WASHINGTON — WASHINGTON -- Sirius Satellite Radio Inc. Chief Executive Officer Mel Karmazin defended the proposed purchase of rival broadcaster XM Satellite Radio Holdings Inc., pledging not to raise prices and saying consumers would have more options.
"We firmly believe that this transaction is essential to preserving and enhancing choice for consumers," Karmazin said in prepared testimony today before the House Judiciary Committee task force scrutinizing the $4.5 billion deal.
Karmazin and XM Chairman Gary Parsons are trying to convince U.S. regulators that joining the only satellite radio services won't harm consumers. Karmazin drew skepticism from legislators, including Michigan Democrat John Conyers Jr., chairman of the committee, who pointed out past promises, such as satellite radio interoperability, that haven't been fulfilled.
"'Trust me' isn't going to work here," Conyers said to Karmazin. "You've got some high hurdles to overcome, don't you think?"
The companies contend there is more competition for listeners now than when the original satellite licenses were granted, from devices such as Apple Inc.'s iPod, terrestrial radio and new high-definition stations.
"We are going to have to convince them that it is not anticompetitive," Karmazin testified, speaking on behalf of XM as well as for Sirius.
Karmazin said he would allow consumers options that would lower customer bills, and said the companies would accept pricing restrictions for an unspecified period.
XM's shares gained 4 cents to close at $14.36 yesterday in Nasdaq trading. Sirius' shares were unchanged at $3.65.
XM shares are trading 17 percent below the offer value of $16.82 in Sirius stock, an indication investors are skeptical the deal will be completed. Under the agreement announced Feb. 19, each XM share will be exchanged for 4.6 Sirius shares.
The proposal is opposed by the Washington-based National Association of Broadcasters, the industry group for free AM-FM radio. XM and Sirius are a duopoly seeking to become a "government-sanctioned monopoly," NAB President and Chief Executive Officer David Rehr testified today.
"They want the ability to set subscription prices for national satellite radio service without constraint from a competing service," Rehr said.
Lawmakers and regulators have promised to look closely at the deal because of concerns that it would create a satellite radio monopoly. House Commerce Committee Chairman John D. Dingell, a Democrat from Michigan, said yesterday that he planned his own inquiry into the deal. The Senate Judiciary Committee's Antitrust Subcommittee also might hold a hearing.
The "critical issue is whether the relevant market is all forms of digital music or simply satellite radio," Conyers said. "If we were to define the market as broadly as merger supporters advocate, what kind of precedent are we setting?"
Congress doesn't have the power to block the deal, which will be formally reviewed by the Department of Justice and the Federal Communications Commission.