Sirius and XM have to extend their merger agreement, again. This time, though, they're not messing around with any deadlines (since the FCC sure isn't) and so they've decided to extend the merger agreement indefinitely.

The two companies have agreed not to exercise their rights to terminate the Merger Agreement prior to May 15, 2008. In addition, they've agreed to continue to extend the merger agreement, as necessary, for rolling 2-week periods.

The rolling renewal will continue until either side notifies the other of its intention not to extend.

[Press Release]

Stilllll going! Just when you thought we had reached a lull in the meetings at the Federal Communications Commission, along comes American Public Media to keep the fire burning.

Rick Chessen, Senior Legal Advisor to Commissioner Copps, and representatives for American Public Media met on Monday to discuss a letter (PDF) it sent to the FCC last week. Yes, that's right, a letter sent late last week deserves a meeting.

The non-profit organization reiterated its letter (you think?) urging the FCC to require that Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. hand over 20% of its combined spectrum for "for non-commercial educational use."

[View Filing (PDF)]

The meetings at the FCC continue occur as we rapidly approach the May 1st deadline for the extended merger agreement between Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. This time, the National Association of Broadcasters is the latest group to enter the fray.

NAB President and CEO David Rehr (pictured) and NAB Executive VP of Legal & Regulatory Affairs Marsha MacBride, met with FCC Commissioner Michael Copps and his Senior Legal Advisor/Media Advisor Rick Chessen last Friday, according to a FCC filing.

At the meeting, Rehr and MacBride argued that a merged Sirius-XM will "harm consumers" as well as "undermine fair competition in local radio markets."

The NAB stuck to the same stale argument from over a year ago that approving the merger would "violate the Commission's long-standing prohibition against a merger of the nation's only two satellite radio licensees" that the FCC needs to be mindful of Sirius and XM's "record of violations of the Commission's rules."

How much longer does this need to drag on? Seriously. I think we've exhausted all the angles and it's time to make a decision. Nothing new is being added that hasn't already been said.

[View FCC filing (PDF)]

Mums the word for FCC chairman Kevin Martin about the merger between Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. at a recent meeting with reporters at the agency's DC headquarters.

Martin said he had no comment on the timing for a decision. When asked whether the FCC had waited for the Justice Department's decision to issue its own ruling Martin told Radio Ink,  "I wouldn't say that the DOJ was slowing us down."

He also rejected the suggestion that the FCC is holding out for a unanimous 5-0 commission vote on the deal, but said, "I always think it's preferable that we have a unanimous decision."

In related news, representatives from Sirius and XM met with Chairman Martin and Daniel Gonzalez on Wednesday (PDF). The subject of the meeting focused on - once again - the review of "pending issues raised in recent filings."

The Department of Justice approved the Sirius-XM merger over a month ago.

Attorneys General from Maryland, Connecticut, Ohio and Washington - who all greatly oppose the Sirius-XM merger - feel they have found the answer to preserving competition in satellite radio: offer it for free.

This revelation was uncovered in a recent letter (PDF) to FCC Chairman Kevin Martin, where the state Attorneys General suggest that the Federal Communications Commission lease a portion of Sirius and XM's bandwidth to a 3rd party. And that leased portion, should be made available, for free.

Does this plan sound familiar?

Radio & Records nicely sums it up for us, "the only entity that has made a pitch to lease satellite spectrum from a combined Sirius-XM is Georgetown Partners."

R&R adds that should the deal win approval, Georgetown Partners "would be willing to take a long lease on the spectrum and form a free, commercial-based satellite radio company," which it promises "will be richly diverse."

It's so nice to see these AGs coming to the rescue.

[View letter (PDF) via Radio & Records]
Thanks Nathan!

New Citi analyst Tony Wible issued a client note this morning, assuming coverage of the satellite radio industry with a "Buy" on Sirius Satellite Radio Inc. and a "Hold" on XM Satellite Radio Holdings Inc.

