The static over a planned merger between XM Satellite Radio and Sirius Satellite Radio may finally be clearing. U.S. regulators are likely to give their blessing to the transaction, imposing conditions that both sides have said they’re willing to accept and analysts say neither side will find too onerous.
Federal Communications Commission Chairman Kevin Martin on June 16 said he would give a green light to the deal, assuming XM and Sirius make some concessions aimed at ensuring the combination doesn’t hurt consumers or thwart competition. “The conditions the FCC is considering applying are not nearly encumbering enough to dissuade the companies from going ahead,” says Frederick Moran, an analyst at Stanford Group. “[The conditions] are a small price to pay.”
Investors, who in recent weeks had grown concerned about how long it was taking the FCC to sign off, breathed a sigh of relief. Sirius shares rose 3.15 percent, to 2.62, on the news, while XM’s stock rallied 3.96 percent, to 11.30.
Martin is likely to circulate a proposal to the four other commissioners later this week, and analysts expect a decision within a month. “I am recommending that, with the voluntary commitments they’ve offered, on balance, this transaction would be in the public interest,” Martin said in a statement. He’s asking for a total of eight concessions, including lifting restrictions on the hardware that is able to transmit the enlarged company’s broadcasts, and opening some channels to noncommercial and minority-owned broadcasters.
Billions in Cost Savings
Analysts say those hurdles won’t hinder the new company’s bid to wring billions of dollars in cost savings by combining. “I don’t think that these conditions will” keep them from meeting those targets, says Blair Levin, an analyst at Stifel Nicolaus and a former FCC staffer. Tom Watts, an analyst at Cowen, says he is not revising his…