Sirius and XM Delay Meetings To Wait for Merger Ruling
Wednesday, April 30, 2008
The nation's two satellite radio operators said yesterday that they would delay their shareholder meetings as they await a prolonged regulatory review of their merger plan, which has drawn new criticism from lawmakers and several states.
District-based XM Satellite Radio Holdings said it would postpone its annual meeting scheduled for May 23 until its purchase by Sirius Satellite Radio of New York is approved by the Federal Communications Commission, the last regulatory hurdle. Sirius said it would postpone its May 20 shareholder meeting. The FCC is reviewing whether the transfer of satellite radio licenses is in the "public interest," which analysts said includes issues such as pricing for subscribers.
Last month, the Justice Department's antitrust division approved the deal after a drawn-out investigation concluded that the merger of the only satellite radio companies in the business would not result in an unfair competitive advantage. The Justice Department said that satellite radio competed with a larger entertainment market that includes digital music players, traditional radio and Internet radio.
The companies made the same argument, saying that customers of their subscription-based services, which carry expensive programs by Howard Stern and Oprah Winfrey, are offered an increasingly broader range of audio entertainment choices.
Since Justice's approval, however, lawmakers and several state attorneys general have written to FCC Chairman Kevin J. Martin calling on the agency to block the merger or approve it with conditions that would protect customers.
State attorneys general from Connecticut, Maryland, Ohio and Washington said in a letter to the FCC that if the merger is approved, the FCC should require the merged company to lease spectrum to allow a competing satellite company to be formed.
Combined, the companies would have 17 million subscribers and would save as much as $4.1 billion in costs over six years, according to analyst April Horace of Janco Partners.
The FCC hasn't said when it will make its decision. At a news conference last week, Martin said he didn't have an update on the review. The agency has the task of reviewing a merger that it said couldn't occur when it gave licenses to the two companies in 1997.
Analysts said the merger is likely to be approved, with the FCC rarely going against a Justice Department decision. The agency, however, may impose certain conditions on the merger to ensure competition among equipment manufacturers of the satellite radio devices and other technologies.
Fred Moran, an analyst for Stanford Group, said in a research note last week that the FCC was unlikely to approve the merger before its May 14 open meeting because Martin had not put it on the agenda.
He said the agency would likely approve the merger in late May or early June, with some conditions attached.