The companies _ which have lost a combined $6.8 billion as public companies,according to Standard and Poor's Compustat _ have said a merger will help keep costs down. In the last few years,both XM and Sirius have spent heavily to lure top talent and programming to their respective lineups,including lucrative deals for Oprah Winfrey and Major League Baseball on XM,with Stern and the NFL on Sirius.
In a conference call with analysts,XM executives took pains to assure consumers they will not be stranded with obsolete receivers if the deal goes through,though they did not offer details. Currently XM and Sirius receivers are incompatible. Sirius chief executive Mel Karmazin offered a similar assurance Monday in an interview on Stern's radio show.
But XM executives declined to answer an analyst's question about whether its marquee programming,including its Oprah channel and baseball package,require renegotiated contracts if the deal is approved.
Two analysts who follow XM gave different opinions on the deal's prospects with the FCC. Sanford C. Bernstein analyst Craig Moffett gave the deal a 50 percent chance at approval,while Bank of America analyst Jonathan Jacoby estimated the chances at less than 50 percent.
Karmazin,in his interview on Stern's show,said he believes the chances are better than 50 percent. He argued that consumers will benefit from an expanded programming lineup and rejected the argument that a merger will result in higher prices,arguing that competition from free radio,iPods and the like will keep a sole satellite provider honest.
"We're competing with (something that is) free,"Karmazin said."If the argument against the merger is higher prices,I'm convinced I can make the argument that won't happen."
Stern,who was on vacation when the proposal was announced last week,endorsed the deal on his show.
"I'm psyched that I'll have a bigger audience,"Stern said.
Last year marked the first year that XM added more subscribers through the automobile market than the aftermarket retail segment. XM chief executive Hugh Panero said XM believes the market will become increasingly reliant on factory-installed models.
"Our financial metrics are heading in the right direction as marketing costs have declined and our revenues have increased,"Panero said.
XM Chief Operating Officer Nate Davis said during the conference call that XM tamed its marketing costs by offering consumers below-cost radio receivers only when they committed to subscribing to XM. Previously,consumers could get the cheap radios without any long-term subscription commitment.
Sirius reports its earnings Tuesday.