SiriusXM Not Interested in Big Acquisitions, Says CFO

Sirius_XM_Microphone - Getty - H 2016
Getty Images

Sirius_XM_Microphone - Getty - H 2016

David Frear told an investors conference his company does not expect to do any major M&A, and will focus on creating value from within the business.

U.S. pay-radio operator SiriusXM on Wednesday said it was unlikely to do any major mergers or acquisitions anytime soon.

"Our organic growth opportunities are still massive," David Frear, SiriusXM CFO, told the Citi Global TMT West Conference in Las Vegas during a session that was webcast. The satellite radio operator's finance chief added he saw no evidence that major business acquisitions were an efficient way to similarly grow his company.

And he warned against diversifying into businesses markedly different from SiriusXM's core satellite radio business. "You can pursue the ego-gratifying strategic initiatives, and take all of management's attention and focus on what has been acquired. Then you take your eye off of the part of the business that creates all the value," Frear argued.

Take interactive music, where SiriusXM has grown its subscriber base steadily in recent years, despite increasing competition from free and subscription music streaming players such as Spotify, Google Play and Pandora. SiriusXM recently bought a minority stake in Pandora.

But Frear said his company, which is controlled by John Malone's Liberty Media, has turned down overtures from rival smartphone-based music streaming platforms. "None of them make any money and there's no path to making any money," he said, as most of the upside is absorbed by major labels through music licensing fees.

Frear said that terrestrial radio, and not Spotify, is the real competition for his company, though SiriusXM saw no need to pick up an AM/FM radio operator. Instead, SiriusXM will continue to focus on organic growth for value creation.

"We're just a cash-flow machine. We look at ways to deploy the capital and grow the business, first through organic investments," Frears said. At the same time, SiriusXM will be opportunistic when it comes to future M&A activity. "We're constantly looking. And when we see things of value, we'll go."