Mel Karmazin
With the launch of XM 5 currently scheduled for October 14th
(http://www.satelliteonthenet.co.uk/index.php/2010)
it is important to note that the major synergies from the merger of Sirius and XM are about to be revealed and begin impacting the bottom line significantly. In Sirius XMs (Nasdaq:SIRI) filings with the FCC located here; (http://licensing.fcc.gov/myibfs/) they reveal that XM 5, call sign S2786, is capable of broadcasting in the 2320 to 2345 MHz (space to earth) and 7025 to 7075 MHz (earth to space) frequency bands. It also reveals that XM 5 is an in orbit spare for the XM 3 and 4 space stations as well as the Sirius FM 1, 2, 3 and 5 space stations. This is vital and extremely relevant information and is a precursor to what will eventually become of the Sirius XM constellation of satellites.
The LOA for the FM 6 (call sign S2812) launch next year also has rather important news regarding the monetization of the synergies from the merger. It states the following in the attachment menu under technical description:
“When FM-6 becomes operational in early 2012, the NGO satellites will be 12 years old. In the years following, it is expected that the NGO satellites will be retired and Sirius XM will then transition to a two geostationary satellite constellation by relocating FM-5 from its current orbital location of 96.0 degrees West Longitude to a location close to 85.0 degrees West Longitude. This GEO constellation configuration is identical to the legacy XM constellation, thereby facilitating future integration of the XM satellites’ architecture with the legacy Sirius architecture. The subject satellite would then operate at the 115.2 degrees West Longitude orbital location to serve Sirius XM subscribers in the continental United States (CONUS – including its offshore waters) and Sirius XM Canada’s subscribers in Canada using a single transponder at either of two selectable frequencies. The transmissions from the satellite will be compatible with the current and next generation of Sirius XM radios.”
This is huge news, as the transition from a Non Geo Stationary Orbit (NGSO) to a Geo Stationary orbit (GSO) will allow Sirius XM to reduce the number of satellites within their constellations. The Capital Expenditures (CAPEX) of Sirius XM post the XM 5 launch and the FM 6 launch will be greatly reduced. In their own paperwork they state they will transition the Sirius XM constellation from the current 6 satellites to two. The final Configuration of the constellation will likely end up as two satellites live plus a spare. Effectively this is halving satellite requirements from current configurations This will generate significant savings in CAPEX estimated at near 1 Billion dollars conservatively. Any further technology advancements should continue to enhance the bottom line of the company even more. These revelations also help put in perspective the reasons behind the vigilance Sirius XM has had with regard to repeaters and repeater network parameters, as these technical performance parameters are crucial to enabling Sirius XM Radio to reduce both their constellations and their Capital Expenditures going forward. It is factual revelation of vital information such as this, which never seems to be discussed in the mainstream, along with Mel Karmazin Sirius XM CEO’s recent comments that absolutely prove the bullish case in my last article which one video this past weekend attempted to dismiss as just misinterpreting rehashed 2010 guidance. Facts will always get in the way of a good fairytale. Perhaps a review of my last article and the linked sites with their information can convince the speaker in the video that there is indeed a bullish case to be made. Regardless of your position, presenting facts never does any harm, and there will always be media people out there who try to interpret and twist things to suit their own purposes. Howard Stern could tell you a thing or two about that. After reading the article and reading the information contained in the links, what are your conclusions?
Disclosure: Long SIRI
Maybe this is rocket science …
LONG 4 YEARS
Another great article supported with facts. I hate when you do that!
Any notion about Europe?
Thx.
In this case no Mr. Sirius, there is nothing that I have seen in documentation for satellite launches related to Europe with SXM or Liberty Media.
As a long time subscriber, I don’t know what I’d do without XM. That I’ll make money on the stock is a good thing, that they are still on the air and growing is a GREAT thing.
God bless us all.
Mel is in at an average price of $5.00 with over $45 million out of pocket.
He said he will not sell unless in double digits,,so we are looking at least at $10.00.
Massive call option buying and remember Cramer came out of his mother’s anus.
FCC YOU HURT US IN THE BEGINNING BUT THANK YOU FOR THE MONOPOLY.
PAYBACK TIME YOU THIEVES.
Nice article ASM. Confirms my speculations about what they are doing with the sats being put up. It also means they can EASILY keep Stern and pay down debt going forward. Thanks for the read.
Egis,
Thanks for taking the time to read it. Yes I agree paying down that debt is going to get much easier and COH should move to the upside substantially moving forward after FM 6 launch.
