Karmazin Sees More Savings From XM/Sirius Combo; Heavy Debt Bill Coming Next Year

imageAfter waiting a long 18 months for former rivals Sirius (NSDQ: SIRI) and XM (NSDQ: XMSR) to come together, it’s natural for CEO Mel Karmazin to be feeling excited about the possibilities. Speaking at the 2008 Merrill Lynch Media Fall Preview Conference in Marina Del Rey, CA., Karmazin shared his excitement, boasting that the merger will produce savings of $425 million, up from the $400 million he predicted earlier in the year, Radio and Records reported. So far, Sirius XM is on track to bring in $2.4 billion in revenue this year, with $2.7 billion expected in 2009, Karmazin said. So far, the company has pro forma revenue growth of 17 percent 2008, he added. Some of the other attributes of the deal that Karmazin gushed about included:

Adding up the savings: Karmazin specifically pointed to $145 million in cost savings, including $20 million related to telco expenses and $50 million for subscriber acquisition costs, reducing senior management and outside advisers for another $50 million, and $25 million by eliminating the “innovation center” in Boca Raton, Fl.

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Subscriber forecast: By the end of the year, Sirius XM should have 19.5 million subscribers, with 2 million more the next, ending 2009 with 21.5 million.

Not all roses and smiles: While things sound rosy for Sirius XM, the two divisions are also bringing together some expensive debt payments in early 2009. Karmazin hopes to refinance the debt and assuage investors’ fears. But given the credit markets these days, that will require a good deal more than Karmazin’s soaring optimism to make it happen. Also, speaking of hopes, Karmazin also shot down any chances of a partnership with Apple (NSDQ: AAPL). Shortly after taking the reins at Sirius, Karmazin spoke with Steve Jobs four years ago about putting Sirius on the iPod. But the talks never went anywhere. Now, an Apple deal is hardly worth thinking about, as it wouldn’t produce enough revenue, Karmazin said.