One on One with Gary Parsons, Chairman of XM Satellite Radio
Thursday, March 01, 2007
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SUSIE GHARIB: Wall Street is skeptical that Washington regulators will approve the merger of satellite radio rivals XM and Sirius. The reaction comes a day after Sirius CEO Mel Karmazin faced a grilling from lawmakers at a hearing in Washington. Joining us now with his thoughts, Gary Parsons, chairman of XM Satellite Radio.
Mr. Parsons, welcome to NIGHTLY BUSINESS REPORT.
GARY PARSONS, CHAIRMAN, XM SATELLITE RADIO: Well, happy to be here, Susie. Thank you.
GHARIB: Let me ask you this, at the end of the day, will your merger be approved?
PARSONS: Oh, yes. I have great confidence that it will be. And frankly, it's for a number of reasons. When you look at the whole (INAUDIBLE) what we are really trying to do is to make sure that number one, we protect our existing customers. They are, in fact, the lifeblood of the company. And whether you are part of the 14 million current customers that we have right now or the millions that are going to enter this year, we're going to make sure that those radios continue to work. There is no obsolescence on that front. And frankly, the ones that join after the merger as well, we want to make sure that the key words are more choice, better value. Both companies are - yes.
GHARIB: I admire your confidence but given the hostile reception that you've received in Washington from government regulators, why do you think that they are going to approve the deal?
PARSONS: Well, actually I would contest whether that was truly a hostile reaction. I think if you listened into the Judiciary Committee hearing the other day, there were a number of representatives who commented on the changes that have occurred in the marketplace. I mean we're now in the year 2007. A decade ago is when these licenses were first awarded. And frankly everything has changed during that time frame. There were no iPods during that time frame. There were no HD radio. There were no streaming music on cell phones, Internet radio. So there is a tremendous amount of competition beyond just simply the 3.4 percent of listeners that listen into satellite radio. And I think that is one of the biggest underlying factors.
GHARIB: But in the field of satellite radio, it has been suggested that if XM and Sirius would agree to government regulators to no price increases over the next couple of years, possibly price decreases or a la carte pricing, that the deal would go through. If it came down to pricing as make-or-break for this deal to get the green light, would you go along with those suggestions?
PARSONS: I think we're very open to looking at any number of alternatives like that because frankly, many of those alternatives are in the company's interest and the combined company's interest. We're both proud of the programming that we each have. But it's clear that Sirius has an FL, XM has MLB. We have Bob Edwards and the others National Public Radio. There is Martha and Oprah and other things like that. We would like to be able to offer the best of all possible programming to the combination of customers and if we can in that process also offer packages and bundles and different combinations in ways to take the amount of service that the customer wants and offer them, in fact, a decreased rate or a smaller portion of service for a better price, we're very happy to do that.
GHARIB: Mr. Parsons, let's just say that the merger doesn't get approved. Can XM and satellite make it on their own?
PARSONS: I absolutely think so. I mean it's very clear, we just completed our first large, positive cash flow quarter in our history as did Sirius. And we think that the customers are reacting well to the product. We're adding more customers every day. I think the combined industry growth rate of subscribers is about 40 percent this past year. But it is clear that we've lost a lot of money over the 10 years that we've been in business, a combination of $7 billion between the companies. So it's in the interest of shareholders and I think in the interest of consumers and our business partners to have a much stronger combined entity.
GHARIB: I hope you'll come back on or program when the final decision has been made either way.
PARSONS: Would love to do that. Thank you.
GHARIB: Thank you so much, Mr. Parsons. We've been speaking with Gary Parsons, chairman of XM Satellite Radio.
