XM Satellite Radio (XMSR) - SIRIUS Satellite Radio (SIRI)

July 18, 2008 (10:10a) - Status Report

As widely reported and analyzed since yesterday (7/17), Commissioner Adelstein has issued a proposal to approve the companies' license transfer application contingent of significant concessions involving a six-year price cap on subscriptions, 25% channel capacity divestiture, direct enforcement and interoperable devices carrying traditional AM-FM reception.

Not surprisingly, the conditions proposed by Mr. Adelstein are far beyond what the companies have offered or expressed interest in accepting in order to obtain the FCC consent. This is essentially what this publication has anticipated over the last few weeks with respect to the Commission and the companies working towards a final disposition in this case. Mr. Adelstein's proposal is perceived as both intentionally stringent and subject to revision via negotiation. In other words, this very likely represents the extreme level of conditions from which the companies must now work to negotiate down to an acceptable level.

Of particular interest in this development is that Commissioner Tate may now be the primary focus of the companies, as they will certainly attempt to convince Ms. Tate to vote in favor of the license transfer with fewer conditions. This would be the logical approach now that Commissioner Adelstein has established a "high bar" for Commissioner Tate to consider. It remains extremely difficult to assess Ms. Tate's current position on Mr. Adelstein's proposal or the transaction overall, but it can be generally assumed that this development will motivate her to issue her own proposal shortly.

To repeat the previous analysis of this situation:

"(T)he FCC vote and final decision will occur at some point in the near future and its outcome will very likely fall right in between where the companies and merger opponents hope. In other words, the voting Commissioners are expected to approve the license transfer, but with conditions that will raise concerns for both sides. At the end of the day, the companies will very likely be forced to accept some spectrum and interoperable device conditions associated they wanted to avoid and will alter the original rationale for the merger."

Commissioner Adelstein's proposals must be seen as the catalyst for intensified negotiations and intervention from all parties. It can be assumed that the companies are now in the process of evaluating the proposals and determining the threshold for acceptable conditions. Ultimately, there is a middle ground here, but it will clearly be up to the companies to work towards that middle ground over the next several days, or perhaps weeks.

The perception remains firmly intact that a relatively high chance (+25%) exists that the companies will not agree to the conditions required for FCC consent. However, at this stage the companies now have a solid threshold from which to negotiate and can be expected to work diligently to do so from this point forward.

Allied Waste Industries (AW) - Republic Services, Inc. (RSG)

July 18, 2008 (9:10a) - RSG Rejects Waste Management Offer

As expected, RSG has reacted Waste Management's unsolicited offer of $34 per RSG share.

A letter from RSG to Waste Management states the following:

"The Board is unanimously of the view that the Waste Management proposal seriously undervalues Republic. Republic’s common stock was trading close to $34.00 per share as recently as last month, before the Allied merger was announced. The Board believes that the merger between Republic and Allied will create significant value generating opportunities, including significant cost saving synergies, which will result in additional value for Republic stockholders. Financial analyses presented to our directors and Allied’s directors, and which will be included in the joint proxy statement to be mailed to our stockholders, support a valuation substantially above $34.00 per share. In your press commentary, you referred to the Waste Management proposal as 'opportunistic.' We believe that your proposal is opportunistic for you and that it will deny Republic stockholders the opportunity provided by the merger between Republic and Allied."

As of this entry, Waste Management has not responded to RSG's decision. There is no expectation that Waste Management will abandon its efforts to draw RSG's interest and/or disrupt the AW-RSG transaction, which is generally perceived as the primary intent here.

Although an increased offer from Waste Management is likely in the near future, this probably will not happen immediately as the company will probably engage in a publicity campaign directed at RSG shareholders before improving its offer.

Again, the current perception is the Waste Management is just as, if not more, motivated to affect the current AW-RSG transaction as it is interested in attempting to acquire RSG. Thus, this situation is only expected to become more volatile over the coming weeks and months.

FTD Group, Inc. (FTD) - United Online, Inc.