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UPDATE 2-Sirius XM raises prices; sees 2014 results below forecasts

Liana B. Baker
Thursday, 24 Oct 2013 | 11:51 AM ET

Oct 24 (Reuters) - Sirius XM Radio Inc said on Thursday it would raise prices by $6 per year for its basic packages starting in January and forecast weaker-than-expected earnings and revenue for 2014.

Customers will have to pay 50 cents more per month for the satellite radio service that is popular in cars and features hundreds of channels that play few commercials and air exclusive content such as Howard Stern's show.

This is only the second time Sirius XM has raised prices since a government ban was a lifted following the merger of Sirius and XM radio in 2008. Its last price raise was in 2011 when it raised the cost of its basic package by $1.50. It did not see significant customer cancellations after that move.

Sirius XM CEO Jim Meyer said on Thursday that the price increase would not lead to customers cancelling their subscriptions.

"While changing prices is a difficult decision, particularly in the competitive audio entertainment market, we are confident that our subscribers see significant value in our service and that this modest change will not significantly impact retention next year," Meyer said on a conference call with analysts.

Gabelli & Co analyst Brett Harriss said he was surprised by the price increase but said it was a positive sign that shows Sirius XM is confident in its product and open to further hikes.

The company added 513,000 net subscribers to its service in the third quarter and set its 2014 revenue forecast at $4 billion, below Wall Street estimates. Analysts, on average, estimated that revenue will come in at $4.17 billion next year.

Sirius XM also said it expected adjusted earnings of $1.38 billion next year, which came in below estimates by Gabelli & Co $1.45 billion and ISI's estimates of $1.51 billion.

Sirius also missed revenue and net income estimates in the third quarter, sending shares down 2 percent to $3.99 per share. Its shares are up more than 40 percent over the last 12 months and were little changed on Thursday.

Sirius is known for giving financial forecasts that are below analysts' predicitions. It usually raises those forecasts over the course of the year.

The company said it plans to add a net 1.6 million subscribers this year. It ended the quarter with 25.6 million subscribers.

The New York-based company, controlled by John Malone's Liberty Media Corp, faces increased competition from Internet streaming services such as Pandora Media Inc that are trying to crack the car market, where Sirius XM has a strong foothold.

Third-quarter net income was $62.89 million, or 1 cent per share, compared with $74.5 million, or 1 cent per share, a year ago. The company missed analysts' estimates by a penny.

Sirius XM said it generated $245 million in free cash flow, up from $195 million a year ago.

Revenue per subscriber was $12.29, up from $12.14 a year ago, but below what analysts at Macquarie expected.

Quarterly revenue increased 11 percent to $961.5 million from a year ago, and missed estimates by less than $10 million.

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