Karmazin Talks XM/Sirius Merger With Howard Stern
February 26, 2007

Sirius Satellite Radio CEO Mel Karmazin was on The Howard Stern Show today discussing the proposed merger with XM Satellite Radio. Karmazin was on for over an hour, tackling topics related to the merger. When asked how the merger came about, Karmazin said, "The big catalyst, and I hate to admit this, because I'm really disappointed in how our stock has performed, is the fact that the stock prices have gotten so low that when you take a look at the value creation of a merger, it becomes something that neither company could ignore."

Karmazin stressed similar themes found in last week's press conference announcing the merger, stating he thinks it will be approved because they aren't competing with XM, but rather with all the other audio entertainment options. He also pointed out that terrestrial radio annual reports list satellite radio as a competitor.

"We all know we've been competing with terrestrial radio so it's very hard for somebody talking about a monopoly of satellite radio, there really is no satellite radio market, there is an audio entertainment market," said Karmazin. "The fact that anyone would think we are not competing with terrestrial radio really is not even an argument that can be made."

Karmazin also revealed there was a meeting with all five FCC commissioners last week after the merger announcement, saying he was met with "skepticism because a lot of media mergers have taken place and there is a general sense against media mergers. We talked about why this is different. We talked about how these companies compete in a very big universe of audio services. We talked about how we are not making money and this isnít about very profitable companies merging and cutting out benefits to the consumer."

Discussing the roots of the merger talks, some of which were held at Mel's apartment, he stated it didnít work out for a long period of time, because the companies couldn't agree on a proper split before settling on a 50-50 deal. He said a 55-45 split one way or the other was first discussed with XM feeling they deserved the bigger share due to a higher subscriber count and better relationships with car companies that produce more cars, while Sirius argued they had better content, a stronger brand and were growing faster than XM. "At the end of the day what prevailed [was 50-50]," said Karmazin, who also said he was willing to step aside to make the deal, though there never was discussion of another CEO.

Karmazin feels "confident" the merger will get approved and "if allowed to combine will be able to effectively compete down the road against all of the technologies out there. If it is not approved, I'm less confident but I'm also optimistic."

He also stated, "If, in fact, the merger did not happen, I absolutely believe that Sirius would continue to be a successful company. From everything that I've heard from the management of XM, they believe that they to would be successful."

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