Capricorn
2009-02-13 14:28:41 UTC
From the W.P.:
CEO Reaches Out To New Investors To Save Sirius XM
By Cecilia Kang
Washington Post Staff Writer
Friday, February 13, 2009; D03
Sirius XM chief executive Mel Karmazin is reaching out to potential
investors. His company has $175 million in debt due Tuesday, and $350
million more due in May. The company has begun to fill out paperwork in
the event it needs to seek bankruptcy protection for the satellite
radio operator that hosts shock jock Howard Stern.
But Karmazin's options may be limited.
Any purchase of the nation's only satellite radio provider would face
regulatory scrutiny, analysts said. And in light of the protracted
18-month review of the merger between XM and Sirius by the Federal
Communications Commission and the Justice Department, few investors may
want to take on the burden.
According to a source familiar with the matter, Karmazin has been in
talks with EchoStar satellite service mogul Charles Ergen, hoping to
strike a deal.
Analysts say Sirius's satellite radio service would complement Ergen's
satellite television service Dish Network. Some have speculated Ergen
may be interested in adding Sirius's spectrum to radio waves it bought
in an auction early last year to build out a wireless high-speed
Internet network.
Such plans would face resistance from Karmazin, according to the
source, and would likely be fought by the FCC. The agency would have to
review how the purchase would affect Sirius subscribers. Any investor
would likely have to agree to not increase prices and to add more
minority programming -- promises the New York-based Sirius had to make
when it merged with the District-based XM last year, analysts said.
If an investor wanted to strip Sirius of its radio service and use its
spectrum for other purposes, the obstacles could be even harder to
surmount.
"The FCC's unlikely to authorize a repurposing of spectrum that would
disenfranchise 19 million satellite users," Barclays Capital analyst
Vijay Jayant wrote in a research report.
Sirius and XM executives poured millions of dollars into lobbying the
FCC and the Justice Department to agree to their union, which was
fought by the National Association of Broadcasters and consumer groups
who said it would create a monopoly in the satellite radio market.
The Justice Department approved the merger last February after deciding
that the combined company would not hamper competition. The FCC
approved the merger months later, with the agency's three Republican
members voting for it and the two Democrats voting against the deal.
Analysts said the long process distracted managers from merging
operations and finding ways to cut costs of the combined company. At
the same time the economy was sinking and consumers were cutting back
on purchases of cars and electronics. Sirius' main source of revenue
comes from new cars equipped with satellite radios.
"Whatever you thought about the wisdom of the final decision, it
clearly took a terribly long time to make," said Rebecca Arbogast, an
analyst at Stifel Nicolaus. "It is hard to keep your eyes on the prize
when you are not sure what your future is."
Kevin J. Martin, who was chairman of the FCC at the time, defended the
agency's lengthy proceedings, saying the merger was extraordinary in
that it called for the agency to overturn rules that blocked a merger
between the two firms. He added that the company had acted slowly to
correct violations of wireless tower use.
"This was not a normal transaction," Martin said in an interview. "They
asked us to change our rules that explicitly prohibited the merger."
CEO Reaches Out To New Investors To Save Sirius XM
By Cecilia Kang
Washington Post Staff Writer
Friday, February 13, 2009; D03
Sirius XM chief executive Mel Karmazin is reaching out to potential
investors. His company has $175 million in debt due Tuesday, and $350
million more due in May. The company has begun to fill out paperwork in
the event it needs to seek bankruptcy protection for the satellite
radio operator that hosts shock jock Howard Stern.
But Karmazin's options may be limited.
Any purchase of the nation's only satellite radio provider would face
regulatory scrutiny, analysts said. And in light of the protracted
18-month review of the merger between XM and Sirius by the Federal
Communications Commission and the Justice Department, few investors may
want to take on the burden.
According to a source familiar with the matter, Karmazin has been in
talks with EchoStar satellite service mogul Charles Ergen, hoping to
strike a deal.
Analysts say Sirius's satellite radio service would complement Ergen's
satellite television service Dish Network. Some have speculated Ergen
may be interested in adding Sirius's spectrum to radio waves it bought
in an auction early last year to build out a wireless high-speed
Internet network.
Such plans would face resistance from Karmazin, according to the
source, and would likely be fought by the FCC. The agency would have to
review how the purchase would affect Sirius subscribers. Any investor
would likely have to agree to not increase prices and to add more
minority programming -- promises the New York-based Sirius had to make
when it merged with the District-based XM last year, analysts said.
If an investor wanted to strip Sirius of its radio service and use its
spectrum for other purposes, the obstacles could be even harder to
surmount.
"The FCC's unlikely to authorize a repurposing of spectrum that would
disenfranchise 19 million satellite users," Barclays Capital analyst
Vijay Jayant wrote in a research report.
Sirius and XM executives poured millions of dollars into lobbying the
FCC and the Justice Department to agree to their union, which was
fought by the National Association of Broadcasters and consumer groups
who said it would create a monopoly in the satellite radio market.
The Justice Department approved the merger last February after deciding
that the combined company would not hamper competition. The FCC
approved the merger months later, with the agency's three Republican
members voting for it and the two Democrats voting against the deal.
Analysts said the long process distracted managers from merging
operations and finding ways to cut costs of the combined company. At
the same time the economy was sinking and consumers were cutting back
on purchases of cars and electronics. Sirius' main source of revenue
comes from new cars equipped with satellite radios.
"Whatever you thought about the wisdom of the final decision, it
clearly took a terribly long time to make," said Rebecca Arbogast, an
analyst at Stifel Nicolaus. "It is hard to keep your eyes on the prize
when you are not sure what your future is."
Kevin J. Martin, who was chairman of the FCC at the time, defended the
agency's lengthy proceedings, saying the merger was extraordinary in
that it called for the agency to overturn rules that blocked a merger
between the two firms. He added that the company had acted slowly to
correct violations of wireless tower use.
"This was not a normal transaction," Martin said in an interview. "They
asked us to change our rules that explicitly prohibited the merger."