New Study Explores Economic Consideration that Government Agencies Should
Take Into Account When Reviewing the Proposed Merger
NEW YORK and WASHINGTON, June 28 — Harold W.
Furchtgott-Roth, a prominent economist and the former Commissioner of the
Federal Communications Commission (FCC), today released a study regarding
the proposed merger of XM Satellite Radio and SIRIUS
Satellite Radio.
The paper, “An Economic Review of the Proposed Merger of XM and
Sirius,” explores the economic considerations that government agencies
should take into account when reviewing the proposed XM-SIRIUS merger. The
paper was prepared for XM and SIRIUS and was filed yesterday at the Federal
Communications Commission (FCC) as part of the companies’ merger
application.
“After studying various economic factors and potential changes in
competing communications services, I conclude that American consumers have
a wide and rapidly expanding range of choices for communications services
that compete with XM and Sirius,” said Furchtgott-Roth. “Additionally,
these competitive choices discipline the prices that XM and Sirius charge
subscribers today and will continue to do so regardless of whether the
firms merge. I believe that government agencies should afford these
companies the flexibility to respond to rapidly changing market
conditions.”
Key findings from the study include:
XM and SIRIUS compete with other providers of communications services,
both in a fixed and a mobile environment
— Nearly all of the programming available via satellite radio can be
obtained elsewhere. In fact, a single internet device can offer many
communications services including those offered by XM and Sirius.
Although mobile broadband services are not likely to displace all other
mobile communications services, such services will certainly siphon
some consumers away from existing mobile services and will discipline
the prices that the other services command in the market;
— Satellite radio has a relatively small presence in comparison to other
comparable communications services. To take just one example, the 14.5
million satellite radio subscribers pales in comparison to the 237
million phones in use today, and many phones allow users to access
wireless data services and download music;
— Mobile internet services are also becoming increasingly available in
cars. If a combined satellite radio provider were to raise prices,
consumers would find identical or similar programming elsewhere and
switch services; and
— The Federal Communications Commission (FCC) has taken note of this
trend toward a broader mobile services market in other proceedings, and
it should maintain that position when evaluating this merger.
Particularly in light of the rapid changes in technology and market
structure, it would be unreasonable for government agencies to restrict
the merger analysis to a static environment that fails to account for
these dynamic market conditions.
The market structure for both mobile communications services and fixed
communications services is changing rapidly facilitated by substantial
government involvement
— The federal government has taken substantial steps to facilitate the
deployment of advanced communications services;
— The FCC has recognized shifting market conditions in reviewing license
transfer applications in the context of merger reviews; and
— The merger is consistent with the government’s efforts to facilitate
deployment of advanced communications services and would also promote
the government’s efforts to complete required regulation of satellite
digital audio radio service (SDARS) licensees, specifically the
coordination of the 2.3 Ghz spectrum with WCS licensees.
It would be unreasonable to examine the proposed merger of SIRIUS and
XM in a static environment that does not account for changing technology
and market structure
— Given the complexity of technology and the time required to develop and
launch services, satellite service companies have an unusually long
planning horizon;
— Rapid changes in the technical capabilities of communications services
mean that market definitions today may have little relevance in just a
few months or years; and
— Failure to provide satellite operators with flexibility in adjusting
plans can lead to unforeseeable harmful consequences.
The analysis and views expressed in this study are solely those of
Furchtgott-Roth, whose research, opinions and commentary has been published
in leading business publications. Furchtgott-Roth received financial
compensation for his time in assembling this paper.
Furchtgott-Roth, who founded Furchtgott-Roth Economic Enterprises in
2003, frequently consults on issues related to the communications sector of
the economy. From 2001-2003, he was a visiting fellow at the American
Enterprise Institute where he completed the writing of A Tough Act to
Follow, a book about the difficulties implementing the Telecommunications
Act of 1996. From 1997 through 2001, Furchtgott-Roth served as a
commissioner of the Federal Communications Commission. In that capacity, he
served on the Joint Board on Universal Service. He is one of the few
economists to have served as a federal regulatory commissioner and the only
one to have served on the Federal Communications Commission. Before his
appointment to the FCC, Furchtgott-Roth was chief economist for the House
Committee on Commerce and a principal staff member on the
Telecommunications Act of 1996.
To view the full paper or to learn more about the SIRIUS-XM merger,
please visit XMmerger.com or SIRIUSmerger.com.
About SIRIUS
SIRIUS, “The Best Radio on Radio,” delivers more than 130 channels of
the best programming in all of radio. SIRIUS is the original and only home
of 100% commercial free music channels in satellite radio, offering 69
music channels. SIRIUS also delivers 65 channels of sports, news, talk,
entertainment, traffic, weather and data. SIRIUS is the Official Satellite
Radio Partner of the NFL, NASCAR, NBA and NHL, and broadcasts live play-by-
play games of the NFL, NBA and NHL, as well as live NASCAR races. All
SIRIUS programming is available for a monthly subscription fee of only
$12.95.
