Jacoby Gives Merger 30% Odds

Bank of America Securities analyst Jonathan Jacoby downplays the satellite merger’s prospects of getting regulatory approval.
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Bank of America Securities analyst Jonathan Jacoby downplays the satellite merger’s prospects of getting regulatory approval.

He says in a note to clients that his D.C. contacts believe its approval chances are 30% or less.

Why? Because they believe the XM and Sirius arguments to get the FCC to change the rule banning such a merger were weak, and as NAB said in filed comments, an existing rule just can’t be waived “if the result would be to destroy the rule.” NAB also added a new argument that a broader audio definition should allow for elimination of the local radio ownership caps.

“In other words, allowing the merger would open Pandora’s box and set a precedent that would encourage a wave of media consolidation,” stated Jacoby.

Although investors’ focus remains on the merger, cost for the automobile ramp-up are higher than expected and “we struggle to model the economics,” wrote Jacoby, because there has been little public disclosure about satellite radio’s costs for OEM distribution.

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Merger Ad Nauseum

We’ve made this point but we feel compelled to reiterate it in the wake of wearisome arguments between the camps as well as endless prognostications by financial analysts as to the likelihood of regulatory approval.