Justice Department OKs Sirius, XM Satellite Radio Merger - InformationWeek
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3/24/2008
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Justice Department OKs Sirius, XM Satellite Radio Merger

The deal still has to be approved by the Federal Communications Commission, which is unlikely to go against the Justice Department's decision.

The Justice Department on Monday approved the proposed merger between Sirius and XM satellite radio companies, clearing a major hurdle in the deal struck more than a year ago.

The companies said in a brief statement that the Justice Department informed them that it would not try to block the merger first proposed in February 2007. Stockholders from both companies gave their approval in November.

The deal still has to be approved by the Federal Communications Commission, which is unlikely to go against the Justice Department's decision. The agency, however, could impose restrictions based on objections from opponents of the merger. The FCC is expected to make a decision in the coming weeks.

When first announced, experts had said the merger would face tough scrutiny from regulators, given that the deal would create a satellite radio monopoly. The two companies, however, argued that they faced stiff competition from many types of audio entertainment, including conventional radio, Apple iPods, mobile phones, and other forms of music and radio programming.

Both companies are losing millions of dollars a year, mostly from high fixed costs, such as launching satellites. In addition, the companies have had to enter bidding wars for high-priced entertainment, such as for shock jock Howard Stern and Major League Baseball.

According to the companies, a merger would enable them to cut costs by consolidating music channels and sharing back-office staff. Subscribers would benefit by being able to listen to programming from either company from the same receiver. The latter, however, would require a substantial amount of engineering work, given that one company's receivers today are incompatible with the other company's programming.

In addition, subscribers would benefit from tiered pricing, which means they would pay less for accessing a limited number of programs, the companies said. Each service today costs $12.99 a month.

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