The Wall Street Journal explores the various obstacles a merger between the lone two players in satellite-radio might face in the wake of increased analyst speculation of a deal, a warming up to the idea by XM and a sense of urgency as the '08 election cycle approaches. Both the FCC and Dept. of Justice are seen potentially blocking an attempt to merge due simply to the fact there would only be one player left in satellite radio. However, both Sirius and XM claim they compete against all types of music media. It may be difficult to persuade the FCC considering it previously blocked a merger between EchoStar and DirecTV. Nonetheless, it seems a recent marked softening of its stance on a merger by XM, as well as stock analyst speculation of a merger could serve as a "trial balloon intended to gauge the reaction of both investors and regulators," says the WSJ adding, "Such advance work may be necessary given that any deal would face significant hurdles." An RBC Capital Markets analyst also warns although cost savings could reach 50%, that might not happen until 2010 due to usage of different technologies.
• Sources: WSJ, Forbes
• Related commentary: XMSR and Sirius: The Street Weighs In, More From The Sirius/XM Satellite Radio Merger Rumor Mill, Sirius Satellite: Reverse Stock Split in the Offing?, Sirius, XMSR Shares Jump On Positive Sirius Subscriber, Cash Flow News. Conference call transcripts: Sirius Q3'06 , XM Satellite Radio Q3'06
• Potentially impacted stocks and ETFs: Sirius Satellite Radio (SIRI), XM Satellite Radio Holdings (XMSR)
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