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Black Friday for Satellite Radio

The already rocky road that XM Satellite Radio (Nasdaq: XMSR  ) and Sirius Satellite Radio (Nasdaq: SIRI  ) have traveled is forming new potholes.

Let's drive over just a few of the recent developments.

  • XM agreed to dramatically up the interest rate paid on its convertible notes due next year -- from 1.75% to 10% -- to avoid having to redeem the $400 million in notes if its merger with Sirius is successful.
  • A group is asking the FCC to look into the Sirius backseat video product, in which the company earmarks a chunk of its spectrum to deliver three video channels to premium-paying subscribers.
  • Apple's (Nasdaq: AAPL  ) iPhone firmware update on Friday now finds free, ad-supported online radio operator AOL Radio -- the Web-broadcasting joint venture between Time Warner's (NYSE: TWX  ) AOL and CBS (NYSE: CBS  ) -- and music discovery site Pandora among the companies offering iPhone users free Internet radio access, with more native applications likely to follow.
  • FCC head Kevin Martin threw a wrench into the already delayed approval process, suggesting that some of his fellow commissioners have merger concerns and are likely to want additional concessions tied to greenlighting the Sirius-XM deal.

Did I mention that all of these developments happened on Friday?

One can always argue that the developments aren't as troublesome as they may appear. The convertibles move may make life more expensive for Sirius-XM post-merger, but it buys Sirius time to refinance that portion of the debt. The backseat-video press release may have been timed well, but Sirius has been offering the video-streaming service since last year. Apple's 2.0 update for iPhone and iPod touch devices is a threat, but it's actually one less reason for the FCC to consider a Sirius-XM combination a monopoly. As for more FCC uncertainty as the deal barrels toward the 17-month mark, its own hesitation only continues to taint the bipartisan commission.

In short, the flurry of satellite radio news essentially amounts to hollow press releases, refi extensions, and more dirt on the FCC's grave.

So is it a black Friday for Sirius-XM? No. The hue would be most accurate as a shiny gray.

Other items on the Sirius-XM dial:

Apple and Time Warner are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days.   

Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He does not own shares in any company mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Read/Post Comments (3) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 14, 2008, at 2:26 PM, Got1toBurn wrote:

    The FCC needs to get this merger aproved so we can prove that it's not a monopoly. As we all investors know, the FCC is bought by the NAB and they are showing their true colors as the days, excuse me, months go by.

  • Report this Comment On July 15, 2008, at 9:41 AM, TMFHelical wrote:

    And to think, most people would assume that space would be free of turbulence. Apparently not.

    I for one really enjoy Pandora, but haven't bought a box yet to marry it to my Bose radio / CD player. I will. I doubt I would ever pay for radio, so the whole XM / Sirius market always escaped me.

  • Report this Comment On July 16, 2008, at 11:45 AM, wereusurprised wrote:

    I just read that congressman edward markay wants more restrictions put on this deal. One being that new receivers have to have the ability to receive the free hi-def radio signals to insure that free radio will still be a viable option to consumers. Way to look out for us Mr. Markay. But wait, after 2 minutes of looking up Markay's corporate donors who is in the top 5 both in 2006 and 2008? None other than the NAB, national association of broadcasters. So I have to ask, is Mr. Markay really looking out for us consumers or for himself and his top 5 contributor?

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