This excerpt taken from the SIRI 8-K filed Mar 21, 2007.
Consolidation of SIRI and XM Announced, UBS NVESTMENT RESEARCH, Feb. 20, 2007, at 2 (noting that savings opportunities could represent approximately $205 million in potential savings); Sirius Satellite Radio, And then there was one, MERRILL LYNCH, Feb. 20, 2007, at 1 (estimating annual cost synergies of ~$400mm in the near-term).
39 Sirius Satellite Radio, And then there was one, MERRILL LYNCH, Feb. 20, 2007, at 3 ([o]ver the next 10 years, we believe MergeCo could have a present value of future cost synergies of $4.3 bb); Consolidation of SIRI and XM Announced, UBS INVESTMENT RESEARCH, Feb. 20, 2007, at 1 (noting that long-term cost synergies could range from $3 to $4.7 billion).
more effectively by adopting the best and most efficient practices of the two companies based on each Applicants core competencies.40
The proposed merger will also preserve and expand an FCC success story. The efficiencies from combining these two companies will produce a stronger, more stable competitor in the audio entertainment market. Satellite radio is a capital-intensive and expensive business given the significant cost of designing, launching, and operating satellites, and the significant investment each Applicant has made to design chipsets and encourage their distribution, to market their brands, and to create compelling programming for subscribers. Sirius and XM each have invested over $1 billion in their initial in-orbit constellations and over $5 billion each in their business overall and continue to report significant operating losses, including reported net losses of $1.1 billion (Sirius) and $719 million (XM) in 2006.41 The vast preponderance of each companys annual expense is associated with the operation, depreciation, and management of its infrastructure and cost of acquiring new subscribers. Both providers must
41 Sirius and XM have generated total cumulative net losses of $3.8 billion and $3.5 billion, respectively, from inception through December 31, 2006. See Sirius Satellite Radio Inc., 2006 Form 10-K Annual Report, at 26 (filed Mar. 1, 2007), at http://www.sec.gov/Archives/edgar/data/908937/000093041307001865/c47044_10k.htm (last visited Mar. 17, 2007); XM Satellite Radio Holdings Inc., 2006 Form 10-K Annual Report, at 32 (filed Mar. 1, 2007), at http://www.sec.gov/Archives/edgar/data/1091530/000119312507044379/d10k.htm (last visited Mar. 17, 2007).
continue to maintain and update this infrastructure and fund replacement spacecraft before the current satellites end of life.42
Such an advanced, next-generation system will be facilitated by the combined entitys increased scale, expertise, and resources. Post merger, the best minds from both companies will be able to cooperate on research and development and technical issues. Moreover, the proposed merger will enable the combined company to achieve efficiencies in the near term through an integrated system sparing plan and in the longer term through the coordination of satellite architecture and procurements. Further, as a more viable competitor in the audio entertainment market, the combined company will have improved access to the capital markets, thereby ensuring that consumers can continue to count on state-of-the-art technology providing even greater choice and flexibility.