Regulatory Matters

As an international satellite system operator and provider of DARS, we are subject to regulation at the international and national levels. At the international level, we are subject to the radio frequency spectrum allocation process and satellite coordination procedures of the ITU. Additionally, at the national level, we are subject to regulation by jurisdictions that have licensed our satellites and their associated ground segments. Finally, while provision of our satellite-only service in most markets does not require service authorization, the implementation of hybrid satellite and complementary terrestrial networks requires that we obtain prior service and/or frequency authorization(s) in each respective market.

Regulation at the international level

The ITU radio-frequency spectrum allocation process

The ITU, a specialized agency of the United Nations with over 190 member countries, meets every three to four years at a World Radiocommunication Conference (WRC). The purpose of the WRC is to update frequency

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allocation decisions and other conditions for use of radio frequency spectrum at the international level. Once the ITU allocates a particular frequency band to a given service, individual member countries may assign and license frequencies within that band to specific communications and media service providers in such countries.

At WARC-92, the ITU allocated the 1452-1492 MHz frequency band (within the so-called “L-band”) to the Broadcasting-Satellite Service (Sound), (BSS (Sound)) referred to as DARS in the United States, on a global basis. Recognizing the line of sight physics of satellite broadcasting and the need to provide seamless coverage in urban areas, the ITU specified that the global allocation covered BSS (Sound) and complementary terrestrial broadcasting. Further, WARC-92 limited BSS (Sound) initial operations to the upper 25 MHz of the L-band allocation (1467-1492 MHz), with the use of the lower 15 MHz of the L-band to commence after the conclusion of a planning conference, which has not been scheduled.

ITU satellite coordination

Our use of the orbital locations assigned to us in our licenses is subject to the frequency coordination and registration process of the ITU. In order to protect satellite systems from harmful radio frequency interference from other communications systems, the ITU maintains a Master International Frequency Register (MIFR) of radio frequency assignments and their associated orbital locations. Each ITU member state (referred to as an “administration”) is required by treaty to give notice of, coordinate, and register its proposed use of radio frequency assignments and associated orbital locations with the ITU’s Radiocommunication Bureau.

In our case, the governments of the United States, Australia and Trinidad and Tobago have licensed or authorized our AfriStar and AsiaStar satellites and the satellite intended for use in Central and South America (AmeriStar), respectively, and are therefore the notifying administrations for each of those respective satellites as well as another satellite intended as a replacement for AfriStar. As our notifying administrations, they are responsible for filing and coordinating our allocated radio frequency assignments and associated orbital locations for each satellite with both the ITU’s Radiocommunication Bureau and the national administrations of other countries in each satellite’s service region.

BSS (Sound) services share the L-band frequencies on a co-primary basis with terrestrial fixed, mobile and broadcasting services. Therefore, our satellites were required to be coordinated with existing systems either lawfully operating in our service regions or enjoying date priority ahead of us. While our notifying administrations, as the formal members of the ITU, are responsible for coordinating our satellites, in practice they require that we, as the satellite licensee, identify any potential interference concerns with existing systems or those enjoying date priority ahead of us, and provide the analytical work and interface necessary to coordinate with such systems. If we are unable to reach agreement and finalize coordination, our notifying administrations would then assist us with such coordination.

When the coordination process is completed, the ITU formally enters each satellite system’s orbital and frequency use characteristics in the MIFR. Such registration notifies all proposed users of frequencies that such registered satellite system is protected from interference from subsequent or nonconforming uses by other nations.

In the event disputes arise during coordination, the ITU’s Radio Regulations do not contain mandatory dispute resolution or enforcement mechanisms. Rather, the Radio Regulations’ dispute resolution procedures are based on the willingness of the parties concerned to reach a mutually acceptable agreement. Neither the ITU specifically, nor international law generally, provides clear remedies if this voluntary process fails. As further described below, each of our satellites in-service has been fully coordinated and registered in the MIFR and therefore enjoys priority over all later-filed requests for coordination and any non-conforming uses. Further, coordination information has been submitted for our AfriStar-2 satellite. However, while the ITU’s Radio

Regulations set forth the procedures for the resolution of disputes that may arise either during coordination or

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after coordination is completed and satellites are registered, as a practical matter there are no mandatory dispute resolution or enforcement mechanisms at the ITU.