"Satellite radio should continue to change the audio entertainment industry and gain share as its proves to be fresh (no need to create play lists or buy MP3s), original, cost effective, and a simple way to access premium/long tail content that can not be supported via radio or MP3 models," wrote the Citi analyst in the note. "Given the highly fixed cost base of the companies, we view the sub growth as the key driver of the stocks and we see the industry having up to 55 mil subs by 2011."

Wible also rated SIRI as a "Buy" with an $8 target based on a 70% probability that the deal closes. He rates XMSR with a "Hold" with a $12.25 target price.

The Citi analyst believes that the SIRI stock - as a merged entity - would be worth $10.

A merger between Sirius and XM might lead to "more choice and better prices" for consumers, but many record label executives are concerned about the merger's implications, according to a recent Reuters article. Some label promotion representatives polled by Billboard feel that the reduction of redundant formats could lead to fewer promotion opportunities for niche formats.

"It's great that their combined (channels) will have a larger audience but it's also at the expense of the exposure," Virgin Records VP of promotion Dave Reynolds says. "It takes away 50% of my chance of being exposed correctly."

"Both networks offer different ways to feature and launch a new project," said Brad Paul, senior VP of promotion at Rounder Records.. "I feel good about having both those options to go to."

Citing Arbitron's numbers, the top channel on Sirius (after Stern) is Sirius Hits 1 with 653,000 listeners, while the top channel on XM is Top 20 on 20 with 1 million.

"It's very rare to find a station like Sirius Hits 1 or XM 20 on 20 that will put in a new song and play it 21, 28, 35 times a week right off the bat," Virgin's Reynolds says. "That's really exposing a record."

"Satellite radio definitely had a lot to do with Sean Kingston's career," Koch Entertainment VP of urban promotion Shadow Stokes says. Rap channels like XM Raw and Sirius' Shady 45 have helped break a number of hip-hop acts, he adds, citing Sheek Louch, AZ and Yung Berg. Still, few executives that Billboard talked to could cite a specific case of Sirius or XM breaking an act.

Losing XM's The City and Sirius' Hot Jamz would be like losing a local station with naitonal reach, says Stokes. "You're talking about losing 40-50 spins," he says. "If you lose a piece of audience, that's always bad whether you're talking about a terrestrial station or a satellite station."

The article goes on to cite reps from metal, smooth jazz, and country genres. It's an important concern, and one that I said scares me the most over a year ago. There's a lot of nuisances between channels like Octane and Squizz, or Highway 16 and New Country, and in an effort to grab those "synergies" a lot could be lost.

Still, in my interview with Gary Parsons, there was one comment that the future Chairman of the merged company said that I think needs to be repeated:

"Clearly some of the synergies on a combination are on a longer term, and others are more near term. And while every expense category has an opportunity for improvement, it's not really the classic case of head count reductions... you know, fire a bunch of people. Because both companies are still growing strongly and they need to grow which requires that head count to grow outwards. That's not where the savings come from."

Here's to hoping that Gary's comments ring true, and the doom-and-gloom speculation from these music execs doesn't.

[Reuters]

And the meetings continue at the FCC, only this time, it's by phone.

According to an filing made public by the FCC this morning, counsel for XM Satellite Radio Holdings Inc. had a telephone conversation with Amy Blankenship, Legal Advisor in Commissioner Tate's Office.

The conversation, which occurred yesterday, was to "review pending issues raised in recent filings" as is frequently the case.

Unfortunately (or perhaps fortunately) there's little else to report except that XM's counsel, Latham & Watkins, urged for "prompt approval" of the pending merger with Sirius Satellite Radio Inc.

Today marks the 400th day anniversary since Sirius-XM filed their application with the FCC.

[View FCC Filing (PDF)]

The perpetual delays in getting the approval from the Federal Communications Commission may be the least of worries for Sirius and XM.

