The wedding is off. Plans for XM Satellite Radio (NASDAQ:XMSR) to acquire WCS Wireless have been unhitched, after the companies mutually agreed that the merger was unlikely to receive regulatory approval.
XM wasn't about to get into the cellphone business. It wanted WCS Wireless for its wireless-spectrum licenses, which combined to reach 163 million consumers. XM already has 170 channels, dwarfing the "more than 125" that Sirius (NASDAQ:SIRI) touts, but this deal would have allowed the company to toss out its net even further.
WCS probably doesn't mind the cold feet. When the all-stock deal was originally announced back in July, XM shares were trading twice as high as they are now. XM won't need to issue the 5.5 million shares, and WCS is free to negotiate a more valuable deal for its licenses.
XM and Sirius make an ideal duopoly. If government agencies won't grant XM's desires to land a few wireless-spectrum licenses, they'll probably object to similar deals. Every few days I get an email from someone convinced that XM and Sirius will eventually merge, though last night's broken deal should be a clear reminder that the government will never let that happen.
XM does have a stake in WorldSpace (NASDAQ:WRSP) -- and Clear Channel (NYSE:CCU) was an early investor in XM -- but these minority stakes don't carry the same kind of competitive threat that you'd get from Sirius or XM looking to take advantage of their duopoly by expanding.
Sorry, XM. Don't print those shares. Your legal tender is no good here.
XM Radio is an active recommendation in the Rule Breakers newsletter service. The stock is trading lower, but that isn't the norm with the stock-selection service. The average pick is up 10.1%, while the S&P 500 has mustered a mere 4% average advance in that time.
Longtime Fool contributor Rick Munarriz has been a Sirius satellite subscriber since 2004, but he does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
