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UPDATE 2-Sirius XM's revenue up, committee studies Liberty Media's offer

Feb 4 (Reuters) - Satellite radio service Sirius XM Holdings Inc reported a better-than-expected 12 percent rise in quarterly revenue and its CEO said the company would freeze capital returns while a committee considers an offer to buy out minority shareholders.

Majority owner Liberty Media last month offered to buy out Sirius XM's minority shareholders in a deal that could be worth more than $10 billion.

Shareholders such as consumer advocate Ralph Nader have spoken out against the deal, an offer of $3.68 per share that provides little premium to shareholders. Sirius XM shares were trading 0.7 percent lower at $3.54 on Tuesday.

An independent committee of three Sirius XM board members - Eddy Hartenstein, Joan Amble and James Holden - are evaluating the offer and are being advised by Evercore.

"If the special committee can reach an agreement with Liberty on a favorable transaction, any deal with them have to be approved by the majority of the non-Liberty shareholders," said Sirius XM CEO Jim Meyer.

Maxim Group analyst John Tinker said he expects Liberty to raise its price by a few cents relatively soon, but minority shareholders can still reject the offer. He does not expect Liberty to back down.

"If shareholders reject a deal, Liberty historically has been very patient and could always come back in a different way," he said.

Liberty Media became Sirius' majority owner in January 2013 after U.S. regulators gave it the green light to take control of the company.

Liberty has expressed interest in tapping Sirius XM's balance sheet to help finance its bid for Time Warner Cable Inc .

RESULTS AHEAD

Sirius XM reiterated its 2014 guidance of revenue to be over $4 billion and for the company to add 1.25 million customers.

"We believe that early guidance for 2014 appears to be conservative; management tends to update guidance as the year progresses," said ISI analyst Vijay Jayant in a research note.

Sirius XM said cash flow increased 31 percent in the fourth quarter. It added 411,484 net self-pay subscribers in the quarter, resulting in a record subscriber base of 21.1 million at the end of the year.

It said its penetration rates in cars rose to 71 percent, meaning its radios are in a higher percentage of new cars than ever before. As it expands to lower priced vehicles, its conversion rates, or the rate in which customers take its product following a promotion, are coming down, its finance chief David Frear said.

Combined with the price increases this year, Frear said the company has taken a "cautious view" toward customer growth this year.

Net income fell to $65.2 million, or 1 cent per share, in the quarter ended Dec. 31, from $156.2 million, or 2 cents per share, a year earlier.

Revenue increased to $1 billion from $892.4 million, as subscriber revenue rose 10 percent to $852.5 million.

Analysts had expected earnings of 2 cents per share on revenue of $981.9 million, according to Thomson Reuters I/B/E/S.

Sirius generated $303.2 million in free cash flow in the quarter.

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