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Sirius, XM Close Merger, Look Ahead

Sirius-XM
Source: Reuters

After a regulatory review of nearly a year and a half, the nation's two satellite radio companies have become one, announcing this morning that they have closed the merger and chosen a corporate name for the combined entity: Sirius XM Radio.

The new company will have more than 18.5 million subscribers and reaffirmed its previous financial guidance, which anticipates $400 million in cost savings in 2009.

Mel Karmazin, the Sirius CEO who will hold the same position at the combined company, said he hopes to move briskly to turn the two money-losing satellite radio companies into a consolidated and profitable venture.

"We have all the tools necessary to begin executing as a combined company with high aspirations for subscriber growth and greater financial performance in part from the significant synergies that we begin realizing literally today -- on Day One," Karmazin said in a statement. "We are moving quickly to integrate the operations."

The Federal Communications Commissions voted on Friday to bless the merger, applying several conditions designed to protect consumers from what opponents argued would be a monopoly.

Those conditions, which included assurances that the company would introduce new subscription plans and not raise prices for three years, were of small solace to the industry group representing radio broadcasters and the two dissenting commissioners.

"In essence, the majority asserts that satellite radio consumers will be better served by a regulated monopoly than by marketplace competition," Commissioner Michael Copps wrote in his dissenting statement. "I understand why the companies would prefer to escape the rigors of competition. What I cannot understand is why the majority thinks consumers will be better off without it."

The company has taken pains to assure regulators and subscribers that it will maintain a diversity of programming. Sirius XM will offer more than 300 channels, including celebrity programs such as Oprah Winfrey and Howard Stern.

In addition, the combined company will roll out new subscription options, including à la carte packages and a "Best of Both" plan, which will bundle programming from both services. The first of the new plans will be available in the fall.

Under the closing agreement, XM shareholders will receive 4.6 shares of Sirius stock for each share of XM.

The new company is trading on the NASDAQ exchange under the ticker symbol SIRI; XM Satellite Radio, which traded on the NASDAQ under the symbol XMSR, has been delisted.

Shares of Sirius hit a 52-week low today, dropping nearly 13 percent to $1.64 in late-morning trading.

Sirius will retain its corporate headquarters in New York. XM, which will operate as a wholly owned subsidiary, will continue to be based in Washington, D.C.