Business

XM, Sirius to Merge

Well, color me shocked. As I’ve blogged before, I am a happy customer of XM. I really never thought that they would try to merge with Sirius despite all the talk that they would. Well, looks like I am wrong.

I really can’t imagine that the FCC would allow the only two satellite radio companies to merge without significant concessions. As a matter of fact, there is currently a specific rule stating that they cannot merge. When DirecTV and Dish Network discussed merging, the FCC put the smack down on the two companies instantly. FCC Chairman Kevin Martin is clearly not amused as the AP has him quoted as saying “[t]he companies would need to demonstrate that consumers would clearly be better off with both more choice and affordable prices” and that the hurdle would be high to any merger.

I’m excited about the prospect of having both the NFL and MLB on the same radio. I’m not a huge fan of football, but it’s a nice way to pass a Sunday drive back home from one of our families when baseball is out of season. I couldn’t care less about getting Stern and I’d imagine some of the music channels would get whacked (please not Lucy or Fungus) but overall I think it’s good for the customers of the services.

Unless prices get pushed up because of the lack of competition. I wouldn’t be at all surprised to find a rate freeze being negotiated to get the deal done.

For investors, I think it’s a great deal and one that may save both companies. Neither one appeared to be on the path to profits competing against one another but together they may be able to wring out enough costs to become profitable. Certainly, they should be able to lower the number of satellites that they need to reach their combined subscriber base.

I think it’s a win for just about everybody as long as the FCC carefully considers the deal and does get some concessions from the company that they won’t jack up rates just because they are the only game in town. I have little doubt that XM and Sirius will be glad to agree to concessions to get the deal done as both probably see this as the only profitable endgame.

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© 2007 Kirk Walsh.