Regulation at the national level

Regulation of the satellites

AfriStar-1: Regulation by the United States . Following a previously issued experimental license, on December 17, 1999, the FCC granted AfriSpace, Inc., our wholly-owned subsidiary (AfriSpace), a full license authorizing AfriSpace to launch and operate the AfriStar-1 satellite at the 21° East Longitude orbital location to provide commercial digital audio broadcasting services in the L-band to Africa and the Middle East. The license specifically provides for a ten year license term and expires in January 2010. It is renewable at that time.

We successfully coordinated the operation of AfriStar-1 with each of the administrations in the satellite’s coverage area. On February 7, 2006, the ITU registered the AfriStar satellite network in the MIFR. Under current ITU spectrum priority rules, therefore, AfriStar-1 has priority for use of the relevant radio frequencies and the associated orbital position. The AfriStar-1 filing has a period of validity of thirty years, through October 2028.

Our AfriStar satellite is licensed to serve all markets within its footprint. As noted above, AfriSpace received its license to serve the Africa and Middle East regions. As a U.S. -licensed satellite system, AfriStar is subject to the FCC’s general policies governing satellite services. In this regard, in its DISCO I Report and Order , the FCC gave U.S. satellite operators the flexibility to serve any market within their satellites’ footprint, provided the United States’ international obligations to coordinate the spacecraft are satisfied. AfriStar has been fully coordinated for service throughout its service region, which includes not only the Middle East and Africa, but also portions of South Asia and Europe. Therefore, on April 8, 2004, AfriSpace notified the FCC that it intended to provide service to all regions within the satellite’s footprint.

Additionally, on February 5, 2008, AfriSpace filed with the FCC a request to modify its AfriStar-1 license in order to allow that satellite to operate in a configuration which provides expanded coverage of Europe. The request has not yet been granted by the FCC.

AfriStar-2: Regulation by the United States . On January 3, 2006, we were awarded a license by the FCC to launch and operate AfriStar-2, and to co-locate it with AfriStar-1 at the 21° East Longitude orbital location. The satellite would operate within the same authorized frequency band (from 1467 to 1492 MHz) as AfriStar-1 and is expected to enhance our service coverage in North Africa, the Mediterranean basin and Europe, as well as provide certain “overlap” redundancy for the northwestern and northeastern portions of AfriStar’s current coverage area. The first request for coordination with respect to AfriStar-2 was published by the ITU on May 3, 2005 and a second request for coordination, identical to the first but with a later validity date to cater for possible launch delays, was published by the ITU on June 12, 2007.

The FCC did not impose a performance bond requirement on AfriStar-2 and only required that it be launched and placed into operation prior to decommissioning AfriStar-1.

A number of ITU filings for the L-band currently have date priority over our AfriStar-2 filings. Although we are required to coordinate our AfriStar-2 filings with these prior-in-time filings, those filings must themselves be coordinated with our AfriStar-1 and AsiaStar satellite notifications.

On February 2, 2006, an application for review was filed asking the FCC to reverse the order by which the FCC had granted the AfriStar-2 license. We timely submitted an opposition to this application for review. While we believe that the application for review lacks any legal basis that would justify a reversal of the FCC’s decision to grant the AfriStar-2 license, there is no guarantee that the FCC will uphold its order and our license.

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Other United States regulation . We are also subject to U.S. export controls laws and regulations, specifically the Arms Export Control Act, the International Traffic in Arms Regulations, the Export Administration Regulations and the trade sanctions laws and regulations administered by the U.S. Department of the Treasury’s Office of Foreign Assets Controls in the operation of our business. We have obtained all the specific authorizations currently needed to operate our business and believe that the terms of these licenses are sufficient given the scope and duration of the activities to which they pertain.

AsiaStar: regulation by Australia

Our AsiaStar satellite is subject to regulation under the Radiocommunications Act 1992 (Cth) and the Radiocommunications Licence Conditions (Apparatus Licence) Determination 2003 (Cth), related subordinate legislation and a Deed of Agreement between the Australian Communications Authority (ACA) (now the Australian Communications and Music Authority (ACMA)) and AsiaSpace Limited, the Company’s wholly-owned Australian subsidiary (AsiaSpace).

