Sirius chief qualifies merger price freeze

WASHINGTON — WASHINGTON -- Sirius Satellite Radio Inc. Chief Executive Officer Mel Karmazin clarified yesterday his pledge to freeze prices in order to win approval of the proposed $4.29 billion purchase of XM Satellite Radio Holdings Inc.

Karmazin, testifying at a House Energy and Commerce subcommittee hearing on digital radio, said XM or Sirius subscribers who elect to keep their existing service after the companies combine won't see a price increase from the current $12.95 a month. But getting programs from both will cost more, he said.


"Those who want to take advantage of new services, like the best of both program lineups, will be able to do so for less than this would cost today, all with their current radio," Karmazin said in prepared testimony.

His comments are intended to clear up questions about his remarks last week, when he told a House committee that the companies would offer choices for consumers to lower their bills and agree to price caps.


Federal Communications Commission Chairman Kevin J. Martin, whose agency will rule on the deal, said privately that Karmazin's testimony then left the wrong impression that subscribers would receive more programs at the same rate, The New York Times reported yesterday.

"There is some confusion here about what we said about pricing," Karmazin, 63, who would run the new company as CEO, testified yesterday.

"If you don't want all of the choices we give you, we will give you an opportunity to have less."

Shares of Sirius slipped 6 cents to close at $3.41 yesterday in trading on the Nasdaq stock market. XM shares fell 12 cents to $14.02.

The value of the all-stock deal has declined by 7.9 percent from $4.57 billion since it was announced Feb. 19.

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.

"The key to getting more subscribers for our merged company is not to widen the price gap between free and $12.95," Karmazin said in yesterday's prepared testimony.

Lawmakers and regulators have promised to look closely at the deal because of concerns that it would create a satellite radio monopoly.


Democratic Rep. Bart Stupak of Michigan said he didn't want to set a precedent that would lead to the combination of DirecTV Group Inc. and EchoStar Communications Corp., the two biggest satellite television companies, whose attempt to join in 2001 was blocked by regulators.

"I'm concerned that approving this merger could start us down a slippery slope of approving the merger of EchoStar and DirecTV. That's not something my constituents want," Stupak said.

Congress doesn't have the power to block the deal, which will be formally reviewed by the Department of Justice as well as the Federal Communications Commission.