XM Satellite Radio invests $25 mn in WorldSpace

MUMBAI: American satellite radio firm XM Satellite Radio has announced that it has made a strategic investment of $25 million in the common stock of WorldSpace.

Worldspace provides satellite radio in Asia, Europe, the Middle East and Africa.

In connection with the investment, XM will cooperate with WorldSpace to develop satellite radio products, technology and distribution and supplier networks. In addition, XM will have warrants to acquire $37.5 million in additional WorldSpace stock and an option to invest along with WorldSpace and other partners in various countries around the world.

XM Satellite Radio chairman Gary Parsons says, "We look forward to becoming a strategic investor in WorldSpace's worldwide satellite radio system and advancing satellite radio technology and reach through our cooperative efforts".

This deal; comes at a time when media research firm Kagan Research has forecast that consumer interest in satellite radio in America is reaching for the sky. In a new report, the company says that low churn, new programming and exclusive vehicle agreements will boost subscriptions for competitors XM and Sirius to 46.8 million, with revenues of $7.6 billion, by 2014.

In the short term, Kagan however has predicted that the two players will face increased competitive pressure from emerging technologies. As wireless technology expands and access to free music Web sites and on-demand services increases, satellite radio will lose potential customers to alternative sources in the battle for consumers' attention. The researcher also believes that the US satellite radio industry will generate $27.9 million in ad revenue this year. This figure is expected to reach $854.4 million by 2014.

Kagan also studied the companies' business models and how soon expensive content agreements will break even with cash flow. It estimates that XM Satellite Radio will achieve positive cash flow by the third quarter of 2007.

Through its subscription-based service, WorldSpace broadcasts news, music brand name content and educational programming to a global service area and targets its programming to consumers, governments, and other organizations. The company utilises its two geo-stationary satellites Afristar and Asiastar, and its ownership of spectrum licenses to deliver more than 100 digital quality audio channels per satellite as well as multimedia content directly to WorldSpace Satellite Radio receivers.

XM claims to be America's number one satellite radio service with more than 4.4 million subscribers. Broadcasting live daily from studios in Washington, DC, New York City and Nashville at the Country Music Hall of Fame, XM's 2005 lineup includes more than 150 digital channels of choice from coast to coast. They are commercial-free music channels, premier sports, talk, comedy, children's and entertainment programming; and advanced traffic and weather information.

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