Discuss the Merger Conference Call LIVE In Our Chat Room[update]
As we mentioned earlier with the merger announcement, there will be a conference call today at 8:30 with Mel Karmazin from Sirius and Gary Parsons from XM to discuss the merger. Listen to it live on channel 122 on Sirius, channel 200 on XM, or at investor.sirius.com.
We will use this post to update you throughout the call, similar to how we do it for quarterly conference calls.
You can also feel free to join us in the chat to talk about the conference call, and get information even quicker. To get to the chat, click on ‘chat’ at the top of any page on Sirius Backstage.
Update: They have added an Investor Presentation to the site(pdf format)
-Onhold music is playing
-Sirius 122 doesn’t have the conference call yet, just a replay of the Afternoon Blitz
-Not on XM 200 either yet
-Tune to CNN 132 or on your telly right now for a story on satellite radio merging(over)
-Sirius 122 saying the CC coming at 8:30(1 minute to go!)
-Music started on 122
-Conference Call will begin shortly. Webcast is 5 seconds behind Sirius
-Conference Call started at 8:35a
-Reportedly still a loop on XM
-Mel doesn’t have any audio; feed went dead
-back to onhold music
-Back 8:42a
-Mel Karmeezee, according to the operator 
-”next logical step in the evolution of satellite radio… will create long term value for the shareholders of both companies”
-bring people from both companies
-see total cost savings of $3 billion to $7 billion
-they will deliver more cash flow faster merged than as a single company.
-expects to offer more diverse programming for underserved interests
-best content from both companies
-will be able to offer radios with signals from both companies sooner merged
-radios will be cooler, lighter, smaller, etc.
-merge the satellite and repeater infrastructure
-offer live video, real time traffic and weather, and “infotainment”
-they can expand the market with more “compelling content”
-only type of transaction that works long-term
-still onhold music online
-more advertiser potential
-147% growth over the last 4 years
-estimated $1.5 billion growth in revenue this year
-if you like corporate buzzwords, listen to this presentation
-confident they have the right strategy
-Still deciding name and location of the new company
-hope transaction to end by the end of 2007[ed note: good luck]
-Hugh Panero will exit at the completion of the merger
-they will remove duplicate channels to make more niche programming
-lots of emerging competition is causing them to do this
-expect shareholder vote in 4-6 months, with regulatory approvals within 9 months
-hope this additional programming will allow them to grow their subscriber base
-there is some other info I’m not covering because it is already provided in the press release from yesterday
-expect all the specialty content from both services such as Stern, Oprah, etc. to be merged onto one service.
-Q&A time
-believe there are synergies in every single line item
-cannot give synergies right now because of anti-trust
-says they would not go into the transaction if they thought it was not in the public interest
-breakup fee: confirms what Orbitcast said earlier of $175 million
-breakup fee paid if one board does not recommend the transaction, so either could be the recipient
-Mel on regulators: “we’re going to corrup, I mean cooperate with them”
-webcast works now
-better value proposition to the consumer and the companies
-research says there are people out there that like both companies’ contents and having two radios is not as attractive as having a single radio that receives both.
-both engineering teams working on radios that receive both systems
-on redundant channels: exclusive content deals can be changed to a shared content deal in the interim but didn’t provide a date on when the new channels could be merged
-both companies will continue to operate as they have been for now
-will the have enough power in the satellites to broadcast 25 MHz of bandwidth? Have the ability to integrate both systems together with additional development
-have the viewpoint that they are not using the repeaters for local programming, and that broadcasting local content nationally is ok
-”NAB putting down everything competitive to them”
-Merger changing the royalty agreements with the OEM auto manufacturers? Retail is the big driver, and will be the first to have interoperable radios. Think the OEM partners see great promise with a combined company.
-Sirius-5 satellite will still launch in 2008
-Pricing: not commenting directly on the issue, but talking about a combination of price and product.
-Unlike DISH and DirecTV, the market is not all pay services right now; only 10%
-advertising line item will “contribute significantly” to ARPU over time.
-Sirius today doesnt’ want to do anything that will slow down the growth of satellite radio
-SIRI opens at $4.04; XM at $16.30
-With millions and millions of radios out on the current spectrum, it would not be in the public interest to give back spectrum in order to get the deal approved
-The surviving platform is “both”, very quick to answer that
-process of getting the waiver from the FCC on the spectrum for the merger: within 25 days from the signing of the merger agreement, they will file their application at the FCC, and then the five commissioners will vote on it after they go through their red tape
-$26 people have to pay to get both services right now can be lowered
-transaction will give more significant free cash flow
-asked if they will buy back shares, Mel just provides options of what to do with free cash flow
-team in Boca Raton working on the interoperable radio
-conference call ends at 9:40a
Quick analysis:
-They did not mention how long it will take to consolidate into one service. This could mean several years until that happens. They also did not comment on future pricing of the service once it does combine, or what will happen to older radios. It seems those might be questions down the road to look at.
-It is surprising to see that they will continue development on the Sirius 5 satellite. I thought that to be an area we would see significant cost synergies of at least $100 million if they stopped development of that.
-There is a website coming together that will be ‘coming soon’ called http://www.selectsatelliteradio.com