Merger Merger Buy-Out
July 18, 2006
The mere mention of a merger between Sirius and XM brings out a lot of instantaneous responses about how it would be impossible because regulators would never allow such a thing to happen.
Today, we are looking at speculation on another satellite front…..Satellite Television.
Rumors are once again circulating that Direct T.V. and Dish are exploring various options that include the two providers becoming one.
Three years ago an attempt at just this was made but thwarted by Federal Regulators citing antitrust laws.
How much has changed in the landscape during the last three years?
Quite a bit. Time Warner and Comcast now control the bulk of the cable television industry, and telephone carriers such as Verizon, AT&T and Qwest are beginning to enter the television arena.
At a recent media conference in Sun Valley, Idaho, EchoStar CEO Charlie Ergen stated that the combination of the nation's two largest satellite TV providers could save $3 billion in expenses. In contrast, News Corp. Chairman Rupert Murdoch, who controls DirecTV, expressed doubts that Ergen would sell, but the Los Angeles Times quoted a number of sources who claimed that Murdoch was working on "something." What that “something” is the big question.
At this point, there are many positives that companies such as Direct TV and Echostar could point to in their argument to allow a merger or buy-out to happen. The competition is now coming from areas that only three years ago were likely not even thought of by many. The same now holds true for satellite radio.
When satellite radio licenses were first issued, the I-Pod was not even conceived. MP3 players were not yet the rage, and cell phone companies were all about making phone calls. Today, consumers have a lot of choice in how they receive their content.
This explosion of technology and explosion in modified business plans can potentially have an enormous impact on what regulators consider when they are presented with a case for a merger. Now more than ever regulators need to think further down the road.
Another aspect of this is that it may be a method for regulators to garner a little bit more control over the bandwidth dedicated to the satellite entertainment industry (be it radio or television), what is broadcast on it, and how widely available it may be. The government can essentially approve such actions contingent upon other actions. If that happens, the parties involved would have a business decision to make.
Can a merger happen in satellite radio or satellite television? Yes, it can. Are there substantial obstacles? Yes there are. What it really boils down to is how receptive the companies involved are to the idea, and then how strongly they are willing to pursue it.
The idea is intriguing for investors because most can clearly see the cost savings associated with the idea. Costs for these companies has always been a concern for investors. The elimination of costs would be something well received on the street. One thing is certain........If regulators were to allow Direct TV and Echostar to merge, you can bet that speculation for Sirius and XM be at a fever pace.
SSG cautions readers to note that at this point all of this merger and buy-out talk is speculation. However, investors should keep their eyes on technology as a sector and be aware of the various scenarios that could pan out.
7/18/2006 11:32:00 AM
SSG Has Merged. You Can Read All Of The Latest SSG Content By Clicking Here
0 Comments:
SSG is not a Financial Advisor. Read Disclosure: HERE
--------------------------------------------------------
