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XM Salutes Panero, Offers Merger Optimism

Washington — XM CEO Hugh Panero offered reasons for his recently announced plans to leave the company in early August in an XM Satellite Radio earnings call today.

Noting that Sirius CEO Mel Karmazin would lead the proposed merged Sirius/XM, and that Nate Davis, XM, president and COO had taken over much of the day-to-day operations at XM, he added, “My role was to do strategy and work with bigger partners and I’ve helped with the merger. I felt the merger had progressed and was hitting a number of milestones … And understanding there would be one CEO at the end of it, I felt it was time to move on.”

The 10-year XM veteran told analysts, “When I first came to XM it was merely a PowerPoint presentation and many were skeptical that anyone would pay for radio,” Panero said, noting that now satellite radio has 14 million subscribers.

During the earnings call, several XM executives and financial analysts credited Panero with helping to launch the satellite radio industry and wished him farewell.

Also on the earnings call, the company pointed to several developments in pushing the proposed Sirius/XM merger forward.

XM noted that comments filed with the Federal Communications Commission (FCC) recently were 4 to 1 in favor of the merger, out of the 5,000 comments filed. “The volume, diversity and strength of the public comments filed with the FCC during this period demonstrated persuasively that the merger is in the public interest and should be approved,” Panero said.

XM chairman Gary Parsons said that overall the company “feels pretty good” that the merger will pass regulatory hurdles. “We didn’t go to great lengths to generate [public comments to the FCC] and it was 4 to 1 for the merger. And a strong constituency of groups who felt underserved by radio came out positively for this and that’s pretty impactful. And the announcement of the various pricing plans is by any measure a bold and pioneering move” that will add support for the merger, he added.

The company also said today in discussing its second-quarter results that the OEM automotive sector is dominating overall sales. Of the 338,000 net new subscribers this quarter, 295,000 were OEM car subscribers.

The OEM conversion rate, or that rate at which new car buyers on a free XM trial subscription convert to fully paid subscribers, increased in the second quarter to 52.7 percent, up from 51.5 percent last quarter.

Davis noted that retail and aftermarket sales have been weak, in part, due to competition from MP3 players, iPods and cellular phones. The company said it is taking steps to become more “OEM-centric.”

XM also pointed out that gross subscribers additions this quarter, ended June 30, rose for the first time in several quarters, and the company is hopeful that net subscriber additions will begin to rise again too.

The company said its NPD market share rating at retail is now in the mid-40 percent range.