Will XM and Sirius Merge?

Decision Day is looming for Sirius (Nasdaq: SIRI  ) and XM (Nasdaq: XMSR  ) .

Regulators have spent the past nine months debating the proposed combination of the country's only two satellite radio operators. A recommendation might be made in the next few days that will either derail the merger or create a premium programming force with more than 16 million subscribers.

Several factors are tugging the Justice Department in different directions. Let's explore them quickly before I hand over the soapbox to you. Yes, you.

Just say no
Critics of the deal argue that the merger would transform a duopoly into a monopoly. Sirius and XM may not be the only satellite radio providers on the planet -- WorldSpace (Nasdaq: WRSP  ) is a fledgling provider outside the U.S. -- but they are the only two with domestic licenses. The original language that awarded the two contracts prohibits a combination.

Consolidation fears come into play, of course. If one company is watching over both brands, consumers may be denied lower prices, enhanced programming, and responsive customer service and other elements that are the logical byproducts of a competitive landscape.

Just say yes
Proponents of the deal argue that a chunk of the billions in realized synergies will be passed on to subscribers. In fact, XM and Sirius have already committed to rolling out low-priced plans and flexible programming packages within a year of the merger's completion.

Fans of the deal also point out that the marketplace has changed. The FCC may have shot down merger plans of DIRECTV (NYSE: DTV  ) and EchoStar (Nasdaq: DISH  ) in satellite television five years ago, but audio content is plentiful in today's world of iPod-enabled cell phones and Internet radio.

Back to you
What do you think? We Fools have added comment boxes to some articles to give you a soapbox to agree or disagree with the articles on the site. This is an incendiary topic, so feel free to chime in.

Why do you think the deal will happen? If it doesn't happen, will it matter to the market? How are you playing this as an investor?

Scroll to the bottom and kick in with your thoughts on this courtship that is barreling quickly to a resolution.

Once you're off the soapbox, check some more articles on the merger:


Read/Post Comments (28) | Recommend This Article (14)

Comments from our Foolish Readers

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  • Report this Comment On November 23, 2007, at 10:15 AM, MeineMike wrote:

    I have followed this proposed merger since it's announcement in February. The tide of opinion certainly has changed in the last nine months. There is absolutely no good reason why this merger shouldn't happen, and happen soon. I'm long on XM and Sirius in stock and options. I have a little insurance XMSR put option just in case politics get in the way and the merger is denied. The FCC and DOJ needs to get moving on this and make a decision within the next 2 weeks. SIRIUS XM=MERGE

  • Report this Comment On November 23, 2007, at 10:53 AM, Siriusbrit wrote:

    Hi,

    after 9 months of deliberation it is obvious that the merger has undergone a lot of scrutiny but has not been shot down!

    I believe that the merger would have been derailed after 6 months at most if there were anti-trust issues. I believe the extended time taken to approve this merger was used to hammer out the final requirements of the DOJ and the FCC.

    The merger will get a green light very soon. And why not! I believe this will greatly improve the service for the consumer and add a little healthy competition for the rest of the Audio market, which would certainly not make this deal a monopoly as many would like to spin this in order to keep their own business space safe. Good products come from healthy competition!

    ALAN

  • Report this Comment On November 23, 2007, at 10:55 AM, dstnewman wrote:

    I have been invested in Sirius since 2003 and XM just since the merger decision. I have been an XM subscriber since 2004, and my parents recently purchased a lifetime subscription from Sirius. I love these two companies, but my investments have not turned out well... YET. In an era when oil and the big AT

  • Report this Comment On November 23, 2007, at 11:16 AM, billblattner wrote:

    It is the right thing to do, it will benefit the consumer.

    People that live outside of the metro areas have a hard time staying tuned to anyone given station.

    I have three SIRI, and two XM radios. This would save me a bunch.

    Bill Blattner

  • Report this Comment On November 23, 2007, at 11:22 AM, YODSTER wrote:

    I think the fact it has taken nine months to make this decision is, in the end positive. I am long on SIRI, Orig. purchased @ 45.00 a share, and continued to purchase as it fell down into the 1.00's. Cost basis is now around 2.67 and I am sitting on pins and needles to see if this happens. With IPOD/MP3, radio, and a unified sat. co consumers will have an abundance of choices avail. to them. I have 5 siri radios and 1 xm and they both havie their positives. I enjoy Howard, but I like the NFL package as well. XM has a lot more music I enjoy as well as Pac10 sports. ~GO MERGER!!