In 1995, the ACA (now the ACMA) on behalf of the Australian government agreed to be the ITU notifying administration for our AsiaStar satellite, operated by AsiaSpace. In 1999, following the ACA filings with the ITU on behalf of AsiaSpace, a Deed of Agreement between the ACA and AsiaSpace was executed that provided for the frequency coordination and operational control of the AsiaStar satellite network from Australia (the Deed).

The Deed remains in force as long as AsiaSpace fulfills its obligations as specified therein, which include compliance with the ITU Radio Regulations, maintenance of a telemetry, tracking and control facility in Australia, AsiaSpace’s continued incorporation in Australia and location of its central management and control in Australia. If AsiaSpace is determined to have breached the Deed, the ACMA has the discretion to terminate the Deed and suppress the ITU notification of the network. In 2005, AsiaSpace agreed in principle to amend the Deed so that it is responsible for all costs payable to the ITU. This requirement is imposed upon other satellite operators in Australia who have entered into similar deeds with the ACMA. AsiaSpace is presently discussing draft amendments with the ACMA. Once the AsiaStar satellite reaches the end of its service life, if a new satellite is launched from Australia or an Australian national (including an Australian corporation within the WorldSpace group) authorizes the launch, the Space Activities Act 1998 (Cth) would apply and we will need to apply to the ACMA and the Space Licensing and Safety Office (SLASO) for authorization to launch a replacement satellite. However, there can be no guarantee that the ACMA and SLASO will grant such an authorization, in which case, the radio frequency assignments and associated orbital location currently used by our AsiaStar satellite could become available for use by other satellite operators.

AsiaSpace also currently holds apparatus licenses 1105214, 1105215, 1317666 and 1317667 which are issued by the ACA (now ACMA) and authorize the use of certain frequencies and facilities necessary in Australia for the operation of the AsiaStar satellite. The licenses are renewed annually. Although renewal is not automatic, there is a reasonable expectation that they will be renewed at the appropriate time.

AsiaSpace has successfully coordinated the AsiaStar satellite at the 105º East Longitude orbital location and, on June 15, 2004, the ITU registered the AsiaStar satellite network in the MIFR. Under current ITU spectrum priority rules, AsiaStar has priority for use of the relevant radio frequencies and the associated orbital position.

AmeriStar: regulation by Trinidad and Tobago and France

On December 30, 1992, the Government of Trinidad and Tobago granted a special license to WorldSpace Caribbean Ltd., a wholly-owned subsidiary, to provide commercial digital audio broadcasting services from the 95° West Longitude orbital location. This license expired on April 2, 2000 and was subsequently renewed in December 2001 and would have remained effective for twelve years (until 2013) unless we failed to launch the satellite within the period of validity of the ITU filing (January 2002).

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As a result of a lengthy coordination process, the initial filing for AmeriStar expired in January 2002. The Government of Trinidad and Tobago subsequently submitted a new advance publication filing to the ITU effective January 2002. This new filing will expire in January 2009 if a satellite is not launched by that time.

Since we do not intend to launch a satellite by January 2009, the 2002 filing will expire at that time, and we do not intend to seek a renewal of our license from Government of Trinidad and Tobago. As an alternative strategy, the French administration, at our request, has submitted to the ITU on February 22, 2008, two filings, at 78° West Longitude and 65° West Longitude, respectively. We will seek a corresponding license(s) from the French administration at the appropriate time.

Regulation of the WorldSpace ground system

Operation of the satellites

Our satellites are monitored and controlled by the ground control system, which is comprised of regional operations centers (ROCs) in Silver Spring, Maryland and Melbourne, Australia; telemetry, command and ranging (TCR) stations in Bangalore, India, Melbourne, Australia and Mauritius; and in-orbit testing/communications system monitoring (IOT/CSM) stations in Libreville, Gabon and Melbourne, Australia that control and monitor the downlink signal quality of each satellite. Pursuant to our contracts with relevant in-country service providers such as Gabon Télécom, Antrix Corporation Limited of India and Mauritius Telecom, the responsibility for obtaining and maintaining all necessary regulatory authorizations for operation of the ROC, TCR and IOT/CSM stations not owned or operated by WorldSpace resides with the applicable local service providers. We believe that our ground system service providers have obtained all necessary regulatory authorizations for the operation and monitoring of the AfriStar and AsiaStar satellites. In Mauritius and Gabon, our previous long-term agreements for ground systems services have expired and we are currently operating on a month-to-month basis with no change in terms.

