Wednesday, February 28, 2007

Calling Mr. Rehr.....Calling Mr. Rehr

February 28, 2007

In doing a bit of research I came across some interesting perspectives from the NAB as it relates to ownership of radio stations, competition, and serving consumers:

Below is the Executive Summary of NAB's ownership filing. (SSG Comments In Blue)

The National Association of Broadcasters (“NAB”) hereby submits its comments responding to the Further Notice of Proposed Rulemaking in MB Docket 06-121, addressing the Commission's broadcast ownership rules. As all parties to the many ownership proceedings conducted at the Commission have recognized, broadcasting is an important part of our American culture. Local broadcasters provide national and local news, information and entertainment to the American public free of charge. Broadcasters participate in their local communities – they understand the needs of their audiences and work every day to provide programming to address those needs. As our record demonstrates, broadcasters recognize and embrace their obligation to serve the public interest. In light of this important role, NAB urges the Commission to approach its review of the broadcast ownership regulations with an eye toward maintaining the vibrancy of the broadcast industry so that it can continue to provide the vital service that all Americans have come to expect.

So Mr. Rehr......Would I be correct in my understanding that you feel that ownership should be viewed with an eye towards ensuring that vital services can be delivered to Americans, and if in doing so, that ownership is bettered by a change in ownership regulations?

As an initial matter, NAB emphasizes that the Commission has a clear duty, under both general administrative law and Section 202(h) of the 1996 Telecommunications Act, to reevaluate the broadcast ownership rules to ensure they still serve the public interest in a rapidly changing media marketplace.

Correct me if I am wrong, but you seem to be indicating that there is law that states that the ownership issues are in place to ensure that the public interest is served....not the interest of any particular organization. I would also like to stress here that you seem to recognize that the marketplace is rapidly changing.

Section 202(h) explicitly requires the repeal or modification of the existing ownership regulations if they are no longer necessary in the public interest as the result of competition. In this regard, the Commission must recognize the continuing proliferation of media outlets accessible to American consumers and the profound impact such proliferation has had on the broadcast industry and the need for continued ownership regulation.

Here you seem to clearly state that there is a proliferation of competition, and further you seem to state that the commission is "required to repeal or modify existing ownership regulations" My question is this Mr. Rehr: Would a similar stance not also apply to the licence restrictions originally placed on satellite radio?

The Commission originally adopted its local broadcast ownership restrictions decades ago in a very different media environment.

A very true statement. Would you not agree that even in the last 10 years even more substantial changes have happened?

Technological advancements, the growth of multichannel video and audio outlets and the Internet, and an expansion in the number of broadcast outlets in the past several decades have altered the media marketplace in two fundamental ways. First, consumers nationally and in local markets of all sizes now have access to a vast array of information and entertainment from broadcast and nonbroadcast outlets. Numerous surveys, including a very recent one conducted by BIA Financial Network (“BIA”), have documented this proliferation of media outlets in local markets, and a further BIA study demonstrated that consumers routinely access many additional “out-of-market” outlets. Second, due to this explosion of outlets, as the Commission found even four years ago, traditional broadcasters are struggling to maintain their audience and advertising shares “in a sea of competition.”

Seems that you recognize that there are indeed many forms of competition in this sector.

NAB herein documents how the more recent development of broadband and new video and audio Internet applications have exponentially increased the number of sources for information, opinion and entertainment, and created new and growing competitors for the advertising support that is crucial to free over-the-air media.

So the competition threatens the advertising model used by the NAB membership. Perhaps the NAB should focus some efforts on making their memberships products and content more compelling and diverse.

In light of these technological and marketplace developments, the Commission must seriously consider whether the current broadcast ownership rules continue to serve the agency’s stated goals of competition, diversity and localism. NAB believes that they do not.

Seems that you feel that current ownership regulations do not fit the world of today. Mr. Rehr, might this also apply to satellite radio?

In a multichannel environment dominated by consolidated cable and satellite system operators, broadcasters are clearly unable to obtain and exercise any undue market power. For this reason, the traditional competition rationale for maintaining a regulatory regime applicable only to local broadcasters and not their competitors is not a proper basis for keeping the current rules. Indeed, the primary competition-related concern in today’s digital, multichannel marketplace is the continued ability of local broadcasters to compete effectively and to offer free, over-the-air entertainment and informational programming that American citizens rely upon. NAB documents, in detail, the audience fragmentation and increasing competition for advertising revenue experienced by broadcast stations, as the result of new entry by cable television, satellite television and radio, numerous Internet video and audio applications, and mobile devices such as MP3 players. To best achieve the Commission’s goals of a competitive media marketplace that provides lower prices, better service and greater innovation to consumers, the Commission should now structure its local ownership rules so that traditional broadcasters and newer programming distributors can all compete on an equitable playing field.

So what are you asking for here? Do you want to begin to pay RIAA fees? Or perhaps you are asking that any content, be it national or local be available to anyone who is broadcasting entertainment and informational services.

A level regulatory playing field is particularly urgent, given that local broadcasters’ most prominent competitors enjoy dual revenue streams of both subscriber fees and advertising revenues.

I see that you spoke about the revenue side of things. Perhaps you could speak to the cost side. Radio subsidies in satellite. The fees paid to the RIAA. The substantial cost of launching satellites, etc. These are costs that the NAB membership do not have to deal with.

Broadcasters, of course, are almost solely dependent on advertising, and local stations today must struggle to maintain needed revenues in a vastly more competitive advertising market.

Did you say "vastly more competitive marketplace"?

Any realistic assessment of today’s media marketplace leads to the conclusion that competition considerations dictate change in the broadcast ownership rules.

Ever consider a change in business model? Ever consider delivering what the consumer wants?

NAB submits that the Commission must also consider whether its existing ownership rules are necessary to the traditional goal of promoting diversity. The proliferation of broadcast outlets and the rise of new multichannel video and audio programming distributors and the Internet have produced an exponential increase in programming and service choices available to viewers and listeners. Strong evidence shows that the public’s interest in receiving diverse content is therefore being met both nationally and on a market basis. Numerous studies, including one just completed by BIA, have confirmed that the post-1996 ownership changes within local broadcast markets, especially among radio stations, have enhanced the diversity of programming offered by local stations. This new BIA study also showed that radio stations are providing a wide range of programming targeted for diverse audiences, including minority groups and groups with niche tastes and interests. Moreover, both older and more recent studies indicate that the joint ownership of media outlets in local markets does not significantly inhibit the expression of diverse viewpoints by these commonly owned outlets.

So commonly owned media outlets is a good thing in your opinion. Does that apply to satellite radio as well?

The ability of consumers to obtain diverse programming and viewpoints is only enhanced by the growing level of substitutability between media for both entertainment and informational purposes. Studies previously conducted for the Commission and more recent surveys on media usage reveal considerable substitutability between media for various uses.

To be clear here......You seem to be saying that consumers utilize various formats for their needs.

Indeed, the recent studies showed that multichannel outlets and the Internet compete with – and substitute for – the use of traditional media including broadcast and newspapers for both entertainment and information, especially among younger consumers.

Seems you outline that there is plenty of competition in this area, and that due to that competition you want the ability to "consolidate" ownership.

As shown by NAB in the Commission’s pending localism proceeding, local stations provide a wealth of local news and public affairs programming, political information, emergency information, other locally produced and responsive programming, and additional, unique community service. But given the relentless competition for audience and advertising shares from the vast array of other media outlets, the real threat today to the extensive locally-oriented service offered by television and radio broadcasters is not the group ownership of stations. Rather, it is the challenge stations face in maintaining their economic viability in a market dominated by consolidated multichannel providers and other competitors. If the Commission seeks to maintain a system of viable commercial broadcast stations offering free, over-the-air service to local communities, then stations must be allowed to form efficient and financially sustainable ownership structures.

So efficient and financially sustainable ownership structures is good for NAB members. Would this "level playing field" situation deliver this as well? Shouldn't others be able to participate in this?

Local Radio Ownership
The Commission must reject calls for stringent ownership restrictions on local radio. Numerous studies have demonstrated that radio programming diversity has continued to increase since Congress opened the door to more efficient and economically viable radio ownership structures in 1996. Stations today serve very diverse audiences, including minority groups, with entertainment and informational programming targeted to their needs and interests. Radio stations also clearly operate in an increasingly competitive marketplace and face continuing audience fragmentation such that even market leading stations must find new ways to earn audience and advertising revenue share.

Imagine that. NAB stations are seeking out an improved business model.

Several previous studies moreover found no evidence that post-1996 ownership changes have lead to increases in the price of radio advertising or other exercises of market power by station groups.

HMMMMM.....So a change in regulation regarding ownership had no impact on advertising fees. Perhaps something similar is then quite possible with subscription prices for satellite radio.

Perhaps most interestingly, two empirical studies have concluded that any potential exercise of market power by radio groups can be countered by the ability of other stations, including smaller groups and individual stations, to gain substantial increases in listening share through programming changes.

