Thursday, January 18, 2007

CITI Comments on Sirius

January 18, 2007

Eileen Furukawa of CITI Summary

- FCC's Martin's statement that current rules prohibit one company from owning both
satellite radio licenses rattled XM/SIRI stocks. In our view, Martin was simply stating
a known fact, not taking a position on merger, as FCC rules can be changed.

- We continue to feel both parties remain interested a merger. Still, hurdles to get
to an agreement remain, and chance of approval from FCC remains a big unknown.

- NPD data shows steep December industry decline of (46%) at retail. 1Q07 is likely
to be another difficult qtr, with some downside risk, but should be near term bottom.

- SIRI: (40%) decline is better than Nov's (45%), but still down sharply due to weak demand and tough comps. 66% Dec mkt share is highest ever for SIRI.

- XM: (55%) decline in Dec was worse than Nov's (45%) drop. XM retail sales have declined 10 straight months, and have accelerated for the past 3 months.

- Maintain Buys on XMSR and SIRI due to return to positive OEM-driven sub growth in 2007, good risk/reward, and nearing positive FCF.

Labels: citigroup, merger, sirius