More on the FCC comment reversal on sat radio merger...
PDATE 1-FCC: rule barring sat radio merger can be changed
4:27 p.m. 01/18/2007 Provided by
(Adds comments from FCC officials and analyst, background)
By Franklin Paul
NEW YORK, Jan 18 (Reuters) - U.S. Federal Communications Commission Chairman Kevin Martin said on Thursday a rule that bars XM Satellite Radio Holdings Inc. (XMSR) and Sirius Satellite Radio Inc. (SIRI) from merging could be altered, if requested.
Martin, speaking to Reuters on the sidelines of a conference in New York, said he was not aware of any request to change the rule on satellite radio licensing ownership, which currently prohibits one entity from owning both licenses.
"The commission looks at anything that is presented to it (and) all of the commission's rules are open to be changed," Martin said.
He declined to comment on the specifics of any potential satellite radio merger.
Wall Street analysts and investors have speculated about a possible combination of XM and Sirius and their shares have risen sharply in recent weeks.
Both stocks fell on Wednesday, when Martin responded positively to a reporter's question on whether a rule existed that might prohibit a potential deal.
The shares jumped on Martin's comments on Thursday. XM shares, which fell 10 percent on Wednesday, rose 6.5 percent to close at $16.45 on Thursday. Sirius, which fell 7 percent yesterday, rose 4.9 percent to close at $4.05.
XM, bolstered by channels featuring Oprah Winfrey and Major League Baseball, leads the nascent pay-radio market, ahead of Sirius, which boasts shock jock Howard Stern and professional football.
Martin said on Thursday that no rule is set in stone, but first there has to be a reason to revisit a policy.
"We have rules that Congress requires us periodically to review," he said. "This particular rule, we are under no obligation to review at this particular time. Someone would have to say (to the FCC) 'look at this rule.'"
Fellow Republican FCC Commissioner Robert McDowell said he and his aides were looking into any precedents for changing the agency's rules.
"It's intriguing," he told reporters after a Federal Communications Bar Association luncheon in Washington. "We're looking at that right now."
Speculation over a deal has rippled through the market for months. Neither XM nor Sirius have said they are pursuing a deal, but neither has ruled it out.
Analysts opinion also vary, with some saying slowing satellite radio growth is an incentive for a larger, more cost efficient provider that can compete with other entertainment options, like iPods and video games.
Others suggest that competition, not combination, is the best way to spur growth.
"We would view a merger as a material risk to their business models," said Janco Partners analyst April Horace. "We also think consumers could put off making a decision about satellite radio due to the potential merger." (Additional reporting by Jeremy Pelofsky and Karey Wutkowski in Washington)
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