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XM Expects Improved Subs In Q2, Q3

LAS VEGAS — Gary Parsons, XM Satellite Radio chairman, speaking at a Citigroup analyst conference here that coincided with International CES said that XM should see improved year-over-year retail subscriber additions during the second and third quarter.

Part of the recent slowdown in satellite radio retail sales has been because past quarters were boosted by the Stern effect, he said. In addition, satellite radio is competing with flat-panel TVs and MP3 players. “What we’re really seeing is the long-expected migration from retail intensive to OEM intensive channels and at a faster rate than we or Sirius would have projected. But there will always be a valuable portion of our growth from the retail channel.”

Parsons also stated that while Sirius continues to hint of a rate increase to $14.95 at some point this year, XM will not raise prices to match that increase in the near term.

He estimates XM’s retail share for the fourth quarter was about 40 percent, but noted that the company refrained from steep Christmas discounting.

“We were more conservative in pricing. We did not discount the radios down nearly as heavily, and we tied the lower end radios to a service commitment,” he said.

To the inevitable question of a possible merger between XM and Sirius he said, “We are open to any action that is positive to shareholder value.” And when asked if XM would consider being either the buyer or seller in a deal with Sirius, he said, hypothetically, that there would likely be a straight merger.

Parsons also admitted that as a result of the Federal Communications Commission (FCC) inquiry into satellite radio emissions last year that some new products were delayed. “Some of the [XM] devices you’ll see coming out in the first quarter would have come out for Christmas if not for the FCC issue,” he said.