Asked what would be the reason to not merge with rival XM Satellite Radio, Sirius EVP/CFO David Frear said, "It comes down to what shareholders would want and what regulators would want."
Frear made the comments earlier today at the Bernstein Strategic Decisions conference in New York. He acknowledged the many economic benefits to having only one staff, but Frear pointed out that each subscription radio provider has far different constellation systems. Then, he asked again, "What will the government allow?"
That's a lingering question that could be the biggest stumbling block in a much-discussed and often-rumored merger possibility. R&R last week posed that question to the FCC, which declined to discuss a hypothetical case involving a combined XM and Sirius. One FCC insider said insight into the FCC's thinking on satellite mergers might be gained from looking at satellite TV company EchoStar's proposal to acquire direct competitor DirecTV. The FCC shot down that proposal within 60 days of its inception.
Veteran communications lawyer Peter Tannenwald, of Washington, DC law firm Irwin Campbell & Tannenwald, acknowledged that such a merger "Is not a slam dunk but it is not out of the question. It is not impossible." Tannenwald also pointed out that "both companies are losing a lot of money, so there is natural pressure to merge." But more important to regulators, he said, is that competitive services with satellite radio may be perceived as far more extensive than with video.
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