XM Satellite Radio Shows Strong Progress

XM Satellite Radio increased its subscriber base in the first quarter of 2002 by 175 percent. It announced April 23 that it had added almost 50,000 new subscribers in the first quarter. It now has just under 80,000 subscribers. It hopes to have 350,000 subscribers by the end of the year.

Bob Peck, a satellite equity analyst at Bear Stearns, said in a research note: “XM’s reported net adds of 48,000, surpassed our estimate of 42,000. The higher than expected net adds were driven by the continued strong demand for the new digital audio service in after-market sales.”

XM began nationwide operations in the fourth quarter of 2001. It reported consolidated revenues of $1.8 million for the three months to March 31, 2002. It had EBITDA loss of $75.9 million for the quarter. The company is now also funded until the first quarter of 2003. A recent secondary offering raised $147 million. According to Peck, this funding “reduces some of the company’s near term funding risk.”

The first quarter was a significant one for XM Radio as it announced deals with a number of car manufacturers, such Nissan, Infiniti, Volkswagen, Audi and Isuzu. Peck said: “We are encouraged by these announcements, as it demonstrates that the automotive market’s interest and commitment to the [satellite radio] service and to XM. For instance, GM only offered XM radios in two of its models in 2002 and is now expanding it to 25 models for the 2003 model year.”

Overall, analysts greeted the results positively. “We believe that satellite radio has the potential to be a widely accepted consumer offering and believe that XM Radio has clearly moved ahead of Sirius in rolling out its service. We expect widespread availability and rising consumer awareness in 2002, but do not expect subscriber growth to hit critical mass until XM Radio receivers become a widely available option in automobile showrooms,” noted Armand Musey, a satellite equity analyst at Salomon Smith Barney in a research note.

–Mark Holmes