Sirius's Karmazin Tells Congress XM Buy Serves Public (Update2)
By James Rowley and Christopher Stern
Feb. 28 (Bloomberg) -- Sirius Satellite Radio Inc. Chief Executive Officer Mel Karmazin defended the proposed purchase of rival broadcaster XM Satellite Radio Holdings Inc., pledging not to raise prices and saying consumers would have more options.
``We firmly believe that this transaction is essential to preserving and enhancing choice for consumers,'' Karmazin said in prepared testimony today before the House Judiciary Committee task force scrutinizing the $4.5 billion deal.
Karmazin and XM Chairman Gary Parsons are trying to convince U.S. regulators that joining the only satellite radio services won't harm consumers. Karmazin drew skepticism from legislators including Michigan Democrat John Conyers, chairman of the committee, who pointed out past promises, such as satellite radio interoperability, that haven't been fulfilled.
```Trust me' isn't going to work here,'' Conyers said to Karmazin. ``You've got some high hurdles to overcome, don't you think?''
The companies contend there is more competition for listeners now than when the original satellite licenses were granted, from devices such as Apple Inc.'s iPod, terrestrial radio and new high-definition stations.
``We are going to have to convince them that it is not anticompetitive,'' Karmazin said in oral testimony, speaking on behalf of XM as well as Sirius.
Karmazin said he would allow consumers options that would lower customer bills, and said the companies would accept pricing restrictions for an unspecified period.
Broadcaster Opposition
Shares of Washington-based XM gained 4 cents to $14.36 at 4 p.m. New York time in Nasdaq Stock Market trading. New York- based Sirius shares were unchanged at $3.65.
XM shares are trading 17 percent below the offer value of $16.82 in Sirius stock, an indication investors are skeptical the deal will be completed. Under the agreement announced Feb. 19, each XM share will be exchanged for 4.6 Sirius shares.
The proposal is opposed by the Washington-based National Association of Broadcasters, the industry group for free AM-FM radio. XM and Sirius are a duopoly seeking to become a ``government-sanctioned monopoly,'' NAB President and Chief Executive Officer David Rehr testified today.
``They want the ability to set subscription prices for national satellite radio service without constraint from a competing service,'' Rehr said. ``They want to eliminate the need to compete with another national service provider to acquire programming.''
Close Look
Lawmakers and regulators have promised to look closely at the deal because of concerns that it would create a satellite radio monopoly. House Commerce Committee Chairman John Dingell, a Democrat from Michigan, said yesterday that he planned his own inquiry in to the deal. The Senate Judiciary Committee's Antitrust Subcommittee also may to hold a hearing.
The ``critical issue is whether the relevant market is all forms of digital music or simply satellite radio,'' Conyers said in an opening statement. ``If we were to define the market as broadly as merger supporters advocate, what kind of precedent are we setting?''
Congress doesn't have the power to block the deal, which will be formally reviewed by the Department of Justice and the Federal Communications Commission.
To contact the reporters on this story: James Rowley at jarowley@bloomberg.net ; Christopher Stern at |
