Morgan Stanley Comments on Retail Share

SIRI Share Gains Ahead Of Expectations, Stern Peak

- SIRI market share was 66% up from approximately 59% share in November. SIRI 4Q market share grew approximately 5% from 1Q06 (where SIRI benefited from the first quarter of Howard Stern). We believe this strong share performance is largely due to a programming and product advantage over XM. Looking to 2007 we do not see any reason market share levels at retail necessarily move back to parity. YoY December sales declines of 40.3% and 54.9% for SIRI and XMSR respectively highlight difficult YoY comps and a generally more competitive consumer electronics holiday selling season.

- December NPD results displayed retail category sales declining ~46% YoY- roughly 14% greater than our retail estimates. As both XMSR and SIRI have already announced 4Q net additions of 439K and 905K, respectively, we believe NPD's results highlight better sat radio sales trends experienced by large wholesalers such as Wal-Mart and Costco, which are not included in NPD results. Market share levels for the year were 60% for SIRI and 40% for XM according to NPD.

- Continued share gains at retail by SIRI point to a clear and sustained marketing and programming advantage relative to XM. We do not believe heavily discounted radios materially impacted share levels in either direction. Although not visible through the NPD results, we believe SIRI 4Q sub growth may have benefited from the sale of second or "family plan" subscriptions. SIRI ended 3Q06 with 14% family plan penetration relative to XM of 21%. However, we note that NPD does not capture direct online sales, where much of the second radio sales might occur.