FCC Commissioner Copps Votes "No" to Radio Merger: No Surprise

FCC Commissioner Copps has opted not to bring a counter proposal to the table, and simply go with a “NO” vote on the proposed Sirius (SIRI) and XM (XMSR) merger.

According to the Wall Street Journal, Copps rendered his decision on Monday, July 22nd. The “NO” vote by Copps represents the first commissioner to go against the proposed merger. The merger now has had three of the five commissioners cast their votes:

• MARTIN - YES
• MCDOWELL - YES
• COPPS - NO
• ADELSTEIN - UNDECIDED
• TATE - UNDECIDED

It is widely anticipated that commissioner Tate will vote in favor of the deal, but wants some “teeth” in the deal to ensure regulatory compliance. Adelstein has offered a counter proposal to the Draft Order Issued by Martin, and has stated he is open to negotiation.

Most who follow the sector believe that Sirius and XM are negotiating with Tate, who in theory would want fewer concessions than Adelstein, in hopes of obtaining the third vote needed.

Market Response

Those that follow the satellite radio equities closely noticed some wild trading Tuesday. Both Sirius and XM dropped like rocks in less than a minute on what appeared to be no news. Then we all saw what happened - FCC commissioner Copps voted against the merger. But why did that cause a drop? Most were expecting Copps to vote against the merger anyway.

The answer could be a simple as the headline attached to the Copps story:

“FCC Member Votes Against XM-Sirius Deal”

Given all of the recent talk about commissioners Tate and Adelstein, it was only natural that people were expecting their votes first. More specifically, people anticipated that the next vote to be publicized would belong to Tate, and that the companies were waiting on “real” negotiations with Adelstein in hopes that Tate would come through with the last YES vote needed. The headline offered no indication of which commissioner voted, and perhaps some assumed that Tate came out against the deal. Had this been the case, it would have been devastating for the equities, leaving all hopes of a merger in the hands of Copps and Adelstein.

The street quickly sorted out that it was Copps that fired his gun while Tate is still exercising her right to remain silent. The equities rebounded, and now once again, we all “Wait on Tate”.

Cowen Analysis

Analyst Tom Watts was quick to the keyboard after it was announced that commissioner Copps had voted no. The analyst noted that the Copps vote was “no surprise”, and that he was still looking to FCC commissioner Tate for the final approving vote on the merger deal.

Watts notes several points which have been oft discussed by this publication, including the fact that it is enforcement issues, and perhaps not more stringent concessions that commissioner Tate is seeking. “The focus remains on Republican Commissioner Deborah Taylor Tate. Her key concern is reported to be the companies' prior violations of FCC rules in their deployment of repeater towers. An announcement of an enforcement action by the FCC came out last Friday, however, the matter has been under consideration by the FCC for some time. We expect the companies to reach an arrangement that could include a fine and/or a timetable for bringing all repeaters into compliance. Such an arrangement should address Commissioner Tate’s concerns, enabling her to vote in favor of the deal.”

Watts calls Adelstein a “fallback option” for Sirius and XM, stating that Adelstein has expressed a willingness to negotiate his proposal. Personally I see Adelstein's proposal as a deal breaker, and he would need to move substantially to come to a deal that the satellite radio companies would feel comfortable with. To his credit, Watts see it more likely that the merger will gain approval with Tate rather than with Adelstein, a position I agree with.

Things seem to be moving fast and furious, so keep your eyes peeled for SDARS merger news.

Catch all of the news of the week on SiriusBuzz Radio. This week's show is Thursday at 9:00 PM EST.

Position - Long Sirius, XM

Comments

[voogie61]

Thanks for your diligent service to our country, Commissioner Copps. We can all sleep easier now, knowing this great land of opportunity is much safer. You certainly have your finger on the pulse of the "real" threat to this nation - SDARS! Please extend my sincere appreciation to your staff as well, including but not limited to the NAB, C3SR, Georgetown Partners and the honorable Reverend Jesse Jackson.

Peace be with you.

[Up the tail pipe again.]

Hey, this is a good time for the Goldman Sachs butt head to come out and downgrade the stock again. Or maybe right after the merge. Corruption and greed at it's best.

