Sirius cuts loss, selling more stock


Two billion shares apparently are not enough for the soon-to-be-merged XM-Sirius, so they’re selling more stock and bonds. Meanwhile, Sirius reported that it reduced its operating loss in Q2 by 70% to $24 million.

With the merger at hand, following Friday’s approval by the FCC, Sirius did not conduct a Wall Street conference call, just as XM did not when it reported last week. There was not even a quote from Mel Karmazin in the press release on Sirius’ quarterly results, so it must be a very busy time at both companies.

As of the end of June, Sirius said it had 8,924,000 subscribers, up 25% from a year ago. While both satellite radio companies are now focused primarily on OEM sales through car dealers, Sirius noted that its retail subscriptions were up in Q2 by 7%. OEM subscriptions jumped 53%. Q2 self-pay customer churn was 1.6%, an improvement from 2.1% in Q1. Sirius said its Q2 conversion rate – turning people into paying customers at the end of the trial period that came with their new car – was approximately 48%, slightly better than 47% in Q1.

Total revenue for Q2 was $283 million, up 25% from a year ago. Operating expenses were basically flat, so the company’s loss from operations decreased to $24 million from $79 million a year earlier.

Now that the FCC has blessed the satellite radio monopoly, the two companies are busy refinancing some XM debt so it can be merged with Sirius. XM announced an offering of $550 million of exchangeable senior notes due 2014. Sirius then announced an offering of $375 million worth of its stock, that’s 135.8 million shares, which will be lent to affiliates of Morgan Stanley and UBS in connection with the XM note offering. XM stock will no longer exist post-merger, so the notes being issued by XM are convertible into shares of Sirius. It’s a complicated trail of transactions, but necessary to complete the merger.

RBR/TVBR observation: Long ago both satellite radio companies said they would turn cash flow positive at around four million subscribers. XM hasn’t gotten there with 9.6 million, nor has Sirius with 8.9 million. Will it happen with 18.5 million, plus the new subscribers the merged company adds this quarter? The merger, with no public benefit whatsoever, was clearly driven by Wall Street. But will even the merger save a business model that was doomed to failure from the start? Or has it merely dragged out the death of the satellite radio “business?”