Sirius XM Holdings Inc (SIRI)

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Sirius-XM Deal Close To FCC Approval
Lisa LaMotta, 07.18.08, 5:30 PM ET


So far there is still static, but a merger between XM Satellite Radio and Sirius Satellite Radio is getting clearer.

Shares of Sirius ticked up 8.6%, or 18 cents, to close at $2.28, on Friday, while XM shares were up 1.2%, or 10 cents, to $8.54. The stocks were up after the Associated Press reported that John Adelstein, a member of the Federal Communications Commission, could give the broadcasters the final vote they need to push the merger through.

Last month, FCC Chairman Kevin J. Martin recommended approval of the merger of XM Satellite Radio Holdings and Sirius Satellite Radio. Martin endorsed the deal in exchange for concessions including turning 24 channels over to noncommercial and minority programming, a three-year price freeze for customers, packages offering services from both XM and Sirius, and standards designed to encourage competition from the companies that make their radios. (See "XM-Sirius On Collision Course")

According to the Associated Press, Adelstein wants to use his voting sway to take the concessions a few steps further. He called for a six-year price cap and pushed for the companies to make one-quarter of their satellite capacity available for public-interest and minority programming. Adelstein did not return calls from Forbes.com for comment.

So far, two of the five member commission have voted to approve the deal. Adelstein's vote would give the satellite radio companies the majority that they need to become one.

Talk of a merger began as far back as January 2005, when reports emerged that Sirius and XM had been meeting to discuss a possible deal. But even before the companies announced their planned tie-up in February 2007, Martin noted that licenses granted to the satellite radio companies precluded them from being combined.

XM and Sirius, however, contended that high-quality terrestrial broadcasts and competition from the Internet and portable music players has made the market too small to support them both, a situation that was unexpected when they were granted their original licenses. They have been lobbying for the government to overturn the ban on a merger, and in March, the Justice Department agreed to do so, leaving the FCC to convince. (See "Sirius-XM Move Closer To Union")