By Andy Montero -
As Sirius XM prepares for the 4th quarter launch of FM 6; the last satellite launch scheduled for several years, it is important to note that the true impact of the merger of both Sirius and XM into one company is only recently now truly going to impact the bottom line. The start of major synergy impacts began with the launch of XM 5, which can broadcast both Sirius and XM signals and is the new “spare” satellite for the company. After the launch of FM 6 there will be no satellite launches until 2017 or so at the earliest according to the company. This will begin to impact quarterly revenue in a positive way starting in fiscal Q1 2012 most likely. The launch expenses for FM 6 likely will hit in Q4 this year when the satellite is launched, currently the launch is scheduled for mid October.
The legacy Sirius infrastructure will remain in operation for several years to ensure legacy equipment is still functioning for subscribers, but eventually the current NGSO satellites will be de-orbited. Sirius XM will need less satellites going forward, which will mean less expenses and more revenue to the bottom line. In the future it appears Sirius XM will require no more than 3 or 4 satellites to cover North America, which is quite a savings compared to the two separate companies. Additionally, the satellite repeater network will be reduced and the satellite earth stations necessary for operations will likely be reduced. Bear in mind this is Sirius XM synergies for itself only; should Sirius XM and say Dish Network (NASDAQ:DISH) and or DirecTv (NASDAQ:DTV) find some synergies in operations, well then all three companies would experience some benefits and their stock holders would see the results. Additionally, as newer satellites are launched with much more capacity and capability increases Sirius XM can look to existing satellites to expand through 3rd party content distribution lanes.
The merged internet player is also a cost saver as there are not 2 separate internet radio services needed. The sound quality of both the satellite version and internet version of the service is much improved compared to a year or two ago. Sirius XM has held their cards close to the vest and rightfully so after all the difficulties the company has endured. Anticipation for Sirius XM 2.0 is growing and the company needs to present some unexpected capabilities surrounding all the hoopla. Record and replay just won’t cut it in my opinion. Sirius XM may have some information on 2.0 in the upcoming conference call since we are currently in fiscal Q3 and 2.0 is slated for retail release in Q4. Overall, there are some very positive developments for the bottom line on the horizon. The company is still growing and hopefully will ensure it continues to do so even as the economy is still fragile. Sirius XM has plenty of room for more improvements regarding metrics such as churn which we all would like to see reduced some more, and even self pay sub numbers, which I feel as many others must remain constant at a minimum or increase, even if just by a small number. As the Q2 conference call was announced yesterday as August 2nd, it will not be long now to see what kind of performance the company has had thru June 30th. How do you see the results for the 2nd Quarter? Let us know.
Disclosure; Long SIRI, no position in DISH or DTV
