Corporate Finance Merger Analysis Sirius Xm Radio

Topics: Satellite radio, Sirius Satellite Radio, Sirius XM Radio Pages: 6 (2040 words) Published: November 28, 2011
Justin Kaufman-2056713
Lecturer- Stephen Chandler

Corporate Finance

Merger Report
Sirius XM inc.

Table Of Contents
1. Coversheet
2. Table of contents
3. Introduction
4. History Of The Industry/History Of the Companies
5. History Of The Companies
6. History Of The Companies
7. Type Of Merger/Reasons for merger
8. Reasons for merger
9. Shareholder Reaction/Finance
10.Regulation Authority/ Wider Reactions
11.Success/Failure Of Merger


This report is about the creation of the sattelite radio industry, and its only two operating companies Sirius Sattelite Radio, and XM Radio. These companies, despite obvious duopoly advantages and some early succeses, were too heavily leaden with debt, resulting in a controversial merger worth billions. Even after the merger the company struggled to cope. I chose this company because of the interesting nature of these two companies with an immediate duopoly of the newly created industry, and the controversial nature of the decision that allowed them to merge.

History of the industry
The digital radio industry began with the creation of digital audio radio service (dars) which was established by the fcc in 1992 by reserving certain segments of radio frequency for sattelite broadcast onto the radio. An auction was held in 1997 after 5 years of negotiations with four competitors, after which only two companies were licensed for use of these frequencies, both of which paid around 90m us dollars. History of the companies

Xm radio
Xm radio, formerly known as american mobile radio began broadcasting in september 2001 using their two geostationary sattelites “rock” and “roll”. Within months fortune magazine named xm radio product of the year, was named invention of the year by Time, and “best of whats new” from popular science, among a myriad of others.

By 2002 XM broadcast to the entire united states, but were severley hindered by a defective sattelite, which their insurance company refused to pay 400m dollars for its replacement. this led to a 500m dollar loss in 2002. By 2003 xm radio was outselling subscriptions 5 fold to its only competitor Sirius, while simultaneously keeping its costs at a fraction of that of Its rival. In 2004 xm contracted bob edwards, a popular national radio host, to boost subscriptions. This was followed shortly by a 650m dollar contract for radio broadcast rights for major league baseball. Also in 2004 the comapny developed a walkman sized reciever unit, months ahead of the technological capabilities of its rival Sirius. Xm increased its subscriptions to 3 million by the end of 2004, triple that of Sirius. Despite its relative success xm radio still reported losses of more than 640m dollars that year. Half of Xm radios subscribers came from a contract with General Motors, which gave free subscription for a month with the option of renewal. Xm later introduced xm wx satellite weather datacasting for pilots and a navigation system compatiible with all types of vehicle, as well as signing oprah winfrey and snoop dogg to lucrative contracts.

Sirius Satellite radio, formerly known as CD Radio, began broadcasting in 2002. It had nationwide coverage by the end of 2002. Following a low subscriber level in its first several years, 1 million at the end of 2004, Sirius signed the previously banned explicit radio host Howard Stern to an exclusive broadcasting contract for a reported 500m dollars. Sirius also entered into contracts with microsoft, in an effort to broadcast video data to cars,ie. television This provided a huge amount of much needed publicity for Sirius and the Industry as a whole. Later signings by sirius include Martha Stewart. In response to Xm radios success in league with GM, Sirius forged a deal with ford to provide radio systems for 20 lines of car. Sirius also followed Xm’s example when they signed a contract for...
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