XM Satellite Radio (XMSR) delivered more growth Wednesday, but investors are starting to worry that subscribers aren't sticking around.

Washington, D.C.-based

XM reported solid first-quarter numbers Wednesday, posting narrower-than-expected losses and in-line subscriber growth. But XM and sole rival


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both saw their shares drop, as some on Wall Street turned their attention to so-called churn as well as the steep hardware discounts the companies are dangling.

XM dropped 22 cents to $27.38 and Sirius lost 32 cents to $4.55.

Wall Street fans of the satellite radio tandem used to be content with predictable, hearty subscriber growth. But that was before the companies counted market capitalization values in the billions of dollars. Now that the two have gained stature and effectively matured into the broadcasting big leagues, their pure growth story has gotten more complicated.

Investors are now questioning things like the strength of XM's auto partner, the faltering Detroit giant

General Motors

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, and the possible effect of its pending car production slowdown. Also drawing questions are the rising costs of radio subsidies required to attract new customers and the rate at which users drop their subscriptions.

XM, for example, saw defections as measured by its monthly churn rate hit 2.7%; some analysts were looking for 2.4%. Pessimists could see that as the beginning of a costly trend if money spent on subscriber incentives keeps walking out the door. XM did not disclose its total churn number but attributes any increase in defections to a recent subscriber rate increase to $13 from $10.

Also, a bullish report on Sirius from Merrill Lynch Wednesday suggested that competition between the two broadcasters may heat up as Sirius looks to steal market share by offering cheaper, new-generation radios.

Analysts worry that if price promotions get aggressive and the companies start touting the advances of the new radios, the push could spark a vicious satellite radio battle.

But some observers question the likelihood of this sort of head-to-head competition.

"Here's my take," said one money manager with no positions. "Do you know who has a better CD player, GM or


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But whether these issues prove to be meaningful in the long run, the impact seems to be immediate on these stocks. Investors flocked to Sirius when it signed Howard Stern and hired Mel Karmazin, both developments seen as catalysts to both subscriber gains and advertising revenue opportunities.

But Stern doesn't start until next year, and in the meantime, nagging issues keep cropping up.

"It's hard to value these companies," said the money manager. "I think the extreme swings stay with us for another year."