By Rick Aristotle Munarriz
June 5, 2008
Recommended (13)
The wedding cake is getting stale. The photographer bailed a long time ago. The band is still playing, but no one is dancing.
Has it really been nearly 16 months since XM Satellite Radio (Nasdaq: XMSR) and Sirius Satellite Radio (Nasdaq: SIRI) announced their plans to merge? Are we still waiting on the Federal Communications Commission to approve or dismiss the pairing? Yes, unfortunately.
It's difficult to fathom why the decision has taken this long. Even the FCC would have to agree. Back in January, FCC Chairman Kevin Martin had a few follow-up questions, but was hopeful that the commission would complete a regulatory verdict before the end of March.
Of the two regulatory bodies that must approve the deal, the Justice Department gave its blessing on March 24. FCC, where are you?
Another quarter, another deadline
"The commission could act by the end of the second quarter,'' Martin announced two weeks ago. If at first you don't succeed, try and tease again.
There's little reason to wager perfectly good money on the FCC shaking or nodding its head later this month. I've got to wonder what the FCC's looking for at this point.
It can't be the antitrust concerns; the National Association of Broadcasters is one of the few remaining objectors to the deal. The group spent $2.5 million this past quarter, lobbying government officials for causes including the derailment of the satellite radio hookup.
Why would terrestrial radio squander money blocking a deal that it argues would form a monopoly? The only explanation is that the broadcasters feel XM and Sirius' union will hurt conventional radio stations ... exposing themselves as competitors in the same fight for listeners. If the group felt that XM and Sirius' merger would hurt consumers, wouldn't it lobby in favor of it? If a single satellite radio provider was a bad deal, more premium subscribers would turn to free commercial radio.
This doesn't mean that approval is a clear call. However, these are all questions, concerns, and concessions that could have -- and should have -- been posed last year. Instead, the FCC is dragging its feet while two companies suffocate.
The race to keep satellite radio alive
Clear Channel (NYSE: CCU) didn't hit any regulatory speed bumps in its proposed sale, even though it's a terrestrial radio titan with roughly $23 billion in enterprise value. That's more than twice the proposed value of XM and Sirius.
Instead, Clear Channel has stumbled only in securing financing on behalf of its buyers. That's a hurdle that Sirius and XM will also have to clear, but the only race that matters at this point is the one where the FCC's waving the checkered flag.
Unfortunately, XM and Sirius are running out of gas. Retail growth has reversed. Subscriptions are still inching higher at the automaker level, but that industry's own sluggish growth will limit the number of new car owners snapping up vehicles with factory-installed satellite receivers.
XM and Sirius have chunky debt repayments coming due next year. In a bothersome development, XM began tapping into its credit facility last month to fund a programming escrow requirement, with the intent of leaning on its General Motors (NYSE: GM) credit facility this month.
XM is bleeding. That alone shouldn't be enough to force the FCC into signing off on the deal, but it should hasten the decision -- one way or the other -- before more of XM's red ink bleeds onto the agency's hands.
I once saw the delay as a good thing. Every successive digital audio revolution provided another reason to let XM and Sirius wed. For instance, last month found Research In Motion (Nasdaq: RIMM) announcing iTunes compatibility for its new BlackBerry Bold. There are 14 million BlackBerry subscribers out there, along with tens of millions iTunes-tethered music and podcast buffs with Apple (Nasdaq: AAPL) iPods and iPhones. How many more portable music gadgets need to come out before we can all agree that XM and Sirius aren't alone in battling terrestrial radio for dashboard space?
Unfortunately, time is no longer XM's friend. Losses actually widened at the company this past quarter. The FCC was fashionably late to the wedding, but now it may just be prematurely early to a funeral.
Rather than asking what's taking the FCC so long -- an increasingly rhetorical question -- I want to know when you think the FCC will make a decision. In the comment box at the bottom of this page, post the date and time (for tiebreaking purposes) that you believe the FCC will hand down its decision. While you're there, feel free to share your opinion on whether the FCC will approve the deal, kill it, or demand concessions, and why.
I have no prizes to award, but I will credit the winner when the FCC finally breaks out of its slumber, and I'll revisit this topic with some of your best responses.
The wedding cake is still stale, but it's never too late to hit the dance floor.
More on XM and Sirius' seemingly endless courtship:
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