Satellite Radio?

I shared my appreciation for XM radio on this blog as well as when I reduced and cancelled. I told my brother-in-law that I had cancelled and he said that most all the people he knew who got it had cancelled. I was surprised, I thought my case sui generis.

Reading between the lines in this WSJ.com piece I suspect some serious (sirius?) problems going forward.

XM Satellite Radio Holdings Inc., the country's largest satellite-radio provider, said Friday it ended 2006 with more than 7.6 million customers as it netted 442,000 new subscribers during the fourth quarter.

Analysts were modestly disappointed with the subscriber number, but said it reflected an overall soft retail market for satellite radios. Instead, investors looked ahead to the potential for a merger of XM and fierce rival Sirius Satellite Radio Inc. The possibility of combining the competitors has been talked about for months, but regulatory hurdles may prove onerous.

Sirius, a later entrant in the market for satellite radio, said earlier in the week it had more than six million subscribers at the end of 2006, and the company has been rapidly closing the subscriber gap with XM. The company rattled investors last month, however, when it cut subscriber targets after early holiday sales weren't meeting expectations.

The only hope is to have the two competitors merge. This would lengthen "the tail" and allow them to provide more diverse content and a stronger hardware position.

David Bank, an analyst at RBC Capital, said the subscriber numbers for both Sirius and XM were slightly softer than expected, but reflected dwindling importance of retail sales for satellite radios. Mr. Bank said the keys are a potential merger and the race to push satellite radio sales to car makers, where XM has a lead over Sirius.

"The next real game changer is going to be whether or not from a regulatory perspective, these companies are going to merge," Mr. Bank said. He has a "buy" rating on XM.

I cannot imagine getting approval for such a merger in the 110th. Democratic committee chairs and TR Republicans are not going to allow a monopoly in Satellite Radio. Even though, as usual, the FTC is not capable of seeing whom a firm or technology actually competes against. I don't think I'd buy.

Posted by jk at January 5, 2007 11:56 AM