FCC's Short Circuit On XM & Sirius Merger

Kevin Martin, Chairman of the FCC, has said that FCC rules would prohibit a marger in satellite radio.  Could this be changed?  Sure, with some serious lobbying and petitioning, long-term concessions, and likely a costly uphill battle.  Satellite radio is not deemed a critical media support mechanism out there yet, so this makes little sense that the FCC would be out there crashing any merger hopes. 

If the head of the organization is saying this publicly it would make sense that he is trying to draw the line in the sand to what were probably direct discussions that have been brought to the FCC by either XM or by Sirius.  Blocking this would-be merger before it is even announced makes little sense when you consider how much of the old Ma-Bell that was broken up in the 1980’s has been put back together on their watch.  Either way, this is taking any merger hopes away from the satellite radio investors.

Here is the Daily Digest from today for the FCC.

All I can think of is Doug’s article from this morning questioning if these companies are worth less than their share prices.  This has much of the supporting data that has built up to today’s news.

The Wall Street Journal (subscription required) has already slammed this today, and there have been as many prelude comments to this speculated merger as you can count.  Even Karmazin admitted last year there would be FCC problems on this long ago.  But if these companies can’t band together they are going to have to do quite a bit more to keep those debt and past operating losses from dragging them down.

You know they aren’t, but this would sure make you wonder if the FCC heads shorted the stocks today if you were a conspiracy theorist.  Sirius (SIRI) is down 6% at $3.90 and XM (XMSR) is down almost 9% at $15.62.  Either way, this story is getting more coverage than one would have imagined and it is getting very long in the tooth.

Jon C. Ogg
January 17, 2007