Sirius Open to Merger Idea; XM Says “No Way”

Dec 7th, 2006 | By | Category: General

At the UBS and Credit Suisse media meetings in New York this week, with only two players in the fledgling satellite radio market, merger speculation follows rivals XM and Sirius. XM Satellite Radio Chairman Gary Parsons said that he considers the satellite radio market to still be new enough that two major players can coexist and thrive.

“There is an opportunity [for a merger] in the context of a much larger competitive market. But when we’re selling satellite radio with the new General Motors vehicle, for example, Sirius is not in there. So it’s not competitive. We’re competing with commercial radio and the iPod and Wi-Fi,” he said.

[Podcasting News Editor’s note: we have been wondering for months about how satellite radio’s paid subscription model can stay competitive with other new media like podcasts.]

On the other hand, Sirius Chief Financial Officer David Frear was a bit more open to the merger concept, reiterating an opinion the company has voiced in the past.

“When you look at the question, it’s sort of an easy answer — why wouldn’t you put them together and squeeze out the financial possibilities?” he said. “A few analysts on the Street put forth estimates on what they think those synergy values are. I don’t think I can think of any reasons from a shareholder perspective as to why a merger wouldn’t be a good thing to do.”

From a consumer perspective, Sirius’ Mr. Frear could also see the appeal. “There are significant benefits in having a single brand in a coordinated offering out to the marketplace as opposed to overlapping product offerings where we have several of the same rock stations. There’s a far more diverse product offering you could put out there for consumers.”

Sirius has lagged behind XM in the programming battle as of late, with a fraction of its competitor’s major sports contracts and fewer musical offerings. But in signing up automotive partners, both players are neck and neck. General Motors has stepped up its partnership with XM for 2007, while manufacturers such as Audi and Hyundai have expressed goals of installing Sirius in as much as 90% of their new vehicles.

“FM [radio] did not go standard in North American automotive production until 1981,” Mr. Frear told analysts. “We’re companies who are five years in and you’re seeing [such high numbers of participation]. The principal difference is revenue share, which from a retail perspective can be significantly higher.”

via Advertising Age

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