Regarding Stern…they will not pay him 100 million per year again, that ship has sailed…..but they should try to keep him at a more appropriate number based on his current worth. I’m sure both he and the company have the numbers and know the size of the audience.
If they do not re-sign Stern, you will hear the sound of a million plus subscriptions turning off all at once through December 2010-January 2011. That’s $12.95 x 12 x 1,000,000 a year in revenue lost, or $155 million annually.
Howard did alot for satellite radio ….6years ago. He is not the be all and end all of satellite anymore. Anyone who pays just for him is nuts imo…with all the content SXM provides….and Sports and Playboy are bigger draws at this point. XM still has more subs than Sirius..and Sirius is Howards home ….so I don’t get the idle threats. Your own numbers predictions show Howard leaving is basically a wash. I don’t think anyone wants him to leave, but if he does, it is certainly not the end of the world. If he leaves he is most likely retiring anyway, I mean he isn’t going to deal with censorship again….and n o one will pay him what satrad pays him..so its a silly comment on an article that has nothing to do with Howard leaving.
Who the hell listens to Playboy ? Great Article, Steve !!
Stern is currently being contracted at 5 years for $500mil, and depending on how loyal the HS fans are worst case scenario Sirius would be impacted by $55mil in revenue loss. But the kicker is that the $500mil dollars could be used more effective in Research & Development and Marketing to increase the
growth of Sirius for the future, and don’t discount the growing subscribers base which if Sirius maintains the growth of this base, it could easily offset the $55 million in losses every year.
There is no doubt that Stern leaving will impact the company. It would be wise for Sirius to contract Stern for fewer $$$ in exchange for fewer shows. Both parties will be happy.
Real nice read Steve. Love the synergies that will accrue as a result of this launch. Can’t beat the combination of lowering costs and increasing cash in flows from growing subs to make that the long term debt in 2013 and later less and less of a concern. As far as Howard goes, he will sign and the market will react based on the terms of the contract. Personally, I think signing Howard is important, but not at any cost and not nearly as important as 6 years ago, but don’t need him competing against SXM on some other medium…that would not be good impo…
Steve, glad to see someone pick up on this “news”… I’ve been pointing it out for the last 6 months or so, that Sirius has decided to scrap the NGO satellite constellation — to go with the GEO constellation, like XM’s. This also allows Sirius to combine their repeaters with XM’s, reducing the repeater network costs.
As for your statement about $1BB in CAPEX savings, I do have a bit of an issue with this. The average cost to design, build, insure and launch a satellite for Sirius and XM has been around $300MM (very roughly estimated). So for Sirius to replace all 3, it was going to cost them approximately $900MM.
When it came to constellation discussions, Sirius had altered their plans and decided to launch a GEO satellite (Sirius FM-5), while only replacing 2 of the 3 NGO satellites… which would allow them to go with a hybrid GEO/NGO satellite constellation. This would also allow them to continue to use just 3 satellites… at the price of $900MM.
After the launch of FM-5, Sirius again changed their plans and had FM-6 changed from a NGO designed satellite, to another GEO designed satellite. With the plan being that it would be launched in GEO orbit — FM-5 and FM-6 would be placed into similiar slots to XM’s satellites, giving them identical coverage. This also mean only launching 2 satellites, instead of 3. So instead of $900MM for new satellites, it’s actually only $600MM.
Meanwhile, XM completed its 2 replacement satellites and now is planning on launching XM-5, to act as in orbit spare for all 4 of the DARS satellites (since XM-5 will be “switchable” between XM and Sirius transmission frequencies). So instead of XM spending $600MM to replace their 2 satellites in 2005-6, they’ve spent $900MM through this year.
Your statement of $1BB in CAPEX savings, maybe a bit confusing… as the only real savings is Sirius going from 3 replacements to 2… about $300MM less. Although, some may argue that XM ended up spending it on the in-orbit spare. The key to remember, Sirius FM-1/2/3 are already paid for and have been for many years. Their retirement doesn’t save the company much. Replacing them with 2 satellites, does save $300MM.
Going forward, the XM satellites will need replacing in (approx) 2020 and 2021 for XM-3 and XM-4; then 2025 for XM-5 (assuming a healthy launch and life). For Sirius, they’ll need to replace in 2024 and 2026.
Good article, I just don’t see a billion in CAPEX savings yet.
