Sirius-XM deal clears major regulatory hurdle

Sirius-XM deal clears big regulatory hurdle

Dept. of Justice ends probe, says combination won’t hurt competition

By David B. Wilkerson, MarketWatch

Last Update: 3:56 PM ET Mar 24, 2008

CHICAGO (MarketWatch) - Sirius Satellite Radio Inc.’s proposed $13.6 billion
acquisition of XM Satellite Radio cleared a major hurdle Monday when the U.S.
Department of Justice wrapped up its investigation of the transaction, saying the
deal is not likely to reduce competition.

Sirius shares (SIRI) were up 10% at $3.19, while XM (XMSR) was up 17% at $13.92.

“The Division reached this conclusion because the evidence did not show that the
merger would enable the parties to profitably increase prices to satellite radio
customers…,” said the Justice Department in a statement.

The Sirius-XM deal must still be approved by the Federal Communications
Commission.

The companies have argued all along that their market should not merely be
defined as satellite radio, since they must compete against all of terrestrial
radio, as well as Internet radio, audio from satellite and cable television
systems, music download services and other media.

Thomas Barnett, assistant attorney general for the DOJ’s antitrust division, said
on a conference call that Sirius and XM do not substantially compete today, and
therefore a merger of the companies would not represent a threat to competition.

Among the DOJ’s findings, Barnett said, was that because Sirius and XM systems
are incompatible with each other, there is very little switching between the
services.

“That can be for a variety of reasons, because you prefer the content, or, more
fundamentally, because you have to go out and buy new equipment … That makes
the cost for switching undesirable, and most people won’t do it,” he said.

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