SIRI, Sirius Satellite Radio, and XMSR, XM Satellite Radio, shares surged in early trading due to tentative approval of their merger by the FCC. SIRI and XMSR have been in merger talks and drew the attention of government nannies.

Federal Communications Commission staff were reviewing the proposed merger and came up with some conditions that they thought would be a better way to run the 2 companies.

 

The FCC chairman called for price caps on services fees and options for 3 years. Obviously Sirius and XM don’t know how to set their own prices very well to remain in business.

The FCC also stipulated that the combined SIRI and XMSR company set aside 8% of its channels for non-commercial and minority owned stations. This may come from the way federal agencies all set aside an 8% tithe to their struggling family members.

The tentative approval sent the shares of both SIRI and XMSR up at the beginning of the day, but once the conditions set by the Feds for approval were considered then the potential growth and business of the combination of satellite radio providers began to look a little crippled by regulation.

Prices controls and preventing market forces have never worked for long as can be remembered from the Nixon administration’s use of it and wage limits.

If Sirius and XM can’t determine the price of their product then their ability to achieve margins and profit is severely compromised.

The government is writing a business plan for Sirius and XM that almost guarantees that their deal will be a failure.

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