Wow, a powerful statement here. might I re-word it a bit? "Perhaps most interestingly any potential exercise of market power bay a satellite radio merger can be countered by the ability of terrestrial radio, internet radio, streaming cell content, WIFI, WIMAX and MP3 services to gain substantial increases in listening share through programming changes". Is that a fair statement?

And, finally, a further NAB study demonstrated that, despite the post-1996 changes in the radio industry, large numbers of radio stations either remain “standalones,” or are part of local duopolies, in their respective markets.

In this current competitive marketplace, NAB supports continuing relaxation of the radio ownership rules.

Perhaps a relaxation in satellite rules is also appropriate

Congress adopted the existing numerical station limits in 1996 before the emergence of satellite radio, Internet streaming of radio stations, the development of Internet applications such as podcasting, on-line music sites, music file-sharing and downloading, and the growth of mobile audio technologies such as MP3 players and even mobile phones.

Seems you agree that there is plenty of competition out there.

XM and Siruis alone now put hundreds of channels of music, news, talk and sports into every local market in the United States, and earn dual revenue streams from subscriber fees and advertisers, all without being subject to comparable ownership restrictions.

You forgot the cost side of things again Mr. Rehr. The cost of implementing these services is fully considered in the scheme of things.

In the Internet age, every local radio station is potentially competing against thousands of radio stations from around the country or the world, and estimated monthly audiences for Internet radio are over 52 million.

Global competition........thanks, I am sure Sirius and XM will use that. Can they quote you directly?

With satellite radio and a host of mobile gadgets, terrestrial radio stations now also face growing competition for listeners while consumers are in automobiles or outside the home or office.

Because past changes in ownership structures have enhanced local stations’ abilities to serve diverse audiences and their communities, without resulting in the exercise of undue market power by radio groups, the Commission should find that a further liberalization of the decade-old radio ownership restrictions would serve the public interest.

So in your own words Mr. Rehr, consolidation can happen without causing undue market power in this hugely competitive market place. Is that correct?

Local Television Ownership
The Commission should reform the television duopoly rule to reflect the current competitive television marketplace and allow more freely the formation of duopolies in markets of all sizes.

More pro-consolidation......HMMMMM

As shown by NAB’s analysis of television market revenues, medium and small market stations compete for disproportionately smaller revenues than stations in large markets. Other specific factors – including the costs of the digital television transition and the decline of network compensation – have combined to further squeeze the profits of local television broadcasters, especially in medium and small markets. A new report on television station finances confirmed the declining financial position of small market television stations, particularly for those stations not among the ratings leaders in their markets. And given the considerable and growing expense of maintaining local news operations, some television stations (even in larger markets) have already been forced by financial considerations to cut back on or forego entirely the provision of local news. These numbers will only continue to grow if local stations are not allowed greater flexibility in ownership structures.

So in the face steep competition, ownership regulations should be relaxed so as to allow better services. A novel concept. I bet it would be applicable to satellite radio as well.

Freely permitting local television duopolies is necessary to preserve and enhance television broadcasters’ ability to serve their viewers and communities in markets of all sizes. As the Commission recognized (and the court affirmed) in the last ownership review, multiple studies and persuasive anecdotal evidence have shown that television duopolies result in efficiencies that produce public interest benefits, such as improved news, sports, weather and other local programming, in all markets including large ones.

There you go.....Production of efficiencies that produce public interest benefits. Seems to me that this is exactly what Sirius and XM are saying. Again, can Sirius and XM quote you directly?

A new BIA study confirmed that stations in local combinations in medium-sized markets are stronger financially and offer more programming preferred by local viewers.

I would bet that a BIA study on a satellite radio merger would conclude that a combination of Sirius and XM woulkd make them stronger financially and allow them to offer more programming preferred by consumers. Can you forward the contact information of someone at the BIA to us? We will be more than happy to pass that along to the folks at Sirius and XM.

The Commission must therefore recognize the positive benefits of reforming the current duopoly rule. Further, it must recognize that the rule, including the top-four restriction, is not necessary in the public interest as the result of competition. The top-four prohibition unduly prevents the formation of duopolies, including those combinations involving financially struggling stations, which would enable stations to compete successfully in local video markets. A strict duopoly rule containing this restriction also fails to properly take into account the competition presented by cable and satellite outlets in local markets, both for viewers and for advertisers. Multiple studies have demonstrated how the competitive position of local television stations has been impacted by increases in cable and satellite viewing and the growth of local cable operators’ share of television ad revenues in local markets. The existing duopoly rule, which remains unduly focused on broadcast television stations alone, simply defies marketplace reality.

Seems there is a lot of competition.

Cross-Media Ownership
As NAB has previously shown, the case for repealing the anachronistic ban on joint ownership of newspapers and broadcast outlets is clear and compelling. The ban inhibits the development of new innovative media services, especially on-line and digital services, and precludes struggling broadcast and newspaper entities, particularly those in smaller markets, from joining together to improve, or at least maintain, existing local news operations. In fact, numerous previous studies spanning several decades have demonstrated that broadcast television stations co-owned with newspapers offer greater amounts of local programming generally, and more local news and public affairs programming specifically, than non-newspaper owned stations. Clearly, the Commission and the court were correct in the last ownership review when they agreed that the blanket ban on newspaper/broadcast cross-ownership no longer served the public interest. In light of ever-increasing new media competition for viewers, listeners, readers and advertisers, this rule – which NAB opposed as unnecessary even in the much less competitive and diverse media market of the 1970s – should not be retained today.

Now there is an interesting business model. Radio, television and print. Seems like something viable.

The radio/television cross-ownership rule similarly does nothing to advance the public interest under current marketplace conditions. The rule is no longer needed to ensure diversity in local markets, but in its current form primarily serves to limit radio station ownership arbitrarily. With television and radio broadcasters facing unprecedented competition from cable, satellite television and radio, and audio and video Internet applications, a cross-ownership rule applicable only to local radio and television broadcast stations is inequitable and outdated.

We agree. The competition is substantial, and there are numerous players in the field of play. So is your argument against a satellite merger because it is in the best interest of you membership or is your concern consumer based? Your arguments here, and in the congressional committee on the satellite radio merger seem to differ......HMMMMM

Particularly if the Commission retains the local radio ownership rule and the television duopoly rule in some form, no plausible reason exists to also retain the cross-ownership rule, as any diversity or competition concerns can be addressed more directly by these other local rules.
Finally, in response to the Commission’s request for comment on proposals to foster ownership of broadcast outlets by minorities, women and small businesses, NAB reiterates its long held belief that the Commission should pursue constitutionally sustainable programs to further opportunities for such groups. NAB recognizes that improving access to capital is key to this effort and suggests ways to achieve this goal, including reform of attribution and auction rules.

For all these reasons set forth in detail in NAB’s comments, the Commission should reform its local ownership rules to reflect the vast technological and marketplace changes that have already occurred and are only accelerating today. Ensuring that local broadcasters are not hampered by outmoded regulation in their efforts to compete and serve their audiences in today’s digital, multichannel environment would clearly be in the public interest.

So, why is it you feel localized programming on satellite radio would not be in the public interest? You want a level playing field on only certain fronts, and that is crystal clear. Mr. Rehr, who's interest do you really have in mind?

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2/28/2007 10:55:00 PM

SSG Has Merged. You Can Read All Of The Latest SSG Content By Clicking Here

SSG is not a Financial Advisor. Read Disclosure: HERE


Does Anyone Really Think The NAB Represents The Consumer?

February 28, 2007

Listening to the hearings before congressional committee today relating to the proposed merger of Sirius and XM, one might have had the impression that the NAB was there to act in the best interest of the consumer. In reading how the NAB defines themselves, you can begin to understand that their interest is with their member stations, and not the consumer. Notice what the NAB is dedicated to, and notice that they fail to mention the consumer anywhere. Do you really think that the NAB is worried about the consumer? Or is it the 8,300 businesses the NAB represents that have Mr. Rehr flying to Washington to oppose the merger. Mr. Rehr, your agenda is clear and transparent.

About NAB The National Association of Broadcasters

"The National Association of Broadcasters is a trade association that advocates on behalf of more than 8,300 free, local radio and television stations and also broadcast networks before Congress, the Federal Communications Commission and the Courts."

Now turn to Sirius

SIRIUS is changing the way people listen to music, sports, news, and entertainment. Operating from its corporate headquarters in New York City's Rockefeller Center, SIRIUS broadcasts over 130 digital-quality channels, including 69 channels of 100% commercial-free music, plus exclusive channels of sports, news, talk, entertainment, traffic, weather and data.

This unique listening experience is available to subscribers from coast-to-coast in the United States. The service can be used in cars, trucks, RVs, homes, offices, stores, and even outdoors. Boaters around the country, and up to 200 miles offshore, can also hear SIRIUS. SIRIUS provides premium quality programming delivered by three dedicated satellites orbiting directly over the United States. SIRIUS' 100% commercial-free music covers nearly every genre - from heavy metal and hip-hop to country, dance, jazz, Latin, classical and beyond, including a dedicated Elvis® channel. Each is prepared and hosted by SIRIUS staff, all of which are recognized experts in their music fields, along with contributing musicians and performers who lend their talent and expertise. This ensures that SIRIUS subscribers can regularly listen to unparalleled music selections, insights and perspectives.

