Talk about a possible link up between Sirius (SIRI) and XM (XMSR) sent shares in both satellite radio companies jumping for a time yesterday, fueled not by Wall Street gossip but by comments made by executives at both companies.

Speaking at an investor conference in New York yesterday, XM Chairman Gary Parsons made the bold statement that the regulatory hurdles that have been a key barrier to a deal thus far are significantly lower now. "We are operating in a much larger marketplace than satellite radio," he said.

Parsons' comments came a day after Sirius CEO Mel Karmazin said that he wouldn't rule out a deal with XM. The same day, Sirius CFO David Frear said that a deal between the two companies would provide ample cost savings as well as benefits to consumers and investors.

The executives' comments sent shares in both companies up as much as 3 percent yesterday, before backing off by day's end. Sirius closed trading yesterday up 5 cents, or 1.3 percent, to $3.88, while XM rose 11 cents, or less than 1 percent, to $14.81.

A major factor that could decide whether the companies merge is whether a merger of Sirius and XM would be viewed solely through the lens of the satellite radio industry or take into consideration terrestrial radio, iPods and online radio as part of the competitive marketplace.

Rumors of a Sirius-XM pairing have been in existence almost as long as the companies themselves but have taken on a new complexion given the retail sales struggles and slowing pace of subscriber additions at both companies. Some analysts project a combination of the two could generate $7 billion in cost savings on infrastructure, marketing and content.

In a recent report, Stifel Nicolaus analyst Kit Spring put the probability of a Sirius-XM merger attempt within the next 18 months at 75 percent, and the probability of getting approval at 60 percent.

But Carmel Group analyst Jimmy Schaeffler disagrees, saying that if a deal was brought to Washington in the near-term, "it would get a thumbs-down just like the DirecTV-EchoStar merger did in 2003."