The year-old merger proposal of satellite radio operators Sirius Satellite Radio (SIRI) and XM Satellite Radio Holdings (XMSR) finally received approval from the US Department of Justice this afternoon, and both stocks are jumping on the news. The full statement from the DOJ is available here. Kudos to Stifel Nicolaus strategist and former FCC insider Blair Levin, who told Eric last week the DOJ ruling was nigh. (In fact, he said last Spring the deal would go through.) The Federal Communications Commission still needs to rule, but Levin thinks that a response will also be on its way from the Commission in short order, and he’s long contended the FCC will basically follow the DOJ’s lead.
In the end, the DOJ determined that expanding technologies for radio such as online programming meant it would be unlikely the combined companies would pursue pricing detrimental to consumers, the Department said in its statement:
After a careful and thorough review of the proposed transaction, the Division concluded that the evidence does not demonstrate that the proposed merger of XM and Sirius is likely to substantially lessen competition […] The evidence did not show that the merger would enable the parties to profitably increase prices to satellite radio customers for several reasons, including: a lack of competition between the parties in important segments even without the merger; the competitive alternative services available to consumers; technological change that is expected to make those alternatives increasingly attractive over time […]
And, oh, did we mention, there really wasn’t ever going to be competition in satellite radio even without a merger?
Because customers must acquire equipment that is specialized to the satellite radio service to which they subscribe, and which cannot receive the other provider’s signal, there has never been significant competition for customers who have already subscribed to one or the other service.
So, with Sirius shares up almost 10% at $3.18, and XMSR stock up 17.17% at $13.99, tell me, dear reader: Has it been worth the wait? Was the pair trade worth it in the end? And just how close is the FCC…
This article has 7 comments:
"Keep in mind that the death of radio has been predicted regularly almost since Paley and Sarnoff started slugging it out in the 20's."
[Old Ga. Dawg]
I grew up listening to old "AM" radio when there wasn't much advertising being broadcast. Then advertising starting being more apparent and then "Talk" radio begin.
"FM" radio was wonderful in it's early starting with improved stereo sound and again - advertising started taking it over. Less music and more BS advertising. Money was more important to most radio stations than that of what listeners wanted to hear coming from there radios.
When Sat.Radio came into being - Consumers were given a choice of staying with free radio or subscription "pay" radio without "Talk or Advertising".
Which Sirius and XM Radio were suppling consumers with. The only problem was enticing consumers to subscribe to one or the other "pay" radio service.
Sirius radio carried certain programs that XM didn't - therefore consumers had to either afford one or both which was very costly.
With the merger approved "by both the DOJ & FCC (with no strings attached) would give consumers the choice of having the best of both Sirius & XM. Even if the offer would be an "a la carte" offering of what one wanted to keep individual cost to consumers down.
I personally look forward to the merger being approved by the FCC with no additional strings. This would definitely be a plus in the eyes of the American consumers.