[oceanspat]

I want to know----WHY this is not being investigated by FBI ---theres gotta be a LAW or Rule these commisioners Taking Bribes from NAB ????? You have 20 million and counting tax payers that listen to Siri/XMSR Music and etc that are being threatened by FCC ---- if COPP does not wanna listen to SADRAD then don't---get a HD Receiver for his favorite FM/AM station- (can you get one --haven't seen one lately)---This is getting same attention as OJ's murdering exwife-----INVESTIGATE FBI this bunch....

[Alan Jr]

Just curious, has anyone else tried Pandora.com? I was bullish on SIRI/XMSR and hold long positions but I think Pandora or other internet radio will take away some future customers. "Free" music, no commercials and no equipment to buy. Add a few talk radio channels to the lineup and who knows. What do you think?

[launiuss]

"WE THE PEOLPE ON THE TAKE OF THE UNITED STATES OF AMERICA"

this should be are new peramble

[tech man]

voogie61, your comments are disconcerting to say the least. i do enjoy free speech, but for the right reasons. you apparently are far nab. comm. Coops is your regular, run of the mill Dem. voting no is the easy way out. the merger needs to be approved for the sake of the people and everyone needs to know that. So do your research mister, it is far the best to merge for better programing and less talk. t.m.

[voogie61]

Alan,

Pandora might have an advantage over XM/SIRI for online listeners (i.e. it's free), but most people want mobile radio, meaning in the car and handheld radios.

[voogie61]

tech,

You're kidding, right?? Obviously you missed the sarcasm in my message. Try turning the monitor upside down and read it again. Perhaps then you'll agree that I'm bunking in the same camp as you.

[muley101]

Alan, Have you tried Pandora's Box from your car or while you are walking the dog? They are building their business for free now but willl have to start either running commercials or charging for the service in order to keep their servers up.

[oregonduck]

Repeater issue is right. Fcc filings with tates office last week were fcused on the repeater issue. Also, Mel met personally (one on one) with Tate last week, according to Ex Pate disclosure filings with the FCC.

[killerkaul]

Voogie61............. I read the sarcasm in your comment, then read on to tech man's comment...... wasn't sure at that point... your recent reply clarified and relieved me. Welcome aboard.

[killerkaul]

oregonduck .....good morning, and thanks for that info.

[voogie61]

Thanks Killer. With a name like that, I'm VERY happy to be on your side of the war against the FCC. :)

[bosch1974]

Two questions (sorry if they're stupid!):

1) So now that there are three votes does the 10 day clock start or not? No one seems to be able to agree.

2) Shouldn't the FCC have been fining SIRI and XM over the last decade for these violations?

[163888]

bosch1974, Here is the answer if others dont agree with it they are wrong that simple. The 10 days is first of all a customary that means its not set in stone. Second it requires that at least 3 of the same votes for or against not just three votes, ether way. now the common sense why just for you I will go into it. First of all in any of the reports did any of them, anywhere say now that Copps voted, we now know the end is only 10 days away. Answer is NO, why is simple, that because of what I just said. So that leads me to believe the things I read about the 10 days is correct.

Now as for the violations, it is common from what I understand that the FCC, wait for some time and lets the violations build up until the company needs something from them before they go after them. most of them are small and are arguable, not worth going to court over (Adelsteins comments tell me that). I have read it somewhere I think it was in a Tyler Savery article in the comments section about a terrestrial radio company that had a shit load of violations and the total fines where very small compared to the number of violations.

[163888]

bosch1974, Do not take that to mean that a vote would not happen sooner. As you know any of them canvote at anytime. Also I forgot to add to that common sense part what makes more sense making sure that once a decision has been decided by 3 of the commissioners that the other 2 cant hold this up forever when they really cant stop it anyway. Or to just force 2 commisioners to vote on what must be a hard vote considering that there is 3 votes in and it is split so far. One just makes more sense, dont you think.

