XM Radio 2010 Annual Report Download - page 4

subscriber base alone by nearly 1 million subscribers
in 2010. Six times as many new customers chose to
pay for our service in 2010 than in 2009.
At the same time, we remain focused on customer
service and are continuing to study ways to improve
and enhance our customer service experience. Early
this year, we added improvements to our website to
allow customers to more easily manage their accounts
online. We expect to continue to look for ways to make
purchasing a subscription to our service, managing
subscribers’ accounts and even finding answers to
questions, quick and easy.
We continue to find new and better ways for
subscribers to access SiriusXM.
Today SiriusXM is available through every major
automaker as factory or dealer-installed equipment
in new cars. Our factory penetration across vehicles
sold in the U.S. market is up to 62% last year from 56%
in 2009. Our entrance into the pre-owned vehicle
market is also starting to bear fruit and is developing
along the lines we expected. We are also encouraged
by the return of consumer confidence in the auto
industry. In addition, sales of our radios at retail
locations nationwide and through our websites con-
tinue to be important distribution outlets for us.
While the car is often our first point of entry with a
subscriber, we are increasingly expanding the plat-
forms through which we are offering our content.
Consumers demand mobility and with SiriusXM they
have it. We have fully penetrated the smartphone
market with increasingly popular apps for the iPhone,
iPad, iPod touch, Blackberry and Android platforms.
We are also offering more and more content through
our mobile apps and are pleased that our new agree-
ments with Howard Stern and the NFL provide for
them to be available on smartphones to our
subscribers.
As consumers have shown in their demand for access
through mobile devices, our subscribers want more
control over when, where and what they are listening
to. With this in mind, we are working to bring Sir-
iusXM 2.0 into the marketplace later in 2011. We
expect that SiriusXM 2.0 will increase both content
and functionality for our subscribers. We are planning
to expand our audio content lineup by a significant
number of channels. We are also improving and
expanding functionality. Subscribers will be able to
buy music from their radio. We will also have DVR-
like capabilities that consumers have become accus-
tomed to with pause and replay, as well as record and
playback. We are very excited about this advanced
listening platform and believe our subscribers will be
as well.
We are also excited about our satellite radio services in
Canada. We own a minority stake in both SIRIUS
Canada and Canadian Satellite Radio Holdings, also
known as XM Canada. Both companies offer over 120
channels of music, news, sports, talk and entertain-
ment programming, and have over 1.7 million sub-
scribers on a combined basis. In November 2010, the
two companies announced a definitive agreement to
combine in a stock-for-stock transaction. The trans-
action is subject to regulatory review and approvals,
but we expect that this merger will pave the way for
our service to continue to grow and flourish in Canada.
Upon completion of the merger, we will have a 37.1%
economic interest in the combined Canadian entity.
Our financial strength and flexibility has never
been better.
As of December 31, 2010, we had only $198 million of
debt maturing before 2013. In the first two months of
2011, we further reduced that to $104 million. In
addition, our overall debt levels compared to our rev-
enue and adjusted EBITDA is manageable, reasonable
and, most importantly, declining. In 2010, we moved
quickly to take advantage of favorable debt markets to
extend maturities and reduce the interest rate on our
outstanding debt. As we go forward, we plan to be
opportunistic and search for ways to improve our
balance sheet for the benefit of our stockholders.
Improving Adjusted EBITDA ($ mm)
2006 2007 2008 2009 2010
$626
$463
($679)
($565)
($136)
Our capital expenditures are decreasing and this is a
positive for us. We successfully placed a new satellite
into orbit at the end of 2010. In the fourth quarter of
2011, we will complete our satellite replacement cycle.
We expect our satellite capital expenditures to decline
by nearly $90 million in 2011, and by another
$100 million in 2012 to nearly zero. We do not expect
to begin construction of another satellite before late
2016 or 2017.