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Satellite Radio Merger Approved

FCC Finally Backs Union of XM, Sirius

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By Kim Hart
Washington Post Staff Writer
Saturday, July 26, 2008; Page A01

The government has approved the long-delayed merger of the nation's only satellite radio companies, combining Sirius and XM into a single entity with 18 million subscribers.

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The decision last night came almost a year and a half after the companies first proposed joining. Based on yesterday's closing share prices, the deal is valued at $3.3 billion, not including debt.

Dozens of lawmakers, consumer groups and broadcasters had long opposed the merger, saying that the union would create a satellite radio monopoly. But three of the five members of the Federal Communications Commission agreed that the marketplace has changed since the two companies formed, with Internet radio, iPods and other technological advances competing for consumers.

The merger passed, but with several conditions.

The companies must cap prices for three years after joining and allow consumers to choose the channels they want and pay less for packages of channels. Radios that allow a la carte channel selections will eventually be available for car dashboards -- the largest area of growth. The companies said they would introduce radios that receive both XM and Sirius channels.

On Thursday, XM, of the District, agreed to pay $17.5 million in fines and Sirius, based in New York, agreed to pay $2.2 million to resolve complaints that some of their radio receivers sold to consumers and signal-boosting radio towers violated FCC technical rules. Both companies said they would bring their equipment into compliance.

The agreement appeared to bring an end to a contentious and drawn-out bid to join the companies. But a last-minute stalemate between two Republican commissioners delayed a final vote.

Commissioner Deborah Taylor Tate withheld her tie-breaking vote to approve the merger until FCC Chairman Kevin J. Martin cast his deciding vote to penalize the companies for violating rules, according to sources familiar with the negotiations who spoke on condition of anonymity. The hold-up was resolved when Tate formally voted in favor of the deal.

Democratic commissioners Michael J. Copps and Jonathan S. Adelstein voted against the merger. Robert M. McDowell, a Republican, voted in favor of it.

"Consumers will get to enjoy the best of the programming on both services," Martin said in an interview. "They'll also be able to pick and choose channels at a lower price."

The FCC's approval means that XM and Sirius have passed the final regulatory hurdle associated with the merger. The deal passed antitrust scrutiny by the Justice Department in March.

Not everyone was pleased with the decision. Critics have argued that the FCC's approval would be a dramatic reversal of rules set in 1997, when the companies were given satellite radio licenses with the condition that they never merge.

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