Authorities back XM-Sirius satellite radio tie

Automotive News | March 24, 2008 - 3:24 pm EST

WASHINGTON (Reuters) — U.S. antitrust authorities today approved a proposed $4.38 billion purchase of XM Satellite Radio by Sirius Satellite Radio , the Justice Department said on Monday.

The deal is also being examined by the Federal Communications Commission, which is expected to follow the Justice Department’s lead. The deal would combine the only two providers of satellite radio in the United States.

The XM-Sirius combination has been closely followed by the U.S. auto industry because nearly every automaker has an exclusive contract with one or the other satellite radio firms. A few automakers have contracts with both.

The department said that significant competition for original equipment satellite radios in vehicles would be unlikely for many years. Most of the deals between satellite radio providers and automakers extend through 2012 or beyond, the department said.

The deal, announced in February 2007, would combine the only two providers of satellite radio in the United States.

"After a careful and thorough review of the proposed transaction, the (antitrust) division concluded the evidence does not demonstrate that the proposed merger of XM and Sirius is likely to substantially lessen competition, and that the transaction therefore is not likely to harm consumers," the department said in a statement.

The long-awaited decision sent shares of XM and Sirius sharply higher. Although they later pared their best gains, XM stock was up nearly 14 percent to $13.59, while Sirius shares were up 6 percent to $3.08, both on Nasdaq.

The traditional radio industry, consumer groups and some U.S. lawmakers had criticized the deal as anticompetitive, but the satellite radio companies argued that they faced competition from traditional radio and personal audio players.

Officials from Sirius and XM were not immediately available for comment.

The division also concluded that although the two companies could develop radios that would receive both Sirius and XM programming, such systems would not become available in the short term.