Subscriber Numbers

October 2, 2006

The Third quarter of 2006 is now complete, and many are looking for subscriber numbers to be announced by Sirius and XM. In our opinion, do not look for those announcements today. Today is Yom Kippur, a very important holiday in the Jewish Calendar. Because of this, we feel it is unlikely that any major news will be delivered today.

Now, getting on to what is expected when subscriber numbers are announced. The third quarter is typically the weakest quarter for SDARS, with two of the weakest retail months of the year (July and August), and temporary shutdowns at auto plants so OEM's can re-tool for the new model year happening all at the same time.

To be very clear, neither Sirius nor XM provide quarterly subscriber guidance, so the estimates and expectations for net subscriber additions are typically established by analysts.

SIRIUS

The street seems to be expecting about 415,000 net subscriber additions for Sirius. This would put Sirius at about at a bit over 5,100,000 subscribers.

The BULL scenario for Sirius is the strong quarter put together in the Sirius Business segment, as well as a stronger than normal marketing effort for the family plan. Retail sales were at a better pace than last year as well, but there could be some offset from the Sirius FCC issue, which we will cover in our BEAR scenario. Sirius would also have benefited from a strong brand awareness. We here at SSG would put a BULL estimate at 450,000 subscribers.

The BEAR scenario would be slower OEM production for re-tooling and a slow down in sales from Sirius Direct due to the FCC issue. We put a BEAR estimate at 420,000 subscribers.

XM

For XM, the street consensus seems to be at about 300,000 net subscribers. This would put XM Satellite Radio just above 7,200,000 subscribers.

The BULL scenario for XM lies in the OEM channel in our opinion. Last quarter, XM seemed to have cleared up some lingering subscriber issues as they switched out their system. This gave XM a weaker than expected OEM number in Q2. We feel that a more robust number will be reported in Q3. There could also be a benefit from Oprah, though we do not see it as being a major boost because it was not marketed to a great extent. An impact from Oprah is likely stronger in Q4. We here at SSG would put a BULL estimate at 330,000 subscribers

The BEAR scenario for XM revolves around the FCC issue, lower brand awareness, and a light marketing effort. However, we expect to see XM at least meet analyst expectations. We here at SSG would put a BEAR estimate at 298,000 subscribers.

Q3 is a difficult quarter to gauge because there were forces at play that are not typical. Both companies had a period of time where they were unable to sell hardware directly. The depth of the effect of this is unknown, and thus puts those trying to formulate an estimation at a disadvantage. We are expecting that XM Satellite Radio will release sub numbers on Wednesday, October 4th. We would expect that IF Sirius releases numbers, that it will be after XM does so.

10/02/2006 08:33:00 AM

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