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Karmazin Says Sirius/XM Merger Could Be Quick Once Approved

10/30/2007 10:09:00 AM Eastern

New York — Sirius Satellite Radio CEO Mel Karmazin told analysts today if federal agencies approve the proposed Sirius/XM merger, it could be finalized quickly.

“If we get approval on Monday, the assumption is the transaction would be closed on Tuesday,” Karmazin said.

In a financial conference call with analysts, where Karmazin reported an upbeat third quarter for Sirius, he detailed his experience with mergers which include Infinity Broadcasting into CBS and CBS into Viacom. Karmazin said “Don’t think it would be overly complicated to get our arms around the merged companies.”






Mel Karmazin

The board of directors at both XM and Sirius are expected to vote on the proposed Sirius/XM merger on Nov. 13 and the Federal Communications Commission and Department of Justice are expected to rule on the merger by the end of the year.

Sirius today reported positive retail growth of plus-64,000 net new subscribers for the fourth quarter ended September 30, compared to XM Satellite Radio’s third quarter loss of minus-17,000 net subscribers for the quarter.

Karmazin credited Howard Stern for Sirius’ retail performance. He reminded analysts that many had predicted the “Stern Effect” would create a temporary lift in Sirius sales for the fourth quarter in 2005 and first quarter in 2006 only. “We said we would see a benefit for years to come, and we were right,” he countered.

As with XM, Sirius reported most of its third quarter subscriber growth was generated by new car sales, or a total of 460,837 OEM Sirius net new subscribers.

Karmazin touted the overall growth of satellite radio, claiming, “Sixteen million subscribers to satellite radio now feel that terrestrial radio does not satisfy them enough. It’s only 5 percent of the population or 15 percent of the homes in the U.S., so there is significant opportunity for growth.”

Karmazin said Sirius’ Back Seat live satellite TV, recently launched through Chrysler, was performing well. “From everything we hear from Chrysler, they are happy with it.”

In other areas, Sirius affirmed its commitment to be cash flow positive in the fourth quarter, regardless of the status of the merger.

Karmazin also stated that the Copyright Royalty Board concluded its hearings two weeks ago and will decide on the royalty rates to be paid by Sirius and XM to SoundExchange by the end of the year. SoundExchange is the royalties collection arm of the Recording Industry Association of America.

Finally, Karmazin admitted that overall satellite radio retail sales are slower than expected. “We’re a little perplexed as to why retail is as slow as it is,” but he said retailers are expecting a strong fourth quarter. Sirius plans a TV campaign that will begin airing close to Black Friday.

In its third quarter, ended September 30, Sirius reported a 45 percent increase in revenue from the year ago quarter to $241.8 million , and subscriber growth of 524,938 net additions during the quarter, driving ending subscribers up 50 percent from a year ago to approximately 7.7 million.

Total revenue for the third quarter of 2007 increased to a $241.8 million, up 45 percent from $167.1 million for the year-ago third quarter. Advertising revenue was $8.5 million in the third quarter of 2007 and average monthly revenue per subscriber (ARPU) was $10.71. SAC per gross subscriber addition was $103 for the third quarter of 2007 compared to $114 for the year-ago third quarter. The monthly average all-in customer churn rate was 2.1 percent in the third quarter 2007.

Sirius improved its net loss by 26 percent to $120.1 million for the third quarter of 2007, from $162.9 million, for the third quarter 2006. The adjusted loss from operations for third quarter 2007 improved 32 percent to $56.9 million from $83.2 million for third quarter 2006. – Additional reporting by Steve Smith

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