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The merger request from the two U.S. satellite radio companies got a vote of confidence from FCC chairman Kevin Martin on Monday, putting pressure on the other four members to make up their minds after 16 months of thinking on the matter.
Martin said that Sirius and XM have voluntarily committed to a host of concessions — including giving up 8% of their spectrum — so that the merger transaction “would be in the public interest.”
Proponents of the deal have argued that a combined XM-Sirius would enable a profitable business, while if the two remained separate one or both eventually could be forced into bankruptcy. Opponents don’t like the idea of a single entity having a monopoly on sat radio.
News of Martin’s support of the merger and his intention to get the remaining four FCC commissioners to quickly clarify their positions sent shares of both companies higher Monday.
Sirius rose 3.2% to $2.62; XM was up 4% to $11.30. Sirius was the top performer on The Hollywood Reporter Showbiz 50 stock index. Because of the pending merger, XM is not a member of the index.
“We view Martin as the key swing vote since the five-panel commission is comprised of two appointed Republicans and two Democrats,” Citigroup analyst Tony Wible said Monday.
The analyst said he now assigns a 90% probability that Sirius and XM will get approval for their merger, so he raised his Sirius target price from $7.50 to $9 and his XM target from $12 to $12.75.
The Department of Justice gave its OK for their merger March 24, but it needs the FCC’s blessing as well.
If approved, the combined entity would have about 300 channels but would give about 24 of them over to minority and noncommercial use. Other concessions include not raising prices for at least three years, a la carte pricing within three months and interoperable radios within a year. (partialdiff)
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