U.S. approves Sirius, XM merger

The Justice Department today approved the merger of the nation’s only two satellite radio companies, removing a major obstacle to the long-pending deal.

Sirius Satellite Radio Inc. and XM Satellite Radio Holdings proposed the $4.6-billion merger in February 2007 to cut costs, but they ran up against strong opposition from traditional radio broadcasters and intense scrutiny from antitrust officials. When the Federal Communications Commission created rules for satellite radio in 1997, it granted two licenses and prohibited any merger to ensure “sufficient continuing competition.”

But executives of Sirius and XM argued that the music-listening market had changed dramatically since then and that the proliferation of iPods and other digital music devices meant there was plenty of competition. After a lengthy review, Justice Department officials determined that the merger would not “substantially lessen competition and … therefore is unlikely to harm consumers.”

“Because customers must acquire equipment that is specialized to the satellite radio service to which they subscribe, and which cannot receive the other provider’s signal, there has never been significant competition for customers who have already subscribed to one or the other service,” the Justice Department said in approving the deal.

The companies, in a joint statement, said: “This decision means the DOJ has concluded that the merger is not anti-competitive and it will allow the transaction to proceed.”

Sirius shares shot up about 9% this afternoon on the news, while XM shares jumped about 16%.

The FCC also must approve the deal but rarely goes against the Justice Department on major mergers. FCC Chairman Kevin J. Martin has said that Sirius and XM faced a “high” hurdle with the him because of the 1997 rules. He told reporters last week that his staff was drafting “various options” but that, “I haven’t figured out what I think we should do on it yet.”

Shareholders of Sirius and XM have approved the deal and last month extended the merger agreement until May 1.

jim.puzzanghera@latimes.com