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XM, Sirius In Preliminary Merger Talks
The New York Post reports that satellite radio rivals Sirius and XM have been cozying up to each other recently.
While talks have not advanced far, executives from both sides have been meeting lately to discuss the possibility of a merger, according to several sources close to the matter.
Sources say the executives have not yet discussed price. They have, however, been weighing any potential antitrust concerns that would arise from a deal, which would create a monopoly in the nascent satellite radio business.
The two companies have talked in the past about merging, but the discussions never got to an advanced stage. But in the wake of Sirius' hiring of former Viacom President Mel Karmazin in November, the issue has gained renewed urgency, sources said.
"Mel is a roll-up guy, a deal guy," said one source close to Karmazin.
While many people in the media industry say it's inevitable the two companies will eventually merge, sources say a deal could be at least a year away.
The satellite radio industry is currently a FCC-licensed duopoly, and both XM and Sirius are hoping they can convince the agency to redefine the market to include all content over wireless broadband services.
A merger between XM and Sirius — neither of which is yet profitable — would alleviate a price war for premium content and allow the two companies to save significant amounts of money on marketing costs.
Merrill Lynch analyst Laraine Mancini said in a conference call earlier this week that one of the chief risks of investing in the companies' stock is a potential price war and "irrational bidding" for content.
Last year, Sirius announced a blockbuster $500 million deal to bring Howard Stern from traditional radio to satellite radio beginning in 2006. While some hailed the deal as a milestone for the fledgling sat radio industry, some on Wall Street said the company overpaid.
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