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FCC says approval is unlikely, but the two satellite radio giants have struck an agreement

Today Sirius and XM announced that both companies have entered an agreement in which the two will merge to form the largest satellite radio service provider in the country. Under the terms of the merger, the single entity formed by Sirius and XM would amount to a total organization value of $13 billion USD. XM shareholders will also receive a fixed exchange ratio of 4.6 Sirius shares for each XM share they own. When the merger is complete, Sirius and XM shareholders will each own 50 percent of the combined company.

According to representatives from both companies, the new combined company will have 12 directors including the current CEOs from both Sirius and XM. Both companies will also continue to operate independently until the merger is complete. As of this writing, a name has not been determined for the new company as is where the new headquarters will be.

DailyTech last reported on rumors surrounding the merger of Sirius and XM. The FCC voiced its opinion early on in the talks between Sirius and XM, indicating that it did not approve of the two companies merging because it would create a satellite radio monopoly. FCC chairman Kevin Martin indicated that an approval of the merger would be unlikely. According to both Sirius and XM however:
The combined company will benefit from a highly experienced management team from both companies with extensive industry knowledge in radio, media, consumer electronics, OEM engineering and technology. Further management appointments will be announced prior to closing. The companies will continue to operate independently until the transaction is completed and will work together to determine the combined company's corporate name and headquarters location prior to closing.
Previous reports on both Sirius and XM indicated that both companies were suffering from losses, especially in 2005 going into 2006. Revenues were dropping and subscribers were leaving from both companies. A merger of the two companies would make sense from a corporate stand point but both companies have to pass grueling anti-trust regulations before the two combine.

Gary Parsons, Chairman of XM Satellite Radio and Hugh Panero, does not seem deterred by the FCC's statements.  "We are excited for the many opportunities that an XM and SIRIUS combination will provide consumers. The combined company will be better positioned to compete effectively with the continually expanding array of entertainment alternatives that consumers have embraced since the Federal Communications Commission (FCC) first granted our satellite radio licenses a decade ago."


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RE: Good news...
By Reflex on 2/19/2007 9:20:19 PM , Rating: 2
Except they won't have one. The primary competitor, as pointed out above, is terrestrial radio, not the other money losing sattallite provider.


RE: Good news...
By TomZ on 2/19/2007 10:00:28 PM , Rating: 2
I disagree - terrestrial radio is only semi-competitive with satellite radio. It's like the difference between conventional broadcast TV and satellite TV. Satellite gives you national coverage with a large selection of channels. Local AM and FM just give you a handful of channels with only a small local broadcast range.


RE: Good news...
By Reflex on 2/19/2007 11:12:56 PM , Rating: 2
You can disagree, but clearly that is their prime competition. The sattalite radio industry seems to believe that its like cable vs. terrestrial television, but they are not adding enough value to be worth the proposition at the price they are charging, not when most major markets supply about anything anyone could want for radio.

If they were a serious competitor they would not have a nearly non-existant customer base, and would be able to turn a profit. As it stands now, they and Tivo and a lot of other services companies likely will not exist in a few years if they continue to stick to their current business models.


RE: Good news...
By ultimatebob on 2/20/2007 8:48:25 PM , Rating: 2
Yes, I agree. Comparing satellite radio to terrestrial radio is like comparing terrestrial TV broadcasts to cable and satellite TV. Sure, they have some content overlap, but there is a MUCH wider range of channels and content on the pay services.


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