XM/Sirius merger

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Main articles: XM Satellite Radio and Sirius Satellite Radio

XM Satellite Radio logo

Sirius Satellite Radio logo

On February 19, 2007, Sirius Satellite Radio and XM Satellite Radio announced a merger that would combine the two radio services and create a single Satellite Radio network in the United States and Canada.^[1] ^[2]

The merger would bring both companies a total of 13.624 million subscribers based on both companies' current subscriber numbers. Reportedly, the merger will bring greater choice to consumers, but no specifics have yet been announced regarding many consumer concerns.

Pending approval of the deal, each share of XM stock will be replaced with 4.6 shares of Sirius. Each company's stockholders will retain approximately 50% of the joined company. Sirius CEO Mel Karmazin will retain his CEO title in the new company, and XM chairman Gary Parsons will retain his. XM CEO Hugh Panero will retain his position until the merger is complete, expected sometime in late 2007. ^[3]

1 Merger Status
2 Benefits
3 Remaining hurdles
4 Canadian Counterparts
5 Technical
- 5.1 Receivers
- 5.2 Satellites
6 Programming
7 Financial
8 Milestones
9 See also
10 Notes
11 External links

[edit] Merger Status

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In depth: XM and Sirius merger

On February 19, 2007 The merger was officially announced to shareholders of the company.^[4] This came after many months of speculation by industry watchers. On February 20, a conference call, open to the public, was organized between executives of both companies. pdf transcript webcast

Currently, the merger is under review by the FCC and a Senate Anti-Trust task force.

[edit] Benefits

Cost: Since both companies will operate as one, this may reduce the cost of licensing the broadcast material. It will also almost certainly reduce the staff required to run the company. Also, programming can be spread out among the companies' combined satellite constellations.

Variety: If all of the non-duplicate channels are kept, this will result in more programming being made available to subscribers of both services.

[edit] Remaining hurdles

The proposed merger faces scrutiny by the FCC, Federal Trade Commission, Securities and Exchange Commission, Department of Justice and possibly other federal organizations. Also, the stockholders of both companies must vote to approve the merger. The FCC also poses a major hurdle: when the satellite radio service was first created by the FCC, one of the licensing conditions was that two companies could never own both satellite radio licenses. In order for the merger to be approved, the FCC would have to waive this regulation. The request for transfer was filed with the FCC on March 20, 2007.

The real question is one of monopoly: will the combined company be a monopoly, or is it part of the larger competitive landscape? XM and Sirius both assert that satellite radio is part of a larger audio entertainment industry, which encompasses traditional terrestrial radio, HD Radio, digital media players such as Apple's iPod, and on-line radio.

However, in a strongly worded press release on February 19, 2007, the National Association of Broadcasters decried the plan, stating that the merger would create a monopoly in the United States satellite radio market.^[5] The NAB continues to be the merger's largest and most outspoken opponent, having taken out full-page ads in Washington DC area newspapers. Proponents of the merger point out that the NAB's strong and outspoken interest in this transaction validates the opinion that Sirius and XM do indeed compete with the NAB's members.

One anti-trust hearing has already taken place but has not come to any clear conclusion on the issue. More hearings are expected, and the question of whether the new company would be a monopoly will have to be resolved before the merger can be approved. ^[6]

[edit] Canadian Counterparts

In Canada the CRTC would have to approve any merger between Sirius Canada and XM Canada. XM Canada and Sirius Canada are partially owned by their American counterparts in joint ventures with Canadian companies. Complicating matters is that Sirius Canada has nearly 80% of the total satellite radio subscribers in that country, and feels they deserve greater than a 50/50 split of the new company. XM Canada feels that their deal with the NHL warrants a significant amount of value in the new company.

[edit] Technical

[edit] Receivers

Currently, XM and Sirius use different compression and conditional access systems, making their receivers incompatible with each other's service. So you cannot buy an XM receiver and listen to Sirius radio. Some of the receivers on the market can cost upwards of $300, and replacing them would be a significant cost burden to subscribers.

Executives from both companies have stated that existing XM and Sirius will continue to operate as separate services. Buying another radio to receive programming from the other service will be optional. ^[7] ^[8] ^[9] However, a unified receiver, which can receive programming from both networks, would allow subscribers to listen to the entire range of channels. Interoperable Technologies, a joint venture of both companies, was formed in 2003 and announced such a receiver in 2006. Mel Karmazin has confirmed the existence and operation of the radio, "We have one. It's in my office."

[edit] Satellites

There are currently 7 satellites in orbit, 4 XM and 3 Sirius satellites. Each company also has a ground spare, of identical construction to its first generation of satellite. Also, Sirius will continue its plans to launch its newest satellite, Radiosat-5.^[10]^[11]

There are no publicly available facts concerning the cross-compatibility of the satellites themselves. If it is possible to use XM satellites to propogate Sirius's signal, this would give Sirius immediate access to a second geostationary satellite, which would improve reception for stationary receivers, such as those at businesses and homes. In the long term, consoldiating transponders on to fewer satellites will reduce infrastructure costs significantly: to build and launch one satellite can cost more than $300 million, ^[12] with a lifetime of approximately 15 years. Once next generation of satellites begins construction, combining satellite networks could result in a savings of $40 million a year.

[edit] Programming

The merger conference call announced that previously exclusive content, including sports and talk, will be folded into one unified service which offers "even more channel capacity" and a la carte ordering of premium services (the ability to order a single channel or small subset of channels).
CEO Karmazin said in an interview that both the XM and Sirius brands will be offered as separate brands/services for the next 15 years.^[13] Any combined or unified services would be in addition to these separate services.

[edit] Financial

Both companies compete primarily with free services. Executives from XM and Sirius both made it clear that they do not want to slow down the adoption of satellite radio, so they hope to not increase the subscriber price, but to gain new revenues from new services: video, navigation, and advertising.(Webcast Q&A)

One concern voiced by some subscribers regards the Sirius lifetime subscription: for a one-time fee, Sirius subscribers were able to obtain a lifetime subscription for a receiver. This subscription is tied to the individual receiver, and there was a concern that the subscription may not transfer to a new universal receiver. However, Sirius' FAQ page regarding the merger states that "Any plan you sign up for now will be honored by the merged company."[1] As they also have guaranteed that no radio will become obsolete, it is likely that this concern will be addressed via some new, merged signal.

While both companies declare the deal to be a "merger of equals", Bloomberg reports that, in truth, Sirius will acquire XM for $4.57 billion in stock. ^[14]

[edit] Milestones

The following milestones have been set for the merger:

Date	Event	Comments
Feb 2007	Execute definitive agreement	Announced Feb 20, 2007
Pending	SIRIUS/XM shareholder votes	4-6 months
Pending	Receive regulatory approvals	Approximately 9 months
Pending	Close transaction	Anticipated end of 2007