XM Satellite Radio Holdings (XMSR)

Having received DOJ approval for pending XMSR merger on March 24th, SIRI is now awaiting approval from FCC. Despite mobilization of multiple special interest groups to lobby FCC against approval, we believe the FCC will ultimately grant approval. However, “conditionality” could be onerous., i.e., FCC may force XM (XMSR)/SIRI to offer some spectrum to a 3rd party (and thus a competitor) or it may mandate installation of HD Radio chips in satellite receivers, etc. This could ultimately augur additional competitive forces counteracting merger synergy benefits. It’s unclear when FCC will rule and what pound of flesh it will extract.

Moreover, while the premium content of each satellite radio provider is worth its suggested new price, a merger would combine the debts each station paid to have the likes of Howard and Oprah.

Both companies overspent to acquire content in a bid to expand subscriber as fast as possible - a fatal mistake that will make sustained profitability (as independent or combined companies) impossible for years to come, said an analyst.^[1]

XM Satellite Radio traded for quite some time on the potential that satellite radio would be a success. Investors were more apt to accept high costs of establishing the business in hopes for a future reward. XM is now transitioning into an equity that investors want to see the results from. This shift in investor perception is a difficult time in any company. not yet profitable, and with the hype dissipated, investors will treat the equity in a more conservative fashion, and demand tangible results to see XM as a "value" investment. During this phase in the company, it is not surprising that money waits on the sidelines.

Analysts claim that neither of the stocks between Sirius Satellite Radio (SIRI) and XM are any good,even if they finally get FCC clearance. Ultimately, share prices follow earnings. And neither of these companies have any. Combining won’t change that fact.^[1]

Moreover, while the premium content of each satellite radio provider is worth its suggested new price, a merger would combine the debts each station paid to have the likes of Howard and Oprah.

Both companies overspent to acquire content in a bid to expand subscriber as fast as possible - a fatal mistake that will make sustained profitability (as independent or combined companies) impossible for years to come, said an analyst.^[1]