XM-Sirius hopes rise , watch for SIRI/xm deal to go
By Scott Moritz
How do you combine satellite radio’s Boardwalk and Park Place and not create a monopoly? You write some game rules that let others play along.
That’s what at least one analyst thinks is happening with the proposed merger of the XM (XMSR) and Sirius (SIRI) satellite radio services, which has been dead in the water for months. As the one-year anniversary of when it was first filed with the FCC approaches Saturday, the agency is signaling that it’s about to do something - finally.
The evidence: FCC chief Kevin Martin said on Thursday that his staff is writing proposals for a possible decision on the deal. Though he did not indicate which way the agency was leaning, he suggested that the drafts included conditions upon which the deal would be approved, according to a Reuters report. Stifel Nicolaus analyst and former regulator Blair Levin predicted in a research note Thursday that the FCC might force XM and Sirius to rent access to their broadcast networks to other companies. The two Democrats on the Commission have opposed the idea of handing sole control of the satellite radio waves to one company. But they “could be persuaded to vote for the deal if a leased-access condition were included,” Levin wrote.
Shares of the pay radio duo rose in after-hours trading Thursday (the market is closed for Good Friday). XM shares jumped 6% and Sirius rose nearly 8%.
It has been widely thought that the only way the monopoly-making deal could be approved is if there were several conditions attached to appease critics’ fears that subscription prices would rise and innovation could suffer. Forcing XM and Sirius to share the airwaves with competitors would address the problem, but that approach with the phone monopolies in the late 90s was largely a failure. Antitrust experts say it appears the Justice Department, which must also approve the deal, may be about to sign off too.
If so, it would be a surprising turnaround for XM and Sirius. From the get-go, the deal between the only two satellite radio shops appeared doomed in large part because the terms of their original airwave licenses prohibited the combination. But early on, Sirius CEO Mel Karmazin proposed new pricing plans that would give users a choice of channels from both companies. The move helped ease the FCC’s burden to prove that it wasn’t necessarily a harmful hookup for consumers. And with both companies coming to the end of a rapid subscriber growth streak and still losing money by the millions each quarter, there’s reason to think the regulators want to avoid a bankruptcy scenario.
Stay tuned, as they say.
