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XM Satellite Quarterly Loss Narrows; Subscription Base Grows

XM Satellite Radio Holdings, which last week announced plans to combine with rivalSirius Satellite, on Monday reported a narrower fourth-quarter loss as a larger subscription base led to a 45% boost in revenue.

The Washington-based company, which has never reported a profit, said it lost $263.1 million, or 90 cents a share, after paying preferred dividends in the final three months of 2006, versus a loss of $270.4 million, or $1.22 per share, a year ago.

Quarterly revenue increased to $257 million from $177 million a year ago. XM finished the year with 7.6 million subscribers, a 29% increase from a year ago, when it had 5.9 million. The subscriber additions, reported last month, are in line with revised estimates. But XM had predicted at the beginning of 2006 that it would have 9 million subscribers at this point.

Subscriptions slowed as smaller competitor Sirius , which added Howard Stern to its programming lineup, took an increasing share of the market, particularly on radios sold through the retail market as opposed to those installed in automobiles at the assembly plant.

For the year, XM lost $732 million, or $2.70 a share, compared to a loss of $675 million, or $3.07 a share, in 2005. But annual revenue increased 65% to $933 million from $558 million in 2005.

A week ago, XM Satellite and New York City-based Sirius announced a deal to combine their operations. The companies will have to gain approval from the Federal Communications Commission and other regulatory agencies before a merger can take place, however.

The companies have said a merger will help keep costs down. In the last few years, both XM and Sirius have spent many millions of dollars to lure top talent and programming to their respective lineups, including lucrative deals for Oprah Winfrey and Major League Baseball on XM, with Stern and the NFL on Sirius.

2006 marked the first year that XM added more subscribers through the automobile market than the after-market retail segment. XM chief executive Hugh Panero said in a statement that XM is well-positioned for future growth as the satellite radio market increasingly becomes reliant on factory-installed models.

"The automobile market is emerging as a key catalyst for satellite radio's future growth, and XM is well-positioned through its relationships with the nation's largest and fastest-growing automakers," Panero said. "Our financial metrics are heading in the right direction as marketing costs have declined and our revenues have increased."

XM shares rose about 2% in premarket trading.

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