Sirius XM Partners With AT&T On Spectrum Deal

| About: Sirius XM (SIRI)

Last week I wrote an article warning investors that Sirius XM (NASDAQ:SIRI) might have a temporary "flash crash" due to CEO Mel Karmazin selling his "charity shares" around the 15th of the month. At the time some "analysts" were predicting the stock might go as low as $1.65, which in my opinion, would have been a great time to buy more shares.

According to an SEC filing on Tuesday, Karmazin did sell some more of his stock/options. However, this time he only sold a total of 7.6 million shares over two days, compared with the average of over 12 million the last two times he sold:

Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned
1.Title of Security
(Instr. 3)
2. Trans. Date 2A. Deemed Execution Date, if any 3. Trans. Code
(Instr. 8)
4. Securities Acquired (NYSE:A) or Disposed of (NYSE:D)
(Instr. 3, 4 and 5)
5. Amount of Securities Beneficially Owned Following Reported Transaction(s)
(Instr. 3 and 4)
6. Ownership Form: Direct or Indirect (NYSE:I) (Instr. 4) 7. Nature of Indirect Beneficial Ownership (Instr. 4)
Code V Amount or Price
Common Stock 6/15/2012 M 3500000.0000 A $0.4300 12000000.0000 D
Common Stock 6/15/2012 S 3500000.0000 (1) D $1.8471 8500000.0000 D
Common Stock 6/18/2012 M 4100000.0000 A $0.4300 12600000.0000 D
Common Stock 6/18/2012 S 4100000.0000 (1) D $1.8301 8500000.0000 D
Common Stock 323947.0000 I By 401(k) Plan
Click to enlarge

When you look at the extremely low volume last week, a 12 million share sale could have been very damaging. On Monday, June 11, the total volume for the day was only 12 million. The average volume day for Sirius is well over 50 million shares. It actually may have been the low share prices that kept Karmazin from selling more. He sold for $1.84 on the 15th and $1.83 on the 18th, according to the SEC. So the price only dipped as low as $1.80 on June 14th. This may have really disappointed a lot of Sirius Bears who have shorted the stock.

Date Open High Low Close Volume Adj Close*
Jun 19, 2012 1.82 1.92 1.81 1.91 55,636,900 1.91
Jun 18, 2012 1.85 1.86 1.81 1.84 41,821,700 1.84
Jun 15, 2012 1.85 1.87 1.82 1.87 37,737,000 1.87
Jun 14, 2012 1.82 1.86 1.80 1.86 32,764,100 1.86
Jun 13, 2012 1.86 1.88 1.81 1.83 32,189,900 1.83
Jun 12, 2012 1.87 1.89 1.85 1.86 19,696,300 1.86
Jun 11, 2012 1.87 1.88 1.86 1.86 12,327,600 1.86
Jun 8, 2012 1.85 1.90 1.85 1.86 16,139,200 1.86
Click to enlarge

Chart forSIRIUS XM Radio Inc.

However, a lot of the bulls were relieved when the share price bounced back to close at $1.91 on Tuesday. It still has a major gap to fill in since the dramatic dip in May. Right now, it is running about 10% down compared to the S&P 500, and the Nasdaq.

However, a new FCC filing may have contributed to Tuesday's little rebound. It was just announced that on June 15th, Sirius XM and AT&T (NYSE:T) filed an application to share spectrum, that could become available for use with government approval:

AT&T and Sirius XM have jointly filed with the FCC a proposal of rules that would allow AT&T's 2.3GHz spectrum to be used for LTE deployment.

Over the last decade and a half, AT&T and Sirius XM (as well as its predecessors Sirius and XM) have been wrangling over what conditions would be required to make WCS usable without completely destroying satellite radio service too. The two companies have finally compromised and put forth a proposal to the FCC that details the new rules that both Sirius XM and AT&T have agreed to follow if the FCC approves them. AT&T is particularly desperate because the build out deadlines are coming up and it really needs to deploy LTE on it if it wants to keep those licenses.

WCS stands for Wireless Communication Service License. It has been unusable to AT&T because it surrounds the satellite radio signal, and can cause interference. However, they seem to have found a way to use it. Both sides have reportedly made concessions, however, we do not know what those concessions are. Will AT&T pay Sirius for the hassle? According to analyst Jonathan Chaplin with Credit Suisse, this will really help the phone company with its future data problems:

Chaplin estimates that if the FCC adopted the proposal, it would take three to five years for AT&T to make the spectrum usable. He also wrote in a research note that, if the proposal is approved, the WCS spectrum would give AT&T equal spectrum footing in LTE with Verizon Wireless (NYSE:VZ). "We believe AT&T will act to close the gap [with Verizon] as quickly as possible. WCS doesn't really narrow the gap because of the time it will take to deploy; however, starting the process now provides a path to using this spectrum at some point in future," he wrote.

So far, neither AT&T or Sirius has commented on this new FCC filing. But one thing is for sure, the volume for Sirius is back up, and the price is heading towards $2.00 again. The second quarter will be ending in just ten days. Maybe we will get some new sub numbers then.

Disclosure: I am long SIRI.