Blair Levin, and analyst for Stifel, issued a report today covering many companies involved in the media sector. Included in this analysis was some detail and opinion on the pending Sirius and XM merger. Stifel sees a possible FCC decision taking place as late as mid May. The companies currently have an merger agreement that expires on May 1, 2008. At that point either company could walk away from the deal without penalty. However, with DOJ approval already secured, it would be unlikely in my opinion for either Sirius or XM to not extend the deal. Investors should watch for an announcement regarding an extension of the merger agreement to happen very late in the month. If the FCC decides prior to the deal expiration, there will be no need for the Board of Directors from each company to meet. Additionally, investors should keep their eyes out for Sirius and XM to announce their quarterly conference call dates. Sirius will definitely have a call. If the merger is approved, it is likely that XM will not have a call, as there would be no requirement to do so.
VERIZON WIRELESS, AT&T LOOK TO HOLD HIGH GROUND ON D BLOCK. We believe that the ultimate winners of the planned FCC re auction of the 700 MHz D block will likely be Verizon Wireless and/or AT&T. At a House hearing this week, FCC commissioners voiced support for taking another stab at fomenting a public-private partnership to develop an interoperable network for first responders. They acknowledged that to attract bidders some rule changes will be necessary, the most difficult of which appears to be a perceived need to better define and control the demands of a public-safety trust. With competitors either struggling or less motivated to build a new network, AT&T and particularly Verizon appear to be in the best position to negotiate terms and bid on the spectrum.
GOOGLE-YAHOO TEST EXPANDS, BUT MAJOR LONG-TERM DEAL QUESTIONABLE. Reports that Google and Yahoo are expanding their collaborative search-ad tests could strengthen the tactical hands of both vis-à-vis Microsoft. Longer term, we are skeptical a major Yahoo outsourcing deal with Google would pass antitrust muster.
NO FCC XM-SIRIUS DRAFT YET. FCC meetings continue, but no draft with proposed conditions has yet emerged.
AT&T BID FOR COST RELIEF GOES DOWN TO WIRE. The FCC is due to act on an AT&T petition for cost-assignment forbearance, a decision that could go either way or produce a compromise and partial AT&T relief.
FCC EYES ACTION ON NETWORK MANAGEMENT. An FCC majority continues to eye new safeguards for broadband applications and consumers, creating overhang for Comcast and concerns for other cable operators and telcos.
WIRELESS CRITICS PRESS CASE ON TEXT MESSAGING. Public-interest groups and others urged the FCC to protect wireless text messaging and short codes from wireless carrier “discrimination.” Industry begs to differ.
Position - Long Sirius, XM