    Jodi

  • Report this Comment On November 23, 2007, at 11:57 AM, PokerRon wrote:

    I originally subscribed to both Sirius and XM, but droped XM because I preferred Sirius's programming. I'm now invested in SIRI.

    If they don't merge, I'm not sure both companies can survive - my bet would be on SIRI.

    A merger would mean a healthier company better able to service its subscribers.

    Ron

  • Report this Comment On November 23, 2007, at 12:57 PM, raitijd wrote:

    I agree with a few commenters I have read that whether or not the merger happens, I believe Sirius stock will rise. With the merger an improved outlook will come cost savings due to administrative reductions given the larger subscriber base. With no merger, XM will fail, I'm betting, and Sirius will prevail and prosper, albeit more slowly than with the case of the approved merger.

  • Report this Comment On November 23, 2007, at 4:20 PM, DelPorto wrote:

    I'm thinking, and actually hoping, that the merger will go through. I subscribe to XM and hold some shares in both companies. Together they migh dominate the satelite radio market, but there is plenty of competition from ITunes, podcasts and other communications systems.

  • Report this Comment On November 24, 2007, at 3:33 AM, edfalc wrote:

    i bought a significant amount of SIRI on 8/6/07 @ 2.95

    for that reason alone , i am hoping this deal goes through

  • Report this Comment On November 24, 2007, at 12:03 PM, GMoney72 wrote:

    I'm trying to figure out how creating a monolpoly is good for the consumer long term.

    I understand that short term, costs (advertising, etc.) can be greatly reduced, but I think the consumer (not shareholder) is asking for trouble in the long run with a merger.

    I notice that most of the "pro" respondents on here are shareholders. I'm not sure the duty of regulators is to protect the corporate owner. This is microeconomics 101.

  • Report this Comment On November 24, 2007, at 3:54 PM, MeineMike wrote:

    That's just the thing GMoney, most of us here DO NOT believe this merger creates a monopoly. The very thought is quite silly. Satellite radio is 4% of the business. If you don't want it, as the consumer, DON'T BUY IT! It's not water for God's sake!

    Yes, many of us responding here are investors and put money into this company because we believe it will turn into a large, innovative, non-monopolisitic power house that will utlitmately benefit everyone, investor and consumer.

    "I'm not sure the duty of regulators is to protect the corporate owner." --I'm not sure how to respond to that one...let me think; for lack of a better adolescent-style response,ummm..."DUH".

    SIRIUS XM=MERGE! That's Common Sense 101

  • Report this Comment On November 25, 2007, at 11:18 AM, wirelessa wrote:

    I think in free enterprise system, any business should be able to merge and consolidate to others, in order to prevent them from losing money and resources, so the consumers and investors can be protected; Sirius and Xm are certainly in that category, and the merger should be approved, if not, they will both raise their prices to stay competitive, and profitable which in that case, the consumer will lose, since they won't have any option to change.

  • Report this Comment On November 25, 2007, at 11:19 AM, GMoney72 wrote:

    The statement "[We] do not believe this merger creates a monopoly" because "satellite radio is 4% of the business" is a decent argument. (Much better than "DUH," anyway...)

    I suppose it depends on how ones defines "the business" -- including terrestrial radio or not.

    Monopoly is defined (by Dictionary.com) as "exclusive control of a commodity or service in a particular market." It doesn't have to be a market for a necessity like water to qualify. Your best argument is to say an XM-Serius merger would not create a monopoly because there are a ton of terrestrial radio stations

  • Report this Comment On November 25, 2007, at 11:20 AM, GMoney72 wrote:

    as competition.

    For the sake of all the shareholders on here, and for the fact I could get Howard Stern on my XM, I actually hope they do merge. Good luck.

  • Report this Comment On November 26, 2007, at 7:14 AM, enginekit wrote:

    I sure hope they merge. I drive an Escalade and subscribe to XM since it comes with the truck and have for 5 years it seems like over several vehicles. Anyway, I would love to get the NFL that is only on Sirius but do not want to double my subscription costs. Looks to me as if a combination will allow me to do that for less than what I pay now.

