Morgan Stanley, who has been unable to comment on SIRI/XMSR recently as they have been helping the companies with the merger, has finally been allowed to give some guidance, although no price targets or profit estimates.

They believe that a non-merged Sirius will have a larger proportion of OEM to retail than predicted, but they will not be FCF+(Free Cash Flow Positive - more cash is coming in than going out minus capital expenditures - satellites and such) until 2010. That assumes there will be a $2 rate increase next year. Without that, FCF+ will not be reached until 2012-2013.

Morgan Stanley also believes that a merger has the potential to help lower the high Subscriber Acquisition Costs, although the first dual-service radios will likely be expensive to produce. They also think that having an a la carte programming package will help to drive subscribers.

The situation at XM is a little more dire. They are pushing back FCF+ until late 2011 at the earliest, and believe there will be only 1.33 million net subscriber adds in 2008, down almost a quarter of a million from before.

Report provided by Seeking Alpha

Posted by BenDee on Thursday, December 13th, 2007 at 9:07 am.
Filed in Satellite Radio, XM, Sirius.
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