Spurned Satellite Radio Bidder Throws Hat Back In Ring
A would-be player in the proposed merger of Sirius Satellite Radio and XM Satellite Radio is making a new pitch for an old plan, even though he has little confidence the plan will or should work.
In 1997, Primosphere Limited Partnership was one of four companies bidding for a pair satellite digital audio radio service (SDARS) licenses being granted by the U.S. Federal Communications Commission (FCC).
That April, American Mobile Satellite Corp. and Satellite CD Radio Inc. were awarded licenses and eventually became known as XM and Sirius, respectively. Primosphere, owned by Clifford Burnstein, was a losing bidder along with Digital Satellite Broadcasting Corp. Primosphere’s bid for the license was $68 million, well short of the $90 million bid submitted by XM’s predecessor company.
Now, with the FCC expected to rule by the end of the year on a merger of the two satellite radio operators, Primosphere is asking the U.S. government to let it back in the business — if only because the company legally never has been out.
“When you file the application you have to actually pay for that slot as a deposit, which you’re supposed to get back if you don’t get [the license]. It was $70,000 per satellite,” said Burnstein, a partner in Q-Prime Inc., a Manhattan-based entertainment company that manages recording artists including Shania Twain, Metallica, the Red Hot Chili Peppers and Garbage.
Since Primosphere appealed the original awarding of licenses — claiming improprieties which have never been proven in court — it never had its $140,000 deposit for two satellites returned. “When we appealed, we didn’t ask for the money back while we thought we were a viable candidates,” Burnstein said.
Though Burnstein said he mainly is being quixotic in his latest legal attempt, he nevertheless finds himself in a position to gain from the merger if the FCC allows it. Less than a month after Sirius and XM announced their merger plans, Primosphere filed a March 19 “supplement to application for review” with the FCC asking that if it approved the merger the FCC also should “authorize a portion of the SDARS spectrum to Primosphere [to] construct its own satellite(s) for SDARS and market its own service.”
Primosphere also asked that during the estimated five years it would take to launch a satellite and market service, the FCC should make it a condition of the merger that either XM or Sirius must lease transponder capacity on one of their satellites until Primosphere’s first satellite is operational.
As Primosphere’s attorney, Howard Liberman of Drinker Biddle and Reath LLP, said, Primosphere’s request is that, “if the commission approves the merger, then they should give Primosphere some of that spectrum, because competition is good.”
Burnstein described Primosphere’s chances as “very slender,” and added that he also opposes the merger of Sirius and XM. “There was a rule that said there’s not supposed to be one [license] but two licenses, and that even after you got [one], you’re not free to merge,” he said. “It’s in black and white. Only Mel Karmazin would fail to believe what the intent was. So we object to their merger on the basis that it’s not allowed. But if you are gong to allow it, then you should also allow for the competition.”
If the FCC allows the merger and also awards Primosphere a license, Burnstein candidly admits he is not sure how to proceed. “That’s a good question,” he said. “Let’s say they do allow us some channels. One, I have to make some business arrangement with them, because no one is going to want to buy in separately. There was a time that they would have but not now.”
It also would be difficult for Primosphere to provide programming, Burnstein said. “It might take me a few months, but I’d be chomping at the bit to do it,” he said. “… We know something about the entertainment business, too. I couldn’t be happier than to provide some competition, but I can’t do it for free. There would have to be a business arrangement to compete with them on their own system, oddly enough. If all this were to come to pass in its own stupid way, if it were to actually come to pass, it would actually help them [XM and Sirius], which is not my intent.”
An XM spokesman declined to comment, while Sirius did not respond to calls.