Bid For Sirius ? Bankruptcy On Tuesday Or Wednesday ?

Bids for Sirius XM may be fueled by longtime rivalry
DirecTV's John Malone and Dish Network's Charles Ergen are said to be in talks to strike some type of deal with the debt-laden firm. But just how badly they want the satellite radio company is unclear

By M. Zimmerman

The nation's only -- and ailing -- satellite radio company is drawing interest from two moguls of space-based entertainment.

Sirius XM Radio Inc. said Friday that it might be forced to file for bankruptcy as early as Tuesday if it fails to restructure its debt. As the deadline nears, speculation is growing of a possible bidding war over the company, which was formed last summer by the merger of Sirius Satellite Radio and XM Satellite Radio.In one corner is John Malone, 67, whose media empire includes a controlling stake in El Segundo-based satellite TV provider DirecTV Group Inc.

Opposite Malone is 55-year-old Charles Ergen, chief executive of rival Dish Network Corp. and its sister company, EchoStar Corp., both of which are based in suburban Denver.

The longtime rivals are said to be in talks to strike some type of deal with Sirius XM -- and the contest could be spirited. One analyst described Malone and Ergen as "cage match contestants," given their reputations for playing rough. But just how badly they want the satellite radio company is unclear.


Some analysts contend that gaining control of Sirius XM and its 18.9 million subscribers could provide some benefits to either DirecTV or Dish Network, but not necessarily enough to justify going forward with a deal.

More likely, they say, Ergen and Malone either see a chance to pick up valuable assets on the cheap or simply can't pass up an opportunity to make life difficult for an adversary.

"There are very few synergies between satellite TV and satellite radio," said Todd Mitchell, an analyst with Kaufman Bros. in New York. "Whenever one of these guys looks at an asset, the other guys will look at it just to drive up the price. It's just corporate hardball."

Representatives for DirecTV, Dish Network and Sirius XM declined to comment.

So far, Ergen seems the more serious contender. Last year, he made a takeover bid for Sirius XM, but was rejected. Since then, EchoStar has been buying up the radio company's debt, and reportedly owns most, if not all, of the $175 million of Sirius XM bonds that's coming due on Tuesday.

Ergen's reported interest in Sirius XM comes as Dish Network is losing subscribers and facing increased competition from cable TV and telephone companies. Some of the radio provider's satellites are in choice orbits and potentially could be "re-purposed" to expand Dish Network's high-definition offerings, or even to provide a competitive wireless broadband service to rural areas, Mitchell wrote in a recent report.

Sirius XM also has a network of ground facilities that could prove valuable to EchoStar, analysts say.

Malone, who controls DirecTV though his Colorado-based Liberty Media Corp., may be interested in Sirius XM more as another investment for his portfolio -- which includes stakes in Time Warner Inc. and Sprint Nextel Corp. -- than as an adjunct to DirecTV, said Benjamin Stretch, an analyst with Macquarie Capital USA in New York.

Being able to offer packaged TV and radio services to consumers already accustomed to receiving entertainment via satellite could help DirecTV woo additional subscribers, some analysts note. And combining call centers and other services could help both companies trim costs.

But "any synergies between satellite radio and satellite TV are just cream," Stretch said. "They can't be used to justify" a deal with Sirius XM.

At present, DirecTV appears to be doing well enough on its own.

This week, the former subsidiary of Hughes Electronics Corp. said it added 301,000 new subscribers in the fourth quarter despite the weak economy, beating analysts' forecasts. The company said its average revenue per customer -- a key industry yardstick -- increased to $90.46 from $87.40 a year earlier.

The company, which has 17.6 million subscribers, also predicted continued growth in the current quarter, with new subscriber growth at or above the levels of a year ago.

Sirius XM, meanwhile, is in increasingly dire straits. Besides dealing with a crushing debt load that threatens to push it into bankruptcy court, the New York-based company is trying to get out of some of its expensive programming deals.

Chief Executive Mel Karmazin -- who at age 65 is another veteran of the media wars -- is reportedly trying to renegotiate deals with Major League Baseball, the National Football League and Oprah Winfrey's production company, among others. Sirius XM also has a five-year, $500-million pact with shock jock Howard Stern that expires in 2010.

If it does come down to a choice between Malone and Ergen, the Liberty Media chief may have a personal edge. Karmazin and Ergen have clashed in the past.

"There's real bad blood between those two," Mitchell said.

Dish Network's stock rose 38 cents to close at $13.58 Friday and is up 22.5% this year. DirecTV shares, up 1.4% year-to-date, fell 24 cents to $23.24, while EchoStar shares slipped 4 cents to $15.17 and are now up 2% for the year.

Sirius XM's stock, which has fallen almost 97% over the last 12 months, gained 3 cents to 10 cents a share.
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