May 1, 2012 / 12:16 PM / 5 years ago

UPDATE 2-Sirius XM CEO doubts FCC will side with Liberty

* CEO: Liberty has influence but is not in control

* Q1 EPS 2 cents, matches Wall Street view

* Adds more subscribers than expected

* Shares rise 1 percent

By Liana B. Baker

May 1 (Reuters) - Sirius XM Radio Inc CEO Mel Karmazin said it was unlikely that John Malone's Liberty Media Corp, the company's biggest shareholder, would get permission from regulators to take control of Sirius XM with its current 40 percent stake.

Liberty acquired its stake in 2009 as part of deal in which it loaned the satellite radio provider $530 million to help it stave off bankruptcy.

Since then, Sirius XM has turned its business around. On Tuesday it reported higher first-quarter profit and revenue, boosted by its first ever price increase. During an earnings conference call, analysts brought up the matter of Malone's intentions.

Sirius XM faces a potential battle with Liberty, which last month requested approval from federal regulators to take de facto control of Sirius XM now that restrictions on its stake have expired.

Liberty executives have said the company could boost its stake above 49.9 percent. It already holds five of Sirius XM's 13 board seats.

Karmazin said on the conference call that he did not think the Federal Communications Commission would side with Liberty.

"We believe the FCC will conclude based on precedent that a 40 percent shareholder, even one with influence, is not in de facto control," Karmazin said.

But he also said he had not heard from the FCC and did not know what Liberty Media planned to do besides keep its options open.

He said Sirius XM would protect its shareholders if Liberty did take control of the company. He said Sirius XM was not currently "combative" with Liberty.

"If the time comes that Liberty's interests are different than the other 60 percent of shareholders, we will do what we have to do to protect the interest of our 60 percent of shareholders," he said.

Wall Street investors would like to know how Liberty will proceed with its stake in Sirius XM.

"We'd like to see this resolved over the next several months and we'd love to hear what Liberty's true intentions are," said Lazard Capital Markets analyst Barton Crockett.

SOLID RESULTS

Sirius XM said it added 404,596 subscribers during the first quarter, ending the period with an all time-high 22.3 million paying users. The subscriber additions topped the 400,000 expected by Gabelli & Co analyst Brett Harriss and were far above the consensus Wall Street estimate of about 200,000, Harriss said.

Harriss said analysts expected the price increase to drive away some customers.

The New York-based company, which has radios on the dashboards of nearly 70 percent of new cars in the United States, raised its prices for the first time ever at the beginning of the year. The price for its basic package went up to $14.49 a month from $12.95.

Customers did not balk at the price rise. The company's subscriber churn, or customer turnover, improved to 1.9 percent in the first quarter from 2 percent a year ago.

Harriss said Sirius XM may have discounted its service for some subscribers to keep them from leaving.

Sirius XM reported net income of $107.7 million, or 2 cents a share, compared with $78.1 million, or 1 cent a share, a year ago. The earnings matched the average Wall Street estimate.

The company, which competes with free Internet radio services such as Pandora Media Inc, reported revenue of $804.7 million, against a Street estimate of $803.8 million. Revenue a year earlier was $622.4 million.

The company now expects a net increase in subscribers of 1.5 million this year as auto sales improve.

Full-year revenue is expected to be $3.3 billion, compared with a Street estimate of $3.36 billion. Free cash flow is expected to rise to $700 million for the year.

Sirius XM shares were up 1.5 cents to $2.27 in morning trade on the Nasdaq.

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