EXPENDITURE STRATEGY – SIRIUS & XM (SATELLITE RADIO)

In February Sirius Satellite Radio announced plans to merge with rival XM Satellite Radio and end up saving billions of dollars in expenses.

But:
1. The licenses issued to XM and Sirius in the 1990s bar the pair from merging.
2. Capitol Hill, Federal Communications Commission, and the National Association of Broadcasters have raised objections.
3. And analysts doubt the projected cost savings the merger may yield because the combined company may have to pay higher programming fees to broadcast their baseball and football programs. Bank of America trimmed its forecast of anticipated savings to $3.6 billion, from $5 billion.

So:
1. The companies argue that new technologies, such as HD Radio, music-playing mobile phones, and Apple's iPod now compete with satellite radio directly. So merging wouldn't significantly weaken competition. Sirius and XM are likely to file more extensive reports outlining their stance.
2. The FCC is skeptical of claims that new technologies necessarily change the equation and provide competition sufficient to restrain monopoly power.
3. XM and Sirius have hired powerful lobbyists and advisers to plead their case in Washington including law firm Wiley Rein (one partner is former FCC chairman Richard Wiley) and at least one former FCC commissioner and several former FCC staffers for behind-the-scenes lobbying.

Where there is a will there is a way.
But it could depend on whose will is on firmer ground and would lead to the greatest good.

[Click here for full story at: BUSINESSWEEK.COM]