tyler1.JPGGeorge Reed Dellinger, of Washington Analysis, who early on predict DOJ approval of the merger, and who watches activity in Washington noted that Friday Chairman Martin of the FCC has made some comments to reporters relating to the pending merger of Sirius and XM. Comments attributed to the FCC Chairman say that he is seeking a consensus 5-0 vote on the proposed satellite radio marriage.

We noted a few weeks ago on our Sirius Buzz Radio show "It Comes Down To the FCC" (available for download) that a simple 3-2 majority in favor of the merger would deliver the least amount of concessions, and that a 5-0 vote would mean more negotiations between the members of the commission, and thus perhaps more stringent conditions as well as additional delay. In essence, there could be a price to pay (concessions) for getting to a unanimous decision. The George Reed-Dellinger report confirms the hypothesis that we published a few weeks ago.

With Washington, one never knows the motives of what transpires behind closed doors, or in the minds of the commissioners. Martin could be genuinely seeking a consensus vote, or simply posturing in order to bring out the depth of the concessions that the dissentor(s) are seeking. Ultimately, it appears that FCC approval will happen, but for investors and the companies, it is a question of what the "cost" will be in terms of conditions placed on the ability to merge.

Reed-Dellinger notes that, "on the surface this implies the deal could be subjected to a lengthy, contentious debate over conditions, such as giving back spectrum or leasing channels, which the Democratic Commissioners may be expected to demand in return for their vote."

However, the analyst also feels that Chairman Martin, "in our opinion, is merely mouthing the typical words encouraging collegiality, and will not sacrifice the deal, and the ‘a la carte’ pricing scheme offered by management, in order to get a 5-0 vote. In light of the strongly-worded approval by the Department of Justice, such a consensus is likely not needed to keep the appellate court from blocking the merger. Moreover, the DOJ went out of its way to praise the combination’s ‘synergies’, which should reinforce the Republican Commissioner’s goals of not saddling approval with unnecessary conditions."

George Reed Dellinger remains of the opinion that the deal will be approved without burdensome conditions, on a 3-2 vote if need be, and that while the May 1 date of the Sirius and XM agreement will need to be extended, that approval should come within the next month.

Position - Long Sirius, Long XM