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Tuesday, March 25, 2008

Sirius Buyout of Rival XM Approved

via Jailbait Jones, who walked into the house last night and said, "Who woulda thunk that Bob Dylan would ever share the same airwaves as Howard Stern?":

WASHINGTON (AP) — The Justice Department has approved the $5 billion buyout of XM Satellite Radio by a rival, Sirius Satellite Radio, saying the deal was unlikely to hurt competition or consumers.

The merger was approved without conditions despite opposition from consumer groups and an intense lobbying campaign by the land-based radio industry.

The combination still requires approval from the Federal Communications Commission, which prohibited a merger when it granted satellite radio operating licenses in 1997.

The Justice Department, in a lengthy statement explaining its decision, said the two companies compete not just with each other but also with other forms of radio and entertainment. Customers must buy equipment that is exclusive to either XM or Sirius, and subscribers rarely switch providers.

“People just don’t do that,” an assistant attorney general, Thomas O. Barnett, said in a conference call with reporters.

The government also appeared to endorse the argument of the companies that they compete with other forms of audio entertainment, including “high-definition” radio, Internet-based radio stations and even devices like Apple’s iPod.

The buyout received shareholder approval in November. The companies said the merger would save hundreds of millions of dollars in operating costs — savings that will ultimately benefit their customers.

“The likely evolution of technology in the future, including the expected introduction in the next several years of mobile broadband Internet devices, made it even more unlikely that the transaction would harm consumers in the longer term,” the Justice Department said. “Accordingly, the division has closed its investigation of the proposed merger.”

The F.C.C. had no comment on the decision Monday. In the past, the agency’s chairman Kevin Martin said any approval faced a “high hurdle.”

Mr. Martin said last week that agency staff was “drafting various options” in preparation for a final recommendation. The five-member commission could vote against the deal, approve it or approve it with conditions. The agency could require the companies to freeze prices or make part of their satellite spectrum available for public-interest obligations.

Both XM and Sirius declined to comment n on Monday.

Senator Herb Kohl, Democrat of Wisconsin and chairman of the Senate Judiciary Committee’s subcommittee on antitrust, said in a statement that the merger would create a satellite radio monopoly and asked the F.C.C. to block it.

“We are particularly disturbed by this decision, given the Justice Department’s record in recent years of failing to oppose numerous mergers which reduced competition in key industries, resulting in the Justice Department not bringing a single contested merger case in nearly four years,” Mr. Kohl said.

The companies have pledged that the combined firm will offer listeners more pricing options and greater choice and flexibility in the channel lineups they receive. If the deal is approved, the companies have said they would offer pricing plans ranging from $6.99 a month, for 50 channels offered by one service, up to $16.99 a month, where subscribers would keep their existing service plus choose channels offered by the other service.

Despite the consumer-friendly promises, most consumer groups have opposed the proposed merger.

“If this is what our competition cops do, we might as well close shop and save taxpayers a few hundred million dollars because they’re not doing their jobs,” said Gene Kimmelman, the Washington lobbyist for Consumers Union, nonprofit publisher of Consumer Reports magazine.

XM Satellite shares rose 15 percent while Sirius was up 8.6 percent.
For those interested, the DOJ statement on its decision can be read here.

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