Robert Peck of Bear Stearns is Bullish On Sirius. He sees current prices as an attractive entry point, Likely FCC approval with modest concessions, and $5 Billion in merger synergies.

REPORT EXCERPTS

Sirius Satellite Radio (SIRI-$2.74-Outperform)

Sector View:

The satellite sector includes companies operating in various sub-sectors and at various stages in their life cycle, which present different risk-reward characteristics. Positive Catalysts, Compelling Entry Point

Contrary to expectations, both Sirius and XM shares have declined since the DOJ decision.Investors seem to be concerned about three main issues, which we think are largely unfounded.

• FCC Approval Likely Without Onerous Conditions. One of the concerns is that the FCC may ask Sirius/XM to divest one set of spectrum. However, given this will result in significant dislocation for millions of existing subs, and limited possibility of another potential satellite radio play, we do not think spectrum divestiture is likely. We believe FCC approval is likely over the next 2-4 weeks and conditions could include providing limited carriage to other content providers, a la carte, as well as pricing caps for a specified period of time. Note, the Commission is meeting on 4/10, but satellite radio is not on the agenda.

• Debt Refi Not an Insurmountable Task. XM has to refi debt likely impacting $600M 9.75% notes, $200M FRNs, and $230M sale & leaseback. While the credit environment is not very favorable, we expect MergeCo likely will be able to refi debt (i) by paying some premium to debtholders, and (ii) the new debt will be in a significantly stronger merged company that will enjoy substantial synergies.

Position - Long Sirius, Long XM

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