Sirius sees bright financial future – if it gets to merge with XM

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Sirius Satellite Radio has issued upbeat financial guidance for 2009, including, for the first year ever, positive EBITDA and positive FCF. Of course, that assumes that it will be merged with XM Satellite Radio by then.


According to Sirius, combining with XM will create immediate synergy savings in the first full year. That’s supposed to translate into $300 million in adjusted EBITDA for the combined company in 2009. The calculations, by the way, assume a Q3 merger closing.

The combined company is also projected to achieve positive free cash flow, before satellite capital expenditures, for the full year 2009.

To date, neither Sirius nor XM has reported positive adjusted EBITDA or achieved free cash flow for a full year.

"The upside potential from this merger is significant. In addition, the synergies, adjusted EBITDA and free cash flow are expected to continue to grow in subsequent years, and we look forward to providing more detail of this growth in coming months," said Sirius CEO Mel Karmazin, who is to become CEO of the combined company.

Merger closing, of course, still needs approval from the FCC. The merger of the nation’s only two satellite radio companies has already been approved by the Antitrust Division of the US Department of Justice.

RBR/TVBR observation: There are rumblings that an FCC merger decision could be days away. But then, there have been rumblings like that before. The recent 4-1 decision by the FCC with Chairman Kevin Martin on the losing side has to be worrisome for Sirius and XM. The decision had nothing to do with satellite radio, or any sort of broadcasting, but it did show that having Martin’s support does not guarantee a positive vote by the full five-member Commission.