Georgetown Partners Gives More Detail, But Still Lacks Substance
How difficult of a concept is it to provide detail on a proposal? In an Exparte filing with the FCC published today, Georgetown Partners finally takes a step in giving more detail on their proposal, but avoids any subject matter that points to the important questions at hand that need due consideration.
Georgetown Partners is still trying to circumvent shareholders, as well as real business negotiations by getting their proposal mandated as a concession to the merger. Should Georgetown get what they are seeking, vast synergies in the merger would be wiped out, and the very business model of Sirius and XM would be compromised.
In their proposal, Georgetown outlines seven points that offer up a smidgen of detail, but still lack substance, and really bring up more questions than answers. After meeting upon meeting with the FCC, Georgetown still has not stepped up to the plate to give shareholders anything to consider.
GEORGETOWN POINT 1
Consummation of the merger shall not be permitted until a contractual leasing arrangement is submitted to, and approved by, the Federal Communications Commission and the Antitrust Division of the U.S. Department of Justice as complying with all aspects of their governing statutory provisions, consistent with the public interest, convenience and necessity, and including (but not limited to) the following requirements.
SIRIUS BUZZ COMMENT
Georgetown is trying to dictate that a leasing arrangement be a condition of the merger. They are requesting that regulators demand that Sirius, XM, and the shareholders be subjected to such a requirement without any stipulation whatsoever. This is basically Georgetown Partners trying to negotiate through regulators rather than with the companies, and avoiding the shareholders entirely. A realistic proposal may include a term such as “lease for fair market value”. As readers can see, Georgetown Partners has never stepped up to the plate to give any inkling as to what exactly they are willing to commit to this lease.
GEORGETOWN POINT 2
Satellite and network capacity must consist of at least 20% of the merged entities’ total licensed bandwidth capacity, as measured in megahertz, and shall be leased on an exclusive basis to an entity that is totally independent of and unaffiliated with Sirius or XM. Such lease shall have a term coterminous with FCC license(s), including replacement or new licenses held by Sirius, XM, or the merged entity. Included shall be all current and future existing network infrastructure and related services to support use of uplink, satellite, and terrestrial capacity in the same manner as employed by the merged entity.
SIRIUS BUZZ COMMENT
The 20% is based on the actual spectrum rather than the channels. By this statement, if the merged company were to develop a modulation overlay technology, that technology would also be given to Georgetown Partners, free and clear of research, development, or expense. The language of this puts all of the onus and expense of a new business on the shoulder of Sirius and XM. In simple terms, the new entity gets to utilize assets and working capital of the merged company without risk. Basically the merged company is being asked to do all of the grunt work for Georgetown Partners without having a fee for such work established.
GEORGETOWN PARTNERS POINT 3
Lesee’s programming shall be carried in the same geographic areas and with the same quality and signal strength as programming provided by the merged entity itself.
SIRIUS BUZZ COMMENTS
It would appear that this is a slick statement designed to get access into Canada as well as other future markets, as well as to place the burden of all upgrades for Georgetown Partners on the merged company. If a new codec is developed, a new modulation overlay, or a new market (such as Mexico) comes into play, Georgetown will get all of the benefits. Once again, Georgetown Partners is placing all of the burden for its business on the merged company.
GEORGETOWNN PARTNERS POINT 4
The merged entity must ensure that all programming broadcast on behalf of the Lesee is capable of reception on all radios and other receivers now in existence and to be distributed in the future, including receivers capable of video, audio, data and telemetry, in the same manner of the merged entity’s services are received.
SIRIUS BUZZ COMMENTS
So the merged entity is now responsible to activate old radios which are not subscribed. Georgetown notes that consumers have paid for these radios, and estimates that there are 17 million of them. Georgetown Partners fails to mention that Sirius and XM, as well as shareholders have also invested money into each of these radios. Why should the merged company spend resources to activate radio’s which will not deliver benefit? I personally have a small collection of Sirius and XM receivers that sit in a shoebox in the corner unactivated. I have upgraded devices over the years, and simply have no use for the old radios. Why wouldn’t Georgetown Partners create their own call center where people with deactivated radios can call into? Georgetown could then collect the pertinent information, and forward it to Sirius and XM for activation (assuming that these concessions were to happen)? Once again, this is another example of getting a business on a silver platter without having to do anything to operate this business. Is Georgetown looking into being in the audio business, or is the merged company going to be responsible for a video and data initiative as well?