Regulation of Receivers . Our receiver manufacturers have the broad responsibility to market the receivers. Pursuant to our receiver development, production, marketing and license agreements, the relevant receiver manufacturers are responsible for obtaining and maintaining any permits and similar approvals relating to the sale of the receivers and for complying with all applicable export compliance laws.

In the international trade of products, most countries follow the Harmonized Commodity and Coding System, also referred to as the Harmonized System (HS), as a basis to calculate customs tariffs. To date, most countries that have allowed the importation of satellite DARS receivers have used the Harmonized System 85.27 classification, which also applies to conventional analog radios. Thus, customs restrictions and tariff levels may vary from country-to-country or region-to-region.

Regulatory status in Europe

Digital radio broadcasting services constitute a relatively new commercial sector in Europe; consequently, many European administrations are re-examining their existing regulatory frameworks to accommodate the potential new services. At the pan-European level, European administrations have established a frequency plan, known as the Maastricht 2002 plan, to facilitate and encourage the introduction of national terrestrial digital radio networks. As described below, one consequence of the terrestrial frequency plan is the reduction of the available spectrum in Europe for the deployment of satellite radio networks.

In July 1995, the European Conference of Postal and Telecommunications Administrations (CEPT), met in Wiesbaden, Germany and agreed on a Special Arrangement concerning the introduction and planning of Terrestrial Digital Audio Broadcasting (T-DAB), in the VHF frequencies (174-230 MHz) and L-band (1452- 1467.5 MHz) in the territories of the signatory Administrations (referred to as the WI-95 arrangement). In the Special Arrangement, each of the signatory administrations received a certain number of allotments, consisting of T-DAB frequency blocks that were geographically limited and pre-coordinated so as not to interfere with each other, and distributed with a view to forming two complete national coverages per country.

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Subsequently, terrestrial digital radio proponents requested that additional L-band spectrum resources above 1467.5 MHz be allocated for T-DAB, in addition to the WI-95 plan. In October 2000, the European Radio communications Committee (ERC), the highest body within the CEPT in charge of radio communications matters, authorized seven additional frequency blocks (approximately 12 MHz) from the satellite-only part of the upper 25 MHz of the L-band to be used for the planning of one further T-DAB coverage in each country. A CEPT Conference took place in June 2002 in Maastricht to develop this third coverage plan and to transfer former L-band T-DAB allotments from the WI-95 arrangement into the resulting new “MA-02 Special Arrangement.”

The resulting MA-02 plan leaves 12.5 MHz (1479.5-1492 MHz) of the original WARC-92 allocation for satellite digital audio broadcasting, including ancillary terrestrial components, and our AfriStar satellite has been coordinated to use this frequency range within its broadcast coverage area, which includes most of Europe. We believe the 12.5 MHz set aside by the MA-02 plan provides sufficient radio-frequency spectrum to execute our business development plans in Europe, including our contemplated provision of DARS and mobile DARS.

Italy and Switzerland

In May 2006, our Italian subsidiary, WorldSpace Italia S.p.A., received an authorization from the Italian Ministry of Communications to launch a subscription satellite radio and data service in Italy, utilizing the frequency band 1479.5-1492 MHz for the operation of the corresponding hybrid satellite/terrestrial network. We anticipates launching Europe’s first satellite digital radio service to portable and vehicular devices in early 2009, using our AfriStar satellite and a terrestrial gap-filler network to be rolled out in the major Italian cities.

In April 2008, we also received approval from Switzerland’s Office Fédéral de la Communication (OFCOM) to operate terrestrial repeaters that will work in conjunction with our AfriStar satellite.

United Kingdom

In May 2001, the Radio Authority issued WorldSpace U.K. Ltd. a Radio Authority Satellite Service License under Part III of the Broadcasting Act 1990, which authorizes WorldSpace U.K. to offer a multi-channel service receivable via custom-built receivers and carried on the AfriStar satellite. The Radio Authority ceased to exist on December 29, 2003, and its duties were assumed by a new communications regulator, the Office of Communications (Ofcom). Ofcom varied the license in December 2003 to conform with the requirements of the Communications Act 2003 (CA). The license will remain in effect until surrendered by WorldSpace U.K. or revoked in accordance with the conditions of the license, and requires payment of such fees as Ofcom may specify.

