Sirius XM Reaffirms Annual Forecast on Customer Additions

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Sirius XM Radio Inc., the largest U.S. satellite-radio company, affirmed its full-year forecast for subscriber growth after adding 446,000 subscribers in the third quarter.

The customer gains, first announced Oct. 10, marked the best growth in that period for the company since Sirius Satellite Radio and XM Satellite Radio merged in 2008.

Sirius will “meet or exceed” its 2012 subscriber forecast of 1.8 million net additions, Chief Executive Officer Mel Karmazin said on a conference call today. A revival in auto sales is spurring demand for the company’s service. Sirius radios come pre-installed in about two-thirds of new cars, Karmazin said last month.

“We believe that this is still conservative,” Karmazin said today of the company’s subscriber projection. “The fourth quarter should be another good one.”

The stock advanced 0.4 percent to $2.81 at the close in New York. The shares have risen 54 percent this year.

Sirius also reiterated its revenue forecast of $3.4 billion, and Karmazin said he remains “very confident” that earnings before interest, taxes, depreciation and amortization will be $900 million.

Net income for the third quarter fell to $74.5 million, or 1 cent a share, from $104.2 million, or 2 cents a share, a year earlier, the New York-based company said today in a statement. Sirius took a charge of $107.1 million after extinguishing $868 million of debt in the period. Revenue rose 14 percent to $867.4 million, just ahead of the $866.1 million estimated by analysts.

Liberty Control

Average revenue per user of $12.14 rose 4.1 percent from a year earlier. Monthly churn increased to 2 percent from 1.9 percent a year ago, although September churn was 1.82 percent, Karmazin said during today’s earnings conference call.

Billionaire John Malone’s Liberty Media Corp. is waiting for the Federal Communications Commission to sign off on its bid to take control of Sirius. Liberty owns almost 50 percent of the company and has said it plans to go above the majority threshold once the FCC grants approval. Amid the transition, Karmazin said on Oct. 23 that he would step down as CEO in February.

Liberty needs FCC approval to complete a takeover because Sirius holds airwave licenses issued by the agency. Malone said in July he planned to eventually spin off the stake to Liberty shareholders, executing a so-called Reverse Morris Trust.

Investors may remain bullish on Sirius because they have faith Malone will return capital to shareholders after he takes control, Vijay Jayant, an analyst at ISI Group in New York, said in a note to clients. Jayant recommends buying the shares.

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