The U.S. Justice Department has cleared the way for satellite radio operators Sirius and XM to merge into a single company. It might be tough to see how allowing a market to drop from two providers to one somehow is a good thing for consumer competition, but the Justice Department has found that a combined Sirius-XM would face plenty of competition from everything from mobile phone providers to Internet-based services.
“After a careful and thorough review of the proposed transaction, the Division concluded that the evidence does not demonstrate that the proposed merger of XM and Sirius is likely to substantially lessen competition, and that the transaction therefore is not likely to harm consumers,” the Justice Department’s antitrust division wrote in a statement.
The merger must still be approved by the Federal Communications Commission. Under telecommunications regulations, the FCC must determine whether the merger would be in the public interest; if so, the FCC would then either have to ignore or rewrite a 1997 order which bars prevents either satellite radio company from buying the other. The FCC is widely expected to concur with the Justice Department’s approval of the merger, but may attach stipulations or conditions on a merger. Some politicians and industry watchers are already encouraging the FCC to block the merger as contrary to the public interest.
The proposed merger has been gestating for over a year; at the time Sirius’ offer for XM was worth some $13 billion. Since that time, both XM and Sirius have been steadily losing money, and changes in stock prices mean the deal is worth approximately $4.6 billion today. Under the deal, each share of XM would be exchanged for 4.6 shares of Sirius stock.
