Sirius, XM Satellite Deal Clears One Hurdle

Sirius Satellite Radio Inc.’s proposed acquisition of XM Satellite Radio Holdings Inc. won US antitrust clearance yesterday to create a single US satellite-radio provider. Shares of both companies surged.

The Justice Department, in approving the deal, said the combined company won’t be able to raise prices profitably because of competition from such forms of audio entertainment as broadcast radio and MP3 players.

“We just simply found the evidence did not support a challenge to the transaction under the antitrust laws,” said Thomas Barnett, the Justice Department’s antitrust chief. There wasn’t enough evidence the merger “would substantially lessen competition or harm consumers,” he said.

The companies are still awaiting approval by the Federal Communications Commission. FCC chairman Kevin Martin signaled Thursday that the agency is close to a decision, telling reporters he had asked its staff to draft “various options.” The commission “is looking at it,” an FCC spokeswoman said yesterday

XM Satellite Radio rose $1.85, or 15.5 percent, to $13.79 in composite Nasdaq Stock Market trading. Sirius rose 25 cents, or 8.6 percent, to $3.15.

The companies proposed the combination to stem billions in losses incurred in attracting talent, sports deals, and subscribers and to reach profitability sooner than they could on their own. Sirius features Howard Stern and Nascar and has 7.67 million subscribers. XM, with Oprah Winfrey and Major League Baseball, has 8.57 million.

“They still have only a fraction of the broadcast audience,” James Goss, an analyst with Barrington Research in Chicago, said before the decision. “On a combined basis, their strength is in creating a more efficient business model by not having duplicate costs and not having consumers being forced to choose one or the other.”

Sirius and XM offered to package programming at different prices to win the support of commissioners. Martin supports a la carte pricing for the cable television industry. Sirius and XM subscribers, who now pay $12.95 a month, may pay as little as $6.99 with the proposed tiered pricing.

The deal was opposed by the National Association of Broadcasters, the trade group that represents free radio stations and waged a lobbying campaign in Congress and at the FCC. The broadcasters’ group argued the merger created a pay-radio monopoly.

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