Tearing The Guts Out Of The Sirius (SIRI) Merger With XM Satellite (XMSR)

Some of the fat cats in the Senate think that the Sirius Satellite (SIRI) merger with XM Satellite might be OK if the combined company would give up a large portion of its spectrum. According to The Wall Street Journal, these legislators would propose that the firms “divest as much as half of their combined radio spectrum as a condition of their proposed merger.”

Although it is not clearly articulated, the reason for the proposal is so that the US government could, if it wanted to, sell that spectrum to another party to start a new satellite radio company. Even that option would allow the government to view XM plus Sirius as something short of a monopoly.

The Senate and the FCC actually know better than to push their deal. Over the year-and-a-half that the merger has been pending, the two companies have gone from being in bad financial share to being in a dire set of circumstance. Each company has well in excess of $1 billion in debt. Neither has ever made a dime and their losses last quarter were not encouraging.

Satellite radio has lost much of its appeal for consumers. The slowing subscription growth rates at the two companies show that. HD radio and the Apple (AAPL) iPod, which can be plugged into a car sound system, have taken away much of the uniqueness of getting music, Howard Stern, and Oprah off the big bird in the sky

The merger may go through. It may be killed. Either way, satellite radio has a dim and perilous future.

Douglas A. McIntyre