Feb. 23 (Bloomberg) -- Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. may forecast slowing subscriber growth when they report earnings next week, a slump that could help build support for their $4.62 billion merger.

XM, the biggest satellite radio service, may predict 21 percent growth to 9.27 million users in 2007, down from a 29 percent gain last year, according to the average of six analysts' estimates in a Bloomberg survey. Sirius is forecast for a 40 percent increase to 8.45 million, after 82 percent growth in 2006.

The reports may shore up the case for a deal as Sirius Chief Executive Officer Mel Karmazin and XM Chairman Gary Parsons seek to convince regulators that their companies compete with products including Apple Inc.'s iPod, Internet-based music, AM and FM radio, and new technology such as HD radio.

``A slowdown could be seen to demonstrate their lack of pricing power because of alternative ways of getting audio entertainment and information,'' said Blair Levin, a Washington- based media policy analyst for Stifel Nicolaus & Co., who doesn't own shares in either. His colleague at Stifel, Kit Spring, rates both stocks ``buy.''

Mark Wienkes, an analyst at Goldman, Sachs & Co. in New York, lowered his subscriber estimates on Feb. 11 because of ``softening retail demand for both XM and Sirius.''

The companies lack a big driver for sales this year such as shock jock Howard Stern's move to Sirius from free radio, which bolstered interest for two years.

Merger Deal

Sirius announced an agreement to buy XM Feb. 19. Under the terms, each XM share will be exchanged for 4.6 shares of Sirius, valued at $17.20 based on today's closing prices.

XM, based in Washington, reports results Feb. 26 before U.S. markets open, and Sirius the next day. XM spokesman Chance Patterson couldn't say if the company would issue a forecast. Paul Blalock, head of investor relations at New York-based Sirius, said it's likely the company will give an annual forecast.

Shares of both companies declined 47 percent last year. XM fell 24 cents to $15.10 at 4 p.m. New York time in Nasdaq Stock Market trading. Sirius declined 6 cents to $3.74.

Analysts project XM's fourth-quarter loss narrowed to 66 cents a share, the average of 19 estimates compiled by Bloomberg, on sales of $248.6 million. The company had a loss of $1.22 a share on sales of $177.1 million a year earlier.

Sirius may report a loss of 19 cents, on sales of $174.7 million, according to the survey. The company reported a loss of 23 cents on sales of $80 million a year ago.

Merger Approvals

To win approval for their merger, Karmazin and Parsons must convince antitrust regulators at the U.S. Justice Department that the company competes in a broader market including traditional AM-FM radio. The U.S. Federal Communications Commission, whose chairman, Kevin Martin, has called the hurdle for the agency's approval ``high,'' will seek assurances that consumers won't be hurt by higher prices or fewer choices.

``XM and Sirius are competing for consumers' attention and entertainment dollars from multiple products and services in the highly competitive and rapidly evolving audio entertainment marketplace,'' Parsons said on a Feb. 20 conference call.

Together the two companies have lost $7 billion over the past eight years buying and lofting satellites, attracting customers and paying for talent that includes Oprah Winfrey on XM.

The companies have avoided making the argument that they can't survive without merging. While slowing growth may help to convince regulators to approve the deal, shareholders want to see that growth can continue amid the potential distractions that will come from government reviews of the deal.

XM predicted a year ago it would reach 9 million subscribers in 2006 and missed that by almost 1.5 million. Sirius in August projected 6.3 million subscribers by year-end and came up almost 300,000 short.

``I don't want growth to fall off the chart because they are distracted by the merger,'' said April Horace, an analyst at Greenwood Village, Colorado-based Janco Partners Inc. who rates both stocks as ``market perform'' and doesn't own them.

To contact the reporters on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net; Christopher Stern in Washington at cstern3@bloomberg.net

Last Updated: February 23, 2007 16:21 EST