Ofcom has recently confirmed its plans to auction 40 MHz of L-band spectrum suitable for a range of services, including satellite radio and mobile TV. The release of 40 MHz of L-band spectrum is part of a wider plan of Ofcom to release around 400 MHz of valuable spectrum, including the spectrum that will be freed-up through the future switch to digital television. The L-band spectrum will be auctioned in two sub “packages”, on an application-neutral basis, with associated rights of spectrum trading:

We intend to participate in the L-band auction, which will likely take place during the second quarter of 2008.

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Other European countries:

We are actively pursuing regulatory authorizations to deploy terrestrial repeaters in additional European markets, notably Germany, France and Spain. In France, the authorities recently approved the ETSI SDR standard for deployment in the L-band allocation for satellite radio.

India

We began offering free-to-air service to India in 2000, and started providing the first subscription digital radio service in India in 2002. We are now in the advanced stages of seeking approval to offer a “hybrid” digital radio service in India. This service will utilize terrestrial repeaters located in urban and other areas where reception is problematic, in conjunction with our AsiaStar satellite, in order to develop a new mobile service intended for use in automobiles. Radio services in India are governed by the central government pursuant to the Indian Telegraph Act, 1885 and the Indian Wireless Telegraphy Act, 1933 which, among other powers, give the central government the power to grant licenses to persons establishing, maintaining or working a telegraph apparatus, or even possessing a wireless telegraph apparatus, including radios, within any part of India. Each successive step in our Indian business strategy entails an increased level of regulation, and involves various regulatory authorities. These include: the Ministry of Information and Broadcasting, which is responsible for policy formulation; the Department of Telecommunications under the Ministry of Communications and Information Technology, which is responsible for licensing and wireless spectrum management, among others; the Telecom Regulatory Authority of India (TRAI), an autonomous government entity created under the TRAI Act, 2000, which is charged with regulating the telecommunications sector and providing recommendations to the government; the Wireless Planning & Coordination Committee (WPCC) Wing of the Ministry of Communications & Information Technology, created under the Government New Telecommunications Policy, 1999, which sets spectrum policy in India; the Ministry of Home Affairs; the Department of Space; and the Standing Advisory Committee on Radio Frequency Allocation (SACFA). The regulatory aspects of the different stages of our business plan for India, as well as the respective roles of these governmental bodies, are described in more detail below.

Free-to-air services. India does not currently require downlink service/frequency authorizations to provide free-to-air, satellite-only digital radio services, including ancillary data transmissions. Currently, only Indian companies are authorized to downlink and uplink television channels to and from India. With respect to protection from interference into our L-band frequencies, the Indian administration has adopted the WARC-92 allocation for BSS (Sound) in its national table of allocations on a co-primary basis with the fixed service. Any potential interference issues are coordinated on a case-by-case basis.

Satellite-based subscription services. We have secured a general business license to carry out various activities including the collection of revenue. This, in turn, allows us to provide subscription audio services in India. Under the Indian Telegraph Act, 1885 and Indian Wireless Telegraphy Act, 1933, establishing, maintaining or working any telecom equipment or possessing any wireless equipment, including satellite receivers, uplinking equipment or terrestrial repeaters, requires the approval of the Department of Telecommunications unless the equipment has been issued a general license or has been specifically exempted from the licensing requirement. Radio receivers have been exempted from specific licensing requirements. We also hold an import license for our receivers.

“Hybrid” services. For the terrestrial retransmission component of our “hybrid” digital radio services, we must obtain a spectrum allocation, spectrum and transmitter authorizations and may also be required to obtain a service license from the Indian government pursuant to the Indian Telegraph Act, 1885, Indian Wireless Telegraph Act, 1933, the National Telecommunication Policy, 1999 and related regulations of the TRAI. We are studying the use of the ETSI SDR terrestrial waveform for our terrestrial component in each urban/suburban area where the satellite signal will be retransmitted. The WPCC process is to allocate terrestrial frequencies after assessing the spectrum requirement and utilization in each city. We expect that the WPCC will carry out this exercise in advance of issuing a full wireless operating license, and in parallel with the separate process of obtaining a service license.