The over 60 channels of sports, news, talk, entertainment, traffic, weather and data offered by SIRIUS have an unmatched lineup of programming, which comes from such top names as Howard Stern, CNBC, CNN, Martha Stewart, ABC News, BBC World Service, E! Entertainment, Maxim, NPR and Radio Disney. SIRIUS carries shows focused on comedy, public affairs, the arts, the trucking life and the full political spectrum from liberal "left" to conservative "right." Around-the-clock traffic and weather reports are provided for the top 20 US traffic markets.
SIRIUS is the leading provider of sports radio programming, broadcasting play-by-play action of more than 350 pro and college teams. SIRIUS features news, talk and play-by-play action from the NFL, NASCAR, NBA, NHL, Barclays English Premier League soccer, UEFA Champions League, the Wimbledon Championships and more than 125 colleges, plus live coverage of several of the year’s top thoroughbred horse races. SIRIUS is the only radio outlet to provide listeners with every NFL game, airs every NASCAR Nextel Cup Series, NASCAR Busch Series and NASCAR Craftsman Truck Series race, and broadcasts over 1000 NBA games per season, plus up to 40 NHL games per week. SIRIUS also features programming from ESPN Radio and ESPNews.

The company’s highly experienced management team is composed of seasoned executives from the entertainment, radio, consumer electronics, music and automotive industries. This team is led by SIRIUS CEO Mel Karmazin.

The nerve center for SIRIUS operations is at Avenue of the Americas and 49th Street in New York City, where the company’s state-of-the art studios are located. Artists including Burt Bacharach, Sheryl Crow, Emmy Lou Harris, Richie Havens, Al Jarreau, Yo-Yo Ma, Lynyrd Skynyrd, Phoebe Snow, The White Stripes, Sting and Randy Travis have visited the studios for performances and interviews.

Broadcasts also are conducted from Los Angeles, Memphis, Nashville, New Orleans, Houston and Daytona – bringing SIRIUS listeners in touch with the centers of music, entertainment and information across America.

Sirius-ready receivers are manufactured to meet the needs of all subscribers, and come in versions for cars, trucks, recreational vehicles, boats, aircraft, the home, offices, stores and for portable use. The receiver product line starts with portable and transportable Plug & Play radios and continues to high-end receivers complete with motorized touch-control display screens, as well as radios that are found in new cars and trucks. SIRIUS products for the car, truck, home, RV and boat are distributed by Alpine, Audiovox, Brix Group, Clarion, Delphi, Directed Electronics, Eclipse, Eton, Jensen, JVC, Kenwood, Magnadyne, Monster Cable, Pioneer, Russound, Tivoli, Thomson and XACT Communications.

Available in more than 25,000 retail locations, SIRIUS radios can be purchased at major retailers including Best Buy, Circuit City, Crutchfield, Costco, Target, Wal-Mart, Sam's Club and RadioShack. SIRIUS is also available at heavy truck dealers and truck stops nationwide.
DaimlerChrysler, Ford, BMW, Audi, Volkswagen, and Kia are SIRIUS' exclusive automotive partners, and their production represents over 40% of the new cars and light trucks sold annually in the United States. SIRIUS radios are currently offered in vehicles from Audi, BMW, Chrysler, Dodge, Ford, Infiniti, Jaguar, Jeep(r), Land Rover, Lexus, Lincoln-Mercury, Mazda, Mercedes-Benz, MINI, Nissan, Porsche, Rolls Royce, Scion, Toyota, Volkswagen and Volvo.

Hertz provides SIRIUS in rental vehicles at locations around the country. In addition, the Penske companies – Penske Auto Group, United Auto Group and Penske Trucking – offer SIRIUS radios as a factory installed option, where available, in cars and trucks through their dealerships.

And Now XM

XM Satellite Radio Inc., an emerging force in broadcasting, was incorporated in 1992 and is a wholly owned subsidiary of XM Satellite Radio Holdings Inc. XM is publicly traded on the NASDAQ exchange since October 5, 1999. XM's founding was prompted by the radio industry's first major technological change since the popularization of FM radio in the 1970s: the creation of a third broadcast medium, transmitted by satellite, now taking its place alongside AM and FM on the radio dial. One of only two companies with a license for this new national audio service, XM has assembled a "dream team" of creative radio professionals and a management team committed to leading the world into the next generation of radio. XM's 2007 lineup includes more than 170 digital channels of choice from coast to coast: the most music in satellite radio, including 69 commercial-free music channels and exclusive live concerts and original programming, plus premier sports, talk, comedy, children's and entertainment programming; and 21 channels of the most advanced traffic and weather information.

XM, the leader in satellite-delivered entertainment and data services for the automobile market through partnerships with General Motors, Honda, Toyota, Hyundai, Nissan and Volkswagen/Audi, is available in more than 140 different vehicle models for 2007.
XM's industry-leading products from manufacturers such as Delphi, Pioneer, Audiovox and Yamaha, among others, are available at electronics retailers nationwide including Walmart, Best Buy, Circuit City, Sears and participating independent dealers.

In addition to our corporate headquarters and broadcast facilities in Washington, D.C., XM has broadcast facilities in New York, Chicago, and Nashville, and additional offices in Deerfield, FL; Novi, MI; and Yokohama, Japan.

I would respectfully submit to you, the SSG reader, that Sirius and XM are far more consumer centered than the NAB could ever hope to be.

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2/28/2007 10:29:00 PM

SSG Has Merged. You Can Read All Of The Latest SSG Content By Clicking Here

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Bear Sterns Report

February 28, 2007

Bear (Peck): In Line Quarter; In Line Guidance

Revenues were in line in 4Q, as was SAC; EBITDA significantly better due to lower S&M and R&D, but expense discipline was seen elsewhere too

SIRI sub outlook is marginally lower than our current estimate of 8.17m for 2007

We think fundamentals take the back seat during the next few months for both stocks as merger milestones will determine stock movements

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2/28/2007 06:03:00 PM

SSG Has Merged. You Can Read All Of The Latest SSG Content By Clicking Here

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Merrill Report

February 28, 2007

Increasing FY07 subs and EBITDA deficit

We are increasing our FY07 ending subscriber estimate to 8.17mm from 7.77mm as SIRI continues to gain retail and OEM market share of the satellite radiosubscriber base. We expect SAC to decline 17% Y/Y to $95 (new 4G chipset) and total churn (including OEM promotion subscribers) will increase to 2.3% from1.9% (self-paying churn of 1.5%). We forecast FY07 revenue of $1.01bb (+58.8% Y/Y), with slightly higher marketing costs (to allay consumer worries about the merger) and SAC (from raised subscriber estimates) increasing our operating expense to $1.58bb from 1.54bb and resulting in an EBITDA deficit of $263.3mm (up from $195mm). We forecast a free cash flow deficit of $30.3mm, near breakeven, a goal which we believe management remains focused on.

Cautious 1H guidance;

no FCF guidance given merger costs Despite indicating that 1H07 comps are difficult, reflecting the incremental HowardStern subs added in 1H06, management believes SIRI can add 2mm net newsubscribers in FY07 (>8mm ending subs). SIRI will advertise that no radio purchased from Sirius will become obsolete given the proposed merger; a move they hope could reduce confusion in the marketplace so that retail sales remain strong. Management estimates FY07 churn of 2.2-2.4%, and SAC of $95.

Revenue beats MLe, FCF modestly better than MLe

SIRI ended 4Q06 with 6.0mm subscribers. ARPU (less mail-in rebates andadvertising) of $10.39 was higher than expected (driven by lower rebate activity; MLe $9.95) while SAC of $103 was higher than MLe $98 (FM modulator issues added to SAC). Revenue of $193mm was $10mm ahead of MLe. Total operating expense (excluding non-cash expense) was $387.7mm, $19.2mm higher than MLe, largely due to SAC and sales & marketing, resulting in a ($166.8mm) EBITDA deficit – $11mm below MLe. SIRI generated $36mm of positive FCF

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2/28/2007 05:59:00 PM

SSG Has Merged. You Can Read All Of The Latest SSG Content By Clicking Here

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Bank Of America Report

February 28, 2007

Sirius Satellite Radio Inc. The Underlying Fundamentals for Sat Radio Aren’t Getting Strongerand the Merger Could Be Blocked – We Remain Neutral on SIRI

For 4Q06, key metrics were mixed in relation to our forecast.

Subscriber churn of 2.0% was 20bp higher than our 1.8% estimate due to higher OEM promo churn. Cash metrics were slightly better thanexpected. The “cash” EBITDA loss of $167M was $8M better thanour estimate. FCF was $29M (vs. our $22M estimate).

Guidance for 2007 is slightly worse than our prior forecast –

churn guidance suggests that Sirius’ OEM conversion rates are running 35-40%. We have revised our year-end ’07 subscriber estimate to8.0M from 8.2M. Management expects total subscriber churn of 2.2-2.4% in ’07, up from 1.9% in ‘06. It now appears to us that the OEM conversion rate is trending around the 35-40% range. If Sirius is unable to boost this rate, it potentially could indicate that satellite radio’s demand issues extend beyond the retail channel.

