The only thing riskier than being an enemy of Liberty Media’s John Malone is to be his friend — as Sirius XM’s Mel Karmazin is discovering. They developed a corporate bromance in 2009 when Malone rescued the satellite radio company as it struggled to keep up with its debt payments: Liberty invested $530M, and received preferred stock convertible into 40% of Sirius’ voting shares. But Sirius has just disclosed that Malone quietly asked the FCC this month to give his company — in Liberty’s words — “de facto control of Sirius XM Radio Inc.’s earth station licenses.” It seems that Malone, one of the media industry’s toughest negotiators, believes Liberty is entitled to take charge with the March 6 expiration of some conditions in the 2009 agreement that limited its ability to buy additional Sirius shares. Liberty’s filing set off alarm bells in Karmazin’s shop. Late Friday, Sirius asked the FCC to dismiss or deny Liberty’s petition. The satellite company says that Liberty’s application has technical problems that should disqualify it — and it’s about corporate governance, not a matter for the FCC. But just in case the FCC wants to take on the matter, Sirius says that Liberty is wrong about the investment agreement. It only entitles Malone to pick five of the 13 board members, not a majority. And although conditions barring Liberty from buying additional shares have expired, it hasn’t bought them yet. “Liberty Media now can seek to control the management, board of directors or policies of Sirius XM, but it has not done so, nor has it proposed to do so,” Sirius says. “Simply stated, Liberty Media currently does not control Sirius XM.” At least not yet.
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