XM Satellite Radio (XMSR) - SIRIUS Satellite Radio (SIRI)
May 14, 2008 (1:15p) - Status Report

After working on an update for this deal for almost two weeks, it has become clear that this entire situation now boils down to the FCC's determination to establish its authority, as has been discussed in several recent entries. The mounting involvement of politicians, state attorneys general, intervenors, etc. may be unprecedented at this stage of a major license transfer review, but it is by no means surprising or worth detailing each intervenor's position or motivation at this point. That the FCC review has become politicized is a given. It was anticipated from day one and even well before the formal merger announcement. The only issue remaining is the type and significance of conditions which the FCC is virtually assured of imposing on the license transfer.
With this being the case, it is also not surprising that SIRI CEO Mel Karmazin issued public statements this week indicating that the companies would consider terminating the transaction if the FCC conditions are deemed too severe. This must be perceived as an indication that discussions between the regulator, the companies, and third parties have reached the point where approval under the companies' terms is tenuous, at best.

    There is simply no way to determine or predict how the companies' or the intervenors' actions during this final stage will influence the FCC's decision. It is presumed that both spectrum divestiture (or lease) and interoperable device conditions are now being openly discussed among the parties as potential conditions, in addition to the a la carte pricing offered by the companies. It is also presumed that the first two issues are precisely what Mr. Karmazin is referring to in his "harsh" conditions comments. Therefore, the specter of one or both of the first two conditions (spectrum/interoperability) will ultimately determine if the companies are to successfully complete this transaction.

    It will be stated again that this publication continues to perceive this merger as arguably the defining moment for the current and future FCC. Any approval that fails to enforce the FCC's authority via significant conditions beyond those proposed by the companies will effectively result in the FCC being labeled a "rubber stamp" regulator for years to come -- at least with respect to major license transfers.

    It is therefore anticipated that the FCC will indeed approve the license transfer, but will impose conditions which will force the companies to either submit to unwillingly or to reconsidering the combination altogether. The odds are now perceived to be evenly split on this perceived outcome and there is, unfortunately no real sense of timing with respect to an FCC decision.

Grey Wolf, Inc.