GEORGETOWN PARTNERS POINT 5
Lessee shall have the sole right to determine the content of its programming, including full control of the production of all content, the bandwidth used to transmit it, and factors affecting its audio quality, video definition, robustness, and any other factor affecting its perceived quality and consumer perception.
SIRIUS BUZZ COMMENT
Is Georgetown Partners going to self perform their content? It is interesting that terrestrial radio is not jumping up and down against this proposal. Georgetown is proposing a terrestrial radio advertising supported model that will be available to consumers for free, and instantly will be available to over 10% of the market. Clear Channel has 9% of the market. Instantaneously, Georgetown would be bigger than, and in more markets that Clear Channel!! One would imagine that the Georgetown model is more of a threat to terrestrial radio than the Sirius and XM model. Why is there virtual silence from terrestrial radio on this? Especially considering the number of meetings that Georgetown has had with the FCC. Are there already side deals with terrestrial players? Is Georgetown going to hold and run this operation, or are they going to sell channels off to the highest terrestrial bidder? Imagine Georgetown with the capability of 60 channels. Sell 10 to CBS, 10 to Westwood One, 10 to Clear Channel, etc. Remember, Georgetown has no experience in this medium, yet walks with a confidence that they are going to hop into it and make money. The statement still lacks substance on what Georgetown is really bringing to the table.
GEORGETOWN PARTNERS POINT 6
Lessee may sell advertising on its programming free of any restrictions by the merged entity.
SIRIUS BUZZ COMMENT
Operationally, what else is Georgetown partners going to do? By their proposal they program stations (or perhaps they sell this off), and advertise. They are not having to worry about any other aspect of the broadcast business!!
GEORGETOWN PARTNERS POINT 7
Lessee will pay a negotiated lease rate on commercial terms as specified in the agreement entered into between the parties and submitted for approval to the Federal Communications Commission and to the Antitrust Division of the U.S. Department of Justice.
SIRIUS BUZZ COMMENT
If Georgetown Partners were serious, they would be in negotiations with Sirius and XM rather than first trying to get such a lease mandated by regulators. Georgetown Partners should lay their cards on the table. There are too many questions and not enough answers.
It takes a lot of balls to make a proposal such as this and not offer any detail whatsoever. Georgetown is seeking a business with virtually no risk and wants to reap all of the benefits. Georgetown is coy bin their stances so far, and there is a reason for this. If they were proposing a reasonable deal they would have nothing to lose in getting some detail on the table. Their proposal is full of restrictions for the merged company and latitude on Georgetown. It is full of requirements for the merged company and liberties for Georgetown. It seeks guarantees and commitments from the merged company, and a free roaming business model for themselves.
If terrestrial radio is scared of a merged Sirius and XM, why are they strangely silent on the potential of a satellite delivered radio service available for free and broadcasting to current FCC decency standards? Something here does not smell right, and as things currently stand, such a proposal would be a deal breaker seven ways to Sunday.
Position – Long Sirius, Long XM, No Position Clear channel, CBS, Westwood
GTP should not even be a consideration in all of this! Mr. martin and the rest should be fired if they give in to this blackmail–no minority context implied. It’s absolutely ridiculous that they even have a voice in the matter.
Insane
They dont give any details, because as I have said before they plan on selling any interest they would get. If they were to tell the FCC their real plans, the FCC would tell them to hit the road.
They should get what they were getting before the merger!
I do not see their point! Those companies have spent millions getting those satellites up and their services running. I do not see any reason to offer that service for free to anyone merger or not.
GTP looks like a modern day shake down artist asking for 20% of the spectrum (50-100 channels) for minority businesses and be the exclusive provider. Let’s just give GTP 20% of of cable TV and 20% of wireless and 20% of the internet capacity…
I can’t believe in America that we give Chester Davenport a dime. Seems like a leach to me on the merger instead of a protector of minority rights.
This GTP proposal is ridiculous and for the FCC to give them a platform is outright cowardice and pandering to a well connected businessman that happens to make money on being black.
This is the same bullshit we heard over and over again, frankly i blame the fcc for hearing them out as long as they have, the regulators are to blame for this whole mess.
In response to GTP here is my counter proposal:
-Give x billion dollars for infrastructure/radios/bandwidth to shareholders financed with debt or otherwise (x will be decided on later at the discretion of shareholders, once the proposal is accepted by the govt)
-pay 20% of all future operating expenses
-not allowed to sign any “Premium” exclusive content (I will define “premium” at a later date once proposal is accepted)
-not allowed to provide any data services
-not allowed to provide and video services
-no access to future or existing R&D whatsoever. Allowed only to broadcast their conventional ad supported radio as they please.
