Merrill On SIRI: Buy, Target $7, Merger Has Greater Than 50% Chance Of Approval

Merrill Lynch, Mar 8, Laraine Mancini

Mr. Karmazin goes to Washington…Round II
New faces same story

Yesterday’s Congressional hearing on the merger of XM and Sirius raised few new points. The panel featured Mel Karmazin, CEO of Sirius, Peter Smyth CEO of Greater Media (also representing the NAB), and Gene Kimmelman of The Consumers Union. The discussion remained focus on price, benefits to consumers, localism, and diversity. Mr. Karmazin's testimony continued to stress that there would be no price increases resulting from a merger and that consumers would benefit from increased choice (with offerings from Sirius and XM) delivered to their respective radios. The real winners will be the OEM subscribers who will no longer have their satellite radio service dictated by the brand of car purchased. Mr. Kimmelman and Mr. Smyth characterized the merger as monopolistic (not a big surprise) and suggested the combined satellite radio company would have an unfair advantage against local broadcasters.

Not much resistance from the House Representatives

We sensed little resistance from the Representatives on the committee. In fact, Congressman Ferguson even stated that he is not opposed to the merger. Similar to last weeks hearing, this was more of a fact finding hearing with the ultimate decision on the merger left to the FCC and the DOJ. We sense little resistance to the merger from legislators during the two hearings to date and we believe that the vehement objections from the NAB and local radio broadcasters lends credibility to the argument that satellite radio competes with terrestrial radio, suggesting that a merged SIRI/XM is not a monopoly. We continue to believe that the merger has a greater than 50% probability of receiving approval.

3/09/2007 07:29:00 AM

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