With Martin's Backing, What's Next for Merger?

It appears the proposed merger between XM and Sirius is headed towards approval at the Federal Communications Commission, given the indication from FCC Chairman Kevin Martin that he will recommend clearance of the deal to other commissioners.

While Martin's recommendation for approval of the merger - as reported in the press Monday - is a big step in the process, the final decision isn't a foregone conclusion. "We believe it is hard to say which way the other four commissioners will vote, as they have been fairly tightlipped in their opinion," said Alden Mahabir of Utendahl Capital Partners.

"That said, some of the commissioners could find that the transaction may need additional conditions before being approved or that the merger is anti-competitive altogether," the analyst added. Nonetheless, Mahabir said the transaction will ultimately receive FCC approval "given the commission's track record of agreeing with the Justice Department."

Conditions that reportedly could be tied to the satellite radio merger appear "to be on par with our expectations, as they are largely in line with what both companies voluntarily put forth themselves," said Mahabir.

Possible conditions include price caps on service fees for three years, an a la carte pricing scheme as proposed by the companies, and the combined entity setting aside channel capacity for non-commercial and minority-owned stations. A merged satellite radio company also may be required to license technology to more manufacturers and offer an interoperable radio within a year of the transaction's closing date, Mahabir said.