SATCASTER MERGER IS IFFY DEAL, SAYS ANALYST Jeffrey Yorke – Radio and Records Banc of America Securities analyst Jonathan Jacoby has been bird-dogging XM and Sirius for a number of years, and he's not all that confident that they are going to pull off their proposed merger. In a review of Tuesday (Feb. 20) morning's joint XM-Sirius teleconference with analysts -- including Jacoby -- the veteran analyst tells investors in a note, "It seems to us that management and Wall Street are not very far apart on the estimated likelihood of a merger being completed. We believe that the probability of success is something less than 50%, and the managements seem to be only slightly more confident."
If the merger does go through, the benefits of two becoming one won't happen overnight. Jacoby believes that it will take a merged satcaster "several years," and maybe even longer, to fully benefit from its synergies, and, he said, "managements confirmed that it would take several years to move to a single satellite technology platform." And he's put off that "the companies failed to provide specific guidance on cost and revenue synergies based on their own analysis, and instead cited a range of Wall Street estimates."
Jacoby notes that in 2004, when EchoStar and DirecTV proposed to merge their satellite TV operations, the companies provided an estimate on synergies. Still, that deal was quickly rejected by the FCC.
The analyst also notes the about-face Sirius CEO Mel Karmazin exhibited Tuesday on the issue of a price increase. Karmazin, appearing at the CXredit Suisse Media Conference on Dec. 6, pounded the luncheon table on raising rates but now that a merger is being proposed has backed off, perhaps on concerns that a promised higher price could interfere with approval. |