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Amid frequent predictions of an imminent close in the XM and Sirius deal, the 53-week long Department of Justice (DoJ) investigation is still underway, reports dealReporter. 1 March 2008 marks the day when both parties could walk away from the deal with no break-up fee. However, a former DoJ attorney said this situation is unlikely, especially when both parties have already invested so much in the process.
Even if the investigation is concluded before 1 March, the Federal Communications Commission (FCC) will still have to issue a license. A source close to the situation said the post-DoJ process would take at least one to two months but nowhere close to six. The source said the FCC “commissioners know the issues” and that he cannot see the deal being “tremendously delayed” thereafter.
The source claimed no knowledge of when DoJ consent would come, and said he would advise XM and Sirius to extend the termination date another three to six months to be sure and give the FCC time to act.
On the other hand, the former DoJ attorney suggested that a lengthy extension would signal a lack of confidence in the deal’s ability to pass regulatory muster, a move that would likely be reflected by the market.
A second source close to the situation said he believed the likelihood of approval was more than 50%. However, he did not have a sense when regulators would conclude the review process. When asked why the process is taking so long, he said the current nature of both the DoJ and the FCC is to be slow in coming to conclusions in any transaction viewed as controversial.
An industry lawyer focused on FCC matters commented ”it can’t be a good sign [the deal] has been dragged out for a year”. The lawyer said, however, that he heard the DoJ was at an impasse because its staff had leaked information to the press that it did not believe the deal should go through. This is despite a Bush political appointee’s desire to push it through, the lawyer added.
The former DoJ attorney described a DoJ staff investigation that has likely issued their recommendation to Assistant Attorney General Barnett, who would now likely be mulling over the decision with his deputies. The attorney added that, generally, the DoJ will have been operating based on the party’s scheduled termination date, though he said he did not have any information regarding the XM/Sirius transaction.
However, it is the FCC that ultimately will apply any conditions on the deal, said the attorney. The DoJ is mandated only to consider the competitive impact of the merger, whereas the FCC is charged with reissuing a license and regulating the merged entity on an ongoing basis.
The source close to the situation at the FCC said possible conditions being considered are an a la carte offering of services and the amount of time prices for these services would remain in effect. The source stated that the Democratic Commissioners do not like media consolidation but expressed optimism that with these a la carte conditions a majority vote can be achieved.
Additionally, FCC chairman Kevin Martin, who could be the swing vote, recently intimated at the Consumer Electronics Show that he might go along with the deal when he described satellite radio as a luxury good, noted the industry lawyer.
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