MEL SAYS 'DEAL,'
SATELLITES LIFT OFF

By TIM ARANGO

June 27, 2006 -- Mel Karmazin finally admitted what many on Wall Street have been saying for several years: that the nation's two satellite radio companies might be better off together.

Karmazin, the boss of Sirius Satellite Radio, said yesterday that he would "love" to buy his larger rival, XM Satellite Radio. The comments sent shares in both companies soaring.

"Regarding XM - would we like to buy them? Sure," Karmazin said at a conference in New York hosted by The Deal. "We'd love to buy them. Price would matter, so that would be an issue."

Wall Street analysts and investment banks have long suggested that the route to profitability for XM and Sirius lies in the two merging, or being acquired by a larger media company.

Karmazin also said regulatory concerns "would be a question mark."

Some have argued that regulators would likely approve such a deal if they considered the market for satellite radio alongside other portable music players, such as the iPod and MP3-playing cellphones.

The two rivals, which have been in a heated, and expensive, competition to lock-up exclusive content deals, both lose considerable amounts of money.

The most notable of such deals was Sirius' blockbuster $600 million, five-year deal to carry shock jock Howard Stern.

Other big deals include XM's $55 million deal for Oprah Winfrey, and Sirius' $30 million pact for domestic diva Martha Stewart.

In the most recent fiscal year, XM's net loss was about $667 million, while Sirius lost $863 million.

Karmazin emphasized that Sirius' business plan "doesn't involve our doing a deal."

An XM spokesman said, "We do not comment on our competitor's wishful thinking."

Both Sirius and XM shares, which have tanked this year, rose yesterday on Karmazin's comments.

XM finished up 91 cents, or 6.8 percent, at $14.37. Sirius stock closed up 23 cents, or 5.2 percent, at $4.70.

Still, both are off substantially on the year - Sirius by about 30 percent, and XM by 47 percent.

Karmazin, the former CBS chief and ex-president of Viacom, joined Sirius almost two years ago after clashing with Viacom chief Sumner Redstone.

Earlier this year, sources have said, CBS considered XM as an acquisition target but never seriously pursued the company. And from time to time, XM and Sirius themselves have discussed merging.

Sirius has about 4.1 million subscribers and XM has 6.5 million.