XM, Sirius Top Execs Stir Up Merger Talk

Long-Speculated Deal Expected Sooner Rather Than Later

By Published on .

NEW YORK (AdAge.com) -- XM and Sirius Satellite Radio could be merging sooner than expected. After months of investor speculation and varying interest from both parties, the power players of satellite radio have been dropping hints like mad that they would like to see it happen. Just this week, at a Citigroup investor conference in Las Vegas, Sirius CEO Mel Karmazin and XM Chairman Gary Parsons both enthused about their mutual interest in combining their assets.
Despite a thaw in XM Chairman Gary Parsons stance on a possible merger between XM and Sirius, a real impediment is the FCC, which blocked a 2002 proposed merger between satellite-TV players.
Despite a thaw in XM Chairman Gary Parsons stance on a possible merger between XM and Sirius, a real impediment is the FCC, which blocked a 2002 proposed merger between satellite-TV players.

Shareholders in mind
Mr. Karmazin, who has been more vocal about the idea than Mr. Parsons, said the best way for him to provide value to shareholders as CEO is through consolidation, particularly in a fragmented industry such as radio. "I think that synergies are to be found and if that's in the shareholder's best interest, those are the kinds of things that a CEO should be looking at."

Mr. Parsons, meanwhile, backed off his long-held anti-merger stance a bit when he told Citigroup analyst Eileen Furukawa: "We are open to assess any action that is positive for shareholders, obviously. Determining what those actions are and how the shareholders gain is the key thing that you really need to understand and make sure you have control of."

Both companies are eager to improve their stock price. Currently XM trades at about $16 and Sirius hovers below $4.

Nearly 14 million subscribers
In addition to a shared stronghold of the automotive market, a merger would bring together Sirius' 6 million subscribers and XM's 7.6 million for a combined 13.6 million subscriber base. A deal could also result in a healthy boost in ad revenue for both companies.

But how close is a deal to actually happening? Representatives for both XM and Sirius had no comment. But a content provider with a long-term contract said Sirius assured them the terms of their deal would not change in the event of an imminent merger. XM Canada, meanwhile, got the rumor mill churning when it was reported to have rallied clients together for a special conference call prior to this week's Detroit Auto Show, where many of the satellite-radio clients were already gathered.

An impediment to a merger is the Federal Communications Commission, which blocked a merger between satellite-TV players EchoStar and DirecTV in 2002. Chairman Kevin Martin indirectly addressed the topic of an XM-Sirius partnership in an interview with Inside Radio earlier this week by saying it "would be what we did on [satellite] television."

Would surpise some
Matthew Warnecke, VP-director of network and local radio for MediaCom, said he would be "extremely surprised" if a deal came down today, given the two companies' close competition.

"The government is invested in these two frequencies to be two suppliers for this space," he said. "There's a whole lot more that needs to happen for the government to say, 'Yeah, we'll let you be the only game in town.'"
In this article:
Most Popular