Media/Entertainment
XM Drops Spectrum Buy
Scott Moritz
05/22/06 - 04:58 PM EDT
Cost-battered XM's (XMSR - Cramer's Take - Stockpickr) expansion strategy took a hit late Monday when the company ditched a radio spectrum deal.
The Washington, D.C., pay radio shop says it has ended a $196 million plan to acquire closely held WCS Wireless. XM blames regulatory delays for the termination of the deal.
"With the inability to obtain the necessary government approval for this transaction in a timely manner, WCS Wireless needed to pursue alternatives for its spectrum with greater certainty of regulatory approval," Chairman Gary Parsons said in a press release.
WCS Wireless holds wireless spectrum licenses regions of the U.S. that XM was going to use to enhance its own land-based network and deliver advanced mobile services, like video. XM had agreed in July to issue 5.5 million shares to buy WCS.
Cash-hungry XM has had some difficulties this year, most recently a charge by a big music industry group of copyright infringement. XM has vowed to defend itself with enormous vigor.
The latest legal troubles add to an already turbulent year for XM. Unlike rival Sirius (SIRI - Cramer's Take - Stockpickr), XM has been dogged by a series of negative events including a shareholder lawsuit, a big insider stock sale and the dramatic departure of a board member who had been critical of the company's unrelenting cash burn. XM shares are down 35% this year.
XM shares sank 46 cents to $16.13 in regular trading Monday, setting a 52-week intraday low at $16.02. They jumped a penny in the after-hours session.