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deep dip you need to git a grip 90 % of the people in the middle part of the country dont even know who hs is nor would they care and they buy cars and they have sat radios in them in case you are confused . great article steve . this should put marec pukes in his place especially after today. i was thinking that there still should be synergies from not having to put up or replace any sats for six years i believe. i guessit depends on how many sats the ones they are sending up now to how many they will need to replace as to how much synergies you actually get.if they dont have to need as many as they have now to build less sats and get more out of them the synergies should gain i would think
Homer,
I have to believe that the end game is to eventually have 2 SATS in GSO with a spare…..if they are already designing spares which can cover both sides…its just a matter of time. It is because of this that I say 1 billion in savings from CAPEX…If you read attachment A regarding FM6 technical description and specifically go over section A5 and associated diagrams regarding satellite transmition capabilities…I think you will see where I am drawing my conclusions from. Thanks for the kind words on the article, only wish you were here more often to impart your obvious knowledge of the situation to the membership here.
Steve, no problem… just remember. All of the satellites only have one transponder in them, so they can only transmit one signal at a time. The XM-5 satellite just happens to be designed with a “switchable” transponder that can be switched to one of the two frequencies (Sirius or XM)… but not both at the same time.
Can it happen some day? Sure. But that satellite is down the line. They’ve been sacrificing using multiple transponders, so that they can have more end of life power. If they use more transponders, then it will come at a cost of lowered power. So again, can they use a satellite with 2 transponders on them some day to broadcast both signals at the same time? Sure, absolutely. But it’s obviously not going to happen in the next 10+ years. Since the current constellation(s) aren’t designed for it.
So after next year, they’ll have 5 satellites in operation (2 for Sirius and 2 for XM… with one spare covering both). Combing down to 2 plus 1 in 10+ years, would knock another $600MM out of the price… however, using a much more complex satellite with 2 transponders is going to increase the cost since it would be much larger payload.
Ah…. it’s rocket science!
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Homer,
I think you are mistaken on XM 5. The following clearly states that XM 5 has 2 transponders. It was taken from the technical narrative. Section A7 page 8.
“Each transponder on XM-5 can be commanded to change its saturation flux-density by ground
command in 1 dB steps over a range of 17 dB. “
Homer,
In the FCC 312 schedule S it also clearly shows there are 2 transponders for XM5. Here is a link to a snapshot of that section…..
http://www.screencast.com/users/asm610/folders/Jing/media/e4a19694-a27b-4965-a0d1-690cb5fe3265
Correct asm, otherwise theywouldnt launch 3 stats that can trasmit both signals. They would only need 1, the spare.
I see no other reason for all three being able to toggle. If 2 go back, ur screwed anyway in the 3 satellite complete system, Sirius 5, XM 5 and Sirius 6.
I meant if two go bad…
Steve, my mistake… I meant each satellite has 2 transponders on them, to operate over both Sirius and XM frequencies – they’d need 4 transponders. Sorry, I wasn’t paying attention to my own details when I posted that last night. When I said 1 transponder, I was referring to 1 transponder group. Let me explain…
Each of the satellites two transponders send out the signal to a specific “side” of the CONUS. Look at this photo taken from the XM-5 tech description:
http://content.screencast.com/users/Homer985/folders/Default/media/3de58a6d-1314-4d76-a5d3-82aa17b28777/XM-5.gif
In it, you can see one transponder targets the Pacific Northwest, while the other transponder targets the Northeast through Ohio. One transponder doesn’t cover the whole CONUS.
Recall that a transponder includes the receiving antenna, the ampifier (transmitter) and the broadcast antenna. From the XM-5 tech description… “For the broadcast service in the SDARS band, the XM-5 satellite will be capable of transmitting on two of four frequencies in the 2332.5-2345.0 MHz band.” Then later it says, “If used as a backup for the Satellite CD Radio fleet, XM-5 will be capable of transmitting on one of two frequencies in the 2320.0-2332.5 MHz band.”
Also go back to when XM ran in to their problems with XM-1 and XM-2… after they launched XM-3, they co-located 1 and 2 together; they then shut down one transponder in each of the satellites while using the other to broadcast to a different portion of the country (XM-1 used one transponder to cover one side of CONUS, while XM-2 used its one transponder to cover the other side of CONUS.)
So getting back to the discussion, I erred by saying “one transponder” — when I meant one transponder group. Because technically there are two, but one is needed to cover each side of CONUS. For the satellite to broadcast both signals, it would need four transponders — two for each signal.
Could you split the two transponders that are currently on all satellites? I guess you could, but the signal would be focused on only one side of CONUS, leaving the other side with limited coverage. The fact is, there is just not enough power to send out two signals in this fashion – especially since the transmitting antenna’s are focused to certain portions of CONUS.
Sorry for the confussion, hopefully I was able to clear it up for everyone. I hear where you’re going with this and understand completely — they’re just not there technically yet. I imagine it will happen some day… it would make sense.
