XM Satellite Radio is teaming with AOL on a co-branded online radio service to debut this summer as part of AOL.com’s transformation into a next-generation Web portal, officials announced Mon. The plan to co-promote programming to XM’s 3.8 million subscribers and AOL’s 22 million U.S. members is seen by analysts mainly as a marketing deal. But in the long run it could boost XM’s Internet presence and pave the way for an XM foray into the cellphone market, they said. “We do not expect wireless audio services to have the same quality and/or demand as audio broadcast from XM’s satellites -- nonetheless, XM is now positioned to participate in the evolution of wireless offerings,” Banc of America Securities analysts said. Users can anticipate: (1) A free Web radio service featuring 20 XM stations plus 130 AOL Radio stations. (2) An improved version of AOL’s premium radio service with over 70 XM stations and 130- plus AOL Radio original and 3rd party stations. XM also will integrate some AOL original programs such as Radio KOL, AOL Music Sessions and AOL Music Live programming into its satellite radio service. Officials said the companies will collaborate on new online and satellite programs and services. AOL Chmn. Jon Miller called the deal “a giant step in digital media.” XM announced Mon. a long-term agreement with Air America Radio. Beginning in May, XM’s America Left channel will be renamed Air America Radio. The channel will air an expanded line-up of Air America programs, including the new Springer on the Radio hosted by Jerry Springer, the upcoming Rachel Maddow Show and others. XM’s Air America Radio channel will continue to run shows now on America Left, including The Ed Shultz Show and The Alan Colmes Show. Bear Stearns analysts said they believe the radio market remains primarily in vehicles and that online radio likely will remain a niche service. But this joint service offers XM the advantages of generating a buzz across AOL’s base and allowing the broadcaster to compete directly against online radio services often cited as a threat. Bear Stearns reiterated its $45 2005 year-end price target and its “outperform” rating on XM’s stock.
An auction of 306 fixed wireless licenses in Canada brought in $45.4 million, Industry Canada announced. Canada sold licenses in the 2.3 and 3.5 GHz bands to be used for wireless broadband across the nation. Bell Canada was the largest bidder by far, bidding $45.4 million during the 17 day auction for 55 licenses. Telus Mobility came in 2nd, bidding $7 million for 130 licences. A numbered company bid $6 million for 25 licences. Rogers Wireless bid $3.8 million for 40 licences. Industry Canada said 8 other firms also bought licenses.
The U.S. telecom industry turned the corner in 2004, as spending grew 7.9% to $784.5 billion, according to TIA’s 2005 Telecom Market Review & Forecast. It said that was “a significant improvement” from gains of 3.6% in 2003 and 1.9% in 2002. The growth was driven by an increase in equipment and software revenue and double-digit increases in wireless services, service in support of equipment and specialized services that offset decreases in wireline services revenue. “2004 was a turnaround for the telecommunications industry,” TIA Pres. Matthew Flanigan told reporters Tues. He said the U.S. telecom industry was expected to continue to grow at a projected 9.5% compound annual growth rate (CAGR) the next 3 years, reaching $1.1 trillion by 2008.
Emmis Communications revenue increased 11% to $169 million and operating income grew 24% to $48.5 million in the 3rd quarter ended Nov. 30. Radio revenue increased 3% due to raising rates while optimizing the amount of inventory the company sells, Emmis said. TV revenue increased 24% largely due to an increase in political ads. International radio revenue and operating income were $4 million and $3.8 million, respectively.
Cable companies are planning to increase rates in 2005 about the same percentage as last year, but many hikes will exceed the annual 3.2% inflation rate, according to our spot check of the largest MSOs. Although companies said they're offering more services and higher quality along with price hikes, consumer groups are disgruntled with the pace of increases and packaging of high-end service.
DSL hit the 85.3 million global subscriber mark, growing more than 39% in 2004, according to industry analyst Point Topic. It said DSL added 24 million subscribers the first 9 months of this year, with more than 500,000 users signing up globally each week. In N. America, DSL gained almost 3.5 million subscribers in the 3rd quarter, to 15.1 million total at the end of Sept., the study said. It said the U.S. added 3.2 million, reaching 12.6 million DSL-enabled phone lines and raising DSL’s broadband market share 3.8%. In Canada, DSL has 48% market share after adding 120,000 subscribers in the quarter, it said. The study said Latin America was now emerging as a DSL market, adding 1.2 million subscribers the first 9 months of 2004, more than 72% growth. It said Brazil was leading the way, gaining over 620,000 DSL subscribers, and Mexico, Argentina and Peru had more than 50% growth this year. DSL Forum Pres. Tom Starr said he expected “DSL subscribers will have passed the 100 million subscriber milestone [by Feb.]… That will mean 10% of the world’s phone lines are delivering [high-speed Internet] to people in every region.”
Integral Systems reported its highest quarterly revenue in company history on Dec. 6. Financial results for the satellite software maker’s 4th quarter of 2004 were $25.1 million, up from $23.7 million in the 4th quarter of 2003. Operating income decreased slightly to $3.6 million for the current quarter, versus $3.8 in the same quarter in 2003. Net income was down to $2.4 million from $2.5 million last year.
Russian Mobile TeleSystems said its 3rd-quarter revenue grew 50% to $1.1 billion from a year earlier, as its net income jumped 117% to $338 million. It said the results were driven by “significant expansion” of its subscriber base, as it added 3.8 million new customers in the quarter, to a total of 28.85 million.
Qwest agreed to pay $250 million to settle securities fraud charges, the Securities & Exchange Commission said Thurs. The company settled without admitting or denying the allegations. The SEC has been investigating whether Qwest inflated revenue by incorrectly booking network capacity deals to improve the company’s image with Wall St. in 1999-2002. The agency charged Qwest “fraudulently recognized over $3.8 billion in revenue and excluded $231 million in expense as part of a multi-faceted fraudulent scheme to meet optimistic and unsupportable revenue and earnings projections.” The SEC said the payment would be distributed to investors. Qwest also will be required to permanently maintain a chief compliance officer reporting to a committee of outside directors and responsible for making sure the company “conducts its business in compliance with the federal securities laws.” Randall Fons, dir. of the SEC’s central regional office in Denver, said “Qwest senior management created a corrupt corporate culture in which meeting Wall Street expectations was paramount.” Qwest Chmn. Richard Notebaert said the settlement concludes a 2-1/2 year investigation of the company and “will now allow us to focus even more of our effort to provide exceptional value and service to customers.” Company management turned over in 2002.
AT&T Wireless announced late Mon. it has agreed to sell its share of Rogers Wireless to Rogers Communications for $1.38 billion. AWE had been hoping to sell its stake as part of its merger with Cingular. Earlier, AWE turned down a $1.15 billion offer from Rogers, which is Canada’s 2nd largest wireless carrier with 3.8 million customers. “For several years, we've been focused on identifying and monetizing non-strategic assets, at the right value, to fund growth in our core wireless business,” said John Zeglis, AT&T Wireless chmn. “During this period, we have sold minority investments in Taiwan, Indonesia, the Czech Republic, and other countries. The sale of our interest in Rogers is simply another step in our execution of this long-term plan.” AT&T Corp. bought its share from British Telecom in 1999. AT&T Wireless took over that interest when it was spun off 2 years later.