    Let them merge!

    cliff

  • Report this Comment On November 26, 2007, at 11:50 AM, xGreedx wrote:

    The deal will get approved and I will tell you why.

    If they did not approve the merger (which they will) XM will fold in 2 years because Siri is the stronger company. Both cant survive alone, which means only one will eventually.

    So regardless of all this talk, you have a "monopoly" at some point if that is what they are concerned about the most.

    A approval helps customers not worry about purchases of either Siri or XM. Stock investments would be healthier and less risky and better price options for the consumer.

    So in reality only one will survive anyway, all ta approval is doing is protecting the consumer and the economy. Approval in 2 weeks

  • Report this Comment On November 26, 2007, at 11:58 AM, gower2352 wrote:

    Is it common since to pay a human being 100 million dollars a year to do a radio show?? And 500 Million dollars for 5 years, is that common since.

  • Report this Comment On November 26, 2007, at 12:03 PM, daveed12 wrote:

    the question of how much the two companies compete outside of the satellite market, i believe, has been answered by the amount of time, money, and mental energy invested by terrestrial radio in attempts to convince the government that they only compete with each other.

  • Report this Comment On November 26, 2007, at 4:01 PM, tpgujc1 wrote:

    I believe the mrger will go through. The question as to whether it creates a monopoly can be answered simply by the major opponent of the merger the, terrestial radio. Why would they care if the merger is approved unless they are competition?

  • Report this Comment On November 27, 2007, at 2:52 PM, adpinc wrote:

    This is absurd that the FCC and DOJ are even questioning the merger.

    If the merger caused prices to increase, people would simply cancel their subscriptions and turn to alternative entertainment services. And while under existing contract, the united company couldn't raise fees anyway without triggering a horrible class action. And when the contract expired, current users would be subject to the company's whim as far as future pricing to enter a new contract. The entire "monopoly" discussion is narrowminded and a waste of taxpayer money.

    I think one of the acid tests for the Government, when debating a monopoly, should be whether or not satellite radio would be considered a consumer necessity v. a consumer luxury.

    I think that there is overwhelming evidence that power generation and computer operating systems are representative of a consumer product that has become a necessity over time, whereas satellite radio is hardly a necessity.

    I don't think the government has any business regulating private industry when it is obvious that the consumer's personal freedoms and rights are not at stake. Unless I am crazy, I did not know I had to have satellite radio so my basic needs were being met. Holy cow, does it really take nearly a year to come to the same conclusion??

    To block the merger would defy reasonable logic, and I think the DOJ and FCC should be able to have come to this conclusion a long time ago.

    The NAB, by lobbying against this merger, demonstrates the fact that they see a highly competitive marketspace.

    To quote recent Hyundai advertisements: "Duh."

  • Report this Comment On November 27, 2007, at 3:13 PM, DBLXX wrote:

    2 words = Howard Stern

    Was he worth the 500 million, yep !

    Without him Sirius would still be looming with a subscribership of 600,000. when Stern signed on or announced his arrival Sirius had 600,000 subscribers. 1 year after his arrival they had 5 million. 2 years after his arrival they have 7 million. Is it a coincidence that Sirius BEAT XM in subscribership the past 8 straight quarters in a row and Howard Stern announced he was going to Sirius EXACTLY 8 quarters ago? Let's say he brought 4 million of the 7 over to Sirius...well each of those people pay $120/year for service and another 50-200 for a radio. Stern = PAID, and then some.

    I am absolutely dumping my 100,000 shares 6-10 months before his contract is up. People will cancel in droves (or not renew) when he is gone.

    ALSO...don't forget all the car manufacturers that GIVE A FREE SUBSCRIPTION TO XM with the lease or purchase of a car not to mention all the rental companies that put it in their cars....XM is counting all of those subscriptions. That represents at least 3 million subscribers. Sirius has NONE of that.

    I will say those 2 words again... HOWARD STERN !

  • Report this Comment On November 27, 2007, at 6:25 PM, mbeagle314 wrote:

    Gee, let's see....

    Exxon and Mobil - Yes, you may merge without any danger of monopolization, price fixing (gouging) and I'm sure we will all see lower prices at the pumps from company synergies ......

