SIRIUS XM SATELLITE RADIO NEWS

Jeff Wlodarczak, analyst for Wachovia published a report on XM’s Q4 and 2007 Operating Results.

REPORT EXCERPTS

XM Satellite Radio Holdings Inc.

XMSR: Weak Satellite Radio Demand Trends Continue in Q4

• XM Q4 RESULTS – WEAK SUBSCRIBER (SUB) TRENDS CONTINUE–XM reported a 4% YoY increase in net new sub additions to +460K (from +443K in Q4 ’06), materially below consensus +522K expectations although in-line with out 450K est. Partly reflecting a lack of interest in the sat radio product, the aftermarket & data channel added only +99K (-64% YoY) net subscribers. Gross sub additions were 1.13M (+6%) below consensus at 1.198M and in-line with our1.119M. Churn (excluding promotional disconnects) was 1.72% compared to our forecast of 1.80% and total churn was 2.52% compared to consensus of 2.6% and our estimate of 2.5%. The OEM conversion rate remained stubbornly at the 50% level although it did improve to 53.9% (vs. 52.4% in Q4 ‘06 and 52.5% in Q3 ’07), we believe this modest improvement reflected extremely aggressive post trial promotional activity.

• FINANCIAL RESULTS MIXED–All-in subscriber monthly ARPU for Q4 was $10.10 in line with $10.00 consensus and our $10.01 driving reported revenue of $308M roughly in-line with our estimate of $306M and consensus of $304M. Cost Per Gross Addition (CPGA) was $120 ($140 as XM defines it) vs. our expectation of $127 and $116 in Q3’07 and $128 in Q4’06. CPGA excluding promotional discounts was $156 (vs. our estimate of $162). Operating cash flow was a loss of ($155M) (including stock option expense and merger related expense) versus our ($137M) loss. The difference between our loss and actual results was related to higher than expected stock-based comp. Like SIRI ($2.93), XMSR did not provide 2008 guidance.

• BOTTOM LINE: Weak demand trends, highlighted by continued very weak retail demand and 50% OEM conversion rates continue (despite aggressive post trial promotional activity). While we believe there is clearly a material niche for sat radio service, we think both players need to ”right size” their cost/business models and a merger of the two players makes a lot of sense to speed this process up. The problem is merger approval (previously expected by the end of 2007) is still uncertain, with the stocks in our opinion overvalued as standalone entities and at best fairly valued as a combined entity. We estimate the industry’s current enterprise value implies the industry will reach the 31M subscriber level (assuming post merger a subscriber is worth $350 in a steady state), vs. the YE 2007 (which includes a material percentage of “subscribers” that are inactive on dealer lots and in promotional periods).

Valuation Range: $10 to $13 Our valuation range is based on a discounted cash flow. We assume a discount rate of12% and a terminal value of 60x estimated 2010 free cash flow. Risks include slower-than-expected subscriber growth and competing terrestrial alternatives.

Investment Thesis: XM has over 8 million subscribers, strong OEM relationships and impressive technology. We are cautious on the outlook for satellite radio and XM and are concerned about the aggressive growth expectations implied by the market value.

Tyler Savery Position – Long Sirius, Long XM

International Launch Services (ILS) announced a contract today for the launch of two SIRIUS Satellite Radio satellites on the Proton Breeze M vehicle. ILS has conducted three launches for Sirius in the past (photo is launch of Sirius 3).

Under the terms of the deal, Sirius expects to launch SIRIUS FM-6 under the contract announced today. Sirius FM-6 is currently under construction at Space Systems/Loral and is anticipated to be launched in the fourth quarter of 2010. In their most recent call Sirius announced intentions of their next launch taking place in the first half of 2009.

The Proton booster and the Breeze M upper stage are built by ILS’ Russian partner, Khrunichev Space Center of Moscow. The Proton vehicle launches from the Baikonur Cosmodrome in Kazakhstan.

“We thank SIRIUS for selecting Proton, and for its long-term relationship with ILS,” said ILS President Frank McKenna. “We launched SIRIUS’ initial constellation of three satellites in 2000. Proton has the ideal performance for SIRIUS, with both its heavy-lift capability and its flexibility to carry spacecraft to various orbits.”