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The transmitter authorization, which is under the authority of SACFA, covers the transmitter equipment inclusive of antenna, RF, IF and Baseband. All radio transmitters require SACFA and WPCC clearance, which is issued by the WPCC based upon the equipment specifications. The transmitter authorization is also required for importing equipment into India, as is a Telecommunications Engineering Center certificate. The manufacturers of our receivers are contractually required to obtain all relevant regulatory authorizations.

In addition to the SACFA and WPCC licenses described above, the terrestrial retransmission component may also require a service license and other related authorization from the Ministry of Information and Broadcasting to operate a digital “multiplex” of channels. At the moment, the Ministry does not have regulations governing service authorizations for hybrid DARS.

Pending DARS deliberations.  In response to the gap described above in the regulations of the Ministry of Information and Broadcasting, TRAI issued a consultation paper in December 2004 and on June 27, 2005 issued a recommendation paper to the Ministry on appropriate terms and conditions for satellite DARS licensees. As we are currently the only DARS provider in India, WorldSpace India has been participating in the government’s deliberation process regarding the DARS policy.

In its recommendation paper, TRAI recommended that licenses for DARS be granted for periods of 10 years. Licenses would only be granted to Indian subsidiaries. TRAI recommended that no licensing fee be imposed, unless the number of license applications exceeds the available spectrum space. Instead, satellite DARS providers that are permitted to use terrestrial repeaters would be subject to a revenue share of 4% of gross earnings generated in India. TRAI also recommended that 100% foreign ownership be permitted in Indian DARS licenses, including terrestrial repeater licensees. The Indian government may or may not accept the TRAI recommendations. Even if the government accepts the TRAI recommendations, it can be selective in accepting the recommendations and may accept them in part.

When a regulatory regime is established, WorldSpace may be required to obtain approval from the WPCC, SACFA, the Ministry of Home Affairs, the Department of Space or other government bodies. WorldSpace may also be required to partner with a local entity to provide service. Although TRAI’s recommendations for DARS do not include foreign ownership restrictions, the laws governing most other telecommunications and broadcasting services in India, including the Foreign Exchange Management Act, 1999, do include foreign ownership restrictions. We anticipate that WorldSpace will be able to continue providing service in India in some fashion, either through its wholly-owned subsidiary, a joint venture with a locally-owned service provider, or some other arrangement.

China

Our wholly owned subsidiary, WorldSpace (China), Information Technology, Ltd. has entered into a memoranda of understanding with several third-party providers of content with respect to possible cooperation agreements. In addition, WorldSpace China intends, through local Chinese media entities or alliances with local Chinese media entities, to provide services to local radio broadcasters and other media groups who hold appropriate licenses granted by SARFT to engage in radio broadcast and television programming business in China. While we are not yet providing commercial DARS service in China and the path to such service is not clear, we have established the necessary satellite infrastructure that will allow us, through cooperation with local China media entities, to begin providing service, if we receive the necessary regulatory approvals.

The telecommunications industry in China is subject to extensive government regulation. The Ministry of Information Industry (MII) is the primary agency of the Chinese government for regulating the telecommunications industry in China. As such, MII is responsible for, among other things: formulating and enforcing telecommunications industry policies and regulations; establishing technical standards; granting telecommunications services licenses; supervising the operations and quality of service of telecommunications operators; allocating and administering telecommunications resources, such as spectrum and telephone numbers; and, together with other relevant government agencies, formulating tariff standards.

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Currently, a national telecommunications law is in the process of being drafted. If and when the telecommunications law is adopted, it is expected to become the basic telecommunications statute and provide a new regulatory framework for the telecommunications industry in China. The Telecommunications Regulations, effective as of September 25, 2000, were promulgated by the State Council, and provide the primary regulatory framework for China’s telecommunications industry until finalization and adoption of the new telecommunications law. The Telecommunications Regulations primarily address: entry into the telecommunications industry; network interconnection; telecommunications resource allocation; tariffs; and service standards.