We reduced our ’07 “cash” EBITDA estimate based onmanagement guidance for revenue and SAC –

positive FCF could be as far out as ‘09. Our new “cash” EBITDA loss estimate of $263Mis $58M below our prior estimate. Investment thoughts – we remain Neutral on SIRI and believe that without a deal SIRI’s stock is worth $2.50. We believe there is a less than 50% chance that the merger is approved by regulators, and as a standalone entity we believe that SIRI shares are worth $2.50. The churn increase forecast for ’07 could be indicative of poor OEM conversion rates and suggests downside risk to our fair value estimates.

Valuation and Target Price Analysis:

Our $3.50 TP is based on tax-adjusted DCF and the probability that the merger is completed

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2/28/2007 05:55:00 PM

SSG Has Merged. You Can Read All Of The Latest SSG Content By Clicking Here

SSG is not a Financial Advisor. Read Disclosure: HERE


Wachovia Report

February 28, 2007


• FINANCIAL RESULTS IN-LINE WITH BETTER ARPU OFFSET BYHIGHER THAN EXPECTED COSTS--All-in subscriber monthly ARPU for Q4 was $10.39, nicely ahead of $9.59 consensus which drove revenue of $193M well above consensus of $172M and our estimate of $168M. This was offset by: 1)higher than expected costs to acquire subscribers (SAC) at $103 versus $98 consensus; and 2) higher than expected sales and marketing costs (+$11M) and programming and content costs (+$5M) which drove an operating cash flow loss of$167M (excluding stock expenses) slightly worse than our ($164M) loss andslightly better than consensus of ($180M) loss.

• WEAK 2007 GUIDANCE--SIRI provided guidance of revenues ''approaching$1B'' for 2007 (in-line). SIRI forecast net new sat radio additions of ''more than1,975K,'' materially below (-12%) our estimate (2,246K) and consensus (-18%) (2,405K). The lower than anticipated forecast is related to higher than forecast ’07monthly churn of 2.2 to 2.4%, vs. our 2.0% est. and consensus of 2.1%. The SAC per gross addition guidance was approximately $95 for 2007, which is higher thanboth our and consensus estimate of $90.

• REDUCING ESTIMATES--We are reducing our '07 sub forecasts materiallydriven mainly by increasing churn forecasts to be in-line SIRI’s guidance. We are also reducing our subscriber forecasts in 2008 and beyond. Our '07 OCF loss forecast increases from $247M to $297M. The changes cause us to drop the lowend of our wide valuation range (which is an attempt to capture the widening divergence between the merged value and SIRI as a stand-alone entity).

• WEAKENING FUNDMENTALS CREATE MORE DOWNSIDE RISK SHOULD AN XMSR ($14.32, MARKET PERFORM) DEAL FALLTHROUGH (50% CHANCE)--Continued weakening demand for sat radio bolsters our cautious fundamental stance on the group. We reiterate our belief that weak retail will inevitably begin to negatively affect OEM's appetite for sat radio,further pressuring the long term opportunity for sat radio. Highlighted by our new valuation range, we believe downside risk is increasing should an XMSR deal fail to materialize, while upside from a merger appears priced in the stock at theselevels. At current, SIRI valuation levels imply that SIRI will eventually reach the 20M+ level in subs vs. current 6M (which includes subs on promotions). Valuation Range: $2.5 to $4 Our range is based on a discounted cash flow. We use a discount rate of 11% and a terminal value of 55x 2010E free cash flow. Risks include slower subscriber growth, high content costs and the potential entrance of terrestrial wireless alternatives. Investment Thesis: We are cautious on the outlook for the satellite radio industry and Sirius. We remain concerned regarding continued weak demand for the satellite radio product.

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2/28/2007 05:51:00 PM

SSG Has Merged. You Can Read All Of The Latest SSG Content By Clicking Here

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Stifel On Sirius

February 28, 2007

4Q top and bottom line beat nicely, but churn and SAC metrics missed: See our variance analysis for further detail.

2007 Guidance looks achievable to us: We believe SIRI's subscriber guidance is realistic. Our model gets to 8.07MM subscribers using a 20% decline in gross retail additions and a 36% increase in gross OEM additions, driven largely by the ramp-up at Ford from about 7% of vehicles to 28%. We are lowering 2007E EBITDA from a loss of $288MM to a loss of $347MM to account for merger costs ($40MM) and slightly higher SAC ($97/sub vs prior estimate of $90/sub). Our updated model is attached.

SIRI's self-pay churn trend is substantially better than its overall churn and XMSR's churn. SIRI guided to higher churn in 2007 (2.2-2.4% from 1.8% in 2006). This includes the 45% of subscribers on free trials that do not convert to paying subs. SIRI noted self paying churn was about 1.65% in 4Q06 with no expected change - well below XMSR's self paying churn of 1.8%.

SIRI is a better stand-alone investment than XMSR: This is mainly because we believe XMSR has some merger premium priced into the stock. We continue to derive a $5 target with no merger synergies for SIRI. Our target is based on a 5-year DCF with a WACC of 10.2% and a terminal EV/FCF multiple of 9.1x. The key driver of value is new car penetration, which we forecast will continue to ramp up from 22% of production in 2006 to 65% by decade-end. We continue to see a 55% chance of merger approval, which could add $1 to our target for Sirius shares

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2/28/2007 05:46:00 PM

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Bridge Ratings, Updated Feb 28th, Satellite Radio Merger Study

The Bridge Ratings Consumer Satellite Radio Merger Perceptual Study
Wednesday February 28, 2007

News of Proposed Merger Likely to Impact 2007 Subscriptions
As serious rumors of a possible satellite radio merger began surfacing in 2006, Bridge Ratings began interviewing current and potential satellite radio subscribers to learn about their perceptions and possible actions should such a merger occur. The following data summarizes much of what we have learned.
For the purposes of this study, Bridge Ratings interviewed consumers at retail outlets who have purchased Satellite radio. Telephone surveys were also conducted between August 1, 2006 and February 23, 2007. Calls were placed to both current and potential subscribers to satellite radio.
I. Consumer Interest Index (CII) :
Since 2003, Bridge Ratings has conducted Consumer Interest surveys in order to project the potential size of the satellite radio subscriber base. Over time marketing by both satellite radio companies has heightened awareness and interest in the medium...read more: here

2/28/2007 04:10:00 PM

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Cowen Believes Sirius & XM Are On The Cusp of Cash Flow Boom

Analyst: XM, Sirius Set For Cash Flow Boom
Matthew Kirdahy, 02.28.07, 1:09 PM ET, www.forbes.com

A Cowen & Co. equities analyst believes shares of the XM Satellite Radio and Sirius Satellite Radio are on the cusp of breaking loose.
In a note to investors Wednesday, Cowen analyst Tom Watts said both stocks will post gains in the second half of the year.
"They are just on the verge of demonstrating exceptional operating leverage and cash flow generation," he wrote. "The merger approval process, which we expect to result in approval, will cloud the picture, but we expect both stocks to appreciate in the second half."
XM Satellite Radio and its lone rival Sirius Satellite Radio agreed on a merger of equals Feb. 19.
Under the terms of the agreement, XM shareholders will receive 4.6 shares of Sirius stock for each share of XM they own. XM and Sirius shareholders will each own approximately 50% of the combined company.
XM would be bringing more than 7 million subscribers to the table, while Sirius carries more than 6 million. (See: "Subscriber Boost Narrows XM Loss" ).
The deal is valued at $13 billion and is in limbo pending the necessary government approvals. (See: "Sirius, XM Want To Make Music Together.") The House Antitrust Task Force is currently holding a public hearing examining the proposed merger.
"The strongest argument to approve the merger would be that one of the players would fail if not approved," Watts said. "High spending and continued losses by XM will hlep paint that picture."...read more: here

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Deutsche Bank On Sirius

February 28, 2007

Maintain $5.25 12-month TP, as pending merger a cushion for slower growth Management's YE2007 guidance of 8m+ was lower than our 8.2m estimate, although cost expectations (ex-merger) were in line. Mgt's view that the retail category may not grow until 2H are no surprise given down 40%+ trends YTD against tough comps. 2007 churn guidance of 2.2%-2.4% was ahead of our 2.1% estimate, and suggests that OEM net sub add growth could slow a bit from 2006 as well. We rate Sirius as a Buy on economical growth in the U.S. satellite radio market, in particular in vehicles.

Retail’s 54% mkt share drove 4Q growth, although $103 SAC slightly missedRetail/rental net sub additions were 556k, ahead of our 545k estimate, while OEMnet adds of 349k were below our previous 360k est. Avg monthly churn was 2.0%, above our 1.8% estimate, reflecting some increase in roll off of bundledplans. SAC per gross add was a bit higher than our $100 estimate.

