Merger Holds Big Cost Savings, Sirius Says

A merger between the nation's sole satellite radio providers is still awaiting federal approval, but the companies have already begun touting how much money will be saved -- and how much will be made -- once they are combined.

Sirius of New York said yesterday that after its business is merged with XM of the District, the new company will save $400 million in 2009 through lower sales and marketing, and cuts in administrative and other operational costs.

The company will have "positive free cash flow" and bring in about $300 million in profit in 2009, not including the money it will have to pay in interest and on stock compensations, according to Sirius officials.

"The upside potential from this merger is significant," Mel Karmazin, chief executive of Sirius, said in a statement.

The announcement was made despite a lack of final approval by the Federal Communications Commission and a negative analyst report two weeks ago that pushed its stock price sharply lower. Sirius shares are near a 52-week low, closing 9 percent lower yesterday at $1.92. XM shares are also near a one-year low, down 3 percent to $7.84 yesterday.

Sixteen months ago the companies announced that they would combine operations to better compete against a slew of new audio technologies on the Web and over mobile devices. The Justice Department approved the merger in March, saying a monopoly satellite radio provider would not harm consumers because there are other competing alternatives such as MP3 players, terrestrial and Internet radio. But the firms still need regulatory approval by the FCC to proceed with the merger.

Analysts have estimated that the merger would create cost savings of $4 billion to $5 billion through combined research and development, marketing and sales. They also noted that it could take years before those benefits would be realized. Last week, a Goldman Sachs analyst said the merged company's cash flow would suffer, subscriber growth would slow and debt would mount over the longer term.

FCC Chairman Kevin J. Martin said a few weeks ago that he would support the merger after the companies agreed to conditions that would include capping prices for three years and creating more opportunities for minority broadcasters.

The full, five-member commission hasn't voted on whether to approve the merger, while key lawmakers continue to pressure the agency to block the monopoly or push the companies for stronger concessions for consumers.

In a letter sent to Martin last week, Democratic Sens. John F. Kerry (Mass.), Claire McCaskill (Mo.), and Benjamin L. Cardin (Md.) said the firms' consumer-focused promises fell short. They said more radio spectrum should be allotted for minority broadcast providers than the 12 channels pledged by the companies. They said about 50 percent of the firms' radio spectrum should be leased to allow for new entrants into the satellite radio field. They also pushed for the makers of radio receivers to integrate high-definition technology into their devices.