XM Satellite Radio Raises $250M for 2001 Launch

XM Satellite Radio Inc. hopes to bring the same diversity and enhanced services to the radio industry that cable operators and satellite providers have introduced to television in the last two decades.

The Washington D.C.-based company will use satellites to broadcast digital radio signals from as many as 100 nationally programmed channels. XM Satellite will use proceeds from its recent $250 million investment to launch its commercial service by 2001.

Clear Channel Communications Inc., a media and outdoor advertising company which owns or is affiliated with 625 radio stations, led XM Satellite’s first institutional round of financing with a $75 million investment. The General Motors Corp. invested $50 million in the satellite radio start-up, while its subsidiary, satellite television provider DirecTV Inc., invested an additional $50 million. A syndicate of venture investors that included Columbia Capital, Telecom Ventures and Madison Dearborn Partners accounted for the balance. The deal is expected to close within the next four weeks.

XM Satellite had previously received $150 million in capital from American Mobile Satellite Radio Corp. and WorldSpace Inc. Concurrent with the financing, American Mobile acquired all of WorldSpace Inc.’s debt and equity interests in XM Satellite in exchange for 8.6 million shares of American Mobile stock.

“Our technology is very similar to other radio satellite services,” said an American Mobile spokesperson. “It’s all about content and programming and putting together the best package.”

XM Satellite’s primary competitor will be publicly traded CD Radio Inc., which holds the only other Federal Communications Commission license for satellite radio. CD Radio, which will launch in 2000, will distribute 100 channels of music and news to its motorist subscribers. Through a partnership with Sharpe Electronics, XM Radio will distribute programming to home and office users, in addition to its core base of motorists.

“As a corporation, we see telecommunications coming to the automobile,” said Catherine Dunsby, General Motors’ manager of corporate communications. “XM Satellite will be our strategic link into that market.”

XM Satellite does not have an exclusive distribution deal with General Motors automobiles.

The company’s programming partners include USA Today, CNN and One-On-One Sports. Clear Channel owns a 29% stake in Hispanic Broadcasting Corp. and will devote five Spanish language channels specifically to XM. Similar programming agreements have been reached with Christian broadcaster Salem Communications Corp. and AsiaOne.

“We have the opportunity to build a national radio broadcasting company that currently exists only in a patch-quilt faction,” said Madison Dearborn Managing Director Jim Perry.

In a related development, CD Radio last week reached a programming agreement with National Public Radio.