Sirius, XM given green light to merge by USDOJ

by Dan Nystedt

March 25, 2008 —

The U.S. Department of Justice (DOJ) has ended its investigation of the proposed
merger between satellite radio operators Sirius
Satellite Radio and XM
Satellite Radio, saying their tie-up will not harm competition and will
likely result in cost benefits for the resulting company.

Although the two companies compete specifically in satellite radio, they also
compete with a wide array of other sources of entertainment content delivery
for users, including AM/FM radio, HD radio (high definition), digital music
players such as iPods and even mobile phones with radio functions, the DOJ said
in a Monday statement. Further, the development of new technologies such as
the delivery of Internet radio wirelessly, will increase competition for the
companies, according to the DOJ.

The decision is important because analysts had anticipated that Sirius and
XM would have a tough time convincing regulators to approve the deal because
the two companies control most of the market for satellite radio in the U.S.
But the DOJ decision looked at the market in terms of overall competition for
entertainment in automobiles and elsewhere satellite radio is used, instead
of narrowly defining the market.

The merger still faces another major hurdle in the U.S. Federal Communications
Commission, and the companies will have to convince the FCC their merger will
not hinder new competition.

One of the cost benefits of the proposed merger will be that Sirius and XM
can realign development and production efforts to make and distribute a single
line of radios, thereby eliminating the cost of developing their own, the DOJ
said. Currently, customers have to buy radio equipment specific to the company
they subscribe to and cannot receive the other provider's signal without also
buying the rival equipment and a subscription.

The two companies, which pioneered the concept of nationwide subscription-based
satellite radio, proposed their all-stock merger early last year. At the time,
they estimated the new company would be worth US$13 billion.

IDG News Service