XM sees radio sales defying auto slump

By Franklin Paul

NEW YORK (Reuters) - XM Satellite Radio Holdings Inc expects car radio sales to remain solid even if the most dire projections of slowing U.S. auto sales come true, Chairman Gary Parsons said on Monday.

The largest U.S. satellite radio service provider, which is waiting for regulators to approve its proposed merger with rival Sirius Satellite Radio Inc, relies almost entirely on car buyers for customer growth. XM lost a net 17,000 retail customers, who buy radios from Best Buy Co Inc and other outlets, in the third quarter.

Parsons expects retail subscriber growth to resume in the fourth quarter due to the typically busy holiday shopping season, but he said retail sales may decline in the first or second quarter of 2008.

"From our standpoint, we see a pretty solid, projectable growth trajectory coming from the new car marketplace," Parsons told the Reuters Media Summit in New York.

He said 70 percent of XM's new subscribers are people who buy its satellite radio service for their cars. But after taking into account customer cancellations, the company is reliant on autos for virtually all its net subscriber growth.

That might seem like a tough market to place bets on. At the Reuters Autos Summit in Detroit last week, three top investors painted a grim picture for the auto sector in 2008, with one executive predicting a possible slump in U.S. sales to levels not seen in 15 years.

Those gray clouds do not directly affect XM, Parsons said, noting that by next year, 40 percent of new vehicles will carry satellite radios, up from 20 percent last year. He expects that portion to rise to 50 percent in 2009, offsetting any drop in overall sales of new cars.

Car makers like satellite radio because it makes their vehicles more appealing to consumers. XM has previously said it expects about 3 million cars would be installed with its radios in 2007, including 1 million in the fourth quarter alone.  Continued...