XM Satellite Radio Holdings Inc. on Wednesday announced a seven-year extension to an agreement with Toyota Motor Sales U.S.A. Inc. for factory installation of XM satellite radios in Toyota and Lexus vehicles.
The agreement extends an existing deal from 2010 to 2017, and follows a similar extension for XM with Honda Motor Co. announced a day earlier. Washington-based XM said Tuesday that Honda would install the radios in both Honda and Acura vehicles through 2016.
Both XM and rival Sirius Satellite Radio Inc. have been banking on growth from auto sales as the retail side of their business has softened, raising concerns on Wall Street. XM did not meet a target for subscriber growth last year, and Sirius met a lowered target.
Although investors have speculated that the two leaders of this young industry might merge, Kevin Martin, chairman of the Federal Communications Commission, mentioned on Jan. 17 that licences granted to the satellite radio companies wouldn't permit them to combine. Some analysts had hoped the FCC would change the rule or make an exception.
Martin's comments sent shares of XM and Sirius spiraling downward. On Wednesday, shares of XM rose 31 cents, or 2.1 per cent, to US$14.21 in afternoon trading on the Nasdaq market. They have been trading in a 52-week range of $9.63 and $27.01.
Car buyers generally get a free three-month trial subscription to XM's service, which regularly costs about $13 per month. XM has said about 52 per cent of the trial subscriptions are converted to paying agreements.
Toyota's annual factory production of XM-equipped vehicles is expected to exceed one million by 2010. Toyota passed DaimlerChrysler AG last year to become the No. 3 car maker in the U.S. by sales and is expected to surpass Ford Motor Co. for the No. 2 slot this year. XM already partners with the top U.S. auto maker, General Motors Corp.
``XM provides exceptional entertainment programming and innovative data services like real-time traffic,'' Dave Danzer, Toyota's vice president of strategy and product planning, said in a statement. ``Our agreement with XM will help us continue to provide these services and develop additional in-vehicle applications for future products.''