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.
