NEW YORK (AP) - XM Satellite Radio Holdings Inc. reported a wider first-quarter loss Thursday and disclosed that federal regulators were probing its marketing practices. Its shares fell 3 percent in midday trading. XM, the larger of the nation's two satellite radio providers, lost $151.4 million, or 60 cents per share, in the three months ended March 31 versus a loss of $122.1 million, or 58 cents per share, in the comparable period a year ago.
XM also disclosed in a regulatory filing Thursday that the Federal Communications Commission found that one of its products, the Delphi XM SKYFi2, wasn't in compliance with transmitter emission standards.
It also said the Federal Trade Commission was investigating whether its marketing practices were in line with rules governing telemarketing, the Truth in Lending Act and other statutes. The company said in the filing that it received both inquiries on Tuesday and was cooperating fully with them.
On a conference call with analysts, XM's chairman Gary Parsons said the FCC notice on the radio unit was unlikely to result in a product recall, and noted that it was not a health or safety issue.
Also speaking on the call, Hugh Panero, the CEO of XM, expressed frustration that the notices came so soon before the company's earnings announcement. "I would like to avoid having these kinds of letters show up two days before our earnings call, but that's the journey we're on right now," Panero said. He said he believed the company was already complying with marketing rules.
The disclosures triggered some unrest among investors, who were already unsettled by the company's surprise announcement last quarter that one of its directors had quit over disagreements on the company's direction. The director, Pierce J. Roberts Jr., had pressed for tighter cost controls.
XM's shares fell 67 cents, or 3 percent, to $21.34 in midday trading on the Nasdaq Stock Market. The company's per-share loss was also wider than analysts had been expecting.
Sanford C. Bernstein analyst Craig Moffett told clients in a note that it was "troubling" to see a "pattern of one step forward and two steps back" for XM's last two earnings releases.
The disclosures of regulatory scrutiny "are likely unnerving to an investor base that has come to be skeptical (at best) about XMSRs marketing balance," Moffett wrote, referring to XM by the ticker symbol for its stock.
XM's revenues doubled to $208 million from $102.6 million as the company's subscriber count swelled to 6.5 million, up 72 percent from 3.8 million at the same time a year ago. In the most recent quarter, XM signed up 568,900 subscribers. XM says it is on track to have 9 million subscribers by the end of the year.
Analysts polled by Thomson had been expecting a smaller loss of 55 cents per share on sales of $201.5 million.
The net average cost for adding each subscriber, a number watched closely by investors, fell to $94 from $141 in the fourth quarter of In the same period a year ago, the average cost was $90.
XM had promised to get its subscriber acquisition costs down after reporting the sharply higher figure for the fourth quarter, when it was going up against the imminent launch of the hugely popular shock jock Howard Stern at the beginning of the year on rival Sirius Satellite Radio Inc.
XM, which is based in Washington, D.C., and Sirius are spending heavily to sign up subscribers and programming talent to their businesses, which offer dozens of channels of talk, news and music for fees of about $13 a month.
This week XM announced an unusual agreement under which its shock jock team of Greg "Opie" Hughes and Anthony Cumia would appear on seven stations owned by CBS Corp., which lost its own star Howard Stern to Sirius at the beginning of the year.
Opie and Anthony, who are longtime rivals of Stern, used to appear on CBS radio but were pulled from the air in 2002 after they aired a live account of listeners having sex in St. Patrick's Cathedral. XM hired them in 2004.
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