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At Last, Two Subscription Radio Titans Find the Finish Line
FCC approval allows for merger of XM, Sirius subscription satellite radio services—with stipulations.
July 28, 2008
The Federal Communications Commission will approve the merger of XM Satellite Radio Holdings and Sirius Satellite Radio Inc., bringing an end to a lengthy and, at times, contentious battle to merge the two titans of subscription radio, creating what some have called an unfair monopoly. The new company will be called Sirius XM Radio.
The merged unit will have to make multiple concessions in order to get the government’s blessing, however. The companies will have to spend almost $20 million in fines involving their signal receivers’ noncompliance with FCC regulations and address issues surrounding these receivers. The deal reportedly also includes a 36-month waiting period before prices can be increased and about 25 channels dedicated to non-commercial programming.
“I am delighted to announce the completion of this exciting merger between SIRIUS and XM,” said Mel Karmazin, chief executive of SIRIUS XM Radio. “We have worked diligently to close this transaction and we look forward to integrating our best-in-class management teams and operations so we can begin delivering on our promise of more choices and lower prices for subscribers.”
The deal also creates synergies some consumers will appreciate. The deal allows for synergies of both talk and sports radio packages that were accessible only to consumers willing to pay for both packages. For example, XM has the rights to Major League Baseball games but Sirius controls National Football League satellite broadcasts. Meanwhile, radio personalities such as Howard Stern and Martha Stewart will now be available alongside XM broadcasters such as Opie and Anthony and Oprah Winfrey.
Thursday, the shares of both XM and Sirius spiked on the reports that their deal would be given final acceptance, but by Friday, each had returned to the respective range at which they had traded earlier in the week.
In anticipation of federal approval, XM offered $778.8 million in senior notes last week, it announced. The notes bear interest at 13%, the statement said, and the company will see a little more than $700 million after expenses and commissions.
The National Association of Broadcasters, which has mounted a vehement opposition to the deal issued a press release last week in anticipation of the favoring ruling for the merger. Its chairman called the deal “irrational” and a “monopoly” and pledged to continue mounting a legal opposition against it.
Four months ago, the US Department of Justice signed off on the deal; at that point a Stifel Nicolas & Co. report predicted the union would be green-lighted by the FCC within weeks, and noted the agency had never gone against the DOJ. Last week, in a new report, perhaps aptly, if not sarcastically, titled “Oh, Mama, Can This Really Be the End?,” the analysts said it is unlikely the deal will now be unwound.
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