XM Sat 1Q loss widens despite revenue jump

XM Satellite Radio Holdings Inc. said Monday its first-quarter loss widened by nearly 6 percent even as revenue jumped 17 percent.

XM, which is seeking regulatory approval for an acquisition by rival Sirius, said it lost $129.3 million, or 42 cents per share, compared with $122.4 million, or 40 cents per share, a year ago.

XM reported $3.5 million in merger-related expenses in the quarter, compared with $9.2 million in the year-ago quarter, XM said.

Analysts, who typically exclude one-time expenses such as merger costs, expected the loss to narrow to 39 cents per share, according to Thomson Financial.

Washington-based XM said revenue rose 17 percent to $308 million from $264 million last year, but that fell short of the $313 million expected by Wall Street.

A major factor in the company's increased expenses was the line item that includes royalties paid to artists. That increased 45 percent from a year ago, to $68.8 million, following a December decision by the federal Copyright Royalty Board to increase royalty payments required of satellite radio providers.

The company finished March with 9.33 million subscribers, up from 7.9 million a year earlier. XM added a nearly identical number of subscribers _ about 1.4 million _ in the 12 months from April 2006 to March 2007.

Sirius Satellite Radio Inc. most recently reported a subscriber base of 8.3 million. While smaller, it has been growing at a faster rate than XM. Sirius is expected to release updated numbers later Monday.

XM shares rose 61 cents, or 5.25 percent, to $12.41 in midday trading Monday.

Nearly all of XM's subscriber growth now comes from factory-installed automobile radios, as opposed to radios purchased separately by the consumer.

In the last 12 months, the factory-installed subscriber base increased 36 percent to 3.9 million, while the retail market increased just 1 percent to 4.5 million. The rest of the subscriber base comes from smaller categories such as subscriptions held by rental-car companies.

The company said 53.3 percent of car buyers with factory-installed radios paid for XM service after their free trial expired, compared with 51.5 percent a year ago. The increase in what the company calls its "conversion rate" occurred even as satellite radio expanded from the luxury-car segment into cheaper models sold to consumers with less discretionary income.

In March, the Justice Department approved XM's acquisition by Sirius, but it still needs approval by the Federal Communications Commission. The companies had hoped to have the deal completed by the end of 2007.

XM President and Chief Executive Nate Davis said Monday in a conference call with analysts that "while the (merger) process has clearly been a protracted one, we remain hopeful" it will be completed in the coming months.