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Satellite radio shares plunge after FCC diss |
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Written by asap
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Thursday, 18 January 2007 |
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Satellite radio twin powers activate? Nope. Sorry.
Shares of XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc. plunged Wednesday afternoon after the chairman of the Federal Communications Commission poured cold water on speculation that the two companies could merge.
The stocks of the two companies, which both plunged more than 40 percent last year, have rallied in recent weeks on talk that they could attempt to merge, despite significant regulatory hurdles.
The FCC rules that created the satellite business specifically forbid a merger between the two holders of broadcast licenses, but several analysts have held out hope that the FCC could allow an exception to the rule or change it, allowing a merger to occur.
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WHAT HAPPENED?
Executives at Sirius have publicly discussed the possibility of a combination, and XM executives haven't ruled it out. A merger could save the emerging industry significant costs.
However, FCC Chairman Kevin Martin pointed out to reporters Wednesday following a monthly meeting of the commission that the licenses granted to the satellite radio companies precluded them from being combined.
Investors took the comments to mean that Martin wouldn't embrace the idea of changing the rules, sending the stocks of both companies plunging.
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