XM's 1Q Loss Narrows

The Associated Press
Thursday, April 26, 2007; 5:02 PM

WASHINGTON -- XM Satellite Radio Holdings Inc., which is in the midst of a proposed acquisition by its biggest rival, said Thursday that its first-quarter loss narrowed as subscription revenue rose sharply.

XM, which in February agreed to a buyout offer from Sirius Satellite Radio Inc., reported a loss of $122.4 million, or 40 cents per share, versus a loss of $151.4 million, or 60 cents per share, in the year-ago period.

The loss was a penny a share larger than Wall Street expected, according to Thomson Financial.

Revenue rose 27 percent to $264.1 million from $208 million last year.

The company ended the quarter with 7.9 million subscribers, up from 6.5 million a year ago. In a news release Thursday, XM said it has since topped the 8 million mark. Last year, XM predicted its subscriber base would exceed 9 million by the end of 2006, but it twice scaled back that prediction as retail sales of its radios waned.

XM now gets the majority of its subscribers from partnerships with carmakers, including the two largest, Toyota Motor Corp. and General Motors Corp.

The company said it expects to have between 9 million and 9.2 million subscribers by the end of 2007, with subscription revenue for the year around $1 billion.

In the first quarter, net subscriber additions, which subtract cancellations from new customer additions, slowed to 285,000 from 569,000 a year ago. Specifically, the company gained 868,000 paying subscribers while losing 583,000. The rate of customer defection, or churn, increased slightly from 1.64 percent in the year-ago quarter to 1.78 percent. The cost to add a new customer increased to $65 from $59.

XM said it anticipates reporting an adjusted operating loss of $170 million to $180 million in 2007.

XM shares rose 77 cents, or 7 percent, to close Thursday at $11.78 on the Nasdaq Stock Market.

Sirius, which most recently reported a subscriber base of just over 6 million, announces its earnings May 1.

The two companies provide a mix of news, sports, talk and commercial-free radio for a monthly subscription fee of about $13. Sirius Chief Executive Mel Karmazin has said that after the deal, subscribers would be offered a more limited amount of programing for a lower monthly fee. At the same time, subscribers who want all the programming currently offered by the two companies _ for instance, access to both Major League Baseball offered on XM and the NFL programming offered on Sirius _ would have to pay more than $13 a month.

The deal has faced significant regulatory scrutiny, in part because the licenses given by the Federal Communications Commission specifically forbid a merger. The companies argue that bar should be lifted because a merger would benefit consumers and satellite radio would still face significant competition from traditional radio and other forms of audio entertainment.

In a conference call with analysts, XM Chief Executive Hugh Panero said he believes that the deal will be approved, but he said XM is well positioned to survive if it is rejected.


On the Net:

XM: http://www.xmradio.com

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