Sirius-XM Deal: The Pace Quickens

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Consider the requirement that Sirius-XM make 24 channels available for noncommercial and minority programming. "That can create demand for these users to sign up for the service," says James Goss, an analyst at Barrington Research. Yes, the condition means the two companies must get rid of about 8% of their current programming—but analysts estimate there's as much as a 50% overlap between the XM and Sirius program lineups anyway. What's more, by giving away 24 channels, Sirius-XM also may save on programming fees. "If anything, it should save Sirius-XM money," says April Horace, an analyst at Janco Partners.

Headed That Way Anyway

Other conditions are in keeping with Sirius-XM's self-chartered course. The FCC would require the company to make its service available in Puerto Rico, and Sirius and XM have already been working to expand coverage. Then there's the requirement that the combined company not raise its rates for 36 months after the merger. "It may be a moot issue," says Tom Taulli, a mergers-and-acquisitions expert. "With the economy slowing, consumers may not be willing to pay more anyway." Chances are the company would have started selling smaller, cheaper packages and offering à la carte channels in order to grow faster, with or without FCC directives.

To be sure, at least one thing has some analysts concerned: the requirement that the company sell programming à la carte. After all, when industries such as cable begun offering channels that way, many consumers ended up paying less each month. But perhaps Sirius-XM could make up this lower per-subscriber revenue by drastically increasing its subscriber base. Consultant Parks Associates estimates that the combined company could grow its user total from 20.5 million this year to 26 million in 2009. Without a merger, XM and Sirius will only have 19 million customers by the end of 2008 and 23 million in 2009.

There's still a need to win support elsewhere within the FCC. Martin needs at least two other commissioners to vote for the deal, and FCC sources tell BusinessWeek.com he hasn't yet been assured he'll get those votes. By releasing his statement, Martin may simply be putting pressure on the other commissioners to come to a decision after allowing the deal to percolate for an unprecedented 16 months. In any case, many experts expect Martin's fellow Republicans, Deborah Taylor Tate and Robert McDowell, to vote yes. The other two commissioners are Democrats.

Kharif is a senior writer for BusinessWeek.com in Portland, Ore.