ILS is a joint venture of Space Transport Inc., along with Khrunichev Space Center and RSC Energia of Moscow. ILS has exclusive rights to market the Proton, Russia’s premier heavy-lift vehicle, to commercial satellite operators worldwide. The Proton has a heritage of 333 missions since 1965.

Proton builder Khrunichev is one of the cornerstones of the Russian space industry. It was created from the merger of the Khrunichev Machine-building Plant and the Salyut Design Bureau 15 years ago. The company includes among its branches a number of key manufacturers of launch vehicle and spacecraft components in Moscow and in other cities of the Russian Federation.

via Central Daily

Position – Long Sirius

WASHINGTON and NEW YORK, Feb 29, 2008 /PRNewswire-FirstCall via COMTEX News Network/ — XM Satellite Radio (Nasdaq: XMSR) and SIRIUS Satellite Radio (Nasdaq: SIRI) today announced that the companies have agreed not to exercise their rights to terminate the Merger Agreement until May 1, 2008.

The closing of the pending merger remains subject to satisfaction of all applicable conditions, including approval from the Department of Justice and the Federal Communications Commission. For more information on the SIRIUS-XM merger, please visit www.XMmerger.com or www.SIRIUSmerger.com.

Position – Long Sirius, Long XM

Well, Bubba The Love Sponge is not called a shock jock because he makes friends with everyone. The Sirius Satellite Radio/Cox Communications radio host found himself on the short end of an upset Mark Lunsford, who’s daughter was abducted and murdered. The father, two years after the incident, has indicated that he is going to sue the Citrus County Sheriff’s Department and the Florida Department of Law Enforcement for negligence in the death of his daughter.

Apparently the story is big news in the Tampa Florida area where Bubba hosts a morning show on terrestrial radio, and an afternoon show on Sirius. Bubba, likely trying to be topical and a bit controversial stated on his radio show that Lunsford was only suing to get money. Lunsford took exception and called Bubba to confront him.

Continue Reading »

Kit Spring, an analyst for Stifel issued a note today on XM’s Q4 and 2007 operating results.

REPORT EXCERPTS

XMSR: First Look: Churn & Conversion Better; But Lack of Expense Control

Financials – were a miss overall: 4Q revenues of $308MM, up 20% YOY, were slightly above our estimate of$305MM and the Street at $303MM.

Adjusted EBITDA loss was $116MM worse than our estimate of $82MM.

EPS loss was $0.78, worse than our estimate of $0.61.

Cash position was $157MM exactly in line with our estimate.

Metrics mixed – great churn and OEM conversion but higher SAC:

4Q gross additions were 1.13MM, up 6% YOY slightly below our estimateof 1.15MM.

OEM gross adds of 766k (up 46%), were below our 800k estimate, while retail gross adds of 364k (down 33%), were slightly above our estimate of 351k.

Monthly churn was 1.72%, down from 1.79% in 4Q06 and below ourestimate of 1.8%, though up from 1.69% in 3Q07.

OEM conversion rate was 53.9% versus our expectation of 52.5% and was the highest rate since 2Q06 despite a deeper penetration into middle and lower-end new cars.

Net subscribers adds were 460k, up 6% YOY but below our estimate of 493k.

Ending subscribers were 9.027MM, within guidance of 9.0-9.2MM, and slightly below our estimate of 9.060MM.

4Q ARPU (average revenue per user per month) were $10.14, above our $10.09 estimate and up 1% YOY.

4Q SAC (subscriber acquisition cost per gross addition) was $87, far above our estimate of $75 and 24% above $70 last year.

4Q CPGA (SAC plus other marketing costs) was $140, far above ourestimate of $127, and $128 in 4Q06.

We plan to update all financials after the conference call which was at 8am ET

Position – Long Sirius, XM

UBS analyst Lucas Binder Issued a report today on XM’s Q4 and Full Year 2007 operating results.

