XM-Sirius merger under pressure at House hearing
Benefit to consumers questioned; Sirius CEO predicts listener "boon"
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Last Update: 3:32 PM ET Feb 28, 2007
WASHINGTON (MarketWatch) -- The proposed merger between Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. came under congressional pressure Wednesday as the chairman of the House Judiciary Committee questioned the merger's benefit to consumers.
"The burden of proof lies with these companies to convince the Congress," regulators and consumers that the merger will improve competition, Chairman John Conyers, D-Mich., said in an opening statement at a hearing about the proposed merger.
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SIRI3.64, -0.01, -0.3%) Chief Executive Mel Karmazin vigorously defended the deal, saying in testimony that the merger would be a boon to consumers, creating more radio programming at better prices.
Karmazin also reiterated his belief that the companies are facing stiff competition from such technologies as multi-channel digital broadcast radio, wireless broadband and mobile phone streaming.
The National Association of Broadcasters, meanwhile, called the proposal "anti-competitive."
The companies announced the planned combination on Feb. 19, after months of speculation that a deal was in the works. Terms call for XM's (XMSR : xm satellite radio hldgs inc cl a
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XMSR14.27, -0.05, -0.3%) shareholders to get 4.6 shares of Sirius stock for each XM share they own. The companies say the merger will save about $5 billion to $6 billion if allowed to go through.
But winning regulators' approval is far from a given, as current Federal Communications Commission rules bar two satellite radio companies from merging. XM and Sirius say they should be allowed to combine since they face intense competition from technologies like podcasting and Internet radio.
Losses narrow but profits elusive
Both companies reported this week that they narrowed their losses in the fourth quarter -- but neither turned a profit.
On Tuesday, Sirius reported a loss of $245.6 million, or 17 cents a share, in the final three months of 2006. That compares with a loss of $311.4 million, or 23 cents a share, a year earlier. See full story.
XM, meanwhile, said on Monday that it lost $263.7 million, or 90 cents a share, compared with a loss of $270.5 million, or $1.22 a share, in the final three months of 2005. See full story.
Wednesday's hearing was the first of what could be several such hearings looking at the proposed merger. On March 7, a House Energy and Commerce telecommunications subcommittee is scheduled to hold its own hearing about the proposed combination.
The hearing will focus on the merger and the future of the industry, said Vikrum Aiyer, a spokesman for subcommittee chairman Edward Markey, D-Mass. Witnesses haven't been announced.
XM and Sirius aim to close their deal by the end of the year.
Robert Schroeder is a reporter for MarketWatch in Washington. |
