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Moreover, according to the companies’ most recent quarterly reports, they’re no falling stars. For Sirius, net subscribers (gross additions minus losses) increased by 556,490 year-over-year, or 9 percent, to 6.6 million, representing two-thirds of the industry’s total net additions. Revenue increased 61 percent to a “record $204 million.”

For XM, net subscribers were up 5 percent and revenue increased 22 percent. The firm boasted, “XM had its largest quarter ever in automotive gross additions with 618,000.” One problem was in the area of customer retention. While gross subscriber additions were 942,000, XM’s net additions were only 338,000. This means that for every three subscribers added, it lost two. This is bad management, but hardly justifies a merger.

Notwithstanding these boastful numbers, had the companies spent less time lobbying and more time building their business their financial situation might be less precarious than they claim. For instance, why not offer a la carte pricing and program options now, not as a bargaining chip for the merger? Because it’s easier to merge than do the hard work of business. And it’s not inconsequential that executives’ compensation is tied in large part to share-price appreciation. When management fails to grow the business, what better way to boost the stock price — and its compensation — than through a merger?

A better idea than a Sirius/XM merger into a satellite-radio monopoly would be for DirecTV and EchoStar to acquire Sirius and XM. The former have had their growth rates flatten recently as the subscription-TV market (cable and satellite) has reached 85 percent penetration, whereas, as noted, satellite-radio’s penetration is in single digits. This would allow satellite-TV firms to expand and diversify their revenue streams while retaining competition in the fledgling satellite-radio industry.

Alternatively, any merger should be conditioned on the grant to another licensee of the rights to provide satellite-radio. Though some would view this as defeating the purpose of the merger, the facts show that better business practices combined with the potential market justifies two players in this industry segment. It would also prevent the lament a few years hence of a satellite-radio monopoly.

ROBERT BRANTLEY

Alexandria