Karmazin triumphs in antitrust approval of XM-Sirius
NEW YORK (Reuters) - Mel Karmazin has not lost his sales touch.
Sirius Satellite Radio Inc Chief Executive Karmazin, who started out pedaling local radio advertising in New York, polished his reputation as one of the media industry's top deal makers on Monday after he convinced U.S. antitrust regulators to allow Sirius's $4.2 billion purchase of XM Satellite Radio.
That approval by the U.S. Department of Justice came despite 13 months of objections from terrestrial radio companies and consumer groups worried about competition and left only minor hurdles to surmount.
"He's going to feel better about this than anything he's done in his career," said Tom Freston, former CEO of Viacom Inc and founder of investment and consulting firm Firefly3 LLC. "It's a big triumph for Mr. Karmazin."
Freston and others credited Karmazin's relentless courting of regulators, politicians and investors in pushing through approval of the deal -- using a combination of hard-nosed bargaining, cajoling and compromise.
"I think he is the most diplomatic, skilled negotiators that I know," said Joel Hollander, former CEO of CBS Radio, who recently started a sports and entertainment advisory firm 264 Echo Place Partners Inc. "Everyone knows he's a great salesman, but he knows how to leave a little bit on the table."
Over the past year, Karmazin has repeatedly promised to do what it takes to win approval for a deal that would bring entertainers and hosts such as Oprah Winfrey, Howard Stern and Deepak Chopra under one roof.
"If in fact there needs to be some commitments on the company's part to assure everybody that this will result in more choice and lower prices, I'm willing to certainly entertain what it is that the regulators might want me to do," Karmazin told Reuters in an February 2007 interview just after the deal was announced.
Indeed, in regulatory hearings over the deal, Karmazin promised lawmakers the combined company would not raise prices and would offer programming choices on a more "a la carte" basis.
Assurances by Karmazin, 64, who would serve as CEO of XM- Sirius combination, apparently did the trick with antitrust regulators, who concluded consumers have alternatives to satellite radio such as mobile phones and personal audio players.
The XM-Sirius combination still must win approval from the Federal Communications Commission, but most analysts said it only appears to be a matter of time before that comes through.
"Now it's past the DOJ and we feel pretty optimistic it will get through the FCC," said David Bank, an analyst with RBC Capital Markets. "I don't think it has happened in my lifetime that the FCC found in a different manner than the DOJ in these matters."
Even once it is finalized, the XM-Sirius combination will face a host of challenges, particularly with the prospect of a weaker economy forcing consumers to cut back on extra spending.
"The bottom line is they'll be able to cut costs. but they'll have to figure out a way to increase the subscriber base," said Hollander. "It's not so easy today. If there's anyone that can do it, it's certainly Mel."
Schooled in the door-knocking, street-pounding world of radio sales, Karmazin worked his way through night school at New York's Pace University by selling ads.
By the 1980s, he was running Infinity Broadcasting, a top national radio company, until it was bought for around $4.9 billion in 1996 by Westinghouse, then parent of CBS.
Later, Karmazin became CBS's president and chief operating officer before it was absorbed by Sumner Redstone's Viacom in 2000, when, again, his deal-making acumen came into play. According to published account of the process in Redstone's autobiography "A Passion To Win," the two did not employ investment bankers in the discussions.
Karmazin ended up with the number two job under Sumner Redstone. But clashes with Redstone led to Karmazin's departure in 2004. He then landed as head of Sirius.
Now Karmazin's Sirius appears on the verge of joining ranks with XM after more than a year of waiting, prodding and negotiating by the executive.
"He just grabbed onto this and ran through an endless amount of hurdles and made it seem more and more possible," Freston said. "This is probably the most difficult deal of his life."
(Editing by Andre Grenon)