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XM and Sirius reveal plans for a merger

The satellite radio companies are expected to encounter federal regulatory resistance.

By ASSOCIATED PRESS
Published February 20, 2007


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The nation's two satellite radio services, Sirius and XM, announced plans Monday to merge, a move that would end their costly competition for radio personalities and subscribers but is also sure to raise antitrust issues.

The two companies, which report close to 14-million subscribers, hoped to revolutionize the radio industry with a bevy of niche channels offering everything from fishing tips to salsa music, and media personalities like Howard Stern and Oprah Winfrey, with few commercials. But neither has yet turned an annual profit and both have had billions in losses.

The companies said Monday that their $13-billion merger agreement would give consumers a broader range of programming, while eliminating overlapping music stations. They could cut duplicate costs in sales and marketing.

A merger would require antitrust approval from the Justice Department and would have to be considered in the public interest by the Federal Communications Commission.

Under their operating licenses, XM and Sirius were prohibited from ever owning each other's license. The commission could waive that rule. But critics pointed to its rejection of the merger of the satellite television broadcasters EchoStar and DirecTV four years ago.

FCC chairman Kevin Martin acknowledged Monday that the FCC rule could complicate a merger but said the commission would evaluate the proposal. "The hurdle here, however, would be high," he said.

The proposed merger promises to be a test of whether regulators will see a combination of XM and Sirius as a monopoly of satellite radio communications or whether they will consider other audio entertainment, like iPods, Internet radio and HD radio, to be competitors.

Both Sirius and XM have been rapidly adding customers since they began selling the concept of subscription-based radio about six years ago. XM ended 2006 with nearly 8-million customers, but Sirius increased its subscriber base by 80 percent last year, to about 6-million, after it signed Stern in a $725-million cash and stock deal.

The two services have paid a high price for their growth. They have some $6-billion in accumulated losses. Both companies' share prices have slumped recently as investors cooled on the companies' prospects for generating profits, given the heavy costs of acquiring programming talent and the radio rights for sporting events.

The companies' services are, for the moment, not compatible. If the merger were approved, officials said Monday, they would provide subscribers with technology that would allow them access to both services.

Each sells subscriptions for $12.95 a month. The cost of the combined service is yet to be determined.

[Last modified February 20, 2007, 01:23:29]


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