Justice Department approves merger between XM, Sirius

The Justice Department gave its OK to a deal that would put Howard Stern and Oprah Winfrey under the same satellite radio company roof.

Antitrust officials said that they saw no reason to block or put conditions on Sirius' acquisition of XM, leaving consumers with a single satellite radio provider. "We determined that we did not have evidence to support a challenge," says Thomas Barnett, who heads the antitrust division.

The announcement boosted XM shares 15.5 percent to $13.79 and Sirius 8.6 percent to $3.15.

Now that Justice has stepped aside, Sirius and XM only need to win approval from the Federal Communications Commission before they can close the deal that they struck in February 2007. Both companies are unprofitable, and want to cut costs.

The FCC has a broad mandate to ascertain whether Sirius' acquisition of XM would be in the public interest.

The FCC has never rejected a deal approved by the Justice Department, Stifel Nicolaus analyst Blair Levin said in a report, adding, "We don't believe this one is likely to be the first." He says the FCC may take several weeks to reach its decision.

The companies have tried to sweeten their case by agreeing to offer consumers options to order some channels - including those with risque or offensive material - on an a la carte basis.

Still, opponents plan to push the FCC to stop the merger or at least put conditions on it. "This monopoly will lead to higher prices, less innovation, and lousy service," says National Association of Broadcasters Executive Vice President Dennis Wharton.

Wharton and other critics note that the companies agreed to remain separate 11 years ago when the FCC approved their licenses. Sirius and XM also have not fulfilled their promise to offer a radio that receives programming from both services.

Opponents likely will ask regulators to insist that the companies develop radios that work with all digital transmissions, including terrestrial HD radio signals. In addition, they want some satellite transmission capacity returned so others can use it, and for Sirius and XM to carry additional channels that serve minority groups and the public interest.

"I'm not worried about Howard and Oprah, but the lesser talent will be hacked away," says Consumer Federation of America research director Mark Cooper. "For these guys, having two country music channels is redundancy."

The Justice Department said that conditions are unnecessary. Satellite radio will compete with AM and FM stations, MP3 players, and potentially with new technologies including mobile broadband.

Barnett added that customers won't be worse off: Most already stick with the satellite service that works with the radio they own. "A price increase is not going to cause you to jump to the other service," he says. "So there's just not competition today that would be eliminated by the merger."

The Consumer Electronics Association trade group applauded the decision in statement: "To the extent consumers have been awaiting a decision on this merger to purchase satellite radio systems, they can now move forward with confidence."