The two rivals in the satellite radio industry, XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc., have decided to merge. Investors hope the deal made between the companies will lead to significant reductions in cost. The firms announced their proposed merger deal as a 'merger of equals,' saying that shareholders at both companies will own about half of the combined company. Sirius will give $4.57 billion in stock to XM shareholders. This represents a major premium to their share value. Mel Karmazin, chief executive at Sirius, will head the proposed combined company, and Hugh Panero, chief executive officer of XM, will continue in his position until the deal is closed. XM's chairman, Gary Parsons, will remain in his role after the proposed merger. However, significant regulatory hurdles must be overcome before the deal can go through. A provision from the Federal Communications Commission (FCC) specifically prohibits the two companies from combining. Industry analysts say that the FCC could change this rule or grant an exception to it so that the companies could merge. The deal also must obtain antitrust approval from the United States Department of Justice. The companies are likely to argue that, in addition to each other, they compete with traditional radio and the growing base of digital audio sources such as iPods, mobile phones, and non-satellite digital radio. XM shareholders will receive 4.6 shares of Sirius stock for every share they own. Investors hope the cost savings resulting from the deal will compensate for the soft retail demand for satellite radio units.