Too many parties have too much to lose to let this one go through without a fight, TheStreet.com's Jim Cramer says. No, it is not over. If there is one thing we have learned about Sirius (NASDAQ: SIRI) (Cramer's Take)-XM (NASDAQ: XMSR) (Cramer's Take), it is that at every step of the way, people have to try to block it or at least hold it up to the point that someone goes out of business. This is a deal, now much longer in passing than Exxon and Mobil, that still has congressional meddling even right now, still has rearguard activists who might fight the merger on the commission itself even though the FCC's staff has said yes.
Lots of people are confusing the issue of the merger benefits with the merger itself. The benefits will be helpful down the road on both the revenue and the costs, and the caps won't mean that much. What matters, plain and simple, is refinancing. Both companies are always in danger of running out of money.
However, if you know that three years hence -- after the frozen period during which service fees cannot be increased -- the two companies can begin to offer extreme cable pricing, you can go hat in hand to the Street with a good bond deal that people will no longer feel could default.
That's why the stocks combined are good. They may turn out not to be good for all of the people playing the various games, because there is no quick way to monetize the two companies. But you will most certainly create a dominant company that will pretty much destroy terrestrial radio, which may be the biggest reason radio stocks continue to trade down and CBS (NYSE: CBS) (Cramer's Take) continues to be brought down by CBS Radio.
There's been so much that I have hated about this government's stalling of this as opposed to the serious antitrust issues that have developed in the last 20 years of laissez-faire antitrust. Everything stinks out loud, including the stalling of the deal until after Clear Channel (NYSE: CCU) (Cramer's Take), the principal target of the merger, went through. The people propounding Clear Channel, just like the people propounding newspapers, do not and have not worked in the industry. They just know cash flows and vectors, not the reality of the endless newspaper-like decline to this medium.
In short, putting XM together with Sirius would be like creating a new Google (NASDAQ: GOOG) (Cramer's Take) with Yahoo! (NASDAQ: YHOO) (Cramer's Take) when it comes to terrestrial radio.
And there's a simple reason: commercials. Everyone hates them.
And you are done with them the moment this deal gets approved, even though it is not a foregone conclusion.
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RELATED LINKS:
Cramer: Sirius, XM Need a Fast Wedding
AIG's Sullivan Is Latest Credit Casualty
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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.
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Reader Comments (Page 1 of 1)
6-17-2008 @ 10:30PM
rick said...
Jim,
A little surprised by your comments here in your assessment of satellite radio. Lets remember where radio in general is eventually going and has been going - online. And if you look at Internet radio in general, it's growing by 10% each week if not more. Plus, mobile devices like the iPhone will give instant access to their conent and I doubt you could make the same argument with satellite utlizing a ubiquitous platform. And why would you pay for satellite when you have so many other choices online and in the near future in your car for free. Not sure the future is that bright for a entertainment medium that is device dependent whether or not they indeed share the same device or not.
Thanks for 'listening.'
7-26-2008 @ 11:04AM
Jose said...
Mr. Cramer, I disagree with you. This is not so much like Cable as it is like the internet. There are many sources for the internet, phone line, cable, satellite, Wifi, DSL, and cellular (called different things by different companies). There are many different sources from which to get your radio, satellite is just one way. I personally don't want to pay for it when I can get what I want for free (commercials) from terrestrial or as part of the internet.
Having this alternative is going to force "free" radio to 1. Have better programming 2. Have better commercials (some are actually entertaining) 3. Offer a better quality of broadcast (digital radio) and better services.
For example, with digital radio you could have automatic local traffic reports. I would have listened to that (for free) when I had a long commute.
Don't be so negative on the impact of "pay-for" radio. It will have a lot of positive influence and like me won't attract everybody. After all, how many different baseball games can you listen to at once? How long before people get sick paying to listen to Howard Stern?