It was just a matter of time. Let the Anti-trust suit begin....
Satellite radio firms Sirius, XM to merge
GOAL IS TO CUT COSTS; DEAL LIKELY TO RAISE ANTITRUST CONCERNS
By Richard Siklos and Andrew Ross Sorkin
New York Times
The nation's two satellite radio services, Sirius and XM, announced plans Monday to merge, a move that would end their costly competition for radio personalities and subscribers but is also sure to raise antitrust issues.
The two companies, which report close to 14 million subscribers, hoped to revolutionize the radio industry with a bevy of niche channels offering everything from fishing tips to salsa music, and media personalities like Howard Stern and Oprah Winfrey, with few commercials. But neither has yet turned an annual profit and both have had billions in losses.
If approved by federal regulators, the merger would give all satellite subscribers access to Sirius' Stern, pro football games and NASCAR races, as well as XM's Winfrey, Major League Baseball and Bob Dylan.
While there had been speculation of a merger, neither side had engaged in serious negotiations until December, when both companies determined it was in their best interests to complete a deal while the Bush administration was in power, people in the negotiations said.
Eliminating overlap
The companies said Monday that their $13 billion merger agreement would give consumers a broader range of programming, while eliminating overlapping stations that focus on genres of music. At the same time, they said, they could cut duplicated costs in sales and marketing.
A merger would require antitrust approval from the Justice Department and would have to be considered in the public interest by the Federal Communications Commission.
Under their operating licenses, XM and Sirius were prohibited from ever owning each other's license. The commission could waive that rule. But critics pointed to its rejection of the merger of the satellite television broadcasters EchoStar and DirecTV four years ago.
Questioned last month about a possible Sirius-XM merger, FCC Chairman Kevin J. Martin initially appeared to be skeptical but later said that if such a deal were proposed, the agency would consider it.
The proposed merger promises to be a test of whether regulators will see a combination of XM and Sirius as a monopoly of satellite radio communications or whether they will consider other audio entertainment, like iPods, Internet radio and HD radio, to be competitors.
Approval expected
``If the only competition to XM is Sirius, then you don't let the deal through,'' said Blair Levin, managing director of Stifel Nicolaus and a former FCC chief of staff. But Blair said he expected the FCC to approve the merger.
``It's my view that in looking at this picture, the Justice Department is going to conclude that the market is contestable,'' he said, ``that there's various ways these services compete and they'll allow this merger.''
Both Sirius and XM have been rapidly adding customers since they began selling the concept of subscription-based radio available coast to coast about six years ago. XM ended 2006 with nearly 8 million customers, but Sirius increased its subscriber base by 80 percent last year, to about 6 million, after it signed Stern in a $725 million cash and stock deal. For Stern, satellite radio offered a safe haven from the decency guidelines of the FCC.
Still, both companies had expected faster growth, and the real number of subscribers may be less than appears at first glance. Many receive the service free for a trial period when buying a new car or truck.
The two services have paid a high price for their growth. They have some $6 billion in accumulated losses. Both companies' stock prices have slumped recently as investors cooled on the companies' prospects for generating profits, given the heavy costs of acquiring programming talent like Stern and the radio rights to the National Football League and Major League Baseball.
Making them compatible
The companies' services are, for the moment, not compatible. If the merger were approved, officials said Monday, they would provide subscribers with technology that would allow them access to both services.
In the meantime, they said, assuming the deal goes through, the companies would make other arrangements to bring programming that's currently exclusive to one provider to listeners of the other, such as getting Major League Baseball games -- currently only available on XM -- to Sirius listeners.
Each sells subscriptions for $12.95 a month. It's too early to say what the deal might mean for subscription prices. The merger could bring down the cost of providing service, but at the same time give the company more pricing power as the only U.S. satellite radio provider.
A group representing radio companies, the National Association of Broadcasters, put out a statement Monday urging federal regulators to block the satellite radio deal.
The Associated Press contributed to this report.