REPORT EXCERPTS

4Q07 Results; Y-O-Y Growth In Net Adds

XMSR reported solid 4Q07 results ahead of our estimates
XMSR reported generally better than expected 4Q07 operating metrics. Highlighted by y-o-y growth in net adds of 460k vs. UBSe of 433k and flat ARPUof $11.71 vs. UBSe of $11.35. Subscriber rev of $266M was slightly better thanUBSe of $261M. Total rev of $308M were better than UBSe of $299M. Reported EPS loss of $(0.78) was worse than UBSe of $(0.56) due to much higher revenue share and royalties.

Settlement with RIAA; lower EBITDA As a result of merger and settlement related charges, EBITDA loss of $(117)M was worse than UBSe of $(72)M. The biggest contributor was $54M more in rev share and royalties, which we believe was associated with the RIAA settlement and trueups for the quarter.

4Q07 conference call XMSR will hold its 4Q07 conference call at 10:00AM. The dial-in number is 877-265-5808, #35479749. Management believes regulatory approval of the merger could be in the “near future”. We expect management to discuss growth in the OEM channel and provide its latest update on the merger process on today’s call.Valuation: Maintain Neutral rating with a $12 price target We base our price target on a detailed DCF analysis, using 3.0% growth in perpetuity and a 13.0% WACC.

Position – Long Sirius, XM

Barrington issued a report today on Sirius’ Q4 and Full year 2007.

REPORT EXCERPTS

Sirius Satellite Radio Inc. (SIRI-NASDAQ )

Estimates Tweaked Higher After Solid Quarter

Investment Highlights

Results for Q4/07 and FY/07 were generally positive, with slightly lower-than-expected revenues, but net earnings above expectations. For the quarter, total revenues were $249.8 million, up 29% over Q4/06. A shift to instant rebates versus mail-in negatively affected ARPU in Q4, particularly since the retail component is higher in the Christmas selling season. Sirius noted that January marks 29 consecutive months of leadership in retail market share versus XM.

Diluted EPS improved to $(0.11) from $(0.17) a year ago, as revenue growth outpaced operating expenses. Our estimates called for diluted EPS of $(0.13) on revenues of $289.4 million, which was in line with the consensus mean estimate for diluted EPS, but higher than the $241.8 estimate for revenues. Full year revenues increased 45% to $922.0 million, while diluted EPS improved to $(0.39) versus $(0.79) in FY/06. Our estimates were for diluted EPS of $(0.40) on revenues of $961.6 million.

Continue Reading »

As if on cue, merger opponents are once again getting active with the FCC. In filings today, C3SR, Georgetown Partners, and the Consumer Federation of America all voiced merger opposition again.

C3SR

The C3SR filing consisted of a 33 page rebuttal to the CRA analysis. This time the rebuttal comes from Alan Ingraham and Hal Singer of Criterion Economics. That the opinion of these two matches the opinion of that which has already been filed by Criterion should come as no surprise. The duo feel that the CRA analysis is “misspecified”, that the use of cross sectional data limits CRA’s findings, and that CRA uses an inappropriate amount of granularity for defining the relevant market. C3SR, which claims to be an advocate for satellite radio subscribers but is funded by the National Association of Broadcasters was active early on in the merger process, but has been very inactive in updating their activities, and has never given any data relative to whether or not they are actually carrying forward the opinion of satellite radio subscribers.

GEORGETOWN PARTNERS

At first blush the Georgetown Partners filing seems to indicate that perhaps we will finally get some answers from the group headed by Chester Davenport, but alas, once again all we have are empty proposals. The filing starts out by stating, “…the attached filing is in response to questions raised at meetings with commissioners and staff.”

Davenport instead goes into a “Fix-It-First” explanation, and how his proposal is the “fix” to the problem of competition in the marketplace. Davenport cites various precedent for “fix-it-first” in his filing, but does not address the issue at hand. Basically Davenport argues a narrow market definition of the marketplace and feels his solution is the fix for the situation. However, if the marketplace is broad, then the competitive concerns of Davenport are moot.

CONSUMER FEDERATION OF AMERICA

The filing of the Consumer Federation of America is basically a “reminder note” that the group opposes the merger. The group met with Commissioner Copps and staff on February 19th.

Position – Long Sirius, Long XM