XM & SIRIUS Get 'Former FCC Economist' Backing the Merger (XMSR, SIRI)

It looks like XM Satellite Radio (XMSR-NASDAQ) and SIRIUS Satellite radio (SIRI-NASDAQ) are going hard and fast on the offensive, or at least as far as turning on the press release machines.  The company hired a lobbying group to press the deal and yesterday gave a ‘diversity group support’ for the merger.

Today the press release machines are back on.  Thomas Hazlett, the former Chief Economist of the Federal Communications Commission, Professor of Law & Economics at George Mason University, and a principal in Arlington Economics, has released a study regarding the merger of SIRIUS Satellite Radio and XM Satellite Radio.  "The Economics of the Satellite Radio Merger," explores the financial and strategic rationale behind the SIRIUS-XM merger and concludes that the merger offers the potential to yield substantial efficiencies, benefit consumers and enhance the dynamics of competition within the audio entertainment marketplace. The paper was prepared for XM and SIRIUS and was filed today at the Federal Communications Commission as part of the
companies’ merger application.

Commenting on the merger, Professor Hazlett stated, "After a thorough analysis, it is my opinion that the merger of XM and SIRIUS will predictably enhance consumer welfare. The National Association of Broadcasters’ (NAB) staunch opposition to the merger illustrates their similar expectation. The improved economic vitality of a combined satellite radio company would drive industry innovation, promote competition and enhance programming and pricing options for customers."

If you wanto to read the rest of the press release you can access it here.

Normally we might not cover what is likely a sponsored study, even though that is what The National Association of Broadcasters does.  But the key difference here is the person wrote the report: Thomas Hazlett, the former Chief Economist of the Federal Communications Commission.  That is not unnoticed. 

XMSR is up 2% to $10.78 after being flat all day and SIRI is up 1% at $2.80 after being slightly down for most of the day.  This alone is not enough to make the tide change for an approval of the proposed merger, and they have many more hurdles ahead to get a deal accepted.  But this one looks like a good start.

There are even two web sites: xmmerger.com and siriusmerger.com trying to pose the benefits.

Jon C. Ogg
June 14, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.