The Telecommunications Regulations distinguish between basic and value-added telecommunications services, which are subject to different licensing requirements. According to the Catalog of Telecommunications Services, promulgated by the MII and made effective as of April 1, 2003, satellite communications services are categorized as basic telecommunications services. All operators of telecommunications businesses in China must obtain appropriate licenses or permits. An operator of a basic telecommunications business is required to obtain certain authorizations, such as a license for providing VSAT service, a license for leasing a satellite transmitter and a frequency approval, in order to provide such specific telecommunications services. Further, the Administrative Regulations on Foreign-Invested Telecommunications Enterprises, promulgated by the State Council and made effective as of January 1, 2002, provide that the foreign equity ownership in a basic telecommunications service provider must not exceed 49%. However, foreign investment in basic telecommunications services, including but not limited to satellite communications services, is highly restricted and regulated.

Currently spectrum utilization by our AsiaStar satellite for broadcasting services to individual households in China must be implemented through a local satellite service provider with appropriate license(s) granted by the MII. In 2000, we entered into several agreements, including an exclusive agency agreement, with China Telecommunications Broadcast Satellite Corporation, through which, after a restructuring in 2001, ChinaSat (acting, as appropriate, through its parent company, subsidiary or subsidiaries or affiliated company), became the sole agent to lease our AsiaStar satellite and develop our satellite leasing business in China. ChinaSat is one of six state-owned telecommunications operators in China and is the largest satellite operator. All existing licenses/permits regarding our satellite leasing business in China were granted to ChinaSat by the MII, including a basic telecommunications business license, and an operation license for leasing a satellite transmitter. According to the agency agreement, ChinaSat assumes full responsibility for obtaining the requisite government approvals, licenses and permits (if any) to ensure the legality of our satellite leasing business. In 2000, China Telecommunications Broadcast Satellite Corporation, which became a wholly-owned subsidiary of China Satellite Corporation after a restructuring in 2001, obtained MII’s approval for its one year commercial testing of satellite-based information service using the L-band of AsiaStar. In October 2004, ChinaSat obtained the MII’s approval to establish an L-band satellite digital audio broadcasting transmission system and uplink station subject to annual review by the MII.

Foreign investment in value-added telecommunications services, including but not limited to Internet data center and Internet access services, electronic data interchange services and information transmission services, is also subject to regulatory restrictions. In connection with China’s entry into the World Trade Organization (WTO), the threshold of the foreign investment in a company, which is engaged in value-added telecommunications services, can be up to 50%. It is, however, not permitted in China to operate value-added telecommunications services by either a foreign company or its wholly foreign-owned enterprise. Under such a WTO commitment, we, through our wholly-owned subsidiary, have entered into memoranda of understanding with several third-party providers of content with respect to possible cooperation agreements. WorldSpace China is validly existing in China and holds a business license to engage in, among others, researching and developing technologies for electronic equipment and multimedia information services, providing e-business information services, and providing technology services, consultations and training concerning its own products and sale of its own products.

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The radio and television industry in China is highly regulated by the Chinese government. The SARFT, along with the Ministry of Culture and the Information Office of the State Council regulate and censor the information which can be provided via radio, film and television. Foreign investors are currently prohibited from operating radio and television stations, radio and television transmission networks comprising transmission stations, relaying stations, satellite up-link stations, satellite receiving stations, microwave stations, monitoring stations and cable broadcasting and television transmission networks as well as publishing and playing broadcast and television programs. However, as of November 28, 2004, foreign investors are allowed, subject to approval by the SARFT and the Ministry of Commerce, to cooperate with local partners in China to produce television and radio programs, provided that the local Chinese partners hold a majority of the interests.

Although beginning in 2004, the regulatory framework for the radio and television industry in China has become more deregulated and transparent, restrictions remain tight on foreign investment in the radio and television fields in China and censorship procedures remain relatively restrictive with respect to content that is to be broadcast in China. The SARFT has indicated its intention to further liberalize this industry and strengthen the development of the digital television and broadcasting service, however, it is uncertain as to when and how these restrictions will be liberalized. Under the current Chinese regulatory regime, we are neither allowed to hold, or to establish any foreign-invested company with Chinese entities to hold, a license or permit with respect to the broadcasting business, nor are we currently engaged in the radio or television broadcasting business in China. If the Chinese government further opens the radio and television industries and grants licenses and permits to foreign investors or foreign-invested companies, we intend to implement a broadcast service using our AsiaStar satellite.

