XM, Sirius merger nears approval

Swing vote on FCC called a supporter

July 24, 2008|By Jim Puzzanghera | Jim Puzzanghera,LOS ANGELES TIMES

WASHINGTON - Federal regulators appeared poised yesterday to give final approval to the merger of the nation's only two satellite radio operators, which would bring together the struggling companies after a 17-month quest.

Deborah Taylor Tate, a Republican who held the swing vote on the five-member Federal Communications Commission, reportedly was ready to vote in favor of the $3.9 billion merger if Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. agreed to new conditions. Among them was paying $20 million to resolve outstanding FCC complaints against the companies, according to an agency official who requested anonymity because the terms had not been made public.

News of a pending merger approval, first reported by The Wall Street Journal, sent Sirius shares up 30 cents to $2.68. XM rose 94 cents to $10.04.

Neither Tate nor a spokesman for Sirius responded to requests for comment. An XM spokesman declined to comment.

Sirius and XM proposed the merger in February 2007 in hopes of ending a costly battle for on-air talent. But the plan drew fire from broadcast radio stations, which feared the combined influence of the two companies, along with lawmakers and public interest groups concerned about increased media concentration.

The National Association of Broadcasters said yesterday that it was not giving up.

"This sweetheart deal for Wall Street speculators is premised on a promise that a monopoly will provide consumers with lower prices, better service and more programming formats," said Dennis Wharton, NAB executive vice president. "Only members of the Flat Earth Society would buy into such specious nonsense."

Broadcasters said one reason the merger should be rejected was that Sirius and XM frequently violated FCC rules, including having dozens of unauthorized ground-based transmitters. The $20 million settlement proposed by Tate could involve those complaints.

Led by Sirius Chief Executive Officer Mel Karmazin, who was chosen to head the joint company, executives from both companies have pushed hard to convince regulators that a merger wouldn't constitute a monopoly. They argued that satellite radio competes with a variety of technologies, including traditional radio stations, Internet streaming and portable devices such as iPods.

The Justice Department approved the merger in March. But FCC Chairman Kevin J. Martin, a Republican, had said that the deal faced a high hurdle with him because the commission barred any merger when it allocated the airwaves for satellite radio in 1997.

Martin announced his support for the merger in June after Sirius and XM agreed to freeze subscription rates for three years, offer smaller and cheaper packages of stations, sell radios that could receive both services and set aside 4 percent of their channels for noncommercial and minority programming.

With Martin's fellow Republican, Robert M. McDowell, supporting the merger, Sirius and XM needed one more vote. Democratic commissioners Michael J. Copps and Jonathan S. Adelstein voted against the deal.

Jim Puzzanghera writes for the Los Angeles Times.

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