With the Federal Communications Commission possibly days away from approving the merger between Sirius Satellite Radio and XM Satellite Radio, Sirius issued Monday (June 30) financial guidance for the merged company. At the same time, three influential members of the Senate, opposed to the merger, offered the FCC a handful of stricter conditions.
In its guidance Sirius, assuming the deal closes in third quarter, said the combination will create immediate synergies in 2009 of $400 million. The company is also expected to achieve positive free cash flow in 2009, the merged company's first full year of operation.
The Department of Justice approved the merger in March, but the FCC has been slower to act. Recently, FCC Chairman Kevin Martin let it be known that he would likely approve the merger, with some conditions. But how the other Commissioners stand on the merger is unclear.
In a two-page letter dated June 27, Sen. John Kerry (D-Mass.), along with Maryland's junior Democrat Ben Cardin and Missouri's junior Claire McCaskill, said Martin's June 16 proposal for the new satcasting entity "fail to provide meaningful competition in the [satellite radio] marketplace and would leave the merged entity in a position to exercise its market in anti-competitive ways against other media, including free, over-the-air radio."
Instead of slivering off only a dozen stations for lease, as Martin proposed, the Senate trio suggested that as much as 50 percent of the spectrum be given up by the new entity and no less than 20 percent be offered in "transparent and competitive process" that would "keep a check on the merged company from exercising monopolistic powers."
In addition, the Senators said the FCC needs to ensure that receiver manufacturers not only produce interoperable satellite radios, but that all receivers also include HD Radio receiver technology on each device. The politicians want to be assured that the FCC can not only enforce those requirements, but also police the a la carte pricing plans the merged company proposes to offer consumers.
The letter followed nine days after a trio of Tennessee Republican House members -- Zach Wamp, John Duncan Jr. and David Davis -- wrote to FCC commissioner Deborah Taylor Tate, a Republican appointee who hails from Nashville, to say that approval of the merger would be against the Commission's long-standing commitment to competition.
"Approval of the proposed XM-Sirius merger would turn back the pages and set a dangerous precedent that would harm the ability of future FCC commissioners to resist the re-regulatory calls that already are beginning to echo around Washington. Since approval of the merger would unquestionably create a monopoly, the only remaining question becomes how does one regulate it? The question leads inevitably down a slippery slope," the House members wrote.
The congressmen ended by urging Tate to vote against the merger.