Pending merger, no 07 FCF guidance-our loss est goes to $165m from $238m Sirius’s full-year guidance of “approaching” $1bn in revenue and c$95 per grosssub add were in line with our estimates of $957m and $96, respectively. Management said that it expected to substantially reduce its adj. op. loss and FCFloss from 2006 levels of $513m and $501mm, respectively. We are boostingsome of our fixed cost estimates, notably programming and G&A, so that positiveFCF is pushed to 2009 in our model (we expect satellite capex in 2008).

Buy rating reflects 12-mo TP of $5.25 and 50% change of merger approvalOur target price is based on a DCF assuming 14.5m Sirius subs by 2010, 27m by2020, a 4% TVG and 14% WACC and merger analysis assuming $5bn in synergiesand 50% probability of deal completion with few material conditions. Risks includechanging market for technology-driven businesses, subscriber growth volatility,competing technologies, rising costs, adverse legal or regulatory developments(including failure to gain merger approval).

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2/28/2007 12:56:00 PM

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Morgan Stanley On Sirius

February 29, 2007

What's Changed
YE07E Subscriptions From 8.62 mm to 8.34 mm

FY07E Adj. EBITDA From ($365.2) mm to ($300.8) mm

Conclusion: We are reducing our FY sub growth expectations to 8.3 mm- still ahead of SIRIannounced guidance of 8.0+ mm. While we believe SIRI subscription guidance partially reflects the potential of a confusing consumer message in FY07, we believe the 8.0+ mm target is conservative. Our forecast currently assumes continued deceleration of retail growth in FY07
(estimated down 10%) and that net adds will be more back- end loaded during the year. We are not changing our OEM expectations for either gross adds growth (up 55%) or net adds (1.1mm). We forecast SIRI pre-marketing EBITDA margins will increase to 31% from 14% in FY06. This compares to our expectation of pre-marketing EBITDA margins of 28% for XM in 2007.
SIRI ended 2006 with roughly $400 mm in cash, and we believe it will burn through $170 mm in 2007.

What's New:

SIRI reported strong 4Q06 results with ARPU of $10.48 and SAC of $103 coming in ahead of
our estimates. Although subscriber results were announced in January, sub growth in the quarter was more heavily weighted towards OEM than expected. Retail gross additions declined 25% YoY in 4Q06 but were up roughly 20% YoY on a full year basis. We currently expect total SIRI gross additions to increase 13% from FY06 but retail gross adds to fall 10% YoY in FY07E.


We believe a SIRI-XMSR merger could generate roughly $4- 5 bn in merger synergies. We note
that our revised forecasts following the merger announcement do not assume a price increase for either operator. We had previously expected SIRI to raise prices in 2007, leading to a one-time cash benefit from
pre-paid subscriptions

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2/28/2007 12:49:00 PM

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RBC Weighs In On Sirius

February 28, 2007

Report Excerpt:

Reports 4Q and Full Year Results

Investment Opinion

SIRI Trading Based On Probability Weighted Arb Spread And Synergies—

Sirius and XM agreed last week to combine, pending regulatory and shareholder approval, in a merger of equals. We believe Sirius is currently trading more in-line with expected synergy realization based on the
probability of the transaction closing. However, 2007 guidance indicates a muted sub outlook and higher than expected churn and SAC.

• Maintaining Sector Perform with new $3.50 price-target (from $4), reflecting reduced long-term retail channel sub growth in our model, higher long-term churn and SAC expectations, and non-merger economics though we believe a >50% chance of the merger closing implies $0.87 in additional synergy value per share.

• Still trading at a 24% premium to XM on EV/Sub basis despite having 11% fewer '07E ending subs.

4Q06 Basically In Line - Reflects Good Execution—

Despite lowering guidance (after raising it) to management's original 2006 guidance, SIRI has generally executed consistently with expectations. ARPU of $10.92 was ahead of our estimates and SAC was down 9% YoY. Subscriber growth of 905K was already pre-released in early January.

Primary Focus On Churn Guidance—

While management's FY07 >$8mm ending subscriber guidance was probably not too far from buy side expectations, SIRI's expected 2007 churn range is modestly higher than our 2.1% estimate, reflecting a maturing OEM channel as more OEM subs become paying subscribers. Our new 2.2% 2007 churn expectation incorporates 2.5% / 1.6% OEM / retail churn, respectively, and magnifies our longer-term subscriber projections. While we acknowledge solid execution thus far, we note that we see more downside than upside risk to our estimate given the limited visibility created by the rapidy ramping OEM channel.

2007 Sub Guidance Not Conservative or Aggressive—

Our new 8.1 mm (previously 8.2mm) ending sub expectation incorporates an estimated 20-30% decline in gross retail adds, which remains the largest question mark heading into the year, particularly given potential consumer confusion over merger implications. We are also raising our SAC p/ gross sub expectation to $95 (in-line with guidance) from $88

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2/28/2007 12:40:00 PM

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Merger Talk:Hear Today's Live Webcast

Wednesday 02/28/2007 - 3:00 PM 2141 Rayburn House Building Full Committee Hearing on: “Competition and the Future of Digital Music” Before the Antitrust Task Force, to be established by resolution on the morning of February 28, 2007. By Direction of the Chairman

Link to live webcast: here

2/28/2007 07:14:00 AM

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Merger Talk: Washington Post Weighs In

House Gets First Crack At XM-Sirius Proposal
By Charles Babington, Washington Post Staff Writer, Wednesday, February 28, 2007

Congress and federal regulators need to get with the times.
That's the message that Mel Karmazin, chief executive of Sirius Satellite Radio, plans to deliver today at the first public hearing on a proposal to merge the nation's two satellite radio companies, Sirius and XM Satellite Radio Holdings.
Karmazin, who will face skeptical members of the House Judiciary Committee's newly formed antitrust task force, says satellite radio is in stiff competition not only with free, over-the-air radio but also with such newer products as MP3 players, Internet radio and music-downloading cellphones. "What I need to do is lay out the realities of the marketplace as we see it," Karmazin said in a telephone interview yesterday...read more: here

2/28/2007 07:06:00 AM

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Merger Talk: BusinessWeek Says Concessions Might Boost Their Case

New Conditions May Ease XM-Sirius Merger
As the satellite-radio providers seek Congress' approval to wed, competition from iPods—and a few concessions—might boost their case
by Steve Rosenbush , Feb 28, BusinessWeek

The proposed $13.6 billion merger between satellite radio players XM Radio (XMSR) and Sirius Satellite Radio (SIRI) would seem to violate conditions that government regulators placed on the companies years ago (see BusinessWeek.com, 2/21/07, "Satellite Static: The XM-Sirius Merger"). When the Federal Communications Commission granted the radio licenses to the companies in 1997, the commission's decision specified that they couldn't be owned by the same entity.
The companies claim that their merger agreement will nonetheless win approval of the FCC, a view that's supported by many analysts who follow the industry. George Reed-Dellinger of researcher Washington Analysis says the odds of approval are "60% plus."...read more- here

2/28/2007 07:03:00 AM

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Tuesday, February 27, 2007

Streaming Sirius On Your Cell Phone

Siriusly Streaming on the 8525 and Traveling with Maps
Tutorials, by Cecilia on 2007/2/27 1:30:00 (93), www.gadgetnutz.com

One of the most interesting and exciting developments of cell phones is being able to stream content. And especially exciting for me is streaming Sirius radio. Sure having a Sirius radio is great and they make various models that can be taken between car and home (and the Stiletto has WiFi as well as satellite grabbing abilities), but flexibility is always a good thing. Being able to listen in with one's cell is convenient.
There's a free program for phones like the 8525 to grab a Sirius Stream. Get the Current Release of SiriusWM5 at geekstoolbox. You must join the forum to get the cab file. Just copy the cab file to your storage card and once there click on it to install. Once installed in the phone's memory - don't install on the storage card - just start it up. The Sirius Dog icon will be in your Programs listing. Access the settings from the menu and write in your login name and password. Save the settings and try connecting. You will be shown a "captcha" image which requires you to input the text and numbers you see there. You have to do this everytime you connect. Yes, it's very annoying, but this is the way Sirius is handling their security at the moment. Of course this means that if I have to reconnect repeatedly I get really impatient. Click the thumbnail on the left (Sirius Dog) to see a gif anim of the various screens you can see after the program has started. One of those screens shows TCPMP, which I have set up SiriusWM5 to automatically begin when I want to start streaming. So why am I using that instead of Windows Media?...read more: here

2/27/2007 08:24:00 PM

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Merger Hearings: More Ammunition For SIRI-XM

YouTube (aka Google) is entering the realm of audio competitors. Bring this press clipping to your meetings on the Hill tomorrow!

YouTube signs streaming deal with Wind-up Records
By Candace Lombardi, CNET, Tue Feb 27 10:28:29 PST 2007

YouTube has signed a deal that will enable it to include music videos from Wind-up Records for streaming on its site, the record company announced Tuesday. Wind-up Records also announced that it is pre-clearing certain tracks that people can use for their own videos. YouTube and Wind-up will share advertising revenue sold around the content. Wind-up Records has produced albums from artists like Evanescence, Strata and Seether, as well as the Walk the Line soundtrack. It is one of the largest independent record labels in the U.S., but is distributed by Sony/BMG Entertainment....read more: here

2/27/2007 02:54:00 PM

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Merger Talk: Congressional Hearings

Well, at least they're not stalling. The first congresssional hearing is scheduled for tomorrow, Feb 28th, and the second house committee hearing is scheduled for March 7th.

