XM Satellite Radio said on Tuesday that Hugh Panero, 51, its chief executive and a company founder, would step down in August, after earlier saying he would resign once a proposed merger with rival Sirius Satellite Radio was approved.

Sirius in February announced plans to buy the larger XM for $4.6 billion in stock and Panero said he would step down once the deal went through. But the proposed merger still faces regulatory hurdles.

Some analysts viewed the departure of Panero, credited with building satellite radio into a fast-growing distribution segment, as a sign the deal was gaining traction.

Hugh's been extremely professional and supportive during the merger process and he simply decided it was time to leave with the process now in full gear, XM spokesman Chance Patterson said.

Panero could not immediately be reached for comment.

Under the deal, Sirius Chief Executive Mel Karmazin is due to serve as CEO of the combined company while XM Chairman Gary Parsons would take on the role of chairman for the new entity.

XM President and Chief Operating Officer Nate Davis will take the role of interim CEO, XM said on Tuesday.

But others said Panero may be leaving due to long-standing pressures to allay investors concerns about the company's ability to sustain growth and stem losses.

Shares in both XM and Sirius, former stock market darlings, have fallen sharply over the past 18 months on these concerns.

The U.S. Federal Communications Commission and the Justice Department are reviewing the deal that would combine the only two providers of satellite radio service in the United States.

The resignation announcement comes two days before XM is set to report earnings and one day after Sirius's Karmazin told a National Press Club luncheon that the two companies would offer customers subscription plans costing up to 46 percent less than the current offerings. The move was seen as a bid to allay regulators' concerns that a merger would raise prices and limit choices.

Janco Partners analyst April Horace said she thought Panero's exit signaled the companies were making progress with regulators.

I think Mel's improved his position with respect to understanding what the FCC is looking for. From my perspective, Hugh Panero's leaving is a big statement with respect to getting FCC approval, she said.

The two companies, which together marked more than $1.7 billion in losses in 2006, said the so-called a la carte packages would work only on satellite radios that have yet to be sold by either company. Other packages will be available on existing satellite radios.

XM shares rose to $12.01 in extended trade from its close of $11.89 on the Nasdaq while Sirius shares advanced to $3.15.

(Additional reporting Michele Gershberg)