I think Sirius and XM can turn this thing around by agreeing that a lease can be done, but insisting that terms of the lease be negotiated on the open market in a fair and open competition (with a set time period for submission of offers, and established criteria for evaluating the offers received). That way competition, not a government mandate will dictate the price paid for the leased bandwidth.
The merged company could negotiate terms they can live with such of the number of years before the lease expires, cost share for subsidizing the production of new radios, the price charged for customer service for non-subscribers, etc. If done correctly, it could greatly increase the public’s interest in purchasing satellite radios, helping to reduce SAC and also generating more revenue, both from the leased bandwidth and from the increase in subscribers that satellite radio’s newfound popularity would generate.
The whole reason GT is doing this is so they can offer standard programming for free in order to decrease new subs for satrad. If the companies stop growing, they do not have as much income coming in and makes it harder to compete. Who is going to advertise on channels that people pay for when you can advertise on station everyone gets. This is a play at bringing this company down.
I would say agree to 10%, with the stipulation that they cannot advertise or retransmit terrestrial radio. It has to be original programming. Also, the 10% is broken up one station at a time to parties interested in programming for Sirius. A lease would be paid for each channel depending on the bandwidth it occupies. Cannot pay the lease, time to go. THAT would create diversity in programming. Minorities are represented in programming, so that is not the issue. Their issue is in minorities OWNING stations. Want to own a station? Buy one. Why must everything be a handout??
I TOTALLY agree if and only if the FCC says a certain % has to be opened up, it should be done at market value and not as a “free hand out” to one particular group which makes no sense to 2 companies who are so far in debt because they had to spend billions in order to create a business–Im willing to bet if the FCC says that 5% or so has to be allocated but its up to Sirius/XM to strike a deal at the fair market value for these assets to ANYONE interested(see how i say anyone which means not only GTP)you will see GTP drop out as they are only looking for a freebe
Why has the FCC heard them so many times from them specifically anyway?
gary as Tyler has said before it is their attorney, that has worked for the FCC and knows the ins and outs of the FCC, is the reason they have got so many mettings with them. One of the reasons he had mentioned anyway, there are one or two others Tyler has stated, I feel this to be the best one though.
“Should Georgetown get what they are seeking, vast synergies in the merger would be wiped out, and the very business model of Sirius and XM would be compromised.”
This is a joke. Vast synergies? Before such savings can be wiped out, they must exist in the first place. And in the case of the XM/SIRI merger, they don’t, never did, never will.
Yes, all of those Harvard MBA analysts must be joking about the synergies. Even the perenially negative analysts (Goldman and Jacoby) estimated $2 billion in synergies. But I’m sure you’re much smarter than them, Stack. Keep amusing us, buddy.
He already knows there is about a billion in just satilite replacement. I think FrontMed likes to post just to post. He makes ridiculous comments and excuses. The sad thing is, he tries to use different names as to look like he is not the only one that is in agreement with himself, sad, sad, and pitiful
What does georgetown have to with anything?
>>> He already knows there is about a billion in just satilite replacement.
Huh? Sirius has said its satellite replacement plans are not contingent in any way on the merger outcome. Are you trying to claim this isn’t the case? If you are, you should take that up with Mel.
I have been the lone voice claiming that Sirius might opt not to do its satellite replacement, preferring instead to transition to XM’s spectrum as quickly as possible. NOBODY else has even hinted at such a thing. So, if you believe that Sirius will NOT replace its satellites after a merger (i.e., will simply discontinue support for legacy Sirius receivers) then I welcome you to my point of view.
Which is it?
>>> Yes, all of those Harvard MBA analysts must be joking about the synergies.
What have these guys done for the investor? They’ve all been wrong about damned near everything (other than Marc Nabi, who was fired, apparently, because he refused to recommend Sirius as an investment).
But forget all that. Just look at the facts (hard for you, I know — after all, you’re Mr. Common Sense).
The facts are that there has been no competent, cogent analysis showing the existence of substantial synergies on an NPV basis. Not one. Whether it is Mancini’s arbitrary lopping off of costs (50% here, 40% there), or Peck’s assumption that half the in-house programming budget can be eliminated (while, in the next breath, stating that the merged company will rely more heavily on in-house programming in lieu of expensive outside content acquisition).
For a full year now I’ve asked you and others to back up the claims of synergies with actual data, no, not data, information — something that can be shown to have meaning. And not one person has been able to do so. I’ve seen, “Oh, they should be able to cut costs here, there, and everywhere” — with some idiots even claiming they’ll save on satellite costs while both companies have said they will continue to support both companies’ spectrum usage.
