Based on SEC filings, company documents, and Wall St. analysis, this is what the two companies would look like as one entity at the end of 2006:

The subscriber base of the two companies together would be roughly 7.8 million from XM. and 6.9 million from Sirius. There is probably almost no overlap between the customer bases, so the new company would probably start with about 14.5 million subscribers. If you look later in the article you probably won’t get any solid “guestimates” out of the subscriber bases for the end of 2007 until after the end of the holidays.

Based on Q3 numbers and Wall St. projections, Sirius should have about $200 million in revenue in Q4 (Q3 was $167 million) to add to XM’s $290 million (Q3 was $240 million). So, the revenue base going into 2007 would be about $500 million.

Sirius has $323 million in costs in Q3 and XM had $301 million. However, some of those costs could be consolidated from the potential total of $625 million. Customer billing at Sirius runs about $15 million a quarter. At XM, the number is $27 million. The combined companies can probably take out $10 million a quarter. Sales, marketing, and customer acquisition at Sirius is almost $130 million. At XM, the number is about $90 million. Total costs for marketing and acquisition could probably be cut $75 million.

Sirius has general and administrative plus engineering costs of $56 million a quarter. XM has $30 million in costs on these items. The total number based on lay-offs and consolidation could probably be dripped to $65 million, a savings of about $30 million.

Before programming costs, overall expense could probably be driven down by $115 million, which would leave the combined entity with a nominal loss. But, programming costs are the largest expense at both companies. Sirius spent $80 million in the last quarter and XM spent almost $40 million. Sirius has 133 channels. XM has 170. Many of he programming contracts are long-term and extend out several years. Because of overlaps on current station deals, a combined company could drive down programming costs even after the added programming expenses in 2007. Any savings in this area in the combined company would make the entity profitable or at least close to profitable on a GAAP basis. It should be noted that depreciation and amortization at Sirius is about $28 million. At XM it is running about $43 million a quarter.

The balance sheets represent a huge problem. Sirius has almost $1.1 billion in long-term debt. At XM that number is over $1.3 billion. Sirius has cash and securities of $350 million. XM has $285 million. So, combined debt would be $2.4 billion against about $600 million in cash. Payables and accrued expenses of the combined company would be over $500 million. To have a significant value to shareholders, the combined business would have to pay down at least $200 million in debt per year. None of the debt is due until 2009, but the majority is due by 2013. The combined company would be able to partially use cash on hand and could go to the capital markets with a new debt issue with the sole purpose of refinancing that amount due in 2009 (and with convertible debt if they were smart and/or able).

If revenue growth can continue at 10% quarter over previous quarter and expense growth can be held to 5%.

Once again, this is more of a viewpoint of what a combined company would resemble rather than a forecast of a Sirius-XM tie-up.

XM, Sirius Agree to Merge Continued…

The companies will hold a joint conference call and webcast on Tuesday, February 20, 2007 at 8:30 AM ET to discuss this announcement. The conference call can be monitored by dialing 800-573-4840 within the U.S. and 617-224-4326 for all other locations, passcode 29490052. The webcast can be accessed at http://www.sirius.com and http://www.xmradio.com as well as on their satellite radio services by tuning to SIRIUS channel 122 and XM channel 200. The webcast will be archived at http://www.sirius.com and http://www.xmradio.com. (Source: Ragingbull)