The future isn't such a scary place for Sirius XM Radio (Nasdaq: SIRI).

Speaking at the UBS Global Media and Communications Conference yesterday, CFO David Frear began by tackling the options that cynics feel will spell the end of satellite radio. The first data slide in his presentation offered the timeline of these evolutions:

  • Internet radio was introduced in 1994.
  • Apple (Nasdaq: AAPL) debuted the iPod in 2001.
  • Terrestrial radio broadened its programming options within a single frequency when HD Radio launched in 2003.
  • Car manufacturers began offering input jacks for MP3 players in 2005.

Frear's point? Basically, Sirius XM has been able to grow -- topping a record 20 million subscribers earlier this month -- despite all of these innovations. Smartphones may be the bigger threats today, especially since they make Internet radio and music-discovery sites portable, but Frear points out that there are now 30 million smartphones out there.

Frear sees opportunity in the streaming apps that Sirius XM has launched for Apple, Research In Motion (Nasdaq: RIMM), and Google (Nasdaq: GOOG) Android smartphones since last year. Even if you're skeptical that handset owners will pay for premium content above and beyond the cost of their data plans, Frear's point remains: Sirius XM is still growing.

The first question asked after Frear's prepared remarks dealt with Verizon's (NYSE: VZ) recent launch of its speedy 4G network in 38 major metropolitan markets. It's easy to see why this development may be problematic for Sirius XM. Faster content delivery through smartphones and mobile broadband options will make Internet radio more compelling. The quality of the streams can improve, with fewer buffering hiccups. However, until the trend indicates otherwise, Sirius XM just keeps growing.

The only quarters in which Sirius XM shed subscribers sequentially were the first two periods of 2009, when the recession and auto market both bottomed out.

Cashing in
The satellite radio star is no longer a story about revenue or subscriber growth. Sirius XM is profitable these days, and that, too, will continue to improve. The perfect storm of lower interest expenses, reduced capital expenditures, and the cash savings of its net operating loss carryforwards will continue to drive free cash flow growth.

Early last year, when Sirius XM was on the brink of bankruptcy, it had little choice but to hand over a 40% preferred share stake to Liberty Capital (Nasdaq: LCAPA), in exchange for borrowing money at a secured rate of 15%. Two months ago, it was able to offer unsecured senior notes at a mere 7.625%. In other words, the combination of improving profitability and analyst upgrades is making it easier for Sirius XM to replace debt with new funds bearing lower interest rates. In time, it'll be able to pay that debt down as well.

As for reducing its capital expenditures, the recent launch of its XM-5 satellite to bolster the reliability and longevity of its fleet means fewer big-ticket investments in the near term. The company continues to realize the cost savings behind the merger of Sirius and XM, as well.

Then we get to Sirius XM's $8 billion in net operating losses, which will be used to offset the tax bite on future profits. This was a luxury when Sirius XM wasn't profitable, but now that the media giant is consistently in the black, it will help pad the bottom line.

There's always a Baba Booey in the crowd
It wouldn't be a Sirius presentation if someone didn't ask about the lack of a contract renewal with Howard Stern. After five years on Sirius, Stern's last live show airs next week.

Just as Sirius XM CEO Mel Karmazin has done in the past, Frear had nothing but kind words to say about Stern. "Howard's been a great partner," he pointed out, also claiming that Stern is happier creatively in the less restrictive Sirius airwaves than he was in the tightly regulated terrestrial market. However, even Frear realizes that Stern may go the indie route and launch his own premium streaming channel.

Frear didn't believe that such a move would be in Stern's best financial interest. He leaned on NBC Universal CEO Jeff Zucker's adage of transforming "analog dollars into digital dimes," but the reality is that we really don't know how much money Stern could realistically make if he started his own service.

It's probably just a negotiating ploy on Stern's part, but a decision on the renewal is long overdue. Sirius XM may or may not need Stern these days, but it definitely doesn't need the model destruction that might take place if Stern successfully launched a premium streaming service on his own.

However, we'll cross that burning bridge when we get there. For now, Sirius XM continues to grow, and its fundamentals perpetually improve. Listen to Frear: There's nothing to fear.

Will Stern's decision to renew or not renew his contract have an impact on Sirius XM this month? Share your thoughts in the comment box below.

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Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He does not own shares in any of the stocks in this article. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.