America's money-losing satellite radio companies saw their share prices rise modestly on Tuesday after proposing a deal to merge their way to profitability and hearing a regulator express reservations about their wedding plans.
On Monday, XM Satellite Radio and Sirius Satellite Radio announced a $13-billion deal that would give them a monopoly on the business of beaming programs to people who buy special radios and pay fees of about $15 Cdn a month.
Satellite radio subscribers can hear scores of commercial-free channels — for a fee.
(Sirius/Associated Press)
Kevin Martin, chairman of the U.S. Federal Communications Commission, said that the FCC — whose approval the companies need — will evaluate any proposal to see if it's in the public interest.
"The hurdle here, however, would be high as the commission originally prohibited one company from holding the only two satellite radio licences," he said in a statement after the announcement.
"The companies would need to demonstrate that consumers would clearly be better off with both more choice and affordable prices."
The New York Times reported that XM and Sirius began serious negotiations in December after determining it was in their best interests to complete a deal while President George W. Bush remains in power.
The newspaper attributed the information to unnamed people involved in the negotiations. Bush, who is seen as friendlier to business than leading Democratic presidential contenders, leaves office in January 2009.
The FCC deliberations, along with possible anti-combines enforcement by other U.S. agencies, could determine the fate of the companies' Canadian partners, XM Canada and Sirius Canada. The CBC is a part owner of the latter.
Spending heavily in a battle for subscribers, the American companies had watched their shares trade near 52-week lows recently. The trend was upward on Tuesday, but not spectacularly so, as trading resumed on U.S. markets after the Presidents Day long weekend.
In early trading, XM shares changed hands for as much as $16.63 US — up 17 per cent from Friday — before slipping back below $16.
Sirius traded as high as $4.06, up 9.7 per cent, before sipping below $4.
The stocks remain well below their 52-week highs of $24.21 and $5.57, respectively.
Canadian Satellite Radio Holdings, which runs XM Canada in partnership with XM Satellite Radio, saw it share price drop about 12 per cent to $7.41 Cdn after rising 27 per cent in Toronto trading on Monday. It remains far below its 52-week high of $14.
With files from the Associated PressRelated
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