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Sirius Calls Merger ‘Uphill Battle’

New York — Sirius Satellite Radio CEO Mel Karmazin told shareholders this morning that the Sirius/XM Satellite Radio merger is an “uphill battle.”

While stating that he continues to believe the merger merits approval by government regulators, Karmazin admitted that Wall Street estimates there is an “80 percent likelihood that the merger is not going to happen.”

This contrasts with a comment earlier this month by XM CEO Hugh Panero stating, “We continue to believe we will ultimately receive the necessary approval to continue with the merger.”

Karmazin’s remark came one day after Senator Herb Kohl, the chairman of the Senate subcommittee on Antitrust, Competition Policy and Consumer Rights wrote a letter to the Justice Department and the Federal Communications Commission (FCC) stating that a Sirius/XM merger “would cause substantial harm to competition and consumers, would be contrary to antitrust law and not in the public interest, and therefore should be blocked by your agencies.”

Karmazin addressed the comment generally by saying, “There are some people out there that think that any combination [merger] is bad.” He also noted in response to a shareholder question, that “the NAB is a very powerful lobbying organization and we are a relatively small company. We are fighting a very well-oiled lobbying organization in the NAB.”

Sirius and XM maintain that the merger would not constitute a monopoly because both companies compete with terrestrial radio as well as MP3 players, cellphones and other technology.

Karmazin asked during today’s shareholder meeting why the National Association of Broadcasters (NAB) cares about the merger of Sirius and XM if radio is not competing with satellite radio. “Why are they hiring John Ashcroft and hiring all these advisors? It’s simple — because we do compete with them. They believe that if we combined, our company would be better, it would be stronger.”

When a shareholder asked about the ties that some members of Congress have to broadcasters, Karmazin replied that many members of Congress “have unique relationships with their local radio station. If you think of the Congressmen and Senators in every market of the country, there’s a local radio station that covers their speeches.”

Karmazin also responded to shareholder questions about the future position of Sirius if the merger is not approved. He said, “Our business model is very much on track. I believe not only are we going to not be out of business, we’ll be a very successful profitable company down the road.” He also noted that Sirius and XM “could have gone to the government and said, satellite radio has two companies that may not make it” and “Wouldn’t it be better to have one company makes it?” But both XM and Sirius felt that this was untrue, he stated.

As of the first quarter Sirius had spent $5 million on the merger and XM had spent $8 million, said the companies.