2/27/2007 02:28:00 PM

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Radio Shack Earnings: Lookin' Good!

RadioShack quarterly profit rises; stock jumps
Tuesday February 27, 1:38 pm ET NEW YORK (Reuters) -

Consumer electronics retailer RadioShack Corp. (NYSE:RSH - News) reported higher quarterly profit on Tuesday after a restructuring improved inventory management and cut costs, sending its shares up as much as 17 percent. The company also forecast stronger-than-expected earnings for 2007 and analysts said the improvements showed the company's new chief executive was managing to turn around the struggling business. Fourth-quarter earnings rose to $84.5 million, or 62 cents a share, from $51.2 million, or 38 cents a share, a year earlier.
Analysts on average expected profit of 41 cents a share, according to Reuters Estimates.
Amid declining sales of wireless products, RadioShack is trying to stabilize its business by closing stores, clearing slow-moving inventory and replacing it with more popular products...read more: here

2/27/2007 02:22:00 PM

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Sirius Conference Call Highlights

February 27, 2007

The Sirius Conference call is now complete and many interesting pieces of information were delivered:

- Sirius captured 67% of the NET addition in the market for both Q4 and 2006

- Sirius lead the sector in GROSS additions. This is the first time that Sirius has accomplished this. Sirius had 54% of GROSS in Q4.

- Sirius had $30,000,000 in free cash flow. This included capital expenditures.

- Sirius had an industry leading self paying churn of about 1.6%, and a fully loaded churn of about 1.9%. Both metrics compare favorably over that which XM reports.

- Revenue was a bit over $193 million

- Family plan accounts for between 13% and 14% of subscriber base. This compared to 22.9% for XM. This metric in particular gives Sirius some room to grow the subscriber base.

- ARPU was $11.01.

- Ad Revenue accounted for $8.4 million

- SAC was $103 for the quarter and $114 for the year

- NET loss was a bit over $245 million for the quarter and a bit over $1.1 billion for the year

- Subscriber guidance for 2007 - Over 8,000,000

- Fully loaded churn of between 2.2% and 2.4% for 2007

- SAC of $95 for 2007

- Generation 4 chipset which promises efficiencies in size capability and battery life are now in production with ST Micro.

- Sirius NAV is rolling out this month with Chrysler

- Sirius became the satellite radio sales leader at Walmart and also won supplier of the year award for the retailer

- HM has been up and running for 4 months

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2/27/2007 09:40:00 AM

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SIRI: Analyst Comments Begin To Roll In


Sirius Satellite: Color on qtr (3.74 ) -Update-
Amtech notes that SIRI subscriber additions of 905k were pre-announced on Jan. 5th. They note that financial results were better than expected, with revenue of $193 mln better than consensus of $175 mln and EBITDA loss of ($167 mln) was better than consensus of ($217 mln). They note that mgmt expects to add around 2 mln new subscriber, roughly inline expectations of around 2.1 mln. They say revenue is expected to approach $1 bln, a touch lower than consensus of $1.014 bln. Churn is expected to be 2.2% to 2.4%. While unclear, they believe consensus was around 2.1%. Firm says mgmt is not providing P&L guidance "in light of the pending merger with XM, and the uncertainty surrounding the timing and financial impact". With expected close around year-end, they think management is being evasive. Firm thinks XMSR's subscriber guidance was relatively inline, but EBITDA loss was significantly lower as they expect higher spending to stimulate demand.


Sirius Satellite Radio (SIRI) Maintains 3 STARS (hold) Analyst: Tuna Amobi, CPA, CFA After pre-announced net subscriber additions of 905,000, Sirius posted a fourth quarter loss per share of 17 cents vs. a 23-cent loss one year earlier, 3 cents and 2 cents narrower than S&P and Street views. Except for churn and retail slowdown, we see improving metrics, including subscriber acquisition costs, average revenue per user and auto OEM gains. Sirius guides, in our view, cautious 2007 2 million net adds, with $1 billion total revenues (vs. 2006's $637 million), 2.2%-2.4% churn (vs. 1.9%) and $95 acquisition cost per subscriber (vs. $114). We are cautious on regulatory outlook for pending merger with XM Satellite Radio (XMSR) and are keeping our target price of $4.50 on relative enterprise value/sales.

2/27/2007 09:16:00 AM

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XMSR: Analyst Comments Begin To Roll In


XM Satellite: Weakening fundamentals create more downside risk should SIRI deal fall through - Wachovia (14.93 )
Wachovia notes XMSR previewed weak Q4 net sub adds of 442K well below their original est of 650K. As expected, XMSR reported very weak '07 guidance including that XMSR will add 1.37 mln to 1.57 mln net new sat subs, or 25% to 34% below firm's and consensus' 2.0 mln est. The result would represent a 7% to 19% decline from 2006's anemic net sub add result. They note the guidance appears driven by continued weak retail demand for the sat radio product. Firm says continued weakening demand for sat radio bolsters their cautious fundamental stance on the group. They reiterate their belief that weak retail will inevitably begin to negatively affect OEM's appetite for sat radio, further pressuring the long term opportunity for sat radio. Further, firm believes weakening demand and a rich valuation were primary reasons for XMSR's' decision to accept a merger.

Sanders Morris:

XM Satellite Radio-XMSR 2007 subs guidance is beatable-Hold@SMMI
- Sanders Morris believes the beatable subs number cou XM Satellite Radio-XMSR 2007 subs guidance is beatable-Hold@SMMI - Sanders Morris believes the beatable subs number could act as a catalyst to increase share value if guidance is raised.


XM Satellite-XMSR target lowered to $14 from $16 on non-merger economics-OP@RBCM - RBC lowered their target as they bel XM Satellite-XMSR target lowered to $14 from $16 on non-merger economics-OP@RBCM - RBC lowered their target as they believe the company's
2007 guidance indicates a weak outlook and higher than expected costs driven by the merger.

Pacific Crest:

XM Satellite Radio-XMSR fundamentals remain weak, see no catalyst -SP@PACS - Pac Crest believes the stock will trade on XM Satellite Radio-XMSR fundamentals remain weak, see no catalyst-SP@PACS - Pac Crest believes the stock will trade on merger sentiment.

2/27/2007 08:12:00 AM

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Sirius Reports Q4 And 2006 Earnings

Sirius Reports Fourth Quarter and Full Year 2006 Results

- Achieves First-Ever Quarter of Positive Cash Flow from Operations and Free Cash Flow - 2006 Revenue Increases 163% to a Record $637 Million - Highest Satellite Radio Subscriber Share in Company's History - 2007 Outlook For More Than 8 Million Subscribers and Revenue Approaching $1 Billion - Executed Definitive Merger Agreement with XM Satellite Radio
NEW YORK, Feb 27, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- SIRIUS Satellite Radio (Nasdaq: SIRI) today announced record full year and fourth quarter 2006 results driven by an 82% increase in subscribers to more than 6 million, positive free cash flow in the fourth quarter and the highest satellite radio subscriber market share in the company's history.

"In 2006, SIRIUS added 2.7 million new subscribers, an annual record for satellite radio, and captured 62% share of satellite radio subscriber growth. More importantly, SIRIUS achieved positive free cash flow in the fourth quarter 2006 -- four years after adding our first subscriber," said Mel Karmazin, CEO of SIRIUS. "The fourth quarter marked the fifth consecutive quarter of satellite radio subscriber leadership for SIRIUS and a record 67% of satellite radio growth. We look forward to another year of strong growth in 2007, anticipating that we will approach $1 billion in total revenue. The pending merger with XM will offer unprecedented choice for consumers and create tremendous value for our shareholders."
SIRIUS ended 2006 with 6,024,555 subscribers, up 82% from 3,316,560 subscribers at the end of 2005. Retail subscribers increased 64% in 2006 to 4,041,826 from 2005 retail subscribers of 2,465,363. OEM subscribers increased 138% in 2006 to 1,959,009 from 823,693 at the end of 2005. During the fourth quarter 2006, SIRIUS added 905,247 subscribers, or 67% of satellite radio net additions...read more: here

2/27/2007 07:31:00 AM

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Monday, February 26, 2007


February 26, 2007

The merger was announced on Presidents Day, and Sirius and XM have already met with the five members of the commission at the FCC. XM had their Q4 conference call today, and Sirius will announce tomorrow. Wednesday Mel Karmazin will be speaking to congress in relation to the merger, and application to the DOJ should happen at some point next week. Application to the FCC will follow shortly there after.

The key element in the merger debate will center around the definition of the marketplace, and whether this merger would upset a balance for consumers. On the face of it some may be inclined to think that this merger would create a monopoly. This stance is only true if you look at a very narrow definition of the market, and feel that terrestrial radio, I-Pods, MP3 players, Internet radio, streaming content over cell phones, etc. are not in the business of providing audio and/or video content to consumers.

