Live Blogging the Sirius + XM Merger Conference Call

Tuesday, February 20, 2007 at 8:27 AM
Tags: 2, XM

(I'm live blogging the Sirius and XM Merger Conference Call for those of you who can't listen in. Just keep refreshing the page because this post will be updated in real-time.)

  • Intros begin! Mel Karmazin, and Gary Parsons are on board for the call.
  • Mel is kicking off the call.
  • DOH! There seems to be some technical issues... back into the holding pattern.
  • Ok we're back.
  • Mel Karmazin begins...
  • "We're all very excited about this announcement and the many benefits"

  • Mel makes general remarks:
  • Both companies have been interested in this combo for quite some time..
  • excited to formally announce the merger
  • this is "the next logical step in the evolution of satellite radio"
  • Excited to review the many benefits that it delivers to XM and Sirius' shareholders and consumers
  • Wants to solve the problem of the lack of choice in the satrad marketplace - make content available to all
  • Marketplace is different now than it was 10 years ago
  • Together the combined company will be better able to compete
  • New company will assemble the "brightest minds and creative genius from both companies"
  • Combo company will create "considerably greater" operating savings
  • We will deliver more cash flow in combo than as a stand alone company
  • Will give current and future subs the best programming possibilities available
  • Expects to offer best programming from both companies
  • Important element in the merger is the "combined focus"
  • Merging of R&D to create the best radios out there
  • Speed the introduction of radios and of content
  • Radios will be "smaller, lighter, simpler and cooler"
  • Overtime will combine satellite and terr infrastruture
  • The merger of the two entities is "very doable" and "very acheiveable"
  • Satellite radio has always been a "growth story" but as a combined co will be a growth story with cash flow and earnings
  • Ability to provide more content to a greater population
  • Regulatory is on everyone's mind... both companies "have done their homework"
  • 1 + 1 = 3
  • Synergy value equals or exceed the current value of both companies
  • Optimization of almost every item on the cost sheet
  • Future generation satellites will be a "single entity"
  • EOY 2006 sub figures will be "signficantly more attractive to larger advertisers"
  • Advertisers look for "reach" and as one company will have greater reach than on their own
  • At the same time, they look to capture savings
  • 147% growth rate of the past 4 years.
  • Satellite Radio has grown faster than Satellite TV and cellphones after their respective launch dates
  • Both companies have executed similar growth objectives
  • Confident they can quickly and successfully merge and grow the companies
  • XM and Sirius will be better to compete effectively in the growing audio industry
  • Accelerated free cash flow generation
  • Combining an "unmatched pool of talent from both companies"
  • Management structure: will combine the best of the two
  • both companies will operate independently until transaction is finalized
  • Still looking into a name and a HQ location
  • Now to Gary Parsons:
  • "very exciting day in our history"
  • Looking forward to executing the growth opportunity
  • Enhanced content, greater choices and accelerate technological advances
  • "signficant value for shareholders"
  • XM and Sirius shareholders will each own HALF of the combined company
  • Gary to be Chairman, Mel to be CEO
  • Board: 12 directors - 4 independent members and 1 each from Honda and GM.
  • Hugh Panero will continue as XM CEO "through closing"
  • Personal note from Gary: Hugh's "enormous" contribution... he's "both a friend and a talented executive"
  • "What does this merger mean for consumers?"
  • Consumers will be big winners in this transction
  • More choice, greater range of programming - the best content from both services.
  • More channels. Allowed to pick and choose in a "more a la carte basis"
  • Satrad competes against terrestrial, against HD Radio, against Internet Radio, and iPods and DAPs have redefined portable audio
  • Satrad has the burden of selling not just a service - but a radio as well
  • there will be competition from the rest of the audio market which will keep prices in check
  • Efficiencies are a very important measure
  • Satrad has enormous fixed costs
  • improved efficencies will allow the new company to make money and deliver a better service
  • the marketplace has evolved since they were first given their licenses a decade ago
  • competition is across a wide of different services.. XM and Sirius are competing for consumers attention
  • There are 237 million vehicles in the US. EACH offer free AM/FM radio.
  • 10s of millions of iPods and cellphones.
  • Against that backdrop - satrad is still a small player by comparison
  • Believe the growth will be faster on a combined basis
  • Work appropriately for regulatory approval in the coming weeks and months... will be
  • executed in a timely fashion
  • Expect transaction to be completed by the end of 2007
  • Combined companies will provide consumers with previously exclusive content
  • "If you want to listen to Howard Stern AND Opie and Anthony, you need to subscribe to both services"
  • This transaction is about CHOICE
  • Bob Peck - Bear Stearns: "Congratulations, we're very excited for both companies"
    Q: Mel, about synergies... where do you see the cost synergies and the revenue synergies?
    Gary, what confidence level do you see for a deal getting through?
    Are there any break-up clauses about the deal?
    A: (MEL) We think all the bills are going to be smaller. From the auditors to the caterers to the lawyers. Synergies are real and realizable. The reason why there's no exact number is because of Anti-Trust.
    (GARY) On the regulatory confidence - we wouldn't have entered into this transaction if we didn't think it wasn't part of the public interest. We believe they will clearly see the broader marketplace that is out there. This is in the public interest. There's a "very good probability" of regulatory approval. Mel feels its greater than 50/50.
    Break-up fees. Yes, there is a break up. A reciprocal concept. We're committed to this. 8-K will be filed by Friday. Break-up fee of $175M is reciprocal.
  • Q: Ben Swinburn from Morgan Stanley:
    Combining programming strategy. Have you done consumer research to see if the disconnects or lack of satisfaction in the service is because of this exclusive content?
    What's the impact with the RIAA and the NAB?

