WASHINGTON (AP) – The Justice Department this week approved Sirius Satellite Radio Inc.'s proposed $5 billion buyout of rival XM Satellite Radio Holdings Inc., saying the deal was unlikely to hurt competition or consumers.
The deal was approved without conditions March 24 despite opposition from consumer groups and an intense lobbying campaign by the land-based radio industry.
The combination still requires approval from the Federal Communications Commission, which prohibited a merger when it granted satellite radio operating licenses in 1997.
The Justice Department, in a statement explaining its decision, said the combination of the companies won't hurt competition because the companies are not competing today. Customers must buy equipment that is exclusive to either XM or Sirius, and subscribers rarely switch providers.
“People just don't do that,” said Assistant Attorney General Thomas Barnett, in a conference call with reporters.
The government also appeared to endorse the argument of the companies that they compete with other forms of audio entertainment, including “high-definition” radio, Internet-based radio stations and even devices like Apple Inc.'s iPod.
“The likely evolution of technology in the future, including the expected introduction in the next several years of mobile broadband Internet devices, made it even more unlikely that the transaction would harm consumers in the longer term,” the Justice Department said.
The buyout received shareholder approval in November. The companies said the merger will save hundreds of millions of dollars in operating costs –savings that will ultimately benefit their customers.
XM Satellite shares rose $1.97, or 16.5 percent, to $13.90 in afternoon trading after the government's announcement, while Sirius shares rose 28 cents, or almost 10 percent, to $3.18.