The fact of the matter is that satellite radio has many competitors. There are aspects of this that satellite radio has advantages with, but there are also aspects where satellite radio is at a disadvantage.

Do AM and FM radio subsidize radio installations in cars? Do they have a fee associated with their service? They have a lock on local content, but also are subject to censorship. Consumers can listen for free, but drive to far, and you lose your signal. There are distinct advantages as well as distinct disadvantages in that segment of the media entertainment sector.

Similar arguments and stances can be stated for I-Pods, MP3's, intent radio, and streaming cell phones.

It boils down to the acceptance that all of these technologies are indeed competing for the ears of the consumer, and this fact is indisputable.

Most analysts believe that the competition requirements of this proposed merger can be easily argued, proven, and won. I have yet to hear a compelling argument that all of these other content providers are not in competition with satellite radio.

On face value, and given what is already known regarding the availability of content and choices, most would be hard pressed to carry an opinion that the DOJ will nix the deal. Time will tell, and there will be a lot of discussion on the subject. Boils it down to the simplest terms, and you can arrive at but one conclusion.

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2/26/2007 11:15:00 PM

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Get a SIRIUS Radio: Now for the low, low price of $0!

Get the Starmate 4 for only $60 with purchase of an additional, pre-paid 6-month subscription at just $6.99 a month.* Whether it’s in your other car, home or office – now you can enjoy SIRIUS wherever you are!
As a valued customer, you already love the sports, news, entertainment and 100% commercial-free music. With your additional subscription, there’s even more music to share. That’s more Howard, more music and more NFL, NBA and NHL® action. Plus NASCAR® — 24/7 coverage of every race and everything in between.
Coming soon, The Foxxhole, an exclusive urban comedy, entertainment and lifestyle channel with Academy Award®-winning actor, American Music Award-winning and GRAMMY®-nominated artist, and comedian Jamie Foxx. Also, stay tuned for Siriusly Sinatra, the 24-hour, seven-day-a-week, commercial-free channel spanning the entire spectrum of Sinatra’s career, as well as other artists from the big band, swing and traditional pop genres.
This offer is for subscribers only so be sure to log on with your username and password. Offer ends April 15, 2007.

STILETTO 10Just $124.99
with purchase of additional pre-paid 6-month subscription*
Sleek, stylish, personal, easy and completely portable, the Stiletto 10 lets you listen to live and recorded SIRIUS content — almost anywhere. Be alerted when your favorite songs or artists are playing on any Sirius music channel with S-Seek. Stiletto 10 also features intuitive recording of your favorite 100% commercial-free music channels.

with purchase of additional pre-paid 6-month subscription.*
The simplified design combined with the versatile mounting options and reversible display allow the SIRIUS One to be placed on the visor, dash or console. The large, high-contrast single-line display allows for quick, easy-to-read access to information. SIRIUS One has been perfected for those looking for the easiest way to get SIRIUS content into their car...read more: here

2/26/2007 10:49:00 PM

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Orbitcast: XM/Sirius Merger Is Different Than EchoStar/DirecTV

XM/Sirius merger is not like EchoStar/DirecTV - and here's why
via www.orbitcast.com, Feb 26

As I'm reading coverage on the XM/Sirius merger, there's a common point of reference being brought up when the media looks to find prior parallels, and that obviously is the EchoStar/DirecTV deal.Understandably because the two seem very similar (I used it myself in the past). Echostar/DirecTV is afterall probably the only precedent to work with. Both involve two companies, broadcasting via satellite, and the only difference is that one does video, while the other does audio. Sounds simple right?Except that in 2002, the definition of the "relevant market" involved only satellite and cable (also known as the MVPD or "Multichannel Video Programming Distribution" market). Even "free" television is delivered through satellite or cable because receiving television via the ol' rabbit-ears just isn't a viable alternative (so much so that in 2008 the FCC is selling off the VHF side of the spectrum)...read more: here

2/26/2007 10:44:00 PM

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XM Announces Q4 And 2006 Earnings

XM Satellite Radio Holdings Inc. Announces Fourth Quarter and Full Year 2006 Results
(Links to conference call replay and transcript below)

XM Adds Nearly 1.7 Million Net Subscribers in 2006
2006 Revenue Increases 67% to $933 Million
XM Achieves Positive Cash Flow from Operations in the Fourth Quarter of 2006
XM and Sirius to Combine in $13 Billion Merger of Equals
WASHINGTON, Feb. 26 /PRNewswire-FirstCall/

XM Satellite Radio Holdings Inc. (NASDAQ: XMSR) today reported financial and operating results for the fourth quarter and full year ended December 31, 2006. XM announced that 2006 revenue increased year over year by 67 percent to $933 million. XM added 1.696 million new net subscribers in 2006 for a total of 7.629 million subscribers, and XM achieved positive cash flow from operations in the fourth quarter.
"2006 was a pivotal year for XM," said Hugh Panero, XM CEO. "The automobile market is emerging as a key catalyst for satellite radio's future growth, and XM is well-positioned through its relationships with the nation's largest and fastest-growing automakers. Our financial metrics are heading in the right direction as marketing costs have declined and our revenues have increased."...read more: here

Link to replay of conference call: here

Link to transcript of conference call: here

2/26/2007 10:38:00 PM

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Howard 100: Mel Stops By To Chat

Karmazin Talks XM/Sirius Merger With Howard Stern
February 26, 2007, www. fmqb.com

Sirius Satellite Radio CEO Mel Karmazin was on The Howard Stern Show today discussing the proposed merger with XM Satellite Radio. Karmazin was on for over an hour, tackling topics related to the merger. When asked how the merger came about, Karmazin said, "The big catalyst, and I hate to admit this, because I'm really disappointed in how our stock has performed, is the fact that the stock prices have gotten so low that when you take a look at the value creation of a merger, it becomes something that neither company could ignore."
Karmazin stressed similar themes found in last week's press conference announcing the merger, stating he thinks it will be approved because they aren't competing with XM, but rather with all the other audio entertainment options. He also pointed out that terrestrial radio annual reports list satellite radio as a competitor...read more: here

Click here to listen to the interview (54 minutes)

2/26/2007 10:33:00 PM

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Sunday, February 25, 2007

Record Labels Weigh In On Merger

Labels weigh potential fallout of satellite merger
Sun Feb 25, 2007 7:10PM EST, By Brian Garrity, NEW YORK (Billboard)

Would a merger between XM Satellite Radio and Sirius Satellite Radio be good or bad for the music business? That's the question industry executives have been wrestling with since the two companies announced plans to combine in a $13 billion deal that creates a single satellite radio behemoth. Officially, label executives are taking a wait-and-see approach. But privately, they are debating the ramifications of the tie-up on everything from promotion opportunities to licensing revenue to existing litigation strategies. Some of the biggest question marks surround the impact of consolidation on satellite radio's role as a promotion and exposure platform. XM claimed 7.6 million subscribers at the end of 2006, while Sirius had 6 million. If the two companies are integrated, similar channels likely will be eliminated, giving the labels fewer outlets where they can promote new artists...read more: here

2/25/2007 09:30:00 PM

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Merger Talk: Craig Moffet Of Bernstein On C-Span


Craig Moffett, Sanford C. Bernstein & Co. This week's guest on "The Communicators," a new C-SPAN series that focuses on the people and events that shape telecommunications policy is Craig Moffett, Sanford C. Bernstein & Co., Sr. Analyst, US Cable & Satellite B'casting. Mr. Moffett is an analyst of U.S. Cable and Satellite Broadcasting and will discuss the proposed merger of XM & Sirius satellite radio. FROM SATURDAY, FEB. 24...read more: here

2/25/2007 09:23:00 PM

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New York Times: More Merger Comments

February 25, 2007, Dealbook, The New York Times

When Unequals Try to Merge as Equals

HERE’S a tip about deal-making: When companies start talking about a “merger of equals,” someone is usually getting the better deal. It is especially true in the proposed merger of XM Satellite Radio and Sirius Satellite Radio.
It is being billed as a merger of equals, with each company getting exactly half of the new entity.
But here’s the unequal part: The stock market thinks that Sirius is worth almost $1 billion more than XM. To get the numbers to work, Sirius offered to pay a handsome 22 percent premium to shareholders of XM. (The premium is actually almost a whopping 30 percent if you account for the run-up in XM’s shares the Friday before the deal was announced, as word began to leak.)
So why did Mel Karmazin, the chief executive of Sirius, dress up the deal as if both companies were on the same footing?
I called Mr. Karmazin soon after the deal was announced to ask just that.
“If you give me a lie detector test,” he said, “I’ll tell you that I believe we’re worth more than them.”...read more: here

2/25/2007 09:18:00 PM

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Satellite Radio Makes The NY Post

By DAMON BROWN, The New York Post, February 25, 2007

Oprah Winfrey's failure can be one of Mel Karmazin's keys to victory.
The queen of all media caused barely a ripple last fall when XM Satellite Radio announced she would get her own channel, "Oprah and Friends."
In fact, when the star of daytime TV, movies, Broadway and magazines landed on XM in the third quarter of 2006, there was a 54 percent decrease in new subscribers - 285,000 versus 617,152 in the previous year.
Not exactly the 138 percent increase in subscribers that greeted Howard Stern's arrival on Sirius.
On Wednesday, Sirius CEO Karmazin will trudge up to a Capitol Hill hearing to try and convince lawmakers his proposed merger with rival XM isn't anti-competitive. He could trot out the failure of Winfrey, Martha Stewart, and even Nascar to spark a new-subscriber wave as evidence the universe of audio entertainment extends well beyond the country's two ailing satellite radio businesses...read more: here

2/25/2007 09:15:00 PM

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XM Conference Call

February 25, 2007

The XM satellite radio Conference Call is scheduled for Monday morning. Contrary to past calls, the important factors here have now shifted. Given the merger news, it is the outlook that will overshadow the Q4 and 2006 numbers.