[Mr. Stupid]

FCC now split 2-2.....now in the hands of TATE

[cos1000]

We now have 4 votes in, 2-2. Adelstein withdrew his offer and voted "NO" because he couldn't get support for his ridiculous proposals from the companies. Now we know that 25% is a deal breaker, Thank God.
It's all on Tate and her fines and enforcement. Public Knowledge and Media Access Project filed an ex parte, saying that: 1. "Open Access" is more important than HD chips installed, let the manufacturers decide to add or not. Moratorium of 60 days not 1 year also what their looking for. 2. A oversight authority, assigned by the Commission not the merged entity is required for enforcement. 3. 5% Minority owned Spectrum with 1 programmer per channel, not SIXM controled, is required, 10% if the existing programming offered is included.

Other than Tate's settling out the fines for prior sins, and corrective action time tables, I believe we're getting a glimpse of what the final approval will look like.

[elvisbus]

I insist that Copps be investigated. Why is an appointed public employee hijacking a company that is just trying to get off the ground? And all he has to say is "No", with no reason? FCC your days are numbered.

[siriusly pissed]

F-Him Anyhow.

[cos1000]

From the Dow Jones Newswire: A quote from Adelstein as he explained and cast his "NO" Vote. Looks like he talked to Tate and she is voting with her Republican Commissioners. Not official yet but ohhhhhh sooooo close.

"Instead, it appears they're going to get a monopoly with window dressing. We missed a great opportunity to reach a bipartisan agreement that would have benefited the American people," Adelstein said.

[cos1000]

For all of those Democrats out there and to the tireless explanations of 163888 trying to set you straight, now do you understand who is F...kin this thing up.

[killerkaul]

Voogie61........... your first impression is I am sure.... the same as many others have been, however, I chose my father's WII card playing knickname in England, as a luck charm for all of my financial dealings. It has done me well so far. I hope to pass some off to the Big Blue Dog. Run strong, run hard..........

[killerkaul]

Cos1000........... that is good news, do you think we have untill the end of the month meeting before she tips her hand? I'm still hopeful of picking up more shares of xm or siri.

[mudslinger]

Why is the arb spread still 14%? The quote from Adelstein and 163888's "common sense" tells me this deal is a virtual lock. Why is Siri DOWN .08? Killer...with xm still 14% below the deal price I would think now is the time to buy more xm if you intend to.

[mudslinger]

Maybe I really am wearing rose-colored glasses, but it seems to me:

1. Fines and an oversight committee....no problem.
2. Open access....no problem.
3. I see 10% to 12% max on the spectrum set asides...no problem
4. 3 year price cap, no problem....maybe 4 to make Deb look strong...not thrilled about 4 but it's not THAT big a deal

This would be consistent with the "window dressing" Adelturd is complaining about. Given these conditions, this looks like a favorable outcome. I can't believe the companies would have let Adelturd go if they weren't sure they could get a favorable outcome from Tate...so again, this deal is a virtual lock right?

So I'm surprised we aren't seeing better price action...

[Freep]

It's all on Tate now. Will she side with the multi-billion dollar special interests and sell her soul to the devil, or will she side with the great American public? She has the potential to financially harm millions of average American investors, or sell them out for a Democrat confirmation and keep her job. We'll know soon.

[163888]

mudslinger, I read that it was because SIRI shares are hard to get to short, to play the arb.

[163888]

mudslinger, please this close no information like that, SSSSSSHHH.

[163888]

I will give you my take of these concessions after the merger is approved.

[mudslinger]

163888...I hear you, so people can't actually make the Short Siri/Long XM true arb play, but wouldn't people at least be bidding up the price of xm to close the gap? That 14% gap would seem to indicate that there's still a lot of doubt about this deal going through on favorable terms...Adelstein's statement removed that doubt for me. You?

[Mr. Stupid]

better price action should kick in soon....the market is giving us a little time to get in before it starts shooting up....sometimes the latest news takes about an hour before it's substantiated by the market.

Get Some

[tech man]

voggie61, sorry i must of read it wrong. i did turn my computer upside down, while running out of the house to go to a meeting. sorry for the mistake. good sarcasm, you had me fooled.. welcome aboard. techman,,,,,,,,.....

[163888]

mudslinger take a look at what happen XMSR went to 10 and SIRI was at 2.39 for highs that is closing the gap. pretty fast it happen in like seconds. Look at them now XMSR up .40 and SIRI down .05. I said this would happen, that once the merger is done the gap would close fast, but not all the way that will for whatever reason never happens. It is always a some fraction off by the time the transfer. Dont ask me why, most likely it is because it is so small that if the buying company gos down after the transfer then they lose anyway.

