Another analyst likes XM/Sirius


An analyst from Citi Investment Research is guestimating a 60% chance that the proposed merger of XM Satellite Radio and Sirius Satellite Radio will get all necessary thumbs pointed up. Citi’s Eileen Furukawa said that if it does go though, it could lead to up to 7B in savings for the combined entity. That had the effect of shooting stock prices up for each last Monday, with XM rising 1.05 and Sirius rising 0.13 per share.

A vote from shareholders of the two companies is on the calendar for 11/13/07. DoJ and FCC approval is also required. The FCC’s Kevin Martin (R) has indicated that the Commission will stick to the normal merger shot clock, which would indicate a decision before the year is out. He also said approval will face high hurdles. Commissioner Michael Copps (D), an anti-consolidation force to begin with, has expressed misgivings about allowing the merger to go through.

RBR observation: Nobody doubts that the merger would be good for XM and Sirius. The question is whether it would be good for consumers. Since both companies say they are solvent and that the merger is not a requirement for their continued operation, there is absolutely no reason to abandon the Economics 101 principle of competition between the two, which was a key foundation of their original license grants. Despite all the efforts by various analysts to gauge the likelihood of approval based on the perception of which way the FCC is leaning, the other half of the equation is the DOJ. We have seen absolutely nothing to change our initial view that the approval likelihood is about 10%.