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Suspense grows over XM-Sirius antitrust review
WASHINGTON (Reuters) - U.S. government antitrust lawyers have spent nearly 10 months so far investigating Sirius Satellite Radio Inc's (SIRI.O) plan to acquire rival XM Satellite Radio Holdings Inc XMSR.O, despite company hopes that the deal would be approved by the end of 2007.
The delay may be due to the complexity of the issues raised by the merger of the only two U.S. satellite radio companies -- or because the Department of Justice (DOJ) is putting together a case to block the deal in federal court, analysts at Stifel Nicolaus said in a research note on Thursday.
Alternatively, top officials at DOJ may be leaning toward approval but might still be weighing arguments from staffers who oppose the deal, Stifel Nicolaus said.
"Like many others, we believed it was likely that the DOJ would have reached a decision before the winter holidays," Stifel Nicolaus said.
Washington, D.C., antitrust lawyer Andre Barlow, of the firm Doyle, Barlow & Mazard, said some analysts may have underestimated the complexity of the investigation.
"It certainly wasn't as imminent as (some) projected," Barlow said, referring to previous rumors that the government was about to make a decision.
Asked by Reuters about the ongoing review, Sirius and XM issued a joint statement saying: "As the companies said from the outset, we expected to complete the processes at DOJ and the FCC so that the regulators could make their decisions and the merger could close by the end of 2007. We have fully complied with the requests from both agencies. The ball is now in their court and we look forward to their determinations."
A key antitrust issue in the case is whether the combined satellite radio company would still face enough competition from free, over-the-air radio and new technologies.
The deal, announced on February 19, 2007, would bring entertainers such as Oprah Winfrey and shock-jock Howard Stern under one roof. Sirius and XM, both of which are losing money, each currently charge subscribers about $13 a month for more than 100 channels of news, music, talk and sports.
Barlow said the DOJ antitrust division is probably in the latter stages of reviewing the deal. But he said a final decision could still take some time because the proposed deal raises complicated questions about emerging technologies and how officials should view the radio business.
"It is a complicated deal to review," Barlow said.
The traditional radio industry, as well as some consumer groups and U.S. lawmakers, have criticized the deal as anti-competitive. But the satellite radio companies argued that they face plenty of competition from traditional radio stations and from the growing popularity of iPods and other personal audio players.
To allay critics' concerns, the two companies promised that after the merger, they would offer several new packages starting at lower prices, which they say would give consumers more programming choices than XM or Sirius could provide individually.
In November, one industry analyst said an antitrust decision by the department could be imminent and he believed the deal would be approved. Two U.S. lawmakers on the House Judiciary Committee responded with a letter to U.S. Attorney General Michael Mukasey, saying they were concerned about reports that officials might intend to approve the merger over objections of career attorneys at the Justice Department.
The Sirius-XM deal is also being examined by the Federal Communications Commission, which is expected to follow the Justice Department's lead.
The FCC is studying whether the deal would be in the public interest -- and whether to enforce a 1997 FCC order prohibiting the two companies from merging.
Shareholders from both companies approved the merger on November 13. XM shareholders would get 4.6 shares of Sirius common stock for every share of XM owned.
Shares of XM, which closed at $13.98 the day before the February 19 deal announcement, have been volatile ever since. XM dipped below $11 a share in May and then nearly hit $16 in late November. On Thursday, XM was trading at $12.57, up 15 cents.
The share price of Sirius, meanwhile, had a 52-week peak of $4.26 just before the deal was announced and was trading late Thursday at $3.12, up 7 cents.
(Additional reporting by Franklin Paul in New York, editing by Gerald E. McCormick)
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