Just as everyone thought that Charles Ergen was the lone player at the poker table, news surfaces that Sirius XM radio is in talks with Liberty Media as well as DirecTV (Liberty has an interest in DirecTV). Immediate thought of a bidding war is likely the first thought on every shareholders mind, but shareholders need to be cautious. Like nearly all reports over the past week, this news seems to be a leak that is lacking in detail. Sirius XM, Ergen, Liberty, and DirecTV all have no official comment.
Ergen has been buying up debt to leverage his position. This could give him a leg up on others, but then again, he is rumored to be seeking outright control, and as yet does not seem to have enough of the debt to get to that point. One can imagine that additional reports and leaks will be coming in the couple of days, and that will add fuel to the speculation fire.
While there is speculation that the interest in Sirius XM relates to the satellites and repeaters, the more likely situation is that these suitors are attracted to the top line growth that Sirius XM Radio have, and will continue to have for some time. Costs for satellite radio are coming down, revenues will rise, and that combination is attractive. The stumbling block is the company's debt, the credit markets, and a poor economy. At some point the credit markets and economy will recover. The question is how the debt will be handled, and who will control Sirius XM Radio going forward.
It is not hard to imagine that there have been a series of meetings and presentations happening at very high levels. Shareholders remain in the dark with opinions, speculation and guestimates. Sirius XM Radio is expected to deliver the Q4 2008 numbers in the final week of February but it could be as early as tomorrow that we begin to see the poker game played out.
Position: Long Sirius XM Radio