So When Will The FCC Decide on Sirius-XM?
Now that the Department of Justice has rendered their decision regarding the merger of Sirius and XM the next logical question is when the FCC will make their decision. The answer is another great unknown in the world of satellite radio. Speculation ranges from days to weeks, and no one really knows. However, there are possibilities that may give hints as to when activities may happen.
1. FCC Chairman Kevin Martin has expressed that the staff at the FCC is drafting outlines with various merger outcomes. This would indicate that there is likely some time yet before a finalized decision is reached. If there was a sense of urgency, then those reports should be available by the end of this week. Leave at least another week for review, and the FCC decision is a Q2 event.
2. FCC public filings are nearly exhausted. Those for and against the merger have exhausted any information that can be brought to the table. At this point all information is in hand at the FCC. There could be some jockeying for position amongst commission members seeking additional concessions, or simply prolonging the process. Even if a notice is filed announcing a pending vote, dissenters can prolong the timeline for at least 30 days if they choose to do so.
Perhaps more important than the timeline is the concessions that may be asked of Sirius and XM. With DOJ approval on a broad base, and without any stipulations, the challenge for the FCC is now bigger. It is now the FCC that will determine the shape of the audio entertainment landscape going forward. The FCC has never gone against the DOJ in matters such as this. It would be highly unlikely that this will happen now. Thus, the situation boils down to concessions. Here are some things to consider:
1. A-La-Carte – The FCC will ask for this, and the companies will grant it.
2. Price Freeze – The FCC will ask for this for a specified period of time. The companies will agree.
3. Educational and Informational Programming – The FCC will require that a certain percentage of content be a part of this category. The company will point out that they already do this with news, NPR, children’s programming, etc. The FCC will ask that some additional channels be made. In my opinion the company will do this.
4. Exclusive OEM Deals – The FCC will ask that exclusive OEM deals not lock out other audio entertainment platforms. They will also stipulate that should a audio entertainment competitor arise using satellite delivered or digital signal, that they not be excluded from dealing with OEM’s. The company will agree.
5. Open Hardware Platform – The FCC could ask that the specifications, etc. be made open so that any company wishing to produce radios can do so. The company will argue that they subsidize chipsets, but that if a company is willing to fore go the subsidy that they would agree to the stipulation.
6. The FCC could ask for strengthened language regarding local content. The company will argue that the current rules are strict enough. If it is a make or break situation, I feel the company will concede this issue. However, this also could raise freedom of speech issues that go outside the realm of the FCC.
7. The FCC could ask that some channels be assigned to minority programming with the company having no editorial control. Sirius and XM will point out the minority programming already available, but may concede this issue.
8. The FCC could ask that HD radio be included in SDARS chipsets. This would be a bold request by the FCC, because it frees Ibiquity from having to give up revenue in order to gain acceptance. I do not know which way the company will fall on this issue, but it is possible that it is accepted if Ibiquity pays the company a fee for such an endeavor.
9. The FCC may ask for a portion of spectrum back. The company will fight this strongly. They need their spectrum to facilitate the broadcasting to existing receivers. Additionally, the spectrum carries with it a large value. Taking away spectrum takes away value. Without value, the companies other plans become much more of a challenge.
10. The FCC may ask for a license back. The company will fight this as well. Given the broad definition of the market, as outlined by the DOJ, the company can argue that there is already plenty of competition out there.
While the popular question is WHEN the FCC will decide, the important question is WHAT will be the stipulations attached to the approval.
Position – Long Sirius, XM
Excellent points. There seems to be some issues between the DOJ and the FCC. I think the FCC was supprised that the DOJ added no stipulations. In the end that point will cause this to drag on for a while but will save the merged company big money. Mel K. knocked this one out of the park.
The big point in the approval was that there were no stipulations, and the market has been defined a broad.
The FCC stipulations will not be too cumbersome in my opinion.
As I have said before I think the DOJ tied the hands of the FCC. The DOJ basically recomended the approval of the merger. While they had to say something to justify them not blocking the merger. I think they said way more then the FCC would have liked, if the FCC were going to try and sattle SIRI/XMSR with alot of conditions, that the companies would find hard to accept. Lets face it, we all know the two agencies Talk to each other, and I dont think they are to far apart from each other on this (if you take the two democrats out).
I also believe that the companies and the FCC have been talking and are pretty much in a agreement as to what concessions would be acceptable by both. I believe this because as many have believed the DOJ had made up its mind a while ago which the FCC would have known about. While a final draft may not have been made, I believe a decision is alot closer then 2 weeks.
A license surrender is almost certainly a deal breaker. The Georgetown proposal is not far behind since it would canibalize satellite radio subscriptions. My feeling is that Georgetown would simply become a broker for terrestrial radio programming anyway. Should any of the preceeding occur, the sound quality would likely suffer, thus making HD radio inclusion less likely. HD inclusion also hampers developement and size of future portables.
Tyler, Do you beleve the FCC and Sirus have already negotiated and or agreed to terms? Were you suprised that there was minimal jump in the stock price after DOJ aproval? What does the crazy volume suggest for future (Next couple of weeks) stock price? I heard an anaylist say short SIRI because of the current ratio between XM and SIRI?
kevin…
>>>>>Tyler, Do you beleve the FCC and Sirus have already negotiated and or agreed to terms?
The companies have been in regular talks with the FCC. They likely have not agreed on terms as yet, and some debate still exists.
>>>>>Were you suprised that there was minimal jump in the stock price after DOJ aproval?
The size of the jump did not really surprise me per se. Investors in this sector are fatigued. They want finality, and the DOJ announcement, while great, is still not finality.
>>>>>What does the crazy volume suggest for future (Next couple of weeks) stock price?
Volume will get a bit crazy IMO. Now people are beginning to jockey for position relative to the market, as well as timing.
>>>>>I heard an anaylist say short SIRI because of the current ratio between XM and SIRI?
This type of play is a way to guarantee a specific return. The play is to go long XM and short Sirius with the same amount of money in each. If the spread between the Sirius price and the XM price (considering the exchange ratio) is 10%, you can lock in that 10% profit once the merger goes through. This strategy basically takes away risk, but limits profit, and assumes that the merger is approved.
Completely understood. Thanks again!
Tyler, it is not my contention that both the FCC and the companies have sign off on a agreement. Just that somebody in the FCC has already put these concessions as hypothetical questions to them to see the reactions. Example: How would SIRI feel about giving 5% for public Interest., How would you react to giving up 20% of your spectrum. My feeling is that the FCC has a vary good idea about how the companies would react to all of the possible concessions that are out there.