The proposed merger of satellite-radio companies Sirius and XM has sparked hopes for greater content for consumers, outrage from broadcasters and skepticism from observers, who say federal officials may never approve the deal.
The two companies agreed to merge Monday in a tax-free, all- stock deal valued at $13 billion, combining a total of 14 million customers and a slew of high- profile radio talent and diverse content.
New York-based Sirius is known for paying $500 million to lure shock-jock Howard Stern from broadcast radio. Washington, D.C.-based XM Satellite Radio Holdings features such star power as Bob Dylan and Oprah Winfrey.
Both companies have exclusive deals to offer various professional sports broadcasts, adding to the anticipation that the merger, if approved, would yield a bonanza of choices for listeners.
“I’m hoping I’m going to get the best of both,” said Eric Schlenz, a software developer in Superior. “I’d be concerned if they made their own decision on which channels to keep or ditch.”
XM and Sirius said the merger would bring better programming, lower equipment costs and operational efficiencies.
But just how XM and Sirius would combine their channels of commercial-free content remains unclear. Customers pay about $12.95 a month for 130 to 170 stations of music, news, weather, comedy and sports.
The satellite systems are popular in automobiles but can be portable or installed in home stereos.
The deal, described as “a merger of equals,” must be approved by shareholders of both companies and is expected to close by the end of the year. It includes $1.6 billion in debt, as both companies have struggled to reach profitability.
Those who install the radio systems in vehicles welcomed the deal, hoping they soon will be selling and installing one satellite-radio product, not two.
“They’re going to have to merge the installation, … considering there are two different antennas,” said Omid Tehrani, a salesman for Sound on Wheels in Denver.
But the merger is expected to face tough regulatory hurdles as it would combine the nation’s only satellite-radio providers. A Federal Communications Commission provision already bars one company from holding two satellite-radio licenses.
The companies will seek a waiver.
“The hurdle here, however, would be high (for such a waiver),” FCC Chairman Kevin Martin said Monday. “The companies would need to demonstrate that consumers would clearly be better off with both more choice and affordable prices.”
The National Association of Broadcasters, which represents 8,300 radio and TV stations, opposes the merger, claiming Sirius and XM are seeking a “government bailout” in the wake of their sagging stock prices.
“Policymakers will have to weigh whether an industry that makes Howard Stern its poster child should be rewarded with a monopoly platform for offensive programming,” executive vice president Dennis Wharton said in a statement.
XM and Sirius said the deal wouldn’t be anti-competitive as consumers have a wide range of choices for music, including FM and AM radio, Internet radio, iPods, and high-definition radio.
“The chances of it getting through are far less than 50 percent,” said Jimmy Schaeffler, senior multichannel TV analyst for the Carmel Group.
But Schaeffler noted that the FCC and U.S. Department of Justice have rejected only one telecommunication merger in recent years – that of Douglas County-based EchoStar Communications and DirecTV in 2002.
EchoStar offers 60 Sirius music channels in several packages. El Segundo, Calif.-based DirecTV offers up to 68 XM channels. Neither would comment on what a merger of the radio companies would mean for their partnerships.
Staff writer Kimberly S. Johnson can be reached at 303-954-1088 or kjohnson@denverpost.com.
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Sirius and XM: diverse offerings
The deal: XM and Sirius would merge as equals; Sirius CEO Mel Karmazin would run the new company, but its headquarters and name are undecided
Combined 2006 revenues: About $1.5 billion
Total subscribers: 14 million
What’s next: Must be approved by the FCC, which currently has a provision barring the companies from merging; Antitrust approval also needed
Comparing the two: Sirius has a celebrity-driven lineup that includes the likes of Howard Stern, as well as National Football League coverage and the upcoming Seriously Sinatra channel.
XM is genre-driven, with a variety of music choices, although the network also has a couple of stars, Bob Dylan and Oprah Winfrey
