SiriusXM Provides More 2.0 Details

Joseph Palenchar -- TWICE, 2/15/2011

New York - SiriusXM 2.0 service will offer a host of features said CEO Mel Karmazin.

These include an electronic program guide; ability to buy music; and ability to pause, resume, replay, and record programming, Karmazin disclosed during an analysts' conference call.

SiriusXM also reported that it expanded its subscriber base for the sixth consecutive quarter to a year-end 20.2 million, but it interrupted four consecutive quarters of net income with a fourth-quarter net loss of $81.4 million, thanks in part to $59.7 million in charges and $85.4 million in losses incurred by extinguishing debt and credit facilities.

The charges included a write-off of the $56 million book value of a Sirius 4 satellite that was to be used as a ground-based spare. The company recently launched an in-orbit XM spare and plans to launch another Sirius satellite in the fourth quarter, the last to go up for about another five years.

Despite the fourth-quarter net loss, the company posted $71.6 million in operating income for the quarter and posted full-year net income of $43.1 million compared with a 2009 net loss of $352 million.

Revenues grew in the quarter by 8.8 percent to $735.9 million and by 14 percent for the full year to a record $2.82 billion.

For the full year, the company posted $210 million in free cash flow following 2009's $185 million and, in 2008, more than $500 million in negative cash flow, said Karmazin, who noted that free cash flow will ramp up dramatically in the future because no new satellites will be launched for about five years.

The company posted a subscriber base gain of 1.4 million in 2010 to a record 20.2 million, compared with a 2009 loss of 231,098. Karmazin said he expects gains of another 1.4 million subscribers in 2011, thanks to rising auto sales and to self-pay churn rates and promotional-to-paid conversion rates that improved in 2010 and will continue at those rates in 2011.

The fourth-quarter gain in net new subscribers was 328,789, up from the year-ago gain of 257,028.

 "With the outlook for improving U.S. auto sales, declining capital expenditures, and the expanded functionality coming with the launch of SirusXM 2.0, we look forward to another year of growth  and strong financial performance," said Karmazin.

For the 2.0 launch in the fall, Karmazin reiterated plans to add a "significant number of channels" and offer a suite of channels targeted to Hispanics. The service can be received only by a new generation of tuners available this year only through retail, but existing radios won't become obsolete.

Some of 2.0's capabilities, however, are already available through select tuners. The XMp3i MP3-style XM portable, for example, records programs for later playback, and the Xpress RCi Dock and Play tuner offers a program guide and ability to pause live programming for up to 60 minutes.  The SkyDock for the car enables iTunes tagging to later purchase songs heard on satellite radio, as does a planned universal car tuner, which will be controlled by select aftermarket head units and is due this year from multiple aftermarket suppliers.

In other comments, Karmazin said Internet radio services that allow for customized channels are popular because they are free and require consumers to listen to commercials. He said he expects more commercials to begin appearing on those channels, and that "sounds an awful lot like terrestrial radio." On its Internet-delivered service, SiriusXM would consider customized channels if subscribers want it, he said.