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Karmazin: If FCC Conditions Are Too Tough, Sirius Won't Merge
NEW YORK -- May 12, 2008: Sirius Satellite Radio CEO Mel Karmazin said during today's first-quarter earnings call that if the FCC ultimately approves his company's merger with XM Satellite Radio with conditions that are "so egregious that they're not in shareholders' or subscribers' best interest, then we won't do it."
But Karmazin is still a big believer in the merger's potential -- even more, he said, than when it was announced. After noting that Monday's was Sirius' fifth quarterly earnings call since the deal was proposed in February 2007, he said, "I share the sentiments I hear from many of you regarding the length of time it is taking to complete our transaction."
The Department of Justice wrapped up its investigation in March and approved the merger with no conditions, but the FCC has yet to make a decision. Karmazin pointed to the depth of the DOJ investigation, noting that XM and Sirius between them supplied more than 12 million pages of documents to the agency and that several dozen subpoenas were served and responded to, and more than a dozen depositions were taken. "The review was extensive," he said, "and concluded that the merger would not substantially reduce competition."
At the FCC, the satcasters must show the merger is in the public interest. Karmazin said, "We believe there is nothing that is more in the public interest than committing to offer the American consumer more choices and lower prices." He cited the support the merger has received from consumers, lawmakers, and various religious and public interest groups.
Karmazin also pointed out that the merger application was filed more than 400 days ago, and that the FCC "clock" began on it almost 350 days ago, noting that the FCC has historically tried to move on such applications within 180 days. "We share the reasonable frustration that many of our investors feel with the time it has taken," he said.
Several organizations and some lawmakers have suggested conditions on the merger that would require a merged satcaster to lease bandwidth to a third-party service to ensure competition or diversity, and one private equity firm has volunteered to be the lessee.
Karmazin said Monday, "We ... share the outrage that some have expressed to me regarding press reports of opportunistic parties trying to take advantage of the process and extract value for themselves that properly belongs to Sirius subscribers and shareholders. I can assure you we will work with the regulators on any conditions they feel should be attached to an approval. I can also assure that we will not do anything that is not in our subscribers', future subscribers', or shareholders' best interest."
Earlier in the call, Karmazin cited Sirius' record gross subscriber adds of over 1 million subscribers in Q1 and its net addition of 2 million subscriptions in the past year as evidence of the satcaster's strength -- even with slowing auto sales and a challenging economy, as well as the uncertaintly surrounding the merger. He said the subscriber figure in particular "is a reflection of our strong content, consumer acceptance of our brand, and exceptional execution by all of our partners."
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