    Now, Sirius and XM - No, you may not merge. Not only is there no free-to-air radio available, there is no music on cable, nor are there such devices as mp3's to take your place. Plus, Senator Kohl's Milwaukee Bucks radio network may be hurt by the merger....

    Call me foolish, but I'd much rather be paying $1.50 for gas again and risk having to pay $12 a month for satellite radio (if i even wanted it in the first place)....

    This whole fiasco is typical government interference where millions aren't being put into the pockets of party backers. Hey Mel, send a few million shares to some of W's old boy network and see the merger magically approved!!

  • Report this Comment On November 27, 2007, at 9:03 PM, wenderful wrote:

    Just from a novice's point of view, why is government trying to control free enterprise? Where we live, our local phone company, Windstream has the monopoly on a particular segment in our area of the county. I cannot even get ATT service for our phone. BellSouth has the other segment of the area. We would love to change, but it is either Windstream or BellSouth (who happens to be affiliated with ATT). We have to pay their prices for telephone and broadband services, and they are not inexpensive. BellSouth customers pay much less, but we do not have a choice who we can use. To me that is a monopoly. In this day and age, give us our choice, not love it or leave it. Siri and XM are a in a market that would benefit from the merger as far as I am concerned. It's either or, so why not merge to make the market more viable and combine technical and service for less overhead, hopefully passed on to the consumer. I bought in May at probably it's lowest, and have faith that it will be a good stock to invest in, especially in a small way as I do. Again, I am not a business person, and just started investing. I do not know all that goes on technically. Just use my common sense and instinct, and invest in moderation. : )

  • Report this Comment On November 27, 2007, at 9:09 PM, loughd1 wrote:

    I say let the companies merge. More thought is being put into this than us going to war.

  • Report this Comment On November 28, 2007, at 11:57 AM, johnknupp wrote:

    I have been riding SatRad since Sirius was called CDRadio. I have been in and out many,many times and have made mucho bucks but really am going to bite the big one if the merger does not happen. Let's all put our hands together and say a little prayer.

  • Report this Comment On November 28, 2007, at 5:31 PM, judgenjury wrote:

    Well put adpink!!

    The NAB is all wet here. I believe they could have been better served by thier strategic advisors at the outset of this merger announcement by offering thier support for a single satrad operator.

    I don't imagine any of those NAB guys n gals are sitting around thier offices yearning for tightened competition in thier space. Thier argument originated from weakness and remains weak.

    I had been kicking myself for not taking a measured speculative position on SIRI sooner (put on initial today on weakness. :) I think the deal gets done. I think

    I have a profitable position here. I'd trade a small loss on this spec for a chance to get Howard, NFL, NASCAR and MLB all in one at a lower monthly price. Truth is....I think I get both.

  • Report this Comment On November 28, 2007, at 8:45 PM, michiganrick wrote:

    It seems everyone is concerned for the consumer.

    I got rid of my Ford Ranger (with a Sirius satellite radio) and bought a new Honda Hybrid. Honda has a satellite ready radio already in it. It has an XM receiver. I assumed all I would have to do is buy a Sirius receiver and connect.

    WRONG!!!

    Honda is one of the last that a conversion receiver is being developed for. In fact, the few companies with them in development won't release them since Sirius and XM may merge.

    I have owned the car for 7 months and been patiently awaiting the day when I can actually purchase Sirius again and put it into my car.

    For those who suggest just buying a head unit and mounting it on the dash... been there, done that originally in the Ford. Poor reception, wiring mess, theft risk, etc... Will not go that route again! Especially not when I have a perfectly good satellite radio in the car.

    So, my question is how does having two satellite companies arranging exclusive installation deals with the car companies benefit the consumers?

    There are many of us who are not able to make the choice of which satellite provider we want in our cars without additional costs up front or ridiculous adapters. Just google Honda Sirius to understand the frustration.

    I very much support the merger and do firmly believe that they compete against the terrestrial stations.

  • Report this Comment On November 30, 2007, at 6:44 PM, bluebird4 wrote:

    I owned XM first, then bought sirius. Sold the latter when it plummeted but held on to XM. A merger would finally make for a profitable company which neither is or can ever be.

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