Sirius CEO Still Expecting XM Merger Approval by Year End

| About: Sirius XM (SIRI)
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Sirius Satellite Radio (NASDAQ:SIRI) CEO Mel Karmazin Tuesday repeated his belief that the company’s pending merger with XM Satellite Radio (XMSR) should get government approval before year end.

“We remain confident that the regulatory authorities will carefully weigh the merits of the transaction and conclude that this merger is not anti-competitive and is in the public interest,” he said in a conference call with analysts after the company reported third quarter earnings Tuesday morning. “We continue to expect that we will close the merger by the end of the year.”

For the third quarter, the company reported revenue of $241.8 million, slightly below the Street consensus of $244.3 million. Sirius lost 8 cents a share in the quarter, in line with expectations.

For the full year, Sirius sees revenue “approaching $1 billion,” with more than 8 million subscribers at year end, average monthly subscriber churn of 2.2%-2.4% and subscriber acquisition costs “approaching $100″ per gross subscriber. The Street revenue consensus for the year is $943.9 million.

Sirius added 524,938 net subscribers in the quarter, which was above most Street estimates. The strength came largely through the company’s OEM auto partners; 460,837 net adds came through the car companies, with 64,101 through retail and aftermarket channels.

The early read from the Street was largely positive.

  • Lucas Binder, of UBS, wrote that the company produced “better than expected results;” he had only expected 394,400 net adds, but he also noted that the company’s EBITDA loss in the quarter of $56.9 million was worse than the $49.3 million he had expected.
  • Deutsche Bank’s James Dix had only expected 310,000 net adds in the OEM channel. He noted that subscriber acquisition costs were a bit above his expectations, but that sales and marketing expenses were less than expected.
  • Tom Watts of Cowen writes that the company produced “excellent Q3 subs and and solid financial results.”
  • Bank of America’s Jonathan Jacoby was far more skeptical. He said subscribe acquisition costs and cash EBITDA were worse than expected, despite the higher net adds and lower churn. Jacoby thinks “the underlying long-term fundamentals appear to be weakening,” and is also is less convinced than others on the Street that the deal will win approval. His price target: $2.75.

Sirius Tuesday morning is down 8 cents, or 2.2%, at $3.53; XM is down 42 cents, or 2.8%, at $14.75

XMSR vs. SIRI 1-yr chart: