The following report is courtesy of Grant Robertson from Theglobeandmail.com:

The proposed merger of satellite radio giants XM and Sirius in the United States will almost certainly force Canada's two fledgling companies into an eventual partnership — but don't expect them to be allies any time soon.

As the U.S. deal wends its way through regulatory investigations that could last until early 2008, Sirius Canada Inc. and XM Canada are promising to spend the next year attacking each other's market share with renewed vigour — and there is much at stake.

In the United States, the $4.9-billion (U.S.) consolidation announced this week by New York-based Sirius Satellite Radio Inc. and Washington-based XM Satellite Radio Holdings Inc. is being called a “merger of equals,” with each company taking half of the combined operation.

But neither Canadian company sees their own potential consolidation as a fifty-fifty split. XM Canada (which is publicly traded as Canadian Satellite Radio Holdings Inc.) and Sirius Canada (majority owned by the CBC and Standard Broadcasting Corp. Ltd.) are each expected to argue for a bigger piece of the pie when the time comes.

Until then, both companies will be aggressively trying to add new customers to bolster their market share and negotiating clout in any eventual merger.

Executives at both companies have suggested competition will be just as fierce as it has been since the Canadian operations were launched in late 2005.

Speaking at an investor conference in Toronto Thursday, XM Canada chief operating officer Stephen Tapp said his company will continue battling for customers, regardless of the “uncertainty” caused by the looming merger.

“We are focused on selling XM because XM is still going to be on the shelf,” Mr. Tapp said.

Sirius Canada chief executive officer Mark Redmond has made similar statements. “The only thing that we need to focus on is continuing to get market leadership and dominance,” Mr. Redmond said in an interview this week.

Sirius Canada argues it should be worth more than XM Canada because it holds the lion's share of paying subscribers. With roughly 300,000 paying customers, its roster is about three times what XM Canada has amassed.

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