TheStreet is reporting that analysts are expecting XM Satellite Radio Holdings Inc., which TheStreet says is set to release its results on Thursday, to post a loss of 39 cents a share, according to a Thomson First Call survey. Sirius Satellite Radio Inc. is expected to lose 7 cents a share as well, when it reports on April 29th.

Shares of Sirius and XM have fallen more than 15% since the last reporting quarter's results in late February.  

"Excluding the merger proposal, we do not believe the fundamentals, subscriber growth curves, or risk-adjusted estimates support a premium or equal valuation for Sirius versus XM," wrote Goldman Sachs analyst Mark Wienkes in a February 26th research note, adding that "trends in subscriber adds, churn, and [average revenue per subscriber] confirm our cautious view on the industry."

For Sirius, increases in the churn rate and subscriber acquisition costs (SAC) are what especially trouble analysts, especially in a troubled economy. Monthly churn is expected to rise slightly from 2.3% in the fourth quarter. At the same time, SAC will likely rise from $90 to a range of $95 to $100, according to several analysts. Inreasing churn and growing SAC are also a concern for XM.

But it's the concern of transforming from a retail-based business model to an OEM-driven model that seems to be the most troublesome, according to TheStreet.

Penetration rates have increased in the automotive sector, but in March auto sales fell 12 percent from a year earlier on an unadjusted basis.

"Recent comments from the automotive industry indicate that many of the issues impacting the subprime [and collateralized debt obligation and loan obligation] market are projected to trickle down and carry negative implications on new car sales, implying around 15 to 16 million units sold in 2008," said Goldman's Wienkes. "As satellite radio operators progress toward an OEM-centric model, watch for primary and derivative effects of a housing and auto slowdown to temper the subscriber ramp."

What TheStreet doesn't mention is that Sirius and XM aren't blind to this, and have said that the increasing penetration rates will offset the declines in auto sales. Whether or not this holds to be true will be seen soon enough.

Analysts also anticipate that the conversion from OEM promotional subscribers will decline - although during the fourth quarter the conversion rate actually increased from 52.4% to 53.9% year over year. For the full-year though, the conversion rate fell slightly from 53.3% in 2006 to 52.7% in 2007.

"Sirius installs will approach 70% of manufactured cars at Chrysler and Ford by year-end 2009 with penetration in other models such Volkswagon and Audi approaching 80%," said RBC Capital Markets analyst David Bank in a note in February. "But the outlook for auto sales is soft, and retail ... demand is anemic, so near-term upside to subscription estimates is probably limited."

As for average revenue per user, or ARPU, TheStreet says that Sirius is expected to see ARPU tick higher in the first quarter, many analysts expect it to go down for XM. And in the event the merger gains FCC approval, ARPU is not expected to improve much as the time progresses.

"We assume no ARPU synergies as the combo may have to agree to price restrictions to get a deal done," said Stifel Nicolaus analyst Kit Spring in a March 25 research note. "We calculate a net ARPU impact over time of a negative 2% to 5%, getting worse over time as the percentage of radios that are a-la-carte capable increase."

[TheStreet]

Primosphere, one of the original four bidders for the satellite radio licenses in the 90s, held a series of meetings recently with the FCC to discuss the pending merger between Sirius Satellite Radio and XM Satellite Radio.

According to five separate filings made public today, Primosphere met with various members of the Federal Communications Commission to reiterate points made in prior filings.

Primosphere is asking the agency to consolidate the Sirius-XM licenses and grant them the other half of the SDARS spectrum. The company has said that it is prepared to construct and launch their own satellites in order to be "a new competitor" in satellite radio.

On April 8th, Primosphere met with FCC Commissioner Adelstein and Rudy Brioche of Adelstein's office, as well as held a separate meeting with Amy Blankenship of Commissioner Tate's office.

On the same day, Primosphere also met with Elizabeth Andrion of Chairman Martin's office, Rich Chessen of Commissioner Copps' office and with staff members from the Media Bureau, International Bureau and Office of General Counsel.

[Read FCC Filings: 1, 2, 3, 4, 5 (PDF)]