US Department of Justice Okays Satellite Radio Merger

26 March 2008

WASHINGTON, DC: The US Department of Justice on Monday  finally gave its blessing to the $13 billion (€8.44bn; £6.55bn) union of America's two red-beset satellite radio rivals – Sirius Satellite Radio and XM Satellite Radio.

In a decision that took thirteen months to reach, DoJ assistant attorney general Thomas Barnett pronounced: "We determined after a very thorough and comprehensive investigation that we should not challenge the transaction and have closed our investigation.

"The evidence did not support a relevant market limited to just the two satellite providers."

The ruling is based on the DoJ taking a broad view of the "relevant market", seeing it not as a game with just two-players but as part of the total audio-entertainment industry.

However, the leery protagonists deemed it premature to break-out the champagne. They declined comment save to note that that they have yet to receive a green light from a second watchdog: the Federal Communications Commission.

Although it is highly unusual for the FCC to block mergers that have received the nod from the DoJ, the former's approval cannot be taken for granted,

As Pacific Crest Securities analyst David Niederman points out:  "The charter for the spectrum [the two satellite companies] were awarded says they need to be owned by separate entities that must compete against each other." 

Despite which stipulation, Niederman declared his belief that the merger "probably will get passed."

Investors apparently think likewise, with XM's stock up 15.5% to $13.79 on Monday, while Sirius shares leapt higher yet to $3.15 – twenty percent up on the day's opening price. 

XM had 9 million subscribers as at December 31 2007, up 18% year-on-year; Sirius posted 8.3m, up 38% on 2006.

Data sourced from Business Week (online); additional content by WARC staff