    A: NAB's comments are consistent with their stance for the past 15 years. As for the RIAA, they're working through it this year as SEPARATE companies currently, but are working with each other. Hopefully will come to resolution of the compulsory licenses.

    As for churn - it's all about value proposition - if you provide more for the consumer they should be happier. When Sirius didn't have a portable product, they didn't have those subs - but once the portable was offered they gained subs. As a single company there's appeal to both providers' content. Their biz model isnt about taking subs from XM... they rather concentrate on the 90% of people who don't have satrad.
  • Q: Brian Craft(?) from Credit Suisse:
    Talk to me about the OEM situation and how it will be supported for both companies.

    A: (GARY) Yes, both OEM companies don't support each other - so we will be supporting them. But with the combined R&D we will develop new receivers for both services. Are there CAPEX savings and other synergies? Absolutely. Overlay the repeater networks will be longer term, but that's the general migration strategy you'll see.

    Q follow up: At what point in time will you begin to migrate users to the dual chipset?
    A: (GARY) We can work with an exclusive OEM to allow for a dual-content through the current chipset - it's just negociations with the content partners.
  • Q: Jonathan Jacoby of BoFA:
    What are going to be the marketing strategies?
    Are you going to have to launch new satellites?
    What about the NAB and HR 983?

    A: On the interim operation - we have had great advice from consel. Until merger is closes will CONTINUE TO OPERATE AS THEY DO TODAY. Look for NO CHANGES on that front.

    On Satellites: we do have the ability to integrate the services together at the chipset together. Sats do have the ability to broadcast across both spectrums.

    Regarding congressional issues: they've already reached out but they're in recess this week, so they plan to meet with them next week. Regarding any "lobbying organizations efforts" - re, the NAB - this is nothing new from NAB. They've been doing this for years and there's nothing different. On the Pickering Bill, satrad is not using local repeaters for local programming. Broadcasting it on a national footprint and satrad is not in the local advertising market either.

    Q - follow up: What are the current shares outstanding?
    A: We'll give you that offline
  • Q:
    Does the merger change anything with the OEM royalty arrangements?
    Will this change the satellite launch schedule?

    Announced Sirius-5 in 2008, and this transaction will not in anyway alter that.
    Regarding deals with the OEMs, they have no intention of breaking any agreements. In the subject of interoperable radios - that's up to the OEMs if they feel it would be a good option for their customers.

    (GARY) to add to this... OEMs will see the benefits for the combined. For the satellite question, XM-4 was just launched and is completed. The XM-5 ground spare construction will not change.
  • Q: Barten Crocket from JP Morgan:
    What about pricing? When the DoJ traditionally looks at a market, they look at pricing senstivity. You've talked about an interest in raising prices... what are you looking for the pricing now? Is there an opporunity to raise prices?

    A: (GARY) Clearly, "its the combination of price and product that determines how quickly you grow your subscribe base" - raising XM's prices reduced XM's conversion rate. So clearly there's a constraining factor with that as well as the competition.

    (MEL) there hasn't been a price increase in 2 years. we're competing against free radio. We don't want to just charge the 10% of population more money - we want to get that 90% who hasn't subscribed. And they're price conscious. THIS IS NOT LIKE DIRECTV and DISH. This is different than that since with TV everyone is getting their signal from pay services. With radio, they're getting their content from FREE services.

    Q - follow up: Looking at the ARPU line over time.... should we assume that there will be a price increase?
    A: Assume that the ARPU will increase from the new services like Backseat video and traffic/weather data services. Pricing opporunities will be assessed when we look at what the consumer is willing to pay. "We don't want to do ANYTHING today that will slow down the adoption of more people coming to satellite radio." The reason we have no raised the prices because of XM, but because of those who have not yet adopted satrad.
  • Q: Vijay Lehman Brothers
    Looking at the licenses, is there any reason why you cant give back the 12.5 MHz?

