Sirius, XM radio eager for ruling on merger plans
They have to worry whether the softening economy will hurt new car sales - the largest generator of new satellite radio subscribers.
Also up in the air is how many holiday shoppers put portable satellite radios on their gift lists.
Several analysts were disappointed by non-car radio sales for Sirius and XM in the third quarter. That led Goldman Sachs analyst Mark Wienkes to write that "the retail satellite radio market is on life support."
But more than anything, the companies are anxiously waiting to see whether federal officials will OK Sirius' agreement last February to offer stock currently worth about $5 billion for XM.
The Justice Department could say any day whether it will challenge the deal on antitrust grounds.
The Federal Communications Commission is expected to follow with a vote on whether it's in the public interest to let Sirius take control of XM's licenses to use the public airwaves.
Sirius and XM say they expect federal approvals in time for their deal - which they bill as a merger of equals - to close by year-end.
Analysts aren't so sure.
"We're close to the ninth inning, and there's a lot in play," says Stifel Nicolaus Managing Director Blair Levin. "It really could go either way."
Research firm The Stanford Group says there's a 60 percent chance the deal will fly. By contrast, Goldman Sachs puts the odds at just 30 percent.
Investors appear to be cautiously optimistic.
"There's some merger speculation built into both stocks," says James Goss at Barrington Research Associates. "If there was definitely not going to be a merger, either of them would be vulnerable."
The merger announcement came as a relief to investors growing impatient with continuing losses at both companies, exacerbated by extravagant deals to sign up popular programming.
Credit Suisse estimates that Sirius will lose $592.9 million on revenues of $929.5 million in 2007, while XM loses $617.2 million on revenues of $1.1 billion.
Sirius, which had 7.7 million subscribers as of Sept. 30, offers Howard Stern, Martha Stewart and National Football League games.
XM, with nearly 8.6 million subscribers, has Oprah Winfrey, Bob Dylan and Major League Baseball.
Opponents of the merger say that it would create a monopoly that could limit the range of opinions broadcast to satellite customers and raise prices.
"Should government be bailing out two companies that made horrendously bad business decisions, including paying Howard Stern $500 million a year?" says spokesman Dennis Wharton of the National Association of Broadcasters, the deal's staunchest foe.
Others add that neither needs the deal.
"You don't allow merger to monopoly unless there's a showing that the entities cannot survive unless they merge," says Andrew Jay Schwartzman, CEO of the Media Access Project, a public interest law firm. "And neither XM nor Sirius makes that claim. Quite the contrary, they claim that they're viable companies and will be viable companies even if the merger isn't approved."
Sirius and XM counter that their combination would not create a monopoly. They argue that they compete with conventional broadcast radio stations and with fast-growing audio alternatives, including HD radio, iPods and Internet and cell phone music services.
Deal supporters add that a merger would benefit consumers. For example, the combined company could offer more diverse programming and pricing options - including some that enable subscribers to just pay for the channels they want.
"These two firms have proved when kept apart to be incapable of mounting the really serious competition against terrestrial radio that I had always hoped for," former FCC Chairman Reed Hundt said this month in an interview conducted by representatives of Sirius and XM. "And it seems to be that there's no indication of any anti-competitive outcome if they do combine."
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