[163888]

Hey you know I cant believe I got sucked in to that message board. I swear never again, except to tell those nit-wits "I told you so". Tyler was right when you see a good piece of information it gets buried so fast you have to shovel through so much crap you cant find it. They put up dumb things like "what is your favorite station", not satellite radio station mind you, but TV station. Can you believe those nit-wits. Believe it or not those kinds of topics are put out and talked about by people that say they are investors in SIRI, UNBELIEVABLE. Then they wonder why, they know so little about the stocks. You should read some of the questions.

[cos1000]

Here is an interesting view from Brandon Matthews on Sirius Buzz about Tate waiting to cast her formal vote until after the market close on Friday, allowing the deal to be finalized on the weekend and opening on Monday with only Sirius stock available for purchase.
siriusbuzz.com/commiss...

[cos1000]

163888 Where's VicDave when things are looking up? Surprise, Surprise.

Killerkaul I agree with mudslinger on picking up some XM, spread is down to 11%. As 163888 said it probable will go to around 5 % before the vote is announced and then its gone.

[163888]

Thanks cos1000, I saw that already to. Call me a dreamer, I think sooner, Just a guess.

[163888]

cos1000, I have no idea, as you know I said I would give him a one time comment, on this investment long term, after the merger decesion. Basically telling him what a blind bat he is. I almost cant wait, just for that reason, screw the pop up in price. I will also get into the concessions issue at least the ones Martin put up, as mudslinger said.

[cos1000]

I agree, the sooner the better for my liking, but an interesting view just the same.

[163888]

cos1000, look at this:

CHICAGO (MarketWatch) -- The Federal Communications Commission is close to approving Sirius Satellite Radio Inc.'s acquisition of XM Satellite Radio Holdings Inc., according to a published report Wednesday.

With two votes opposing the deal and two in favor of it, Republican FCC Chairman Kevin Martin has just about convinced Deborah Taylor Tate, another Republican, to cast the deciding vote that would green light the transaction, Reuters reported, citing an unnamed source familiar with the agency's review of the merger.

An FCC spokesman declined comment.

Thus far, Democrats Jonathan Adelstein and Michael Copps have reportedly voted against the deal, while Martin and Republican Robert McDowell have voted in favor.

Staff members of the Federal Communications Commission backed the transaction earlier in June, culminating a 16-month review.

Martin said he supported the transaction as long as the two companies agreed to certain conditions.

To secure FCC approval of their merger, Sirius (SIRI, Trade ) and XM (XMSR, Trade ) have agreed to a three-year price freeze for consumers, the creation of smaller packages at lower prices, a la carte radio programming, to let any manufacturer make satellite-radio equipment and set aside up to 8% of their channels for minority-owned stations and noncommercial use.

Under one offer the companies announced last July, subscribers would be able to choose 50 channels for $6.99 -- a 46 % decrease from the current standard subscription rate of $12.95. Customers could then add more channels for a minimum of 25 cents each.

The companies also said they would offer a series of "family-friendly&... packages that would allow customers to exclude the racier content provided by shock jock Howard Stern and others.

Supporters of the merger argue that the satellite radio companies don't so much compete with each other as they do with a wide array of audio entertainment, including traditional radio stations, Internet radio, MP3 players and cell phones that play music.

Critics of the deal counter that the combination of Sirius and XM would create a monopoly, and that satellite radio operators flagrantly disobey FCC regulations prohibiting transmissions that interfere with broadcast signals.

Sirius shares were down 1 cent at $2.37, while XM shares were up 6% at $9.64 Wednesday



and this:

FCC Chmn Close To Deal On Approving XM-Sirius Merger -Reuters

Jul 23, 2008 13:31:42 (ET)



The Federal Communications Commission chairman, Kevin Martin, is near a deal to approve a merger between XM Satellite Radio Holdings Inc. (XMSR) and Sirius Satellite Radio Inc. (SIRI), Reuters reported Wednesday, citing a person familiar with the FCC's review. The source said Republican commissioner Deborah Taylor Tate is near to casting the five-member FCC's deciding vote in support of the merger.

Web site: www.reuters.com