SIRIUS, XM Set To Confirm Merger Plan Today

[estranged4life]

New York Post has issued the following report from Peter Lauria:

"Satellite radio operators Sirius and XM are expected to announce their long-awaited merger today, according to a source familiar with the deal.

The two sides were locked in negotiations over the weekend trying to hammer out a final agreement with an eye toward going public with the merger today in Washington, D.C., where XM is based, this source said.

Talks were still going on at press time and the deal could fall apart at any time. With antitrust issues of paramount importance, this source said lawyers for both companies were working overtime to fine-tune the language of the agreement and frame the discussion around the deal itself and not regulatory concerns.

The transaction is expected to be structured as a merger of equals, but given Sirius' higher enterprise value, shareholders in the Mel Karmazin-led firm will likely come away with a larger percentage of a combined company.

According to the source, XM Chairman Gary Parsons will retain that title in the combined entity, with Karmazin likely taking the CEO role. It is unclear what role, if any, XM CEO Hugh Panero will play.

Combining Sirius and XM would result in a single satellite radio operator with more than 12 million total subscribers. A deal would also marry Sirius content, such as Howard Stern, Frank Sinatra and Nascar with XM's Oprah Winfrey, Bob Dylan and Major League Baseball.

More important, analysts widely predict that a deal would also save the two companies nearly $7 billion annually.

Karmazin and Parsons have been dropping hints since last summer about a possible tie-up, believing that competition from terrestrial radio, online radio and mobile music devices such as iPods have not only expanded the marketplace but also lowered the regulatory hurdles to a deal.

In a note on Friday, Bear Stearns analyst Robert Peck speculated that Sirius and XM needed to move quickly before their window of opportunity closed.

Gaining regulatory approval "could take up to 15 months; hence, we think any proposed deal needs to be announced by the end of March to close by mid-2008," Peck wrote.

On Friday, XM shares hit their lowest point since early November while Sirius shares were approaching 52-week lows. Shares in both companies did trade on heavy volume and ended the session higher, with Sirius gaining 10 cents to close at $3.70 and XM jumping a dollar to $13.98.

[skcin]

So what will this mean? Will they cut channels, or just have tons more? Will we all have to get new receivers?

[ELIUD]

I hope this goes through. I haven't subscribed to either one because I've been leaning toward XM for Air America and Sirius for Howard. Hopefully I won't have to pick one over the other after the merger.

[JazmenFlowers]

this is awesome! I've missed BPM on XM, but can't give up my OutQ on Sirius. I'm a lifetime subscriber to Sirius so I hope they bring/keep both channels.

[HejiraNYC]

Originally Posted by estranged4life

Combining Sirius and XM would result in a single satellite radio operator with more than 12 million total subscribers... More important, analysts widely predict that a deal would also save the two companies nearly $7 billion annually.

Huh? 7 billion dollars per year?? Let's do the math... $13/month times 12 months/year times 12 million subscribers. That's $1.872 billion gross revenue per year between Sirius and XM. I doubt they make a whole lot of money on the receivers, since they are not very expensive, or they are "stunt-priced" to bring in subscriptions. How on earth (or above earth) are they managing to make any money?? I'd love to know how to stay in business while losing over 5 billion dollars a year.

[estranged4life]

Report: Satellite Radio Sings A New Tune As It Eyes Merger

Grant Robertson has issued the following report from Globe and Mail:

XM Satellite Radio and Sirius Satellite Radio will fast-track production of receivers capable of receiving both services if a proposed merger of the two companies is allowed by U.S. regulators.

Sirius chief executive officer Mel Karmazin said Tuesday morning on a conference call with analysts that the two companies are planning a revamp of their technology if they are allowed to join forces. His comments came after XM and Sirius announced Monday they reached an agreement to form a $13-billion (U.S.) satellite radio giant.

The two companies have worked on developing technology in the past that could carry both companies' signals. However, those radios never made it to market since both companies were reluctant to introduce that technology while they were rivals.

Both the Sirius and XM signals will be maintained for the foreseeable future so existing customers won't have to replace their receivers immediately, including those who have bought factory installed receivers in new cars, the companies said.

The proposed merger, which analysts estimate could lead to savings in the billions for the two struggling companies, will drive the companies to combine signals and content and introduce the versatile radio receivers.

“We will be able to speed introduction of radios offering content from both our services today, something that has been challenging as separate companies,” Mr. Karmazin said.

The proposed merger requires shareholder approval, which could take four months, the companies expect. The deal could close by the end of 2007 if regulators approve the transaction, which would create a monopoly in North American satellite radio.

XM and Sirius were granted licences to operate in the United States in the late 90s and affiliate services of XM and Sirius were granted permission to launch in Canada in 2005. XM Canada is publicly traded while Sirius Canada is privately owned through CBC, Standard Broadcasting and its U.S. parent.

The industry has amassed significant losses in both the U.S. and Canada as the companies compete to draw subscribers to the service, which offers roughly 100 channels of music and talk programming for roughly $15 a month.

In an effort to build their subscriber base, the companies have been spending heavily on marketing, and to subsidize the radio receivers for consumers, while battling to sign celebrity hosts such as Howard Stern, Oprah Winfrey and Martha Stewart to lucrative contracts.

Sirius inked Mr. Stern to a five year $500-million (U.S.) deal, while XM opened its chequebook to get the 11-year rights to Major League Baseball games for $650-million (U.S.).

“The long term success of this business rests on growing our subscriber base,” XM chairman Gary Parsons said. “Satellite radio has the burden of not just selling a service but a device as well.”

Mr. Parsons and Mr. Karmazin said the deal will save the companies money if it is allowed to proceed, since a greater portion of revenue will be realized as cash flow, if overlapping expenses, such as marketing, administration and satellite infrastructure, can be eliminated.

U.S. regulators have suggested that the proposed deal will face an uphill battle, since there is a provision in the licences of either company preventing them from merging.

Officials with the Federal Communications Commission made similar comments in January after rumours began circulating of a potential deal. However the head of the FCC also said at the time that the licences could be rewritten to allow for consolidation if a compelling case is made by the companies.

It is expected the satellite radio companies will argue that the market has changed dramatically since they were first granted licences roughly a decade ago. The introduction of iPods, which can store vast catalogues of music, and Internet radio, has altered consumer habits.

Satellite radio originally began as an alternative to commercial broadcast radio, however the industry has been expanding its business model as well. XM and Sirius have branched out into a variety of platforms including Internet distribution of their programming and transmission to portable devices such as cell phones.

The Canadian affiliates of XM and Sirius launched in late 2005 — well into the rise of the iPod — and the industry has tried to differentiate itself in the market by targeting consumers who want to listen in their cars, or those who want unique programming, such as a 24-hour NHL channel.

If the U.S. deal is permitted, Canadian analysts say it will almost certainly lead to consolidation of the two services in Canada, since one of the companies would likely cease to exist.