The merger allows the possibility for the combined company to offer a-la-carte programming. Such a plan potentially can reduce the monthly cost of a subscription to a point where more consumers are willing to participate. If the volume of additional consumers is substantial enough, it could offset the lower revenue that the company receives for an average subscriber.

Synergies in this deal are both short and long term. Over time, it is anticipated that the companies can combine their spectrum, and streamline programming to avoid duplicity.

The merger gives the potential for satellite radio as a medium to become financially viable in a shorter timeframe.

Sirius has proposed the following pricing tiers:

Sirius Everything - $12.95 per month - Approx 130 channels

A-La-Carte 1 - $6.99 - Pick Your Own 50 channels (add additional content on a per channel basis)

A-La-Carte 2 - $14.99 - Pick You Own 100 (includes some XM channels)

Sirius Everything and Select XM - $16.99 (approx. 140 channels)

Family Friendly and Select XM - $14.99 (approx. 130 channels)

Family Friendly - $11.95 (approx 120 channels)

Mostly Music - $9.99 (approx. 65 channels)

News Sports And Talk - $9.99 (approx 50 channels)

XM has proposed the following tiers:

XM Everything - $12.95 per month - Approx 170 channels

A-La-Carte 1 - $6.99 - Pick Your Own 50 channels (add additional content on a per channel basis)

A-La-Carte 2 - $14.99 - Pick You Own 100 (includes some XM channels)

XM Everything and Select Sirius - $16.99 (approx. 140 channels)

Family Friendly and Select Sirius - $14.99 (approx. 130 channels)

Family Friendly - $11.95 (approx 120 channels)

Mostly Music - $9.99 (approx. 65 channels)

News Sports And Talk - $9.99 (approx 50 channels)

Sirius has 8.3 million subscribers who have access to premium content that includes talent such as Howard Stern and NASCAR broadcasts. While XM’s 9 million listeners pay a premium for content from Oprah Winfrey, Major League Baseball and in-studio artist performances.

To fund such content and compete with each other, both Sirius and XM spend [and lose] hundreds of millions of dollars a year.

Together, they can combine their best programming and management and form a music and news medium better equipped to fight against billion-dollar competitors such as Clear Channel Communications (CCU) and Apple (AAPL).

The proposed merger of Sirius and XM would unite the two satellite radio firms under one umbrella. It is anticipated that the merger will produce synergies that analysts estimate will be between $2 Billion and $9 Billion dollars.

Satellite Radio currently makes up about 5% of the radio listening market. By combining operations, satellite radio may be able to become a more viable competitor.

Long term upside for these equities will rely on the companies proving that a merger will deliver synergies and profits. While a merger announcement will bring a pop in stock price, the main consideration is where things will settle down. For longer term investors, the question seems to be whether you are willing to wait and see if all of this comes to fruition. The merger process seems to have taken a toll on the stocks, and tested the patience of the street. Like it or not, there will be sellers on the merger news, and this could temper the rise in stock price.

Perhaps the best way to look at this situation is to see what expectations are, and whether or not you feel that the merged company can meet or beat them. At this point the companies are not firing on all cylinders. part of it is the wait on the merger, part of it is the current economy, and part of it is high costs.

The synergies are not all instantaneous, but some metrics could scale pretty quickly. A lot depends on how the merged company brands and markets itself (As Sirius, XM, Sirius/XM, or XM/Sirius). I feel it is important that they end consumer confusion and set on a path that markets whatever brand they intend to use. Once complete, this needs to seem like one company to the consumer.