The staff of the Federal Communications Commission has proposed that the agency approve the merger of XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc., setting the stage for a final vote on the multibillion-dollar deal in as little as three weeks if the companies meet several conditions.
Justice Department antitrust officials signed off on the proposed merger in March after determining that the two satellite-radio operators compete with a variety of media, including MP3 players and Internet radio. Some FCC officials disagree, however.
The conditions on the deal, which were proposed by FCC Chairman Kevin Martin, appear to be designed to protect consumers from price increases for satellite-radio service and inflated prices for satellite receivers.
For Sirius, XM and their shareholders, the FCC's latest step removes some of the uncertainty that had dogged them for 16 months as their planned merger languished in limbo. But it also puts pressure on the companies to show that as a combined entity they can create promised efficiencies and prove satellite radio is a viable business in the long term.
Negotiations on approval of the deal now move on to the next stage in the process, in which the FCC's other four commissioners become involved. An order detailing the proposed conditions will be circulated among the commissioners as early as Monday, FCC officials said Sunday.
Mr. Martin is calling for price caps on the combined company's service fees and additional service options for three years to give consumers leeway to choose the channels to which they want to subscribe.
FCC officials said XM and Sirius have voluntarily agreed to all Mr. Martin's terms, many of which the companies had suggested as part of their merger proposal last year.
"I am recommending that, with the voluntary commitments they've offered, on balance, this transaction would be in the public interest," Mr. Martin said in a statement.
The FCC would also require the combined XM-Sirius to set aside 8% of its channels equally for noncommercial and minority-owned stations that wanted to lease them. Finally, the companies have agreed to license their technology more widely to other manufacturers, and to offer interoperable radios for sale -- both within one year of the deal's closing date.
XM declined to comment. Sirius didn't respond to requests for comment.
Mr. Martin may not have the votes for this deal, which could prompt more conditions to be added.
The merger deal, which offers 4.6 shares of Sirius for every XM share, is valued at about $7.54 billion at current stock prices, down from $11.4 billion when unveiled in February 2007.
The deal presents several opportunities for cost saving. Prices the combined company pays for programming, for example, would be likely to fall due to the lack of a rival bidder to drive them up. Back-office operations such as engineering, subscriber relations and marketing could be combined and slimmed down.
But the companies will be trying to reap those dividends as the overall economy stalls, raising questions about how many consumers want to pay for satellite radio.
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