UPDATE 2-Sirius XM raises earnings forecast, adds users

Tue Aug 7, 2012 10:33am EDT

* Q2 EPS meets Street view 2 cents/shr

* Raises annual EBITDA forecast to $900 million

* Revenue jumps 13 pct

* Wall St awaits Liberty media conference call Wednesday

By Liana B. Baker

Aug 7 (Reuters) - Satellite radio operator Sirius XM Radio Inc posted higher-than-expected quarterly revenue on Tuesday, boosted by price increases, and raised its earnings outlook for the year.

Sirius, which competes with free Internet radio services such as Pandora Media Inc, reported a 13 percent rise in second-quarter revenue to $837.5 million. The result beat estimates of $834.38 million, according to Thomson Reuters I/B/E/S.

Chief Executive Mel Karmazin said the company has been speaking regularly to Liberty Media Corp, the holding company led by billionaire John Malone that owns 46 percent of Sirius shares.

But on a conference call Karmazin had little to say about the status of talks with Liberty, which told the U.S. Federal Communications Commission in May it intended to take control of Sirius.

Karmazin has been telling Wall Street he will not give up control without securing a premium for shareholders from Liberty.

Karmazin, whose contract expires at the end of the year, also told analysts the perception that he was reluctant to work for a controlling shareholder was overblown, and that his role is not an issue in current conversations with Liberty.

Regarding his contract, Karmazin said "the board and I will deal with it" before the third-quarter conference call.

On Tuesday, he said Sirius was not privy to Liberty's plans. Liberty has said it is interested in a tax-free spinoff of its stake in a transaction known as a Reverse Morris Trust.

Liberty also told the FCC in May it wanted to take over a majority of Sirius' board seats. It currently holds five seats out of a total of 13.

"Clearly Liberty has to decide what they want to do and maybe they've done that already, but they have not exactly communicated that to us," Karmazin said on the conference call.

Liberty may update Wall Street on its plans for Sirius on its earnings conference call on Wednesday.

HIGHER REVS PER SUBSCRIBER

Its revenue per subscriber rose to $11.97 from $11.53 a year ago, beating an estimate from Lazard Capital Market analyst Barton Crockett.

The company raised its prices for the first time at the beginning of the year. Some analysts had worried Sirius was discounting its products to keep subscribers.

"This will stand as a positive rebuttal to fears that the price hike was being subverted by discounting," Crockett said in a research note.

Sirius raised its 2012 target for adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to $900 million from $875 million and kept its free cash flow expectations at $700 million.

Gabelli & Co analyst Brett Harriss said he expects the company to raise its annual earnings forecast even higher in future quarters.

Excluding a $3 billion income tax benefit related to previous net operating losses, the New York-based company reported earnings of about $136 million, or 2 cents per share, which matched analysts' estimates.

In July, Sirius said it added 622,042 net subscribers in the second quarter, up 38 percent from a year ago. It now has 22.9 million subscribers and expects to add 1.6 million net subscribers by the end of the year.

It also raised its subscriber and revenue targets last month, fueled partly by strength in the auto industry, where Sirius gets most of its customers.

Sirius XM shares rose 5 cents, or 2 percent, to $2.25 on Tuesday.

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