Sirius-EchoStar-Liberty: Ménage-à-Blah

February 12, 2009 at 12:16 pm PT

As entertaining as news of a Sirius XM-EchoStar-Liberty Media three-way might be, research houses don’t appear to be giving it much credence. Already a few have issued reports dubious of the idea of Liberty accepting the white knight role in this debacle.

In a note to investors this morning, Collins Stewart analyst Thomas Eagan described the possibility of Liberty acquiring or even investing in the struggling satellite radio concern as “highly doubtful.” Explaining his skepticism, Eagan notes, “We do not believe that Liberty initiated the dialogue with [Sirius]. Additionally, we believe [DirecTV] management does not want [Sirius] combined with its operations. [DirecTV] certainly does not need it. Their operations lead the industry.”

Over at Barclays Capital, James M. Ratcliffe and Vijay Jayant are equally skeptical of an alliance between Sirius (SIRI) Liberty (LINTA). “Liberty involvement is more likely an effort by Sirius XM to attract a competing bidder, in our view–we don’t believe the company is fundamentally interested in becoming involved in the satellite radio business,” they wrote, adding that a Sirius bankruptcy is still a distinct possibility. “Chapter 11 would allow the restructuring of above-market OEM revenue share contracts and branded programming contracts, improving operating cash flows,” they explained. “On the other hand, it would result in aggressive competition among the various capital stakeholders and create a significant management distraction for as much as eighteen months.”

For Sirius, bankruptcy may be a more attractive option than cutting a deal with EchoStar’s (SATS) Ergen, but that’s not really saying much. Anyway, Sirius has about a week to decide between the two.

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Tagged with: Charlie Ergen, Dish, DTV, EchoStar, John Malone, John Paczkowski, Liberty Media, LINTA, Mel Karmizan, Nasdaq, New York, SATS, Siri, Sirius Satellite Radio, Sirius XM

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Jeff Stevens

DirecTV has about 30 XM channels. AT&T launched a DirecTV partnership on 2/3/09 dropping a partnership with DISH. AT&T announced CruiseCast on 1/20/09 without any auto deal like SIRI has. That’s not enough reasons for Malone and ATT to block Echostar? Hello?
Jeff Stevens

Other investors may also be at the table. Bob Kraft of the NE Pats and NFL network may be interested in preserving their deal especially if video is in the future. MLB and Oprah as well have deals to preserve.