Media Bureau Sends XM, Sirius Request For Extensive Merger Information
The FCC last week sent XM-Sirius a letter requesting more information and documents, as the agency probes the satellite operators’ merger. Bear Stearns said in a research note the information request should be taken as a sign that decision time on the merger is near.
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“Given the very specific questions, we wouldn’t be surprised if the FCC were close to finalizing its order on the merger,” Bear Stearns said. “In addition, the FCC has given XM and Sirius only two weeks to respond while not stopping the clock… which we think is also a positive as it suggests a degree of urgency on the part of the FCC.” Analyst firm Cowen & Company last week said the Justice Department is near a decision on the merger. “It looked to me like the government has already made its decision to approve in principle and is just filling in the details regarding terms of the merger,” Thomas Watts, managing director of telecom services equity research at the firm said in response to the FCC request.
The letter, from Media Bureau Chief Monica Desai, asks for any and all agreements and like documents related to the transaction. These should include, Desai wrote: (1) Agreements with all major retailers, including Wal-Mart, Best Buy and Circuit City, on the marketing and sale of XM radio receivers and related equipment. (2) Agreements with all aftermarket equipment manufacturers or distributors, including, Audiovox, Delphi, Pioneer, AGT, Alpine, Sony, Polk and eton/Grundig. (3) Programming agreements for all specialized channels, including those worked out with Major League Baseball, NHL, the PGA tour, Fox News, CNN and the Food Network, as well as agreements with on-air talent, from Oprah Winfrey to Bob Dylan. (4) Agreements between XM and Sirius and car manufacturers, rental companies and other corporate partners. (5) Agreements between the two companies’ joint engineering operation covering the research and development of interoperable radio receivers.
The document also asks numerous questions exploring XM- Sirius arguments in favor of merger approval. For example, on the issue of merger-related cost savings, Desai requires XM-Sirius to “provide a full explanation as to why those cost savings would not be achieved absent the proposed transaction” and to “provide a quantification of the cost savings and an explanation of how the quantification was calculated.”