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It will happen Homer, the repeaters and their locations are critical to what they can achieve regarding satellite infrastructure. Also again Homer, not to be a pain in your bottom, but if you go back to the technical description of the FM 6 satellite, section A.21 pg 23, you will see that the satellite has a single transponder listed for its communications payload. The dual transponder configuration appears to be strictly on the XM side.
well, in the future, since I have read that they are going forward with just the xm platform as far as the prefered platform going forth from 2014-2016 and beyond, wouldnt that be part of the plan ? and then use Sirius for other Services or just decommision the brand all together. I mean if they stop offering new sirius radios in aftermarket and reneg the new contracts with all the sirius partners to start putting xm in the cars. By the time the Sat’s need to be replaced on the sirius side all but the Lifetime users would be left on the Sirius side as which point they could just spend maybe 10 million to offer those people xm radios… they might not have to because alot of those people will probably have an xm car at that point. So no more Sirius Sats, unless new Service is introduced, probanbly 20-30 million in annual cost savings on the sats maintenance, insurance, repeaters, etc…
>>> The dual transponder configuration appears to be strictly on the XM side.
Yep, that’s what I see… I’m admittedly not up to speed with the Sirius configuration, as much as I am with XM. But looking over the tech spechs for FM-5 and FM-6, Sirius does use a single transponder, centered more on the center of CONUS.
In hindsight, I see where the confussion is coming in (including my own). What we’re overlooking here is the significance of the different transmission schemes that Sirius and XM use. For example, Sirius’ signal is split in half — using one carrier on their transponder (4.5MHz bandwidth) centered on one of two S-Band frequencies (the other satellite will use the other carrier frequency). Meanwhile, XM’s signal is split 6 ways, with each satellite using 2 carriers, one on each transponder (1.84MHz bandwidth); and the final 2 carrier channels being used by XM’s repeaters. I keep forgetting that the transponders were not so much about east vs west… but rather, different portions of the signal. The lower portions of XM’s channel would be found on one transponder, while the upper channels are coming from the other transponder…. I remember this all now from when it was explained to me awhile back.
The difference in the configurations gives Sirius a more efficient use of their spectrum… Sirius – 4.5Mbps of bandwith versus XM – 3.28Mbps of bandwidth. However, Sirius use of the lower quality/efficient PAC compression codec (XM uses the AAC+ codec) equalled them out.
But that gets off topic… I’m more convinced than ever that the XM-5 satellite cannot broadcast both signals at the same time. Remembering now that the XM signal requires two transponders in order to operate correctly, seals it for me. The capacity and power of all of these satellites is just not there. But again, that’s not to say that in 2020 they don’t replace these 5 with 3 new satellites, designed with the transponders needed to cover both configurations. But you’re still replacing 5 satellites with 3… saving some, yes… but the cost of those “super satellites” will be more.
I will point out that I find it interesting that Sirius noted the availability of what they call “Channel 3″ in their tech specs for FM-6. A 12.5MHz channel centered at the center of the Sirius licensed spectrum. If they ever switched over to the XM satellite platform for Sirius XM subs over the next few years, that’s 12.5MHz ready to go for something.
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FM 6 is one more step in the eventual migration to the constellation I wrote about. They have to basically jog in place while they continue the technology migration and evolution to the XM side. FM 5 and 6 are mere bridges…imho.
I aside from the name I have not seen any synergies yet. You ask why do I say this? I have XM, thinking that they have merged, I call the Sirius help line. The help lines are not the the same. Sirius can not look up your XM data in their data base. I call XM help line and it is in India and I can’t understand a word there saying other than hello. I just want to renew my subscription and get the Userid and password for the online account. He says it should be in your e-mail in a few minutes, I’m still waiting after two days.
I am a stockholder, and happy with the stock, pissed about the functionality of the company. Get it together Mel please!
Agree its a moot point as they will soon have new assets to cover both waveforms for the next 12 years and by then a multimode receiver will be in the market for sure. But for today the two systems need dedicated satellites to broadcast the sets of content (even accounting for migration of “Best Of” content to each other system). They have two waveforms, two conditional access schemes, two frequency plans, and tens of millions of microprocessors deployed in cars for each waveform that cannot be changed. The key is the receiver, and hence the chipset. Subsidizing these have cost them several billion already. Satellite CAPEX of a whole new system of 1BUSD is dwarfed by radio costs (subsidies)
40M radios deployed x 100USD per radio subsidy = 4BUSD
even if they just subsidized a multimode chipset it could cost 1BUSD.
the key to this industry is the receiver not the satellites.