ANALYST: LOOK FOR 'CONCRETE PROPOSALS' IN SATCASTERS' FCC REPLY Jeffrey Yorke – Radio and Records Bear Stearns satellite analyst Robert Peck predicts that Sirius and XM will offer some "concrete proposals on public benefits" from their proposed $13.6 billion merger when they reply to the FCC no later than the close of business on July 24.
"We believe XM/Sirius will not only rebut the arguments raised by the entities petitioning against the merger, but likely will go beyond just discussing the competition in the audio market," Peck wrote. "We expect the companies to go into more detail about their proposals regarding a la carte, price guarantees, block and rebate, reduced pricing for basic packages, as well as pricing for the 'best of both,' drawing regulatory focus towards the tangible consumer benefits that will arise from the merger."
Sirius CEO Mel Karmazin could give some real insight into what the company will say to the FCC on Monday (July 23), when he addresses the National Press Club in Washington, D.C. The NPC invited Karmazin to speak last month; these coveted invitations are seen as a rite of passage for political and corporate leaders. Once a speaker has accepted the invitation, it's considered gauche to dodge questions, and super salesman Karmazin will find himself in a cordial yet demanding environment. Expect him to have XM chairman Gary Parsons at his side for questions following the luncheon address.
Peck, for his part, is upbeat about the merger's prospects. "We believe the merger likely will be approved on merits," he wrote. "There has been a lot of debate on whether the proposed merger between XM and Sirius would be allowed to proceed by the [Department of Justice/Federal Trade Commission] and the FCC. After attending several congressional hearings, reviewing recent FCC filings, speaking with various legal and political contacts, and working through the merits of the merger proposal, we believe the proposed merger is likely to pass regulatory hurdles with appropriate concessions.
"We underscore, though, if political forces are more powerful than the merits of the deal, the outcome may be different. However, our sense is that the deal will be judged on merits and is therefore likely to pass. Our opinion is in fact a vote of confidence in the FCC and DOJ, who we believe will base their decisions on what's best for consumers and the American public."
During a July 10 Bear Stearns-hosted analysts' teleconference with former FCC chairman Dick Wiley, now with leading D.C.-based communications law firm Wiley Rein, Wiley told analysts that while there is "even betting" on both sides concerning the merger, he believed the proposal has a better chance of being approved than not.
Some 29.3 million shares of Sirius were traded Tuesday (July 17) as the stock fell a penny, to $3.17 a share. XM Satellite Radio ended the day up 15 cents a share, to $12.82, as 4 million shares were traded. |