Sirius XM Radio and Liberty Media Pursue Other Markets

Following Liberty Media Corporation’s 2009 investor meeting last week on the 16^th of October, I was pleasantly surprised to discover Sirius XM Radio CEO Mel Karmazin was scheduled to speak.  Once the meeting got underway though, I truly was not prepared to hear what either Greg Maffei of Liberty or Mel Karmazin of Sirius XM Radio (SIRI) laid out during the meeting.  Rest assured, Sirius XM Radio’s relationship to Liberty Media and John Malone is a two-way door.  Liberty Media gets 40% of the company with exclusive content and can leverage it over multiple possibilities; which I believe they are preparing to do in earnest.  Mr. Maffei’s statements were like music to my ears when he said they were looking for opportunities regarding SIRIUS XM in other markets.  To me it seems that this all is coming together and turning into global expansion with recent news of Liberty buying the debt of Worldspace and also now looking to purchase the hard assets of the company. This action could be seen as removing the hurdle of Spectrum licensing overseas that would be expensive and virtually impossible for SIRIUS XM to procure. More details are sure to come from this developing story as details continue to emerge. As Worldspace seeks to re start asset sale processes with Liberty Satellite Radio LLC, a unit of Liberty Media. Liberty Satellite Radio LLC is in fact a holding company that Liberty Media owns and has used in the past. This ties closely with Sirius XM’s rumored, though not confirmed partnership with APPLE (APPL) and could bring a whole new loyal following as well, likely adding more multi-subscription households.  All this would give lots of those potential subscribers an opportunity to purchase all of the exclusive available channels including, but not limited to, Oprah Radio, MLB Home Plate, NFL Radio, NHL Home Ice, Mad Dog Radio, The Foxxhole comedy channel, and National Public Radio with the purchase of a new SKYDOCK and the possibility of an XM best of SIRIUS package. Seems like a no brainer.

Purchasers will also gain access to a variety of Sirius XM music channels, including E Street Radio, The Grateful Dead Channel, Eminem’s Shade 45, Radio Margaritaville, Siriusly Sinatra, and many others. All told, a subscriber will be able to listen to a huge variety channels, as well as exclusive “SIRIUS XM only” concerts and special programming.  Additionally any music track can be purchased from iTunes while listening to it in the Sirius XM app which can only help add to the applications already great popularity. The iPhone SKYDOCK application just might be a lot more important than we originally speculated.  To me it seems that this all is coming together and turning into global expansion with recent news of Liberty buying the debt of Worldspace and also now looking to purchase the hard assets of the company. This action could be seen as removing the hurdle of Spectrum licensing overseas that would be expensive and virtually impossible for SIRIUS XM to procure independently.  More details are sure to follow from this developing story as details continue to emerge.  As Worldspace seeks to restart asset sale processes with Liberty Satellite Radio LLC, a unit of Liberty Media. Liberty Satellite Radio LLC is in fact a holding company that Liberty Media owns and has used in the past.

Suffice it to say there is a lot more to what is going on than meets the eye, or what is constantly rehashed over and over again in the Mainstream Media. The real battle has begun, as Sirius XM Radio continues showing signs the company is finally using their heads when it comes to growing a subscription base not tied to the Auto industry or expensive specialized Satellite Radio equipment. It would appear that the trio of APPLE, LIBERTY and SIRIUS XM could be just the thing the doctor ordered for Sirius XM Radio.  The combination of these three companies has indeed sparked some interesting fireworks in the recent past and will in the near future.  The internet version of Sirius XM Radio is just fingertips away from anyone who has either an iPhone or iPod touch.  Now the Apple’s iPhone and iPod touch users may also take advantage of a docking station which transforms their devices into a full fledged satellite radio as well.  The missing puzzle piece in all this is the company’s effort to take advantage of iPhone and iPod touch user numbers in Mexico, The Caribbean, Central and South America and overseas in Europe, Asia, Africa and Australia.

Before continuing, let me also inform readers that Mel Karmazin once again spoke to the rumors of a reverse split in the near future, stating very emphatically that it was not in the cards.  Mel also spoke of Free Cash Flow (FCF) and how that is one of the major focuses of the company at this time, which leads on to wonder what’s in store during the upcoming Q3 Conference Call.  He also went on to say that if you look at the history of companies with lots of FCF, there is a common theme….stock repurchase.  To me that is an incredible comment from a CEO who seems to grow more and more confident as the combined company continues to improve even in a down economy.  The SIRIUS XM conference call for Quarter 3 is now scheduled for 5 November at 8 AM. Surely we will hear more good new at that time.

Let’s continue on the Global Expansion theme with Liberty Media.  Liberty Global is the leading international cable operator offering advanced video, telephone, and broadband internet services.  They operate broadband communications networks in 14 countries, principally located in Europe, Japan, Chile, and Australia.  Liberty Global’s operations also include significant media and programming businesses such as Chellomedia in Europe.  Liberty Global connects 16.7 million customers to the world of information, communications, and entertainment.  As of June 30, 2009, Liberty Global’s networks passed approximately 34.5 million homes and served more than 26.6 million RGUs, including approximately 15.3 million video subscribers, of which 7.2 million were digital cable and DTH subscribers, 6.4 million broadband internet subscribers, and 4.9 million voice subscribers.

Liberty Global’s UPC Broadband (UPC) division is a leading provider of cable television, broadband internet, and voice services in Europe, serving approximately 9.2 million customers throughout 9 countries.  UPC is the largest cable television operator across the majority of the markets in its footprint. In Western Europe, UPC operates cable networks in the Netherlands, Austria, Ireland, and in Switzerland through the Cablecom brand.  In Central and Eastern Europe, UPC’s operations span five markets: Poland, Hungary, Czech Republic, Romania, and Slovakia. Chellomedia is Liberty Global’s European-based content division, and a leading international provider & distributor of TV channels, content, and digital services.  Chellomedia has a strong focus on theme based TV channels, rights aggregation, channel distribution, and channel sales.

Liberty Global also operates in Japan and Australia.  In Japan, their operations are conducted through Jupiter Telecommunications Co., Ltd. (J:COM), a subsidiary of LGI/Sumisho Super Media, LLC. The Australian operations are conducted through AUSTAR United Communications Limited (AUSTAR). Rounding out the Global reach in South America and the Caribbean is primarily through VTR GlobalCom S.A., an 80% owned subsidiary, and wholly owned subsidiary Liberty Cablevision of Puerto Rico. Liberty Global also has ownership interests in two Latin American content businesses: MGM Networks Latin America, a joint venture with MGM, and Pramer S.C.A., a 79% owned subsidiary, both of which produce and distribute programming to the Latin American market.

As you can see, this all is an exciting turn of events for Sirius XM Radio if Global expansion is truly on the table as it appears to be.  The distribution network and licensing appears possible now through Liberty.  Repeater networks were already in place in Sweden, Germany and Italy from deals put in place by Worldspace.  Even a Satellite radio agreement with FIAT had been brokered and agreed to prior to Worldspace going into Bankruptcy.  I would think that if all the iPhones and iPod Touch devices throughout these countries and markets were capable of receiving the Sirius XM internet feed in the not too distant future or the full SATRAD feed from the SKYDOCK, that sub growth would be a given with the possibility of well over 24 million total subscribers between auto and retail just being a formality at that stage. If the premise of my article holds true, and I am doing some speculating here, but doing so with the knowledge of who the players involved are, and some very recent comments and facts, there are some very exciting days just ahead for Sirius XM Radio.

Disclosure: Long SIRI