Panero opts for early exit from XM

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Hugh Panero, who helped found the satellite-delivered subscription-radio industry a decade ago, will step down as CEO and resign from the board of directors at XM Satellite Radio next month, the company said Tuesday.

Panero had said that he would stay with XM until it merged with Sirius Satellite Radio, an event the companies hope to accomplish by year's end, assuming federal regulators approve the deal.

If the two merge, Sirius CEO Mel Karmazin will be chief executive of the combined company, and Gary Parsons, XM's chairman of the board, will chair the board of the merged outfit.

Panero did not say why he plans to quit Aug. 10, and an XM spokesman said only that Panero had no immediate plans other than to relax for a while.

The company said that XM president and COO Nate Davis will assume the role of president and interim CEO.

While industry observers took Panero's announcement of an early exit as a sign that the merger approval process is going well, others cautioned not to read too much into the development.

Credit Suisse analyst Bryan Kraft speculated that, whether the merger was approved or not, Panero's reign as CEO was winding down.

While hailed a visionary after skeptical "experts" who routinely dismissed the concept of pay radio beamed from expensive satellites were proved wrong, Panero also has been under intense scrutiny for failing to rein in spending.

Besides the necessary costs of more than $1 billion to build and launch satellites and install ground-based repeaters nationwide, XM has signed expensive deals for content and has yet to turn a profit. Major League Baseball alone cost XM $650 million over 11 years, and XM also shelled out $55 million for three years of Oprah Winfrey.

Those sorts of expenses, and more like them, had one board member quitting in protest, while on the other hand, analysts were critical of Panero for not spending more for the likes of Howard Stern, who signed with Sirius for $500 million, and the NFL, which went to Sirius for $220 million. Some also objected when, for $107.5 million for five years beginning this year, Sirius snatched NASCAR from XM, which had paid $15 million for the previous five years.

Kraft said Panero "will not have a management role in the merged company, and in the event the merger is rejected by regulators and doesn't close, he likely would not have a role in the company as a stand-alone entity, either."

But detractors also must note that XM, in spending a bit less money than Sirius, also has built the bigger company, with 7.9 million subscribers compared with Sirius' 6.6 million as of the end of the first quarter.

Panero's announcement comes just ahead of XM's second-quarter earnings release scheduled for Thursday and a day after Karmazin said that if XM is allowed to merge with Sirius, the combined company would introduce a la carte pricing plans that would save some subscribers as much as 46% off their monthly bill. Karmazin's move is designed to assuage the concerns of lawmakers who presume that an XM-Sirius merger would be a burden on consumers.

Soon-to-be interim CEO Davis has been an XM board member since 1999 and COO since last year. He's a former executive at XO Communications, Nextel Communications and MCI. He's on the board of Charter Communications and Mutual of America Capital Management.

"Hugh brought to XM the rare combination of vision, operating experience and programming expertise," said Eddy Hartenstein, the XM board member who once was CEO of DirecTV. "People used to say that no one would pay for radio, as they once said about television, but Hugh proved them wrong and created a new industry along the way."
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