XM Shrugs Off Slowdown

XM says subscriber acquisition costs grew to $65 per new user from $59 last year, and the costs per gross add also grew to $103 from $93 in the first quarter of 2006. Investors would prefer to see costs come down, especially as subscriber growth slows.

This is the second consecutive subscriber growth disappointment for XM and it adds to the concerns about the scale of pay radio's mass market appeal.

The news comes as some analysts see the proposed merger between XM and sole rival Sirius (SIRI Quote - Cramer on SIRI - Stock Picks) failing to pass regulatory muster.

On Tuesday, Bank of America analyst Jon Jacoby cut the projected value of the two satellite broadcasters due to weaker subscriber growth and customer conversion rates. He also cut the chances of a successful merger approval to somewhere between 25% and 40%. His comments sent shares in Sirius down sharply.

On Thursday, XM rose 34 cents to $11.35 and Sirius rose a nickel to $2.88.

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