SIRIUS Internet Radio (SIR) is a CD-quality, Internet-only version of
the SIRIUS radio service, without the use of a radio, for the monthly
subscription fee of $12.95. SIR delivers more than 75 channels of talk,
entertainment, sports, and 100% commercial free music. SIRIUS products for
the car, truck, home, RV and boat are available in more than 25,000 retail
locations, including Best Buy, Circuit City, Crutchfield, Costco, Target,
Wal-Mart, Sam’s Club, RadioShack and at shop.sirius.com. SIRIUS radios are
offered in vehicles from Audi, Bentley, BMW, Chrysler, Dodge, Ford,
Infiniti, Jaguar, Jeep(R), Land Rover, Lexus, Lincoln, Mercury, Maybach,
Mazda, Mercedes-Benz, MINI, Mitsubishi, Nissan, Rolls Royce, Scion, Toyota,
Volkswagen, and Volvo. Hertz also offers SIRIUS in its rental cars at major
locations around the country.
Click on http://www.sirius.com to listen to SIRIUS live, or to purchase a
SIRIUS radio and subscription.
About XM
XM is America’s number one satellite radio company with more than 8
million subscribers. Broadcasting live daily from studios in Washington,
DC, New York City, Chicago, the Country Music Hall of Fame in Nashville,
Toronto and Montreal, XM’s 2007 lineup includes more than 170 digital
channels of choice from coast to coast: commercial-free music, premier
sports, news, talk radio, comedy, children’s and entertainment programming;
and the most advanced traffic and weather information.
XM, the leader in satellite-delivered entertainment and data services
for the automobile market through partnerships with General Motors, Honda,
Hyundai, Nissan, Porsche, Subaru, Suzuki and Toyota is available in 140
different vehicle models for 2007.
XM’s industry-leading products are available at consumer electronics
retailers nationwide. For more information about XM hardware, programming
and partnerships, please visit http://www.xmradio.com.
This press release contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
statements include, but are not limited to, statements about the benefits
of the business combination transaction involving SIRIUS Satellite Radio
Inc. and XM Satellite Radio Holdings Inc., including potential synergies
and cost savings and the timing thereof, future financial and operating
results, the combined company’s plans, objectives, expectations and
intentions with respect to future operations, products and services; and
other statements identified by words such as “anticipate,” “believe,”
“plan,” “estimate,” “expect,” “intend,” “will,” “should,” “may,” or words
of similar meaning. Such forward-looking statements are based upon our
current beliefs and expectations and are inherently subject to significant
business, economic and competitive uncertainties and contingencies, many of
which are difficult to predict and generally beyond our control. Actual
results may differ materially from the results anticipated in these
forward-looking statements.
The following factors, among others, could cause actual results to
differ materially from the anticipated results or other expectations
expressed in the forward-looking statement: general business and economic
conditions; the performance of financial markets and interest rates; the
ability to obtain governmental approvals of the transaction on a timely
basis; the failure of SIRIUS and XM shareholders to approve the
transaction; the failure to realize synergies and cost-savings from the
transaction or delay in realization thereof; the businesses of SIRIUS and
XM may not be combined successfully, or such combination may take longer,
be more difficult, time-consuming or costly to accomplish than expected;
and operating costs and business disruption following the merger, including
adverse effects on employee retention and on our business relationships
with third parties, including manufacturers of radios, retailers,
automakers and programming providers. Additional factors that could cause
our results to differ materially from those described in the
forward-looking statements can be found in our Annual Report on Form 10-K
for the year ended December 31, 2006 which is filed with the Securities and
Exchange Commission (the “SEC”) and available at the SEC’s Internet site
(http://www.sec.gov). The information set forth herein speaks only as of
the date hereof, and we disclaim any intention or obligation to update any
forward looking statements as a result of developments occurring after the
date of this press release.
Important Additional Information Will be Filed with the SEC
This communication is being made in respect of the proposed business
combination involving SIRIUS and XM. In connection with the proposed
transaction, SIRIUS plans to file with the SEC a Registration Statement on
Form S-4 containing a Joint Proxy Statement/Prospectus and each of SIRIUS
and XM plan to file with the SEC other documents regarding the proposed
transaction. The definitive Joint Proxy Statement/Prospectus will be mailed
to stockholders of SIRIUS and XM. INVESTORS AND SECURITY HOLDERS OF SIRIUS
AND XM ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER
DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION.
Investors and security holders will be able to obtain free copies of
the Registration Statement and the Joint Proxy Statement/Prospectus (when
available) and other documents filed with the SEC by SIRIUS and XM through
the web site maintained by the SEC at http://www.sec.gov. Free copies of the
Registration Statement and the Joint Proxy Statement/Prospectus (when
available) and other documents filed with the SEC can also be obtained by
directing a request to SIRIUS Satellite Radio Inc., 1221 Avenue of the
Americas, New York, NY 10020, Attention: Investor Relations.
SIRIUS, XM and their respective directors and executive officers and
other persons may be deemed to be participants in the solicitation of
proxies in respect of the proposed transaction. Information regarding
SIRIUS’ directors and executive officers is available in its Annual Report
on Form 10-K for the year ended December 31, 2006, which was filed with the
SEC on March 1, 2007, and its proxy statement for its 2007 annual meeting
of stockholders, which was filed with the SEC on April 23, 2007, and
information regarding XM’s directors and executive officers is available in
XM’s Annual Report on Form 10-K, for the year ended December 31, 2006,
which was filed with the SEC on March 1, 2007 and its proxy statement for
its 2007 annual meeting of shareholders, which was filed with the SEC on
April 17, 2007. Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the Joint Proxy
Statement/Prospectus and other relevant materials to be filed with the SEC
when they become available.
SOURCE XM Satellite Radio; SIRIUS
