By Scott Moritz
Don’t hold your breath, but a federal regulator says a final decision may be reached June 30 at the latest on the merger of XM (XMSR) and Sirius (SIRI). While most analysts expect the Federal Communications Commission to sign off on the deal, the question now is what conditions the agency will impose.
“The commission could act by the end of the second quarter.” Said Federal Communications Commission chairman Kevin Martin, speaking to reporters at a conference Friday, according to Bloomberg.
The tie-up between the only two satellite radio shops, announced in early 2007, passed an antitrust review by the Justice Department in March and analysts say its only a matter of time before the FCC has agreed on what concessions will be required to approve the deal. The FCC is trying assuage critics who say the satellite radio monopoly squanders the competitive opportunities that were established by having two companies hold dual licenses for radio waves.
Analysts say forcing XM and Sirius to share the airwaves with competitors or outside programmers would address the problem, but it isn’t clear what form that approach would take. In March, Martin said his staff was drafting different proposals, presumably in an attempt to find a compromise that can pass muster with the commission, which is made up of two Democrats and three Republicans.
In recent weeks, lobby groups and lawmakers have urged the FCC to force the combined company to, among other things, return or lease access to some of its radio spectrum and allow satellite radio makers to add features, which could include video and MP3 compatability, into new devices. These moves are intended to stimulate competing services from other broadcasters and new choices for consumers. Another possibility: Reserving channels for public or independent programmers.
Meanwhile, satellite radio subscriber growth has slowed dramatically with the cooling economy and sluggish car sales. The delayed merger decision has started to draw attention to the heavy costs and steep losses that continue to accumulate at both companies. XM is getting static for its first-quarter adjusted net loss of $30.7 million, up from a loss of $27 million in the year-ago period. The company also faces a $400 million loan payment due next year.
And on Wednesday, XM said it tapped $62.5 million of a $250 million credit facility to help fund an escrow commitment with Major League Baseball. In the wake of the move, the company said in a filing that it has asked its creditors to lower the amount of cash required to avoid a default, from $75 million to $50 million, for the next 90 days.
A delayed merger approval with onerous conditions might not have been the big payoff the companies were expecting when they proposed the deal a year-and-a-half ago.