WASHINGTON (AP) - The Justice Department on Monday approved Sirius Satellite
Radio Inc.'s proposed $5 billion buyout of rival XM Satellite Radio Holdings
Inc., saying the deal was unlikely to hurt competition or consumers.
The transaction was approved without conditions, despite opposition from
consumer groups and an intense lobbying campaign by the land-based radio
industry.
The combination still requires approval from the Federal Communications
Commission, which prohibited a merger when it first granted satellite radio
operating licenses in 1997.
The Justice Department, in a statement explaining its decision, said the
combination of the companies won't hurt competition because the companies are
not competing today. Customers must buy equipment that is exclusive to either XM
or Sirius, and subscribers rarely switch providers.
"People just don't do that," Assistant Attorney General Thomas Barnett said
in a conference call with reporters.
The government also appeared to endorse a central argument the companies
used in pushing for their merger: that ample competition is provided by other
forms of audio entertainment, including "high-definition" radio, Internet-based
radio stations and even devices like Apple Inc.'s iPod.
"The likely evolution of technology in the future, including the expected
introduction in the next several years of mobile broadband Internet devices,
made it even more unlikely that the transaction would harm consumers in the
longer term," the Justice Department said.
The buyout received shareholder approval in November. The companies said the
merger will save hundreds of millions of dollars in operating costs -- savings
that will ultimately benefit their customers. The Justice Department also noted
that argument in its approval.
The FCC had no comment on the decision Monday. In the past, FCC Chairman
Kevin Martin has said any approval faced a "high hurdle."
Martin said last week that agency staff was "drafting various options" in
preparation for a final recommendation. The five-member commission could vote
against the deal, approve it or approve it with conditions. The agency could
require the companies to freeze prices or make part of their satellite spectrum
available for public-interest obligations.
Both XM and Sirius declined to comment on the decision on Monday.
Sen. Herb Kohl, D-Wis., chairman of the Senate Judiciary Committee's
subcommittee on antitrust, said in a statement that the merger would create a
satellite radio monopoly and asked the FCC to block it.
"We are particularly disturbed by this decision, given the Justice
Department's record in recent years of failing to oppose numerous mergers which
reduced competition in key industries, resulting in the Justice Department not
bringing a single contested merger case in nearly four years," he said.
The companies have pledged that the combined firm will offer listeners more
pricing options and greater choice and flexibility in the channel lineups they
receive. If the deal is approved, the companies have said they would offer
pricing plans ranging from $6.99 per month, for 50 channels offered by one
service, up to $16.99 a month, where subscribers would keep their existing
service plus choose channels offered by the other service.
Despite the consumer-friendly promises, most consumer groups have opposed
the proposed merger.
"If this is what our competition cops do, we might as well close shop and
save taxpayers a few hundred million dollars because they're not doing their
jobs," said Gene Kimmelman, the Washington lobbyist for Consumers Union,
nonprofit publisher of Consumer Reports magazine.
Shares of both companies rose following the news. XM Satellite shares were
up 15 percent in afternoon trading while Sirius was up 8.6 percent.
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