NEW YORK – U.S. satellite radio providers Sirius (SIRI) and XM (XMSR) said Monday they can offer consumers a variety of subscription packages that cost up to 46 percent less than current plans if their merger is approved.
In a bid to allay concerns among U.S. lawmakers that their merger would raise prices and limit programming choices, the two companies announced several new packages that they say offer consumers more choice than they can individually.
Under one package, customers can pick 50 channels on either XM Satellite Radio Holdings Inc.'s or Sirius Satellite Radio Inc.'s systems for $6.99 a month. Additional channels can be added for 25 cents each.
Currently, subscribers pay about $13 a month for more than 100 stations on either XM's or Sirius' systems.
"We need to build the subscription business base of satellite radio to strengthen our business and better leverage our high fixed costs," Sirius Chief Executive Mel Karmazin said in a speech in Washington. "We are confident that a lower price point (and) more programming choices will help us do just that."
Karmazin said he hoped the lower price would spur growth in the nascent satellite radio business as it competes with digital music players, video games and traditional radio for consumers' attention and funds.
The XM-Sirius deal, which would combine the only two providers of satellite radio service in the United States, is currently being reviewed by both the Federal Communications Commission and antitrust authorities at the Justice Department.
The two companies, which together marked more than $1.7 billion in losses in 2006, said the new "a la carte" packages will work only on satellite radios that have yet to be sold by either company. Other packages will be available on existing satellite radios.
RIVAL: DON'T BE "HOODWINKED"
In his speech, Karmazin took to task the merger's toughest critic, the National Association of Broadcasters, saying the radio industry lobbying group had argued the merger would result in higher prices.
"This (plan) should finally put this false argument to rest once and for all," he said.
In a statement, the NAB's Dennis Wharton said policymakers should not be "hoodwinked" by the announcement.
"Nothing is stopping either XM or Sirius from individually offering consumers a more affordable choice in limited program packages," he said. "Moreover, after reading the fine print, one discovers that XM and Sirius customers have to buy a new radio for an undisclosed fee to reap the alleged rewards from today's announcement."
Karmazin said the new radios would be similarly priced to currently available satellite radios.
The planned "a la carte" programming would be available beginning within one year following the merger, which the companies hope to complete later this year.
Analyst David Bank of RBC Capital Markets said the move may benefit the merger, but could eventually hurt the company's financial standing.
"In giving the FCC the safeguards that should greatly enhance probability of regulatory approval, potentially effectively lowering average revenue per user, XM and Sirius could also erode operating fundamentals, offsetting merger synergy values," he said.
Another of the new offerings lets subscribers choose 100 channels, including stations from both systems, for $16.99 a month. Other options will include packages with a focus on music, news and talk stations, or "family friendly" fare for about $10 to $12.
XM and Sirius said that they they will file on Tuesday their joint reply to the Federal Communications Commission, now that a period of public comments has closed.
Shares of Sirius rose 2.3 percent to $3.20 on Monday afternoon, while XM shares were down 0.55 percent at $12.58.