    A: Looking at the license - which is not like a congressional rule btw - it doesn't make sense to turn off one of the satellites. It doesn't work that way and there's no reason to do so. We will continue to

    Q- follow up: Given the temporary authority, isn't it a viable scenario?

    A: YOu don't want to cause harm to the consumer.

    Q - follow up2: What is the surviving serivce?
    A: JUST TO MAKE THIS CRYSTAL CLEAR. They will maintain BOTH services and it's not practical to shut down one or the other.
  • Q: Loranne Mancini, with Merril Lynch
    There's going to be a lot more SIRI shares on the market, how do see that going in the near future?
    Interoperable receivers - what's the timeline?

    (MEL) On the subject of free cash flow, it gives us a lot more capabilities to work with - such as in buying back the stock.
    We're constantly coming out with new products. Tehre's a team in Boca Raton whos working on the interoperal radio, and we're looking at bringing it to market as fast as we can. We would be willing to bring it to market as soon as we have regulatory approval.

    (GARY) We're trying to match up as elegantly as possible the entire range of content for the consumer. There will be economic incentive to do this as rapidly as possible.
...and we're done.



Ryan, are you listening online, on the phone, or on the radio?

I'm on the phone and on the radio - so I can catch anything I missed via the radio delay.

I can't get into the webcast, can only get on hold on the phone and XM200 is playing jazz. Is it still on hold?

Working now!

"Lack of choice"?? Sure, why not...

All I know is my Sirius stock was up 44% before the bell...


Radios will be "smaller, lighter, simpler and cooler

The most interesting thing said so far.

"Radios will be "smaller, lighter, simpler and cooler
The most interesting thing said so far."

Mel said this right? I thought XM already had units meeting all these qualifications?

Pre-Market: 4.09 +0.39 (10.54%) Feb 20 8:45am ET
Or 44% over your purchase price?

Obviuosly Hugh Panero is history in this deal. Who would be next? God, I hope not O&A and R&F but I am not too confident. Stern just became relivant to their world again. Ugh
I wish both could be on the Sirius-XM but Stern and Mel won't allow that, we all know it.

I love it! They putting HD Radio over to get this merger through! HAHAHAHAHA! Brilliant!

"If you want to listen to Howard Stern AND Opie and Anthony, you need to subscribe to both services"

It is about time they were mentioened together. Stern is not the competition to Oprah. He is the competition to O&A. Finally they acknowledge that!

Does the NAB really believe they can take on Wall Street?!?! Ain't gonna happen!

i wasn't for the merger until i heard that Gary and Mel seemed to be on the same page. i guess this will be a good thing since xm's stock went up about 2.70 (at this point). i must say when i am asked as a xm shareholder i will vote yes for the merge.

Q : Mel, how do you respond to people that say you're crazy for spending $500,000,000 on Howard Stern?


The only way to save SatRad now is for the merger to be blocked, most likely from the FCC. I really hope they put the kibosh on this before both companies are ruined. This whole merger is anti-consumer and anti-free market.

If this monstrosity is allowed to take place you can say hello to increased prices, dumbed down music content, all-commercial music channels, and the same crappy sound quality to provide bandwidth for a couple of crappy kid backseat tv stations.

FCC, please kill this before Parsons and Mel destroy satrad.

>> 44%?
>> Pre-Market: 4.09 +0.39 (10.54%) Feb 20 8:45am ET
>> Or 44% over your purchase price?

Typo. I meant .44


I completely agree. This merger will ruin satrad as we know it. How many times have we seen mergers of this kind where already large and corner market entities have joined to create uber-companies that put the screws to consumers??? It's not a rhetorical question and doesn't take long to thing...hmmm...let's see - AT&T/Cingular. There's one. Terrible service, terrible plans and equipment, and terrible pricing. Now I know why I have Verizon. But that's just it - in cellular service, there is a choice. Now, in sat rad, if this merger goes through, there will be no choice. Once again, loyal customers will have only one provider gouging them for all they can take. Why would anyone besides shareholders and the CEOs want this? It doesn't benefit US, the ones giving those shareholders and CEOs cold hard cash in their pockets.

For thos eon Sirius, the live play by play of the conference call on Opie and Anthony is priceless. Like MST3000 for radio :-)

Worth catching the replay on XM around 5pm today

>>> "FCC, please kill this before Parsons and Mel destroy satrad."

I dunno... I think anything the FCC (potentially) and the NAB is against, I'm pretty much all for. Fuck them...

With the money they save, they should be able to by a few more FCC commissioners and Congressmen to help clear the way. I'm assuming the commissioners are relatively cheap next the cost of owning a Senator or Rep.

