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Satellite Radio's Merger Implications

27 марта 2007
Once dust from the initial bomb of Sirius and XM's merger announcement settled, observers, analysts, and consumer groups all took turns interpreting just what a combined satellite radio superpower would mean for the market and country. But as the shockwaves were being felt, executives involved with putting the deal together reached out to their subscribers in an effort to explain just what was going on.

In a letter to Sirius customers, CEO Mel Karmazin described an exciting move that will provide superior programming, improved services like real-time traffic and the expedited development of rear-seat video. The executive said the combination of Sirius and its rival XM would be finalized by the end of the year "after shareholder and regulatory approval."

But the merger is far from a done deal, and one man - namely Federal Communications Commission Chair Kevin Martin - was quick to point out that the companies have a long way to go before the U.S. sees a unified satellite radio provider. Said Martin , "The hurdle here, however, would be high as the commission originally prohibited one company from holding the only two satellite radio licenses."

Echoing Martin's sentiments was Wedbush Morgan's William Kidd who said regulatory approval is the obvious challenge with a likelihood less than 50 percent. The analyst also said even if the deal is allowed, "it could take three to five years for many of the revenue synergies to be realized."

Still, others don't believe regulatory approval will be as difficult as most envision. Oppenheimer's Thomas Eagan said its likely federal regulars will approve the merger because the audio industry - unlike video - has changed so dramatically since the two licenses were granted years ago. The analyst said the introduction and success of MP3 players - especially Apple's iPod - and the coming impact of internet and HD radio have all contributed to a market that would embrace the combined competitive power of a unified satellite radio provider.

Eagan also pointed out that changing the FCC license restriction to enable one company to hold both DARS licenses does not require congressional approval – a restriction that was part of the original license grant.


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