In China, a permit from the Ministry of Commerce or its local counterparts is required for any technology licensing agreements between foreign companies and the Chinese licensees for technology which is subject to restrictions on importation under Chinese laws. With regard to technology that may be freely imported, Chinese licensees are required to register the technology licensing agreements with the Ministry of Commerce or its local counterparts and obtain a registration certificate. If the licensed technology is protected by a Chinese patent, the parties to the technology licensing agreement are required to file the agreement with the State Intellectual Property Office (SIPO) or the local patent offices authorized by SIPO. Chinese licensees are also required to present the permit or the registration certificate or, if the licensed technology is protected by a Chinese patent, the filing documents, as the case may be, to the Chinese foreign currency control departments, local banks, taxation departments and customs when they make payment of the royalties to us. We have entered into technology license agreements with several Chinese companies to manufacture the receivers necessary for Chinese customers to listen to our programming upon the successful launch of our services in China.

Singapore

In February 2000, The Singapore Broadcasting Authority issued an International Satellite Radio Service License to WorldSpace Asia which authorizes WorldSpace to downlink its DARS service into Singapore. The license expired on January 31, 2005, but has been renewed for an additional 5 year term.

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Noah A. Samara has served as the Chairman, Chief Executive Officer and President of WorldSpace and its predecessors since inception. Mr. Samara has been involved in the development of both geostationary and low earth orbit (LEO) satellite systems since the mid-1980s. Mr. Samara’s early career was in satellite telecommunications, first with Geostar Corporation and later with the Washington law firm of Venable, Baetjer, Howard & Civiletti.

Sridhar Ganesan has served as Executive Vice President—Chief Financial Officer of WorldSpace and its predecessors since October 2004. Mr. Ganesan joined the WorldSpace group in September 2001 as Senior Vice President, Corporate Strategy & Development. Prior to joining the WorldSpace group, Mr. Ganesan was the founder and Chief Executive officer of a US-based applications services provider, Skymach Corporation, from 2000 to 2001. Prior to that, Mr. Ganesan worked at Lockheed Martin Global Telecommunication in business development positions. Mr. Ganesan has more than twenty years of experience in business development, implementation of international businesses and projects and marketing and sales in the satellite, telecommunication, Internet, information technology and media areas.

Gregory B. Armstrong has served as Co-Chief Operating Officer of WorldSpace since May 2006. Prior to joining WorldSpace, Mr. Armstrong had been Executive Vice President and Chief Operating Officer of Jupiter Telecommunications Co., Ltd., Japan’s largest multiple system telecommunications operator based on the number of subscribers, since January 2002. As Executive Vice President he was responsible for franchise operations, sales and marketing, AIT & billing, customer service, operations, engineering/construction, new technologies and digital product development. Prior to joining Jupiter, he held numerous positions with Liberty Media, a holding company owning interests in electronic retailing, media, communications and entertainment businesses, and its affiliated companies, including Executive Vice President and Chief Operating Officer of On Command Corporation, one of the largest providers of in-room entertainment for hotels; Managing Director for Latin America at Liberty Media International; Senior Vice President of Cable Operations at Tele-Communications International, Inc.; and Vice President of UK Operations of Viacom Worldwide.

Alexander P. Brown has served as Co-Chief Operating Officer of WorldSpace since May 2006. Mr. Brown has held international leadership roles with a variety of major content companies in the media industry. Prior to joining WorldSpace, he had been President and CEO of CNBC Asia Pacific, a cable television network specializing in business news, since May 2002. From January through November 2001, Mr. Brown was President and CEO of Virtual Spectator, Inc., a developer of on-line software for sports applications. From 1996 until 2000 Mr. Brown was managing director of ESPN Star Sports, a joint venture between ESPN, a sports and entertainment network, and Star TV. From February 1992 until 1996, Mr. Brown was Managing Director of ESPN Asia, where he launched and established ESPN’s Asian operations.

Donald J. Frickel has served as Executive Vice President, General Counsel and Secretary of WorldSpace and its predecessors since January 1999. Mr. Frickel joined the WorldSpace group in March 1996 as Senior Vice President, Legal & Regulatory Affairs. Prior to joining the WorldSpace group, Mr. Frickel served as Associate General Counsel for Mobil Oil Corporation.

Available Information

Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to the reports are available free of charge through our Internet website, http://www.worldspace.com. We post each of these reports on the website as soon as reasonably practicable after the report is filed with the Securities and Exchange Commission. The information on our website is not incorporated into this Form 10-K.

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