FCC chief recommends OK of satellite radio deal

June 16, 2008 2:41:05 PM PDT
The chairman of the Federal Communications Commission says he is satisfied the $3.8 billion merger of the nation's only two satellite radio companies is in the public's interest, but that's no guarantee the deal will win final approval. Two of the other four commissioners are ardent foes of allowing big media companies to get bigger and a third has been sympathetic to the broadcast industry, which opposes the satellite radio deal.

Some powerful members of Congress also have spoken out against the merger. Put it all together, and approval of the deal is anything but a slam dunk.

FCC chairman Kevin Martin said Sunday he will recommend that Sirius Satellite Radio Inc.'s buyout of rival XM Satellite Radio Holdings Inc. be approved by the five-member commission.

The companies offered concessions, including turning 24 channels over to noncommercial and minority programming and a three-year price freeze on service.

Commissioners can vote as soon as they receive Martin's order recommending the deal, which was expected late Monday.

The other four commissioners have kept their views on the deal largely to themselves. Unlike in other major decisions, Martin has no indication how they may vote. A three-vote majority is needed for approval.

The two Democrats on the commission - Michael Copps and Jonathan Adelstein - have strongly opposed efforts to loosen rules on media ownership. But they may agree to the deal if they believe concessions offered by Sirius and XM are significant enough.

"As I've said from the beginning, this merger is a steep climb for me. That hasn't changed," Copps said Monday in a statement.

Copps said he will review Martin's proposal with an open mind.

Republican commissioner Robert McDowell has portrayed himself as a supporter of free markets and limited government intervention, suggesting he will vote in favor of the deal.

The two Democrats "lean pretty heavily against" the deal, said Blair Levin, a former FCC chief of staff and now an analyst with the investment firm of Stifel Nicolaus. He agreed McDowell probably will support it.

The third Republican, Deborah Taylor Tate, generally has voted with the chairman in the past, but she has shown a streak of independence lately. In public remarks, she has shown sympathy for broadcasters and has been courted heavily by them recently. She is also politically vulnerable, given that she still awaits confirmation by the Senate for another term.

But the Justice Department's approval of the merger in March bodes well for the companies, Levin said. He said he was unaware of any merger approved by the Justice Department but then rejected by the FCC.

The XM-Sirius deal will affect millions of subscribers who pay to hear music, news, sports and talk programming, largely free from advertising, in homes and vehicles. Under the proposal, XM shareholders will receive 4.6 shares of Sirius stock for every share of XM they own. XM shareholders, based on Monday's closing price of Sirius shares, would receive about $3.85 billion.

The FCC's analysis of the XM-Sirius deal has lasted twice as long as the agency prefers in merger reviews, largely because it has faced a special hurdle: To ensure competition, the FCC prohibited the merger of the only two license holders when it created the industry in 1997.

That spurred the companies to offer significant conditions in an attempt to convince regulators the deal would be in the public interest.

Among some of the other promises, the companies have agreed to an "open radio" standard, meant to create competition among manufacturers of satellite radios. In addition, the companies have pledged to offer radios that are capable of receiving both services within one year.

The combined company would also include a so-called "a la carte" offering that would be available within three months of the close of the buyout.

Washington-based XM reported 9.3 million subscribers through the first three months of the year while New York City-based Sirius reported 8.6 million subscribers.


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