SIRI, XMSR

A merger of satellite radio operators Sirius Satellite Radio and XM Satellite Radio makes sense in terms of pricing and operations costs, Credit Suisse media equity analyst Bryan Kraft said in a research note.

The potential combination would provide a number of benefits to consumers, Kraft said. "Specifically that: One, the combined company could offer more programming choices by combining spectrum and eliminating duplicate channels; two, consumers would not have to be locked in to one service or the other when buying a new car; and three, consumers who view exclusive content on both services as must-haves would not have to subscribe to both services separately," Kraft said in a Sept. 14 note to investors.

But along with potential U.S. government objections, other potential problems stand in the way of such a deal. "We believe that XM management might be reluctant to give up control to Sirius management given the level of competition between these two management teams," Kraft said in a Sept. 14 note. "We think that this ego factor might bias XM management toward rejecting a bid that does not value XM at a premium to Sirius’ enterprise value. In declaring the bid inadequate, XM might point to its larger subscriber base and greater share of OEM (original equipment manufacturer) distribution or a pessimistic assessment of the potential for regulatory approval."

In terms of whether the deal would receive regulatory approval, Kraft said "obtaining regulatory approval, while far from assured, we believe has a probability of greater than 50 percent. We think that regulators would define the market to include other forms of listening, specifically terrestrial and Internet radio as well as downloadable content. We believe this market definition and the fact that XM and Sirius are unprofitable will be key to obtaining approval."

Protostar Ltd.

Protostar Ltd. has received a commitment for a $40 million round of financing from a venture capital syndicate. Vantagepoint Venture Partners of San Bruno, Calif., led the round with participation from existing Protostar investors New Enterprise Associates and Redshift Ventures.

Protostar is developing a constellation of geostationary satellites to provide service to direct-to-home (DTH) companies in Asia. The initial plan calls for a three-satellite constellation that will cover South Asia, Southeast Asia and China, an area containing more than 3 billion people. Protostar expects both to complete construction and launch its first satellite, Protostar 1, in the first quarter of 2008. Protostar 1 is being built by Space Systems/Loral.

Concurrent with the financing, Protostar appointed director Steven Dorfman as chairman of the board and announced that Duncan Davidson, managing director of Vantagepoint, has joined Protostar’s board. John Higginbotham, Protostar’s outgoing chairman, will remain on the board as an independent director.

DTV

Direcpath, a joint venture of DirecTV Group Inc. and Hicks Holdings LLC, signed a definitive agreement to acquire Apartment Mediaworks LLC, Hicks Holdings announced Sept. 11.

Mediaworks, based in Atlanta, provides pay-TV, broadband Internet and related services to multiple dwelling unit (MDU) and gated-community owners in the southeastern United States. Direcpath was formed in May to provide bundled DirecTV programming, broadband voice and data and security services to the same market. Financial terms of the deal, the largest to date for Direcpath, were not released. Completion of the transaction is expected to occur within 30 to 45 days.

"We’re excited about the Mediaworks acquisition because it enables Direcpath to rapidly build the critical mass necessary to compete in major markets across the Southeast and provide MDU owners with a compelling bundle of products that includes the full array of DirecTV’s industry-leading content and services," John Suranyi, president of DirecTV sales and service, said in a statement.

GCOM

Globecomm Systems Inc. reported revenues of $126 million in its 2006 fiscal year, up 15 percent from revenues of $109.6 million in 2005, the company announced Sept. 12. Net income slipped from $4.8 million in 2005 to $4.5 million in 2006, which closed June 30.

Globecomm credited the improvement to increase in revenues from data communication services, which jumped 48 percent to $28.1 million due to increases in telephony, VSAT multimode, and Internet and data along with an increase in life cycle support services. Revenues from ground segment systems, networks and enterprise solutions increased 8 percent to $97.9 million, driven primarily by government demand.

"The execution of Globecomm’s one-stop-shop strategy was showcased in fiscal 2006 more than ever," David Hershberg, the company’s chairman and CEO, said in a statement. "The ability to design, install, maintain and service mission critical networks was the driving force behind these contract wins, as many companies are beginning to outsource strategic core components of major networks. These types of awards provide steady revenue streams and validate the company’s ability to effectively execute mission-critical programs on a long-term basis. Globecomm enters fiscal 2007 anticipating record revenues and profits."