Could Satellite Radio Competitors Merge In 2007?
January 2, 2007 at 5:01 AM (PT)
THE NEW TORK TIMES reports that last year’s debut of HOWARD STERN’s radio show on SIRIUS SATELLITE RADIO put the technology on the map, raising the public’s awareness of satellite radio and helping to boost significantly subscriber totals for SIRIUS and its larger rival, XM SATELLITE RADIO.
But SIRIUS and XM shares have taken a battering on WALL STREET, with prices for both off about 50% from their year-ago levels. On FRIDAY (12/29), SIRIUS closed at $3.54, while XM ended the year at $14.45.
Clearly, a merger makes sense from an investorâ??s point of view to reduce costs, and to have a better return.
And now, the industry may be getting ready to try an even more dramatic third act -- a possible attempt to merge the two services.
The benefits of a merger have been promoted by the chief executive of SIRIUS, MEL KARMAZIN, for a number of months, and SIRIUS officials continue to say that a merger would be a good thing. XM has not commented on the possibility, and neither company has said whether it has actually discussed the issue.
"When you have two companies in the same industry, we have a similar cost structure," said SIRIUS CFO DAVID FREAR. "Clearly, a merger makes sense from an investor’s point of view to reduce costs, and to have a better return."
And if the companies were to merge and effectively double their subscriber base, the new company could reduce programming costs through increased negotiating clout, removal of duplicative channels and elimination of redundant employees.