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Wednesday, March 21, 2007

Jacoby On The Senate Hearing

March 21, 2007

Another Week, Another Sat Radio Merger Hearing

This week, the Senate Judiciary Antitrust subcommittee took their turn examining the proposed merger between XM and Sirius - as with the House hearings, Senators had differing views on the merger's merits.

Senator Herb Kohl (D-WI) expressed concern about the ability of satellite radio to raise prices for consumers. He stressed that promises made by Mr. Karmazin not to raise prices are irrelevant and that the regulators will determine whether or not to approve the merger largely based upon the perceived ability of competition to constrain the pricing power of satellite radio.

Senator Orrin Hatch (R-UT) appeared to be in favor of the merger, noting that there is nothing to prevent another company from acquiring spectrum and providing a separate satellite radio service in the future.

Mr. Karmazin adds yet another piece to the pricing puzzle - the 'lowest entry price point' will be less than $12.95. Mr. Karmazin noted that 'a la carte' type programming would make such a low-priced offering possible. We suspect that any service package priced below $12.95 per month would be limited to music and perhaps a few less expensive talk channels - i.e., no sports
programming (and maybe no Stern).

Investment thoughts - we remain cautious on both XMSR ($13.54, Neutral, Target Price: $17.00) and SIRI ($3.31, Neutral, Target Price: $3.50); the regulatory hurdles make completion of the deal far from certain (less than 50%, in our view). Recent press reports suggest that FCC Chairman Martin already has some concerns about the effect of the merger on consumer prices. Today's hearing failed to provide any indication that the prospects for regulatory approval of the merger have improved.

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3/21/2007 12:13:00 PM


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1 Comments:

  • I don't usually like to dismiss anyones opinions just because of who the person is . But is there anyone in Sat Rad that has been more consistently WRONG than Jonathan Jacoby . I mean let the facts show that if we would have all listened to this guy we would all have loaded up on XM stock a couple of years ago at near $40 and road it down to it's current levels around $13 with his blessings and encouragement !

    This guy should have been fired long ago and probably would had he not been trying to help the bad investment that BOA made in XM in the first place . What a farce he and BOA are , and I will never , ever again be able to trust anything that any analyst from BOA has to say !

    By Blogger eduardo, at March 21, 2007 8:59 PM  


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