Sirius XM Radio (SIRI)

more effectively by adopting the best and most efficient practices of the two companies based on each Applicant’s 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 company’s annual expense is associated with the operation, depreciation, and management of its infrastructure and cost of acquiring new subscribers. Both providers must

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40}           These operational efficiencies clearly benefit the public interest in that they will allow the combined entity to provide consumers with greater choice at lower prices and innovative products and services as detailed above. See, e.g., Applications of Nextel Commc’ns, Inc. and Sprint Corp. For Consent to Transfer Control of Licenses and Authorizations, Memorandum Opinion and Order, 20 FCC Rcd 13,967, 14,016 (¶ 137) (2005) (“Sprint Nextel will achieve merger specific efficiencies in information technology, billing, customer care, sales and marketing systems”); Bell Atlantic-NYNEX Order, 12 FCC Rcd at 20,063 (¶ 158); AT&T-Comcast Order, 17 FCC Rcd at 23,317 (¶ 184) (noting that the “greater scale and scope of [a] merged entity is likely to spur new investment” including by allowing “significant up-front . . . investment costs” to be “spread . . . across a larger customer base” and enabling the sharing of “expertise” that “should contribute positively to consumer experience”).

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).

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