Sirius Says It Could Do Without XM

By Cecilia Kang
Washington Post Staff Writer
Wednesday, February 27, 2008

Sirius Satellite Radio said yesterday that it gained subscribers in the fourth quarter and lost less money, signs that its business is improving even as the company's merger with XM Satellite Radio Holdings remains stuck in a regulatory limbo more than a year after it was proposed.

Though Sirius remains hopeful that the merger will be approved by the Justice Department and the Federal Communications Commission, chief executive Mel Karmazin said yesterday that the company could survive without it.

"In the unlikely scenario of a merger not being approved, we believe we are fully funded. We believe we are going to become a profitable company on a stand-alone basis," Karmazin said during a conference call with analysts.

New York-based Sirius reported a loss of $166.2 million (11 cents per share) in the fourth quarter, compared with a loss of $245.6 million (17 cents) in the fourth quarter of 2006. Revenue rose 29 percent, to $249.8 million. Subscriptions rose to 8.3 million, up from 6 million a year earlier.

For all of 2007, Sirius lost $565.3 million (39 cents) compared to a loss of $1.1 billion (79 cents) in 2006. Revenue rose 45 percent, to $922.1 million.

XM, which is based in the District, is scheduled to report fourth-quarter results tomorrow.

Despite the improvement in Sirius's financial performance in the quarter, Karmazin said the prolonged review of the proposed merger is hurting it.

Shareholders of both companies voted in favor of the merger in November, and government action had been predicted by the end of last year. But the protracted review, which is closed to the public, has prompted speculation that the agencies are concerned about creating a monopoly.

Sirius and XM, the only two satellite radio companies, have argued that they compete with many entertainment sources, including iPods and terrestrial radio.

FCC Chairman Kevin J. Martin has said he expects the agency to decide on the merger by the end of the first quarter.

As the companies await word, customers may be lost in the process, Karmazin said.

"The merger is creating a lot of confusion," he said. "Our own secret shoppers have gone in and have gotten misinformation from salespeople at retail. It's not malicious, but they are not exactly aware of what is going on," he said.

Sirius shares rose 1 cent yesterday, to $3.05.

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