Justice Dept. approves XM + Sirius merger
The US Justice Department has approved the merger between XM and Sirius satellite radio services, stating that it could not find any evidence that the combination would substantially reduce competition.
In what has seemed like an eternity, the first steps towards a single satellite radio entity began Monday as the DOJ approved the $13 billion deal.
XM and Sirius first announced their "merger of equals" last February, with Sirius' Mel Karmazin assuming the role of CEO, and XM's chairman Gary Parsons taking the chairman's position.
The two companies had hoped at the time to finish the merger by the end of 2007. However, both the Justice Department and the FCC took their time in studying the merger -- even causing the two sides to extend the agreement through May 1 (it was set to expire in February).
Broadcast industry groups such as the National Association of Broadcasters had voiced their opposition to the deal, saying it was anti-competitive. In its defense the two companies argued that since satellite radio's creation, the entertainment industry had changed.
Satellite radio was now competing with devices such as music players and other entertainment devices, they claimed. From the DOJ Antitrust Division's statement, it appears as if regulators agreed, adding other factors played into their decision.
The reasons for the approval included "a lack of competition between the parties in important segments even without the merger; the competitive alternative services available to consumers; technological change that is expected to make those alternatives increasingly attractive over time; and efficiencies likely to flow from the transaction that could benefit consumers," according to the statement.
With the DOJ's approval, the two companies now wait on the FCC, which must also approve the deal in order for the two companies to merge. That approval is a bit more difficult since it requires an actual rule change.
In the original agreement that created the two licenses, a provision was placed that forbid one company from owning all licenses. In order for this to be approved, that would have to be changed.
However, it is likely that the FCC will consider the DOJ's antitrust concerns -- which apparently do not exist -- and would approve the deal as well. It is not immediately clear how soon after approval from both sides would customers see any benefit.
5:25 pm EDT March 24, 2008 - In a joint statement this afternoon, XM and Sirius said they'd celebrate the merger's DoJ approval by offering a la carte programming options for subscribers, presumably upon the merger's completion.
"In a strong indication of the consumer benefits inherent in this transaction, the companies unveiled an array of new programming options, including two first-of-their-kind à la carte options where consumers can individually select the channels they wish to receive," reads this afternoon's statement. "A public opinion survey found that over 70% of voters thought the two new a la carte packages would be a good deal for consumers."