Sirius/XM Merger Update

It has been while since we’ve discussed the XM-Sirius merger announced in February. For two companies that had combined losses nearing two billion last year, they are understandably anxious for action.

Whether you favor the merger or not, there has been progress. On the most recent XM earnings call, it was noted that four out of every five comments filed with the Federal Communications Commission (FCC) were in favor of the merger. Twice elaborates:

XM chairman Gary Parsons said that overall the company “feels pretty good” that the merger will pass regulatory hurdles. “We didn’t go to great lengths to generate [public comments to the FCC] and it was 4 to 1 for the merger. And a strong constituency of groups who felt underserved by radio came out positively for this and that’s pretty impactful. And the announcement of the various pricing plans is by any measure a bold and pioneering move” that will add support for the merger, he added.

Sirius adds their take in today’s second-quarter report (link):

"Momentum for the pending merger with XM continues to build," said CEO Mel Karmazin. "Support from our customers, suppliers and other groups representing a diverse cross-section of Americans clearly demonstrates the public interest benefits and enhanced competition that will come from the merger. We continue to work with the [Federal Communications Commission] and the [Department of Justice] to make the case that the merger offers more choices, including a la carte offerings, and lower prices for subscribers, and we continue to expect that the merger will be completed by year-end."

Recognizing this momentum, XM’s CEO, Hugh Panero, has announced he will leave XM, apparently to make room for the merged company:

Noting that Sirius CEO Mel Karmazin would lead the proposed merged Sirius/XM, and that Nate Davis, XM, president and COO had taken over much of the day-to-day operations at XM, he added, “My role was to do strategy and work with bigger partners and I’ve helped with the merger. I felt the merger had progressed and was hitting a number of milestones … And understanding there would be one CEO at the end of it, I felt it was time to move on.”

The 10-year XM veteran told analysts, “When I first came to XM it was merely a PowerPoint presentation and many were skeptical that anyone would pay for radio,” Panero said, noting that now satellite radio has 14 million subscribers.

The companies also laid out their plans for future subscription plans, mimicking content tiers offered by cable and satellite television providers:

Satellite radio providers Sirius and XM said Monday they could offer a variety of subscription packages that cost as much as 46% less than current plans if their merger is approved.

In a bid to allay concerns among lawmakers that their merger would raise prices and limit programming choices, the companies announced several new packages that they say offer subscribers more choice than they can individually.

Under one package, customers could pick 50 channels on either Washington-based XM Satellite Radio Holdings Inc.’s or New York-based Sirius Satellite Radio Inc.’s systems for $6.99 a month. Additional channels could be added for 25 cents apiece. Currently, subscribers of either system pay about $13 a month for more than 100 stations.

"We need to build the subscription business base of satellite radio to strengthen our business and better leverage our high fixed costs," Sirius Chief Executive Mel Karmazin said in Washington. "We are confident that a lower price point [and] more programming choices will help us do just that."

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