Sirius XM

Sirius XM Radio Inc (NASDAQ:SIRI) third quarterly results were largely expected as the company’s ARPU (Average revenue per user) improved due to increase in the prices.  A report from Barclays, expect Sirius XM Radio Inc (NASDAQ:SIRI) to come up with a buyback program in 2013, “once Liberty’s FCC application for de jure control has been approved and LMCA has moved to a majority stake in SIRI”.

Sirius XM Radio Inc (NASDAQ:SIRI) increased the prices in January and since then, has been discounting the benefits from the same. The report expects the benefits from the price rise to fade in 2013 as “as the large bulk of subs will already be on the new plan”.  Of the total $12.14 ARPU in the third quarter, report believes the price rise has contributed $0.19, “slightly offset by the drag from family plans”. For the fourth quarter, report expect the price hike to contribute $0.23 sequentially to ARPU and “drag from family plans to increase to $0.15 as more customers would likely switch to a cheaper plan when rolling over their annual contracts”.

The research report believes Copyright Royalty Board (CRB) may increase the prices modestly, a similar step-wise rate increase structure, as in 2007. The loyalty rate structure started at 6 percent of gross revenue in 2007 and gradually increased to 8 percent by 2012. SIRI’s royalty payment to SoundExchange, a non-profit organization that collects and distributes royalties to copyright owners, is expected to be around $330 million in 2013 and may touch $570 million by 2017, assuming “a starting point of 9% of gross revenue in 2013 with a 0.5% annual increment”. The CRB is now in the final stage of deciding a new rate structure for 2013 through 2017. The main participants of this proceeding, Sirius XM Radio Inc (NASDAQ:SIRI) and SoundExchange, have submitted their proposed rate changes, which are still quite far apart.

Barclay’s expect Sirius XM Radio Inc (NASDAQ:SIRI)’s operating expenses to jump to $659 million in the fourth quarter on account of continued investment in customer acquisition and retention. The increase in OPEX is mainly driven by higher customer service and billing expense of $77million as the company invests to improve the call center experience, and develop online self help tools.

For 2012, the report forecasts revenues of $3.42 billion and EBITDA of $913 million, which are above the guidance from the company. For 2013, the report lowers its revenues and EBITDA outlook on “somewhat more conservative ARPU expectations, as the impact of the price increase is beginning to fade”.

Overall, the report is “positive on the fundamental Sirius XM Radio Inc (NASDAQ:SIRI) business, we believe the shares are fully valued at these levels, and maintain our Equal Weight rating”.