I’m open to being proven wrong. But nobody has done it yet, so go for it if you think you can.
The argument about quantifying synergies could go on forever.
The bottom line is that any sort of divestiture of assets (including spectrum) needs to come at a cost and that cost needs to be negotiated and up for competition similar to the 700 mhz spectrum with the proceeds going to the current owners.
Anything else is charity.
hippo….
Perhaps you should be the one that proves that no synergies exist.
-Marketing
-satellite launch schedules
-staffing
-customer service consolidation
-Better manufacturing delas because of volume
-Better distribution deals
-Consolidated selling of advertising
-an a-la-carte pricing model that increases penetration
and so on and so on and so on
Once again what a dimwit. Yes SIRI is replaceing those satilites and if no merger XMSR will have to also, at a cost of about a billion dollars. Nobody has said the savings would come overnite estimated time frames go from what 2 to 9 years now, with savings being from 2 to 7 billion. Only a dimwit would say that there are not going to be savings.
Next you pitiful individual, I see you had no answer for why you have used at least 5 different names I know of. One only has to go back through your post, Tyler has called you out, every time you tried. It is a pitiful loser who has to try and post under a different name on the same arguement, just so you can feel better about your own arguement, that somebody agrees with you. On that note you are a sad, sad, and pitiful individual.
Each of the items you listed is highly subjective. Obviously, there will be savings by eliminating duplicated management and some minimal savings from eliminating duplicated programming staff. However, these are small amounts compared with the total expense burden, most of which is fixed.
While some marketing savings may be achieved, this cannot be shown with any degree of certainty at this point, and such savings will come only after the two brands are merged into one, which will be some years down the road.
There are idiots who don’t comprehend that XM has no need for additional satellites until 15 years hence, and therefore they represent no meaningful savings – even though I’ve tried to explain it to them time and again. I know you understand this, so perhaps you should write an article discussing it.
At no time have I said there won’t be “savings”. What I have said is there is no evidence there will be any NET savings, when properly discounted. While there could be SOME, there is at least as much chance there will be NET unrecovered costs. There are some people posting here who don’t understand the concepts of time value of money and that could contribute to their confusion — but the point is that if it costs you $300M today to save $1 Billion or $2 Billion 15 years hence, that very well may not be a good tradeoff. The analysts covering this subject have, for the most part, used overly optimistic assumptions. I know that Peck provided a sensitivity analysis, which is without a doubt the most important disclosure in an analysis of this type, and he clearly indicated that minor changes in assumptions could result in synergies in the billion dollar range, and any significant change could well result in a net loss from the merger.
Some of the costs you listed, like customer care, yield practically ZERO reduction from consolidation, and with the addtion of ala carte, will likely become MORE expensive (an assumption conveniently overlooked). As to the ala carte option providing enhanced revenue, there has been ZERO evidence put forth to suggest this is the case (one analyst put forth a “normal curve” analysis, which was laughable).
You guys are naive to assume that what you’re being told is accurate. People like John, who lack the gumption to understand the subject matter, eat it up — but I expect more from you.
As a veteran of many, many financial projections, I will say that they are never right and for the most part, they fall short of expectations — particularly, when they are prepared with the goal of swaying opinion in mind. I can prepare two financial projections with the same set of data and easily, legally, and ethically come up with results reflecting the extremes at either end — and have done it many times. If you’re going to the bank, you have one set of assumptions, if you’re negotiating for concessions from creditors you have another. And the results are radically different.
What was really telling was Frear’s “analysis”, which was purposefully vague and designed to avoid tackling the important issues. As a professional who has done this kind of work, I spotted it within 5 minutes.
It is in the analysts’ interests to keep people pumped up about these stocks. But honestly, can you really give Peck any credibility anymore? Certainly, Spring and the others have been largely clueless, but now, even Peck and Watts are grinding out bullcrap.
You are the idiot, SIRI satellites have a life span that takes them into 2015, yet they were going to be launching a satellite in 2008. A full 7 years before the life span ends. One last thing here, SIRI had also stated they were going to launch in 2008 but changed their minds and puched it back to 2009. That was just an example how things change and if Mel said they were planning on putting those satellites up at certain times, that can also change.
As for the rest of your dipple you obviously have no comprehention yourself. 300 million to save 1 or 2 billion in 15 years is about 11% and 22% were are you getting that over 15 years. People should be flocking to you if you can get those kinds of returns for 15 years straight. Next people like me are willing to back their comments up, unlike yourself. You give your opinion and it has been proven wrong time and time again.