Typically we would generate an article outlining and detailing our opinion of where the numbers will come in. Given the shift of importance, we will change our methods slightly.


The street is expecting a loss of 71 cents per share. We expect XM to beat that number. The number of gross additions was not as robust as XM had hoped for, but with fewer subscribers comes fewer expenditures. XM did not spend aggressively as they did in Q4 2005. This will help the bottom line. Investors need to be aware that there were some refinancing expenses that happened early in the quarter that could impact the number.


This figure is now a bit of a wild card. Nissan, Toyota and Hyundai installs for Q4 would count towards SAC and CPGA, but these installs are not counted as subscribers. in simple terms this means there are added costs on one side, and the benefit of using these installs in the divisor of the equation are not there. The level of impact will depend on the number of installs from these OEM partners. We anticipate that installation ramp-ups here are not yet substantial. We feel that XM will talk about a new metric to better define this situation. This new metric will likely be called something like "Promotional Installations". This type of metric is more important later in 2007, but XM should get the ball rolling. This will help investors understand why SAC and CPGA are rising a bit, and give the street an idea of what to expect going forward.


ARPU should remain fairly steady, and may see a slight bump in the advertising category. Advertisers are beginning to gravitate to satellite radio, and names such as Oprah help that process along.


This metric will be one that the street will begin to watch closely. Satellite subscribers have a tendency to pre-pay for several months, or even years in advance. This will be the last report from XM where the merger news was still unknown. Going forward it will be interesting to watch this line. We would expect that the average pre-pay will decrease going forward given the merger news and consumer uncertainty.


Churn will likely be right around 2% on the self paying side, and about 2.9% overall. Many are watching to see if there was an impact on XM due to the NASCAR move to Sirius.


The NET number is already known. Now it is time to see the GROSS numbers and the breakdown between OEM and Retail. Retail has been disappointing for XM for the past year, and there is a danger that at some point, if the retail share does not improve, that XM will have a virtual wash at the retail level. Such an event in and of itself would be very concerning to the street. In the face of a merger, the concern may be somewhat alleviated. We expect a bit over 600,000 deactivation's on a whole.


This metric has become more important in the minds of many. People seem to feel that the OEM channel will be very important to SDARS this year. Keeping the take rate above 50% seems to be important. If the take rate dipped below 50%, it could be cause for concern.....but again, the merger comes into play.


Guidance going forward will be the key, and it is hard to contemplate what exactly XM will say. They will likely provide realistic yet conservative goals and targets across the board. The trick here is to be aggressive enough to keep the street satisfied. Look for sub guidance to be between 1,5 million and 1.7 million. It is also quite possible that some of the guidance we received in the past will not be given due to the merger.

Q & A

This will be a must hear event. Look for most questions to center around the merger, and 2007 performance rather than the 2006 results.

Key items investors should listen for are whether or XM will be CFBE in 2007, what kind of losses are expected, and where the legal items stand. These items will be in the spotlight from time to time as 2007 moves forward.

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2/25/2007 07:55:00 PM

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Saturday, February 24, 2007

Merger Talk: Understanding The Analysts

I find it ironic that before the merger announcement, many analysts (I won't mention names) were saying that XM and Sirius should merge, highlighting the potential programming synergies and operating cost savings. Now that there is an executed agreement, those same analysts are saying that a merger will never get approval. Go figure...!

2/24/2007 08:07:00 AM

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Merger Talk: Barrons Comments

Single Satellite Would Lift Investors
Barrons, Feb 26

WALL STREET REACTED CAUTIOUSLY to the merger agreement last week between Sirius Satellite Radio and XM Satellite Radio, amid concerns about antitrust approval and fears that the deal amounts to a sign of weakness by the two money-losing rivals, whose shares trade for less than half their 2004 peaks.

Sirius stock rose just 4 cents, to 3.74, while XM gained $1.12, to 15.10. The larger gain in XM shares reflected Sirius' offer to pay a premium for a deal, which has been championed by Sirius CEO Mel Karmazin from almost the moment he arrived at the company back in 2004.
The market skepticism could provide a buying opportunity, because both Sirius and XM are apt to rally if federal regulators okay the deal. XM probably has more upside because it trades at a nearly $2-a-share discount to the current value of the Sirius offer of 4.6 shares of its stock for each XM share...read more: here

2/24/2007 07:55:00 AM

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Friday, February 23, 2007

What Cramer Said On MadMoney Tonight

Cramer's 'Mad Money' Recap: Two Specs to Examine
Page 3, Feb 23, www.thestreet.com

Mad Mail
In the show's "Mad Mail" segment, in response to a viewer who wrote in, Cramer said that he believes it's better to buy the stronger company, like Sirius Satellite Radio (SIRI - Cramer's Take - Stockpickr - Rating), rather than the weaker company, like XM Satellite Radio (XMSR - Cramer's Take - Stockpickr - Rating), in an anticompetitive merger, because whether or not the deal goes through, the former should go up...read more: here

2/23/2007 11:38:00 PM

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Satellite Radio TechWorld Sheds Light On XM's Repeater Inquiry

Friday, February 23, 2007, via Satellite Radio TechWorld
XM's Notice of Inquiry for Its Repeaters

Most of you by now have heard about XM's disclosure that it received a notice of inquiry (NOI) from the FCC. It should not be a surprise to our readers here. Ultimately it could result into a notice of apparent liability (NAL), which will result in a "forfeiture" of some magnitude.

The FCC has been handing out NAL's right and left the last few weeks. They have handed out NAL's every day this month, except one. A quick count shows 156 NAL's or other forfeitures this month alone, resulting in a weighted average of $4,700 for each incident. Most of these were for failure to file for renewal in a timely matter. The vast majority of the forfeitures were for $1,500 (73). The next most popular forfeiture was for $7,000 (47). Forfeitures were for as much as $25,000 (1) for the month. There were only 17 forfeitures above $7,000.

Since both XM and Sirius volunteered the information, one would expect the forfeitures to be minimum. We would guess a worse case of $1,500 per incident. The total amount would depend on whether the FCC considers the network of repeaters as a whole or individually. And then there are the 4 repeaters that XM continued to operate with authority. Quite possibly, the FCC could look unfavorably on this and hit them with the maximum penalties...read more: here

2/23/2007 05:04:00 PM

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Amtech Previews XMSR & SIRI Earnings

Amtech previews next week's XMSR & SIRI earnings
via www.briefing.com, Feb 23

Amtech notes that both satellite radio providers will report next week with XMSR on Monday and SIRI on Tuesday, both before the market open. With lower than expected subscriber numbers already reported by both companies, firm thinks the focus will be P&L trends and subscriber growth guidance. They expect lower losses for both companies as a result of lower subscriber additions. They say the general feeling is that the merger announcement the week before earnings reports is probably not a signal of improving business fundamentals and guidance is likely not great. Expectations for subscriber guidance have come down with SIRI missing Q4 by 300k and XMSR missing by 200k against earlier forecasts. Firm thinks slowing retail subscriber growth is expected to be offset in part by a pick-up in OEM business with the 2007 car model year, with another leg up in 2H with 2008 model introductions. They think consensus for 2007 is around 2.1 mln net new subscribers for SIRI and around 1.5 mln for XMSR. With the merger proposal, SIRI becomes the valuation driver for both stocks. Barring a material surprise in either direction, they believe the XMSR report is more likely a non-event and SIRI may have more stock relevance. They note the binary outcome on merger approval/rejection is however a more important event for the stocks than earnings or guidance from either company.

2/23/2007 09:11:00 AM

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New York Times: Satellite Radio is A Good Idea But Has Been A Bad Investment

High & Low Finance
Satellite Radio: A Good Idea, but a Bad Investment
By FLOYD NORRIS, Feb 23, The New York Times

It is the genius — or perhaps the great flaw — of the American capital system that really clever, but totally uneconomical, ideas can be financed by investors.
That process creates enterprises that may eventually be valuable, even if not to those who put in the original money. So it was with satellite radio, a onetime Wall Street darling that is again the subject of investor enthusiasm after the announcement of plans to merge the only two players in the American market: XM and Sirius.

Perhaps satellite radio will finally work out as an investment now. The hope is that the two companies can use the threat of financial failure to obtain regulatory approval for creation of a satellite radio monopoly....read more: here

2/23/2007 08:21:00 AM

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