UPDATE 3-Sirius loss narrows, sees growth as autos recover

* Q3 adjusted EPS break-even vs Street view for 2 cent loss

* Q3 revenue up 3 pct, beats expectations

* Adds 102,000 subscribers to end Q3 with 18.5 mln

* Sees subscriber, revenue growth in 2010

* Shares rise about 4 pct in afternoon trading (Adds analyst comment, updates stock activity)

By Franklin Paul

NEW YORK, Nov 5 (Reuters) - Sirius XM Radio Inc (SIRI.O) posted a smaller quarterly loss on Thursday, helped by subscriber gains and the success of premium programming on its pay radio service, and said it expects to sees subscribers and revenue grow in 2010 as the auto industry recovers.

Shares of Sirius XM rose about 4 percent amid signs of resilience at the company, which earlier this year secured financing from John Malone's Liberty Media Corp (LINTA.O) LCAPA.O LMDIA.O to stave off critical debt deadlines.

It ended the quarter with 18.5 million subscribers to its service, which is home to programming including Howard Stern, Oprah Winfrey and Major League Baseball. That was up 102,000 from the second quarter of this year but down 2 percent from the third quarter of 2008.

"Sirius added 102,000 (which) was significantly better than our estimate of a 237,000 decline, and above the 100,000 decline we think was being expected by investors," said J.P. Morgan analyst Lev Polinsky in a note to clients.

Its third-quarter net loss was $149 million, or 4 cents a share, compared with a loss of $4.88 billion, or $1.93 a share, a year earlier. The 2008 loss included a large charge related to goodwill.

Excluding special items, Sirius broke even on a per share basis in the quarter, beating Wall Street expectations for a loss of 2 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 3 percent to $629.6 million, also outpacing analysts' expectations of $608.7 million.

BENEFITING FROM "CLUNKERS"

The U.S. government's Cash for Clunkers program, which boosted new car sales in July and August, was a boon for Sirius, which gains the majority of its new customers when cars are purchased. While car sales have since leveled off, many of those auto owners will remain Sirius subscribers.

Sirius XM Chief Executive Mel Karmazin said some 55 percent of new cars are now equipped for Sirius and nearly 47 percent of car buyers with promotional subscriptions that come with new cars eventually convert to paying customers.

"Mel Karmazin expressed optimism about subscribers, and I share an optimism in a broader sense," said Barrington Research analyst James Goss. "It's conceivable that there could be a quarter or two of rockiness; but their latest quarter was better than I thought, so maybe I underestimated how quickly the turn (in car industry sales) could take place."

Some automakers are becoming more optimistic about a slow recovery in auto sales, which would also boost subscriptions for satellite radio. An executive at German autos parts supplier Robert Bosch GmbH [ROBG.UL] expects U.S. light vehicle sales to improve to 11 million units in 2010, up from about 10 million units this year. [ID:N04462936]

That's still lower than 13.2 million shipped in 2008.

"Regardless of how quickly that sector recovers, Sirius XM will continue to grow. We will add subscribers, introduce new products, improve ARPU (average revenue per unit, or customer), manage churn, and control costs," Karmazin said on a conference call with analysts.

Churn, the rate at which users quit the service, was about 2 percent, flat from the second quarter and up from 1.7 percent a year earlier.

Sirius forecast 2010 revenue growth of mid- to high-single digits, and growth in free cash flow -- a measure of cash left after all expenses are paid -- compared with 2009.

It added that it sees full-year adjusted income from operations to increase by 20 percent, and expects to achieve positive full-year subscriber growth in 2010.

"While the near future's macroeconomic performance is extremely difficult to predict, our business has reached sufficient scale to allow us to continue to grow cash flow," Karmazin said.

The company repeated its outlook for pro forma 2009 adjusted income from operations of $400 million.

Sirius shares, which before Thursday's start of trade had risen about 12 percent in the past quarter and more than tripled this year amid optimism about its financial health, rose 3.9 percent to 63.5 cents a share on Nasdaq. (Reporting by Franklin Paul; Editing by Derek Caney and Gerald E. McCormick)