FCC (FINALLY) OKS SIRIUS-XM

Federal regulators formally approved the merger of the nation's only two satellite radio operators Friday, ending a 16-month-long drama that played out in the halls of both Washington and Wall Street. The Justice Department had previously given its OK that the pairing did not create a monopoly.

Sirius Satellite Radio’s $3.3-billion buyout of rival XM means will result in a combined 18 million subscribers being able to receive programming from both services. Executives say the deal will mean huge cost savings that will lead to a first-ever profit for the so far struggling industry.

The Federal Communications Commission voted 3 to 2 to approve the buyout, with the tie-breaking vote coming late Friday night from Republican commissioner Deborah Taylor Tate. The vote split along party lines, with the GOP in favor, and the Dems against.

Tate had insisted the companies settle charges that they violated FCC rules before she would approve the deal. The companies agreed to pay nearly $20 million to the U.S. Treasury for violations related to radio receivers and ground-based signal repeaters.

FCC Chairman Kevin J. Martin confirmed the decision. "I think it's going to be, in the end, a good thing for consumers and be in the public interest," he said.

Subscribers will not have to buy new radios to receive a mix of programming from both services, according to the companies. If they want to pursue a special pay-per-channel option, they will need new sets.

The merger's approval was a major blow for the land-based radio industry, which lobbied hard against the buyout. It was also opposed by consumer groups, various members of Congress and state attorneys general, all of whom argued that the merger would hurt consumers and was not in the public interest.

"Today's vote certainly comes as a disappointment to NAB,” said EVP Dennis Wharton, who conducted a long-term lobbying campaign against the merger estimated in the multi-millions. “We continue to believe that consumers are best served by competition rather than monopolies."

The combined companies will reportedly be based at XM's current headquarters in Washington, DC, with studios maintained in N.Y., where Stern and Martha Stewart broadcast their shows.

Meanwhile, Sirius saw a 25% increase in revenue to $283 million in its Q2 financial report, with total subscribers up 25% to 8.294 million and adjusted loss from operations down 70% to $24 million. Retail subscribers increased 7% to 4.677 million, with OEM subscribers up 53% to 4.247 million. Gross subscriber additions rose slightly to 1.029 million, compared to 1.002 million for second quarter 2007 and 1.003 million for first quarter 2008.

Second quarter 2008 average monthly self-pay customer churn rate was down from 2.1% in first quarter to 1.6% this time; the second quarter conversion rate is about 48%, up from first quarter's 47%.