Mel is a cunt. Can I say that on satellite radio?

>> " to by a few..."

Typo: buy

i just thought i would point out Board Room Mel said 1+1=3

>> "i just thought i would point out Board Room Mel said 1+1=3"

That's CEO-speak for "I'm gonna make Billions on this deal"


XM subs, listen to the O&A replay. They aired the call and did some commenting. Fucking brilliant, as usual.
Thanks for this Ryan, you rock too.

Background: XM & TimeWarner Cable Subscriber

If this works like cable in NYC where multiple cos became one, the subscriber will eventually get screwed with rising fees and nowhere else to go for cable.

I got XM after deciding its programming is a greater fit. Both predominantly offer music. What benefit is it to me to get two 60's stations, etc. Why would the combined entity want to carry both anyway? Won't they pare down staffers by picking what they consider to be the better of similar channels.

Here is what the merger means to me:
Plan on needing to buy a new radio and paying more now that there is no competition.

""If you want to listen to Howard Stern AND Opie and Anthony, you need to subscribe to both services"

It is about time they were mentioened together. Stern is not the competition to Oprah. He is the competition to O&A. Finally they acknowledge that!"

parsons made that statement. in his head o&a are competition to stern. LMFAO!

"XM subs, listen to the O&A replay. They aired the call and did some commenting."

they had nothing better to talk about? oh yeah, brilliant content. im glad to see you're getting your $13 a month worth.

O&A will most likely not be on the new companies airwaves. not because Stern said so or "they dont want to", it would be because they have no effect on adding new subs. they are not worth the ink it would take to sign them. have fun on freefm bbbboys. your going to rot there for the rest of your 3 year radio career (unless CBS kicks the poor rating losers off sooner and pays them out)

I dunno anymore about O&A/R&F being gone. Gary has more control over the board, since they have 4 + 2 from GM/Honda and they are currently the biggest channel on XM. Mel is not god of satrad, though he is a big force. But you have to consider that Howie is probably going to be retiring in a few more years and they have to have some future talk content. Lets face it, like them or not, O&A will be on the radio for a while yet and Howard is getting to the age and financial status where he can retire whenever he wants.

I wouldn't be surprised to see a big talk block of O&A on SiriusXM at 102 and carry R&F and O&A, much like Howard has Bubba and company on 100 and 101. Might actually bring a lot of folks if you could buy the "premium" talk block of Howard 100-101 and the boys on 103.

Oh please don't turn this into an "O&A versus Stern" discussion.

Look, I know Stern and O&A fans hate each other, and hate the other show, but no one knows, least of all Philmore, who is going to stay and who is going to go.

I DO HATE the "subscription" plan they are switching to, though. Didn't they already try this? Wasn't it a failure at XM? I guess all O&A subs will subscribe to O&A and Stern subs to Stern, but why make new subs choose? Why does Sirius seem to be running the show when they needed the merger simply to survive?

I like my XM just the way it is. I hope my doubts are proven wrong and the merger gives me more choice (I really am excited about finally getting some decent classic rock stations, like Sirius' Classic Vinyl).

Just... if anything, just don't touch my ron and fez, okay? Please? I can put up with anything else... just don't touch R&F!

I am with Ryan. It is not about O&A vs. Stern discussion.

This is a "Greed versus Consumer" discussion.

I dont like this merger at all!
If the price goes up I will go back to my iPod in a flash.
I do love my XM Radio but there is no way im spending any more money on this thing per month!

You can't value this deal until we know how many shares of Sirius will be out on the merger. This is the number ONE question that was glossed over.

IF there is 3.0 Billion, ( and I suspect it's 2.2 ) then it's a suck assed deal even if they merge.

Better for XMSR to pick off DCX and go alone.

Make it so.

Thanks for the blog. The notion of ala carte pricing is quite scary. Does the combined company still have to carry the Clear Channel stations? I think the music choices are going to suffer, given the huge committments to MLB, NASCAR, NFL, and Howard. Bush's FCC are completely corrupt, so hopefully Congress can torpedo this deal.

First of all, Thanks to Ryan for putting this together.
How many of you out there are dual subscribers? Those of you that are, you are paying $25.90 a month for both services,wouldnt you rather get the best of both worlds for a cheaper price? I know I would. If the fight between XM and Sirius continues they will run eachother into the ground and then we would have nothing. A merger is a better option than going back to FM radio.
Again this is "just_my_opinion"

Post a comment

(or continue the conversation in the Orbitcast Forums)

Recent Entries

From the Forums...
Search Orbitcast:

Recent Readers
Latest Poll
Technology & Media Blogs
These are blogs that relate to technology, media or other specific industries, but not soley on satrad.
Sponsored Links

Copyright © 2008 Orbitcast Media, LLC.