Despite remaining hurdles at the Justice Department and FCC, Sirius CFO David Frear still thinks the Sirius-XM Satellite Radio merger will gain approval and they will close the deal by the end of the year.
Meanwhile, the Copyright Royalty Board has set rates for satellite radio. Sirius lawyers are still examining the 85-page ruling, but in a nutshell: deal starts at 6% of revenue in 2007, and then goes up 0.5% per year until 2012.
Notes from Frear’s talk at UBS Global Media Conference after the jump.
3:13: Inevitable Howard Stern question. Frear says hard to know how many subs are directly related to Stern. Is he happy? Frear says listen to his show. He said he sounds happy.
3:10: Question about internet listening. Is it a business? Frear: “Definitely the competition we are facing, the nacent competition, was significantly harmed by the webcasting decision that the copyright royalty board gave a year ago. AOL and Yahoo have talked about a decision to stop streaming. Internet radio is around and will stick around. We have it as well. We’ve been providing streaming to subs fro 4 years now.”
3:07: After merger, engineers will get together and standardize equipment. The best programmers will be selected for stations. Customer management system will merge, etc.
3:02: Absent a merger, there is no possible way we would introduce a la carte pricing–Frear
2:59: Among the synergies: “We have two R&D teams doing essentially the same thing. Every line item on the PnL will get better on this.” Mel Karmazin will pick management team. “I am auditioning here,” Frear says.
2:57: Operating synergies to every line item on the profit-loss statement. XM and Sirius can’t look at one another’s contracts, but predicts merger will create $3 billion to $7 billion in additional value.
2:55: Frear says he expects to close the Sirius-XM transaction by the end of the year. More than 8 million subscribers.
2:53: Frear argues that the so-called “original rule” that prohibited XM and Sirius from merging when the original licenses were granted by the FCC, was of a different time, not relevant to the music/media market today. He says former FCC chairman Reed Hundt, who created the initial rule, agrees.
2:51: On the merger process: “We went through 4 Congressional hearings. SBC and Bell South had no hearings. There were no new issues that came up in the public comment period and that’s good news.”
2:49: No big content deals on the horizon, so so programming costs are fixed in the near term.
2:47: Frear says Sirius has lagged behind XM in terms of progress with auto manufacturers. Hence, XM’s sub acquisition costs (SAC) is lower than XM’s. He says he believes Sirius SAC will come down to XM’s level. Really talking as if Sirius and XM were already merged.
2:44: The Copyright Royalty Board set satellite royalty rates–XM and Sirius to put out press releases on the new rate structure later today. In a nutshell: deal starts at 6% of revenue in 2007, and then goes up 0.5% per year until 2012.
2:40: Frear says Sirius will reach $1 billion in revenue by the end of 2007.
2:38 Frear starts with a deep-background presentation, noting that Sirius has a long history, 12 years between founding in 1990 and first subscriber in 2002. The success of both Sirius and XM, he says, “we both have to take listeners away from terrestrial radio.”
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