Satellite radio rivals XM and Sirius agree to merge, hoping to cut costs

NEW YORK — If Sirius and XM have their way, Howard Stern and Oprah Winfrey could soon be sharing the same airwaves.

Long bitter rivals, Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. have decided that they would be better off working as one rather than duking it out in the marketplace.

Whether federal regulators agree about that remains to be seen.

Just hours after the two companies announced an agreement to combine on Monday, Kevin Martin, the chairman of the Federal Communications Commission, indicated that approval from his agency wouldn't come easily, particularly since the FCC has a provision in place specifically barring both satellite radio licenses from being owned by the same company.

The FCC will evaluate any proposed transaction to see if it's in the public interest, Martin said in a statement, but he added that: "The hurdle here, however, would be high as the Commission originally prohibited one company from holding the only two satellite radio licenses.

"The companies would need to demonstrate that consumers would clearly be better off with both more choice and affordable prices," Martin said.

XM and Sirius have racked up significant financial losses to subsidize new subscribers even as they escalated an arms race to lock in long-term programming deals. Sirius signed a five-year, $500 million deal in 2004 with the shock jock Stern, while XM paid $650 million for an 11-year deal with Major League Baseball. XM signed a three-year, $55 million deal with Winfrey.

A major rationale for combining the two companies would be to save costs.

Mel Karmazin, the CEO of Sirius who will become CEO of the new company, declined to comment in an interview about how much the companies hoped to save by the merger. He said he was optimistic about achieving regulatory approval, but acknowledged: "We understand that there's a lot of work to be done."

Investors and analysts have been speculating about a deal for months, and are hoping that the cost savings that would result would give the companies a boost amid softening retail demand. Both services offer dozens of channels of talk and commercial-free music for monthly fees of about $13.

XM radio receivers can't receive signals from Sirius, and vice versa. But Karmazin and Parsons said in an interview that the companies are working on developing a receiver that could receive both signals.