Sirius: Merger On Track, Posts Slimmer Loss
By Amy Gilroy -- TWICE, 5/1/2007
New York — Sirius CEO Mel Karmazin said the proposed Sirius/XM merger is still on track for completion by the end of the year, and that several organizations are expected to come forward in support of the merger.
These comments, made on May 1, came as Sirius announced its first-quarter results, which saw the company reduce its net loss by 68 percent to $144.7 million, from $458.5 million a year ago, and posted record revenue of $204 million, an increase of 61 percent compared with the period last year.
Regarding the merger, Karmazin told analysts, “We expect to receive endorsements from a number of prominent organizations, many of which will file letters with the FCC,” he said, noting the Federal Communications Commission (FCC) is expected to launch a formal open comment period on the merger.
Despite skeptical comments on the merger offered by several senators during recent Congressional hearings, Karmazin said he was pleased that members of Congress have expressed the idea “that competition will continue after the merger.”
Further, he reiterated, “We remain confident the regulatory authorities will carefully weigh the merits of the transaction and we’ll be able to close it by the end of the year.”
Sirius has spent about $5 million on the merger during the first quarter and it expects that Sirius will be viewed as the “acquirer” in that deal.
XM told analysts last week it has spent $8 million on merger expenses.
Total Sirius subscribers reached 6.58 million during the quarter compared with 4.08 million a year ago. However, net new subscribers were down from the quarter last year, when Howard Stern began airing on Sirius. Net additions for first quarter 2007 totaled 556,490, including 192,978 from the retail channel. This compared with net additions in the first quarter last year of 761,187, including 534,958 new retail additions. The company won a 76 percent share of the total satellite retail market for the quarter, it said, representing its highest share to date against XM.
Jim Meyer, Sirius’ president of operations and sales, said he believes the total satellite radio retail market will continue to run at a rate of approximately 4 million gross additions for the year.
Sirius said it is improving its OEM subscriber sales, and it will be achieve penetration in 34 percent of the vehicles that its auto partners produce offering satellite radio during 2007. This compares with a penetration of 23 percent last year.
Sirius also announced a two-month promotion where Mercury will offer three years of free Sirius. The promotion begins today and will be backed by TV and print advertising support.
The company admitted it was disappointed with recent sales of wearable portable radios, stating that Sirius’ strongest selling receivers fall in the $79 and $149 range. According to the The NPD Group, Port Washington, N.Y., sales of “personal” portable satellite radios were down in 2006 by 20 percent in dollars and 15 percent in units compared to 2005.
In other comments today, Karmazin told analysts that Sirius does not plan to raise its monthly service fee presently.
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