XM Canada may refuse a merger with Sirius Canada and go it alone in the satellite radio business if negotiations with its rival don't go well in the wake of industry consolidation in the United States.

In an unexpected move, XM Canada chief executive officer Michael Moskowitz said Monday the company is not averse to striking out on its own if it can't agree on terms with Sirius, comments that may set the tone for tense negotiations in the coming months.

A forced merger of the two Canadian companies is believed to be the most likely scenario to unfold after regulators in the U.S. cleared the buyout of XM Satellite Radio Holdings Inc. by Sirius Satellite Radio Holdings Inc.

Since both Canadian companies rely on their American affiliates for the bulk of their programming, which includes more than 100 channels of music and talk radio, XM Canada would have to expand its operations greatly in order to operate independently.

However, Mr. Moskowitz said the company is not averse to the idea if it finds the terms being offered in a potential merger with Sirius Canada are not attractive.

“Nothing is off the table at this point in time,” Mr. Moskowitz said. “You can merge or you can go it alone, and we'll evaluate those two options.”

In the wake of the U.S. deal, which had been scrutinized by regulators for more than a year, the two Canadian companies must now meet in the coming months to discuss how a merger would look. The talks are expected to be tense, since Sirius is likely to argue it deserves a bigger portion of any combined company since it has more subscribers.

A spokesman for Sirius Canada said the company's CEO, Mark Redmond, would not comment on possible negotiations.

Sirius Canada claims 750,000 subscribers compared with 440,000 at XM Canada. However, the companies have disputed each other's numbers over the past few years, disagreeing over how subscribers are counted, particularly whether those who get discounts should be included. Satellite radio customers pay about $15 a month for each service, but some are offered free trials and subsidized receivers as incentives to sign up.

Relations are already frosty between the two sides. Though the U.S. merger has been cleared, neither CEO in Canada has phoned the other to instigate discussions.

Analysts viewed XM Canada's move as an attempt by the company to dig in its heels in advance of the negotiations. If the merger terms prove unfavourable, XM Canada could back out and look to launch dozens of its own channels and continue operating as an independent company. It would build the company around agreements it has with auto makers to install its radios, and the rights to exclusive content, such as a deal to broadcast National Hockey League games.

“It's a message of bravado to shareholders more than anything,” said Carmi Levy, senior vice-president of strategic planning for AR Communications Inc. in Toronto.

“They're simply saying, ‘We're more than capable of going it alone if we need to, and we're not going to blindly go down the merger path just because the American companies have done the same.' … The question is, is that the best route for the company to take?”

Satellite radio has struggled since it came to Canada in 2005. Both companies have incurred steep startup costs to get their businesses going. XM Canada, which is publicly traded as Canadian Satellite Radio Holdings Inc., has so far lost about $250-million, though the company recently started seeing positive cash flow last quarter. XM's largest shareholder is fast food and wireless telecom executive John Bitove.

Sirius Canada is majority owned by the CBC and the Slaight family, which sold the Standard Broadcasting radio network to Astral Media Inc. last year. It is also minority owned by the U.S. affiliate.

The Canadian merger could create a company worth about $800-million. Whatever XM decides, Mr. Moskowitz said service will not be interrupted.