U.S. News

Sirius Satellite Net Loss Narrows, Beating Estimates


Sirius Satellite Radio Tuesday posted a smaller-than-expected quarterly loss as it beefed up the number of automobile subscribers to its pay radio service, sending shares higher.

Sirius , the No. 2 satellite radio service which has agreed to purchase bigger rival XM Satellite Radio Holdings , said its second-quarter net loss was $134.1 million, or 9 cents a share, compared with a loss of $237.8 million, or 17 cents, a year earlier.

Wall Street had expected the company to post a loss of 10 cents per share, according to Reuters Estimates.

Revenue at Sirius, whose lineup includes the National Football League, shock jock Howard Stern, lifestyle guru Martha Stewart and the Catholic Church, jumped 51 percent to $226.4 million from $150.1 million.

The average analyst forecast was for revenue of $228.3 million, according to Reuters Estimates.

Analyst were impressed with the rise in subscriptions attributed to automakers -- also called OEM customers -- which overshadowed results that were otherwise in line with their views.

"The OEM contribution was significantly larger than I had thought," said Janco Partners analyst April Horace, who noted that Sirius has done a solid job of controlling costs.

Sirius said it added 561,493 subscribers in the quarter, and ended with 7.1 million subscribers. That compares with 8.25 million at XM, which started its service a year before Sirius.

Its deals with car makers, who build the radio service into new automobiles, also helped boost subscriber additions. Sirius added 431,650 net new subscribers from auto makers.

Analysts said the results follow several announcements last week where automakers such as Chrysler Group pledged to increase the ratio of cars they build with satellite radios.

"We are encouraged by recent developments because increased OEM commitments demonstrate our belief that subscriber growth will come from automakers, and that such a position ... is not as speculative as it seems," Wedbush Morgan Securities analyst William Kidd said in a client note.

The results came about a week after Sirius Chief Executive Mel Karmazin said XM and Sirius would offer subscription plans costing up to 46 percent less than current offerings. The move was largely seen as a bid to allay regulators' concerns that a merger would raise prices and limit choices.

The U.S. Federal Communications Commission and the Justice Department are reviewing the deal that would combine the only two providers of satellite radio service in the United States.

Sirius said its second-quarter subscriber acquisition costs per gross subscriber addition fell to $108 from $131 a year earlier.

However, its monthly churn, or the average rate at which customers leave, rose to 2.1 percent from 1.8 percent last year, while average revenue per user slipped to $10.71 from $11.16.

Sirius said it expects to end the year with revenue "approaching $1 billion" and over 8 million subscribers.

Analyst on average expect the company to have revenue of $948.7 million, according to Reuters Estimates.

Shares of Sirius were up 6 cents, or 2 percent, to $3.03 in afternoon Nasdaq trading.