tyler1.JPGWhile this news is not an approval of the merger as yet, it is very big in that it offers some new insight into the merger process that was previously not available. Respected analyst George Reed-Dellinger, who has been among the most accurate in terms of the regulatory process throughout the merger published a report today citing new information that could not only pave the way for FCC approval, but also ensure that concessions for the merger could be more reasonable than people thought.

The big news is that Sirius and XM have pledged 8 channels to be leased to minority owners, and that members of the minority in Congress have praised the idea. This 8 channel arrangement has not previously been publicly discussed. Dellinger points out, and I agree that this would diffuse the proposals of 20% of the spectrum sought by Georgetown Partners. As usual, Chester Davenport of Georgetown Partners was not available to comment.

REPORT EXCERPT

George Reed-Dellinger -- We believe that recent correspondence from Congress has paved the way for the Federal Communications Commission (FCC) to approve the XM (XMSR-$12)-Sirius (SIRI-$3) in the next few weeks without burdensome conditions. More specifically:

House Commerce Committee Chairman John Dingell (D-MI) asked the Commission to extract restraints on pricing, which the companies have already volunteered, and made no mention of giving back spectrum as a requirement (which the companies oppose). Today’s letter from minority congressmen on the House Telecommunications Subcommittee praised the companies’ pledge to lease eight channels to minority owners. This will help defuse the more aggressive petition by privately owned Georgetown Partners, which asks the FCC to require 20% (sixty channels) for minority programming.

This correspondence from the Democratic Congress lends support to FCC Chairman Kevin Martin in moving the approval forward, without the more burdensome conditions that the Democratic Commissioner’s might be expected to hold out for (spectrum give-back and the Georgetown petition). We have long believed the Chairman was paying only lip service to a goal of gaining a consensus, 5-0 approval of the deal, and would be quite willing to accept (as would the management teams) a 3-2 approval should the Democratic Commissioners oppose the combination. The strongly worded support for the merger by the Department of Justice is likely to have more sway with any court reviewing the case than a Commission vote divided on political grounds. We expect a draft order can now be pieced together and voted on ‘circulation’ as opposed to a May 14th open meeting vote.

Tyler Savery Position - Long Sirius, Long XM