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Sirius-XM merger still faces hurdles

June 17, 2008|Jim Puzzanghera | Times Staff Writer

WASHINGTON — The static may be lifting on the long-pending merger between the nation's only two satellite radio operators after a key regulator backed its approval Monday.

The conditions requested by Kevin J. Martin, chairman of the Federal Communications Commission, could lead to lower prices for the next three years for subscribers of Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. Martin said the companies agreed to the conditions, which mirror those requested by some influential lawmakers and public interest groups.

"I am recommending that with the voluntary commitments they've offered, on balance, this transaction would be in the public interest," Martin said in a written statement.

But the signals aren't all clear yet. Two leading consumer advocates blasted the proposed conditions as failing to ensure that satellite radio prices won't eventually rise. And Martin, a Republican, may have trouble pushing his proposal through the FCC.

"As I've said from the beginning, this merger is a steep climb for me. That hasn't changed," said Commissioner Michael J. Copps, a Democrat. He said he would review the plan by Martin with an open mind. The four other commissioners declined to comment, as did Sirius and XM.

The companies announced their merger, now valued at about $3.85 billion, in February 2007. They are desperate for cost savings to offset expensive programming, such as shows featuring the likes of Howard Stern and Oprah Winfrey, as well as pro sports broadcasts.

Despite intense opposition from the National Assn. of Broadcasters, which represents traditional radio stations, the Justice Department approved the merger in March. Antitrust regulators agreed with Sirius and XM executives that their combination would not create a monopoly because iPods and other devices give people growing options for listening to music in their cars and elsewhere.

But Martin had said the merger faced a high hurdle at the FCC, which, to ensure competition, barred any future merger when creating satellite radio in 1997. Martin has pushed Sirius and XM to formalize some pricing promises made to lawmakers and agree to other conditions.

Martin's plan includes commitments by Sirius and XM to: freeze subscription rates for three years; offer smaller, cheaper packages of stations that also allow listeners to pick only the stations they want; within a year of merger approval, sell radios that can receive both services; open their technological standards so anyone can make satellite radios; and set aside 24 channels -- 8% of the total -- for noncommercial and minority programming.

Sirius shares were up 3.2% to $2.62 on the news. XM shares rose 3.7% to $11.27.

Consumers Union and the Consumer Federation of America said the conditions didn't justify creating a monopoly in satellite radio.

"This is a raw deal for consumers," said Chris Murray, legislative counsel for Consumers Union.

Blair Levin, an analyst with brokerage Stifel, Nicolaus & Co., predicted that the FCC ultimately would approve the merger. But noting how long the deal has been pending, he said, "This is one where Yogi Berra's admonition that, 'It ain't over till it's over,' constitutes wisdom."


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