U.S. States Urge FCC Constraints on XM-Sirius Deal

A group of state attorneys general on Thursday urged the U.S. Federal Communications Commission to impose restrictions on Sirius Satellite Radio’s (NASDAQ: SIRI) purchase of rival XM Satellite Radio (NASDAQ: XMSR) if it decides to approve the $4.15 billion deal.

Attorneys general from 11 states including Ohio, Missouri, Connecticut and Iowa told the FCC they were “disappointed” by Justice Department antitrust regulators’ decision on Monday to let the deal proceed without conditions.

The FCC must now determine if the XM-Sirius deal is in the public interest, and whether to enforce its 1997 order barring either satellite radio company from acquiring the other.

The states said the deal should be subject to restrictions designed to preserve competition and protect consumers.

“The combination of these companies will result in a single corporation controlling access to all nationally available satellite radio,” the attorneys general said.

The states said the FCC should consider requiring Sirius and XM to make interoperable radio receivers available to customers, offer different packages of channels on an a la carte basis and divest some radio spectrum that would allow another competitor into the business.

The merger would bring entertainers such as Oprah Winfrey and shock-jock Howard Stern under the same banner. It has been criticized as anticompetitive by the traditional radio industry and by some U.S. lawmakers.

However, antitrust authorities at the Justice Department approved the combination after concluding it would not harm consumers. The department said satellite radio companies face stiff competition from traditional AM/FM radio, high-definition radio, MP3 players and audio delivered by mobile phones.

With the Justice Department’s approval in hand, analysts say XM and Sirius are unlikely to face outright opposition from the FCC. However, the FCC could impose conditions on the deal designed to protect consumers and preserve competition.

Sirius Chief Executive Mel Karmazin has promised that the company would offer a la carte pricing and would let customers block adult channels and get a refund for those channels. Sirius also said all existing XM and Sirius satellite radios will continue to work after the companies are combined.

The deal, in which Sirius is offering 4.6 shares for each share of XM, is worth about $4.15 billion based on Sirius’ closing price of $2.83 on Thursday.

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