General Motors Company (NYSE:GM) recently announced a step forward in the world of the connected car. The company plans to roll out 4G enabled cars in 2014 teaming up with AT&T Inc. (NYSE:T) as its service provider. Analysts at Piper Jaffray estimate GM represents ~25% of Sirius XM Radio Inc (NASDAQ:SIRI) new subs with an 18% market share US.
The development of the connected car could be a driver of growth for Media and Telecom as the average American spends almost 17hrs per week in their car, eclipsing only human essentials like sleeping (60hrs), working (43hrs) and watching TV (35hrs). Pipper expects SIRI to weather this threat by broadening its product offering and competing on content availability. We detail the main points about General Motors Company (NYSE:GM)’s new announcement and how Piper believes it will impact Sirius XM Radio Inc (NASDAQ:SIRI).
• General Motors and AT&T Inc. (NYSE:T) to equip cars with 4G.
General Motors Company (NYSE:GM) announced a push to differentiate their connected car offering by providing 4G availability. While most automakers are largely offering connectivity via smart phone integration, GM plans to install a 4G antenna with an option to select a subscription package and connect to the internet across all GM brands. GM plans to build on its expertise with telematics service OnStar to integrate entertainment, information, safety features and diagnostics.
• Connected car offers limited threats to Sirius XM Radio Inc (NASDAQ:SIRI).
Satellite radio would appear to be most at risk to new offerings in the car as its premium subscription offering could be disintermediated by lower cost services. While we do expect music offerings to get more competitive over time, the analysts do think that Sirius XM Radio Inc (NASDAQ:SIRI)’s exclusive non-music deals, strong relationship with OEMs, friction-less billing relationship, and new pushes into smart phones and in-car telematics should help offset these risks to growth over time. However, they see only minor impact on subscriber growth and minimal impact on pricing with those losses being offset by new telematics offerings. Piper doesn’t expect connected car penetration rate to be meaningful until 2018
