As the Sirius/XMSR merger is on the minds of many that follow this sector, the timeline becomes important. There are many things to consider regarding the process, and in trying identifying when a decision might be made.
THE DEPARTMENT OF JUSTICE
Tasked with deciding the anti trust aspect of this merger, they are seen as the “leader” of the process. As anticipated and likely due in part to the attention this merger has received, the DOJ, after an initial 30 days issued a second request to Sirius and XM seeking additional information. In my opinion, the delivery of all requested materials is a timely process, but the DOJ does not stop their analysis while awaiting such information. Further, it is likely that Sirius and XM are providing information in a pretty steady stream. We may see an 8K filed when all items of the second request have been submitted. Readers can rest assured that until such time that all of the requested information is provided, there will not be a decision from the DOJ. If I had to proffer a guess as to the timeline for Sirius and XM to comply fully with the second request, I would put it at mid to late August at best. Once the requested information is supplied to the Department of Justice, a new 30 day clock can commence.
The second request is neither a positive or negative event in the merger process. It is simply a mechanism to gather more information for consideration. DOJ staff will use the knowledge gained within the initial 30-day period to tailor the second requests as narrowly as possible to the transaction and the goals of the investigation. The intent is to get all of the information needed to render a decision. While this may seem like a long process, the DOJ has made strides in trying to streamline. The DOJ can modify its merger review process to reduce the burdens of compliance where such modifications are consistent with the Division’s need for documents and information sufficient to enable it to satisfy its statutory responsibilities. The Division has already modified the instructions in its “Model Second Request” to provide companies an alternative to searching backup tapes and other media that may not be easily accessible for responsive documents; shorten the default time period for relevant documents and information from three years to two years; and significantly reduce the requirement that companies conduct “second sweeps” for responsive documents created or received after the initial search but before the company complies with the second request. These steps are designed to make the compliance process easier.
The DOJ process can include regular consultations between the applicant and the DOJ. The purpose of these meetings is to outline various aspects of the merger, including a look into the competitive landscape. Another viable avenue permitted by the DOJ is a “Processing and Timing Agreement”. This option in theory significantly reduces the time involved in a Second Request, but has various stipulations. In the case of the Sirius and XM merger, this course of action does not seem to have taken place.
As stated, it is likely that the DOJ, working with the FCC, will take the lead in this case. If we were to assume that Sirius and XM fully complied with the second request by the end of August, then it would seem reasonable to assume that the DOJ would not render a decision for at least 30 days at a minimum. Therefore, a DOJ decision prior to October 1, 2007 is very unlikely. It is quite possible that the DOJ process will go into late October or early November in my opinion.
The FCC has started their 180 day timeline. This timeline is merely a guide, and does not really dictate anything in particular. The time clock can be started and stopped at any time, and for virtually any reason.
It is my opinion that the FCC rulings will come after the DOJ decision. A decision by the DOJ gives the FCC, as an agency, the advantage of not being seen as the “deciding factor” in such a closely watched merger.
Additionally, and an element pointed out by an associate, the FCC may want to wait until Congress is out of session before announcing their decision. This year the session ends on October 26th. In such a politically charged merger, and the already politically charged atmosphere of Washington, announcing a decision while congress is out of session may be the path of least resistance for the FCC regardless of which direction their decision is.
In general, the first 30 days are used to seek comment. Replies to comments are due days 30 through 45. Replies to opposition are due days 45 through 52. On day 90, the FCC determines their initial information request, if required. Days 52 through 180 are slotted for analysis of the record, and discussions with parties.
Readers need to bear in mind that the time clock is informal in nature, and is a guide that outlines how the process may work. In the case of this merger, for example, public comments were accepted long before the time clock actually started.
The FCC is deciding a couple of different items in this process. The transfer of license and the status of an FCC rule established when the original licenses were granted.
The FCC is virtually the only party in the merger where public comment is actively sought and the public can view.
It is possible for the DOJ and FCC to carry differing decisions with regards to the merger, though unlikely.
The FCC can seek concessions and set stipulations on a merger.
Congresses role in the merger is not really a decision making role. Congress can proffer their opinion, as some already have. Congress can play a role in future spectrum decisions. When SDARS was first being considered, 50 megahertz of spectrum and four licenses were discussed and proposed. Congress limited the spectrum to 25 megahertz and two licenses. Additionally, there are aspects of the audio entertainment industry as a whole that are before Congress now. While not tied directly to the merger, this legislation before Congress can have an impact on business models of virtually any company in the audio entertainment industry, and thus, by extension, could carry an impact on how a merged company operates.
In closing, it is my opinion that any decisions regarding this merger are an end of 2007 event at the earliest, and perhaps could spill into 2008.
Disclosure: Long Sirius, Long XM