Embattled Sirius XM Radio has set up a potential showdown next week between two Colorado billionaire media moguls.

The satellite radio company reportedly has approached John Malone's Liberty Media, which controls DirecTV, to head off EchoStar Corp.'s Charlie Ergen.

It was previously reported that Ergen had accumulated controlling stakes in two pieces of Sirius XM debt coming due this year, including a $175 million piece due Tuesday.

The New York Times and The Wall Street Journal reported the talks between Sirius XM and Liberty Media on Thursday. A deal with Liberty Media/DirecTV also could help Sirius XM avoid bankruptcy.

Ergen may have maneuvered first into a negotiating advantage.

But Sirius CEO Mel Karmazin views Ergen as a hostile suitor, and Liberty Media could step in as the white knight if Malone is prepared to infuse enough capital.

"This is simply a matter of two potential buyers, both of whom can see value in a franchise that still has plenty of growth prospects but is currently starved for capital and has an untenable cost structure," said Craig Moffett, an analyst with Sanford Bernstein in New York.

"The bankruptcy process," Moffett added, "could solve a lot of the cost-structure problems. Either Charlie Ergen or John Malone could solve the financing problems."

Before the new wrinkle involving Malone, The Times had reported that Sirius XM was preparing a bankruptcy filing - less than a year since Sirius merged with XM, combining the only two U.S. pay-radio providers.

Liberty Media and EchoStar officials both declined comment on the Sirius XM reports. Sirius XM spokesman Patrick Reilly also declined comment.

Ergen and Malone, who are headquartered within miles of each other in Douglas County, are rivals in the sense of controlling competing satellite TV companies.

Currently, DirecTV is doing a number on Dish Network, posting strong subscriber growth including 300,000 net additions in the fourth quarter alone.

By comparison, Dish, which has yet to report its fourth-quarter figures, recently lost subscribers for the first time in its history.

But beyond a competitive relationship, Ergen and Malone also have discussed ways their companies could work together.

Malone, in an interview last summer with the Rocky Mountain News, said "we've had a number of meetings with Charlie" to discuss joint programming initiatives and other areas of cooperation.

An effort by Ergen to merge EchoStar with DirecTV in 2002 was thwarted because of antitrust concerns.

Jimmy Schaeffler, a principal of the Carmel Group in California, said last week he viewed Ergen's interest in Sirius XM as fitting into Ergen's strategy of expanding his subscription business into new mobile markets.

He noted Ergen last year paid $700 million for wireless spectrum that could be used for mobile video services and, before that, paid $380 million to buy Sling Media, which produces equipment enabling viewers to watch their home TV from remote locations.

Kaufman Bros. wrote in a report last week that while the Sirius platform is highly specialized, the more generic XM satellites could be used for other services, such as capacity to expand high-definition satellite TV offerings or "even a competitive satellite broadband offering for rural customers."

But Moffett said he views the battle as primarily two savvy businessmen recognizing a good opportunity, rather than one needing Sirius XM more than the other.

He said he sees both Ergen and Malone as saying to themselves: "This is potentially a good business and I might be able to buy it on the cheap."

Additional reporting by finance editor David Milstead.

CHARLES W. ERGEN

* Age: 55

* Net worth: $8.1 billion, 35th among Forbes 400 Richest Americans

* Titles: Chairman and CEO of Dish Network Corp. and EchoStar Corp.

* 2007 annual salary: $592,308

* 2007 total compensation: $2,559,422

* Education: Bachelor of science degree in business and accounting from the University of Tennessee and an MBA from the Babcock Graduate School of Management at Wake Forest University.

JOHN C. MALONE

* Age: 67

* Net worth: $2.3 billion, 190th among Forbes 400 Richest Americans

* Titles: Executive chairman, DirecTV Group Inc.; chairman and CEO of Discovery Holding Co.; chairman of Liberty Media Corp.

* 2006 annual salary: $390

* 2006 total compensation: $430,693

* Education: Bachelor of science degree in electrical engineering and economics from Yale University and an M.S. in industrial management and a doctorate in operations research from Johns Hopkins University.

Back to Top