Skip navigation
MOST POPULAR RELATED TAGS
  • TOPICS
  • SECTORS
  • COMPANIES
Media Money Video Gallery
The hour's business headlines, with CNBC's Julia Boorstin
The hour's business headlines, with CNBC's Julia Boorstin.
MEDIA MONEY INDEX
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
Loading...
See all Media Money PostsMedia Money with Julia Boorstin
Text Size
Jun.16
3:29 PM ET
Monday, 16 Jun 2008
Satellite Radio Merger Clears Key Hurdle

CNBC.com

XM
[XMSR  Loading...      ()   ] and Sirius Satellite [  Loading...      ()   ]radio-- the nation's only two satellite radio operators -- have cleared a major hurdle: FCC Chair Kevin Martin recommended approval of their merger. This puts them one step closer to the deal that's now valued at roughly $7.5 billion dollars, based on recent stock prices.

This follows the Justice Department's approval of the merger in March. The theory behind Martin and the Justice Department's approval hinges in the idea that creating a monopoly in the Satellite Radio space won't hurt consumers because Satellite Radio also competes with a range of other media-- from traditional radio, to Internet radio, even MP3s.

This whole new approach could set a new precedent for the way future media mergers work. Though future mergers will also depend on how a new presidential administration weighs in.

That being said, Martin is requiring some concessions to protect consumers, and the companies have already agreed to them. The companies have to turn eight percent of their satellite channels--24 of them--over to non-commercial and minority programming. They have to put a price cap on the combined company's service fees for three years. They'll also have to offer new options for a la carte pricing, so you can pay just a couple of dollars per channel for the few you want to subscribe to. And perhaps the biggest gesture to encourage competition, the combined company will have to create an "Open Radio" standard-- licensing their technology to other manufacturers within a year of the deal's close, so other companies can create compatible radios.

Both stocks--SIRI and XMSR--were trading up on this news. The word on the street is that while these two companies are in big trouble if they're on their own, together, they'd save billions of dollars, and have a real chance at success. But the battle isn't won yet. Mergers can be tough, and RBC Capital Markets analyst David Bank tells me he thinks it'll be about five years before investors see any real big benefits from the merger. He also points out that in a rocky consumer economy the companies--combined or separate--still face the challenge of adding subscribers, convincing people that this high-end radio service is a must-buy.

Now three of the five FCC commissioners must approve the deal. Though the debate could drag out for another month or so, it seems that eventually, the necessary three will get on board.

Questions?  Comments? 

© 2008 CNBC, Inc. All Rights Reserved

Permalink: /id/25195073

HOME  |  NEWS  |  MARKETS  |  EARNINGS  |  INVESTING  |  VIDEO  |  CNBC TV  |  CNBC PLUS  |  CNBC MOBILE  |  CNBC HD+
About CNBC   |   Site Map   |   Privacy Policy   |   Terms of Service   |   Advertise   |   Help   |   Feedback   |   Video Reprints
  Data is a real-time snapshot   *Data is delayed at least 15 minutes

Global Business and Financial News, Stock Quotes, and Market Data and Analysis