Canadian Satellite Radio Holdings Inc.

For those excited at the prospects for satellite radio in Canada and looking to get in on the ground floor, Canadian Satellite Radio Holdings Inc. (CSR) could be worth keeping an eye on.

CSR, the Canadian affiliate of XM Satellite Radio that will offer services under the XM Canada brand, filed Nov. 14 an amended preliminary prospectus for an initial public offering (IPO) of stock with the Canadian Securities Administrators. The prospectus does not include certain details, including the price of the IPO, how many shares CSR is offering or how much CSR is expecting to raise from the offering. CSR intends to use the proceeds to complete the initial infrastructure rollout and to fund operating expenses, the company said.

The prospectus did offer a glimpse into what markets it will be targeting going forward. The prospectus notes that XM Canada will offer at least 80 channels of music, sports and entertainment programming for an initial subscription fee of Cdn. $12.99 ($10.92). CSR will pay XM a monthly fee equal to 15 percent of all subscriber fees earned by CSR earned that month and 50 percent of the net revenues earned by CSR from premium services, subject to other terms.

The Canadian satellite radio market may provide an example of what might have happened in the United States if Sirius and XM had been able to launch around the same date. Given XM’s significant head start in launching service in the United States, Sirius has been following the leader ever since debuting its competing service. But the two companies will go head-to-head on a relatively level playing field in Canada in terms of start-up date. The competition for subscribers may depend more heavily on automotive deals and content.

On the automotive front, CSR revealed that it has agreed to an exclusive 13-year distribution arrangement with General Motors of Canada Ltd. CSR executives added that General Motors plans to install satellite radio receivers in certain 2006 model year vehicles and “will use commercially reasonable efforts to offer XM Canada’s satellite radio service from factory-installed radios in as many vehicle lines as possible for the 2006 model year and in at least 90 percent of vehicle lines for the 2007 model year and beyond.” This is a significant agreement for CSR, since General Motors produced 28 percent of the 1.6 million new vehicles sold in Canada in 2004, according to R. L. Polk Canada Inc. Toyota, at 11 percent, had the second largest market share, followed by Honda at 9 percent.

CSR also seems to have the upper hand in content with the exclusive National Hockey League contract. Sirius also will not offer popular shock jock Howard Stern in Canada given the likely problems that come from the decency oversight both satellite radio broadcasters will face in the country.

Regardless, it still remains to be seen whether the Canadians will follow the same adoption patterns at the Americans when it comes to satellite radio, but if it does gain quick acceptance, CSR’s stock could offer a nice opportunity for early investors.

NSE

New Skies Satellite Holdings Ltd. again made headlines as a potential acquisition target, but this time it was about New Skies turning down a suitor. According to news reports, New Skies rebuffed a bid from SES Global valued at more than $1.1 billion, calling the offer inadequate.

This raises questions as to what New Skies considers to be an adequate offer. The company must be placing a heavy premium on its orbital slots, since it’s seven-satellite fleet is significantly less than the 24 satellites that Intelsat plans to acquire from Panamsat for $3.2 billion. Plus, New Skies has two Lockheed Martin 7000 series satellites in its fleet that are at risk of suffering the same kind of issues that caused the failure of the Intelsat IS-804 in January (SN, Nov. 14; Aug. 15).

The news appeared to have no dramatic impact on the company’s trading price. New Skies shares lost 18 cents Nov. 17, the day the news of the rebuffing of the SES Global offer broke, but New Skies stock had been on a slight downswing from the two previous trading days after topping out at $23.45 Nov. 14. New Skies shares also have been going through daily ups and downs for the past month that have been keeping the stock firmly in the $22 range. That investors did not drive the share price down following the SES Global news may suggest that investors maintain a certain level of confidence in New Skies’ prospects as either an operator going forward or as a potential takeover target.