Sell Sirius to the Free Local Radio Broadcasters?

With nearly $1 billion of its $3.3 billion total debt coming due in 2009, a lousy liquidity situation and shares trading around 13 cents, the New Year does not look promising for Sirius XM Radio (SIRI). Even with the tools to raise its stock price above the $1 threshold necessary to avoid delisting and meet at least a portion of the loan repayments it faces next year, the struggling satellite radio outfit’s future seems uncertain at best. Really, there’s no reason not to believe that the company will continue to disintegrate in 2009.

So, though CEO Mel Karmazin recently ruled out any interest in privatization in the near term, maybe it’s time to think about selling Sirius XM again. The question then becomes, to whom?

How about a coalition of free local radio broadcasters?

A ludicrous idea? Perhaps. But over at RadioWorld, WHDX/WHDZ owner Dave Wilson makes a compelling argument for it. “According to Yahoo Finance, Sirius XM’s enterprise value at this writing is less than $4 billion,” Wilson writes. “This means free local radio broadcasters might be able to buy all of the stock of Sirius XM, buy out those with minority ownership interests, and pay off Sirius XM’s debt for about $4 billion. If $4 billion sounds like a lot of money to you, well, you’re right. But consider this: In 2008, the FCC collectively charged free local radio $22,439,275 in regulatory fees to fund all of the wonderful things it did for us. Dividing $4 billion by $22.44 million yields a ratio of 178. So, if you want to know how much it would cost a station to participate in a local radio buyout of Sirius XM, simply take that station’s 2008 regulatory fee and multiply it by 178. For a small-market Class A FM station, it would be $106,800. For the highest-powered FM in the largest market it would be $1.8 million.”

So a local radio buyout is financially possible. But is it possible from a regulatory standpoint? Wilson says it is, as long as no AM or FM licensee owns more than 4.99 percent of Sirius XM shares. Feasible from a business standpoint as well, if you adopt a cable company-esque business model. “The real beauty of bringing free local radio and satellite radio together would be the increased value it would bring to consumers, and thus to us as licensees,” Wilson argues. “Imagine this–our satellite company uses 100 satellite channels to broadcast radio programming nationwide. National spots are sold by our satellite company and we all share in the profits. Local spots would be sold by each of us in our local markets.”

Sounds like a wonderful plan for local radio, doesn’t it? Too bad it’ll never happen.