The longest merger in American corporate history got closer to reality with the last hurdle of the US Federal Communications Commission (FCC) looking to be crossed, as FCC commissioner Jonathan Adelstein said he would approve the Sirius-XM deal, but with stricter conditions, an FCC staff member confirmed.
The conditions would require the merged company to include HD Radio on any satellite radio product it subsidises that also includes an AM-FM tuner. Stipulations would also include a six-year freeze on service fees and that Sirius and XM devote 25 per cent of spectrum to minority and public-interest programming.
A pro-merger vote by either Adelstein or Deborah Taylor Tate, two undecided commissioners of the FCC, would result in merger approval. However, a staff member at Tate's office said, ''She doesn't have a stance right now. She's having the necessary meetings to make the right decision.''
The NASDAQ-listed XM Satellite Radio Holdings and Sirius Satellite Radio are the only two satellite radio (SDARS) services operating in the US and Canada.
A satellite radio or subscription radio (SR) is a digital radio signal that is broadcast by a communications satellite, which covers a much wider geographical range than terrestrial radio signals.
For now, satellite radio offers a meaningful alternative to ground-based radio services in some countries. Mobile services, such as Sirius, XM, and Worldspace, allow listeners to roam across an entire continent, listening to the same audio programming anywhere they go.
Radio services are usually provided by commercial ventures and are subscription-based. The various services are proprietary signals, requiring specialised hardware for decoding and playback. Providers usually carry a variety of news, weather, sports, and music channels, with the music channels generally being commercial-free.
On 19 February 2007, Sirius Satellite Radio and XM Satellite Radio announced a merger that would combine the two radio services and create a single satellite radio network in the US. The merger would bring both companies a total of more than 17.3 million subscribers based on current subscriber numbers as of 2008.
In Canada, Sirius Canada and XM Canada are partially owned by their American counterparts in joint ventures with Canadian companies. The two Canadian ventures have not yet agreed to a merger. Complicating matters is that Sirius Canada has nearly 80-per cent of the total satellite radio subscribers in that country, and feels they deserve greater than a 50:50 split of the new company.
The proposed merger is controversial because in 1997, the FCC only granted two licenses and, in order to ensure a state of competition, stipulated that one of the holders would 'not be permitted to acquire control of the other.'
The question at hand is whether the merger will create a monopoly. XM and Sirius both assert that the company would not be a monopoly, as satellite radio is only part of the larger audio entertainment industry, which encompasses traditional terrestrial radio, HD Radio, digital media players such as Apple's iPod and iPhone, and on-line radio.
Pending approval of the deal, each share of XM stock will be replaced with 4.6 shares of Sirius. Each company's stockholders will retain approximately 50 per cent of the joined company. Sirius CEO Mel Karmazin will retain his title in the new company, and XM chairman Gary Parsons will retain his. XM CEO Hugh Panero stepped down from his company in August 2007.
XM Satellite Radio and Sirius Satellite Radio had 2007 revenues of $1.14 billion and $922 million respectively.