01.05.2005, 09:12 AM

Sirius Satellite Radio Inc. on Wednesday unveiled plans to launch a video service in the second half of 2006, and said it has made a deal to use Microsoft Corp.`s media software to power its portable video player.

The company also reached an agreement with the software giant to co-develop future video offerings, its latest assault on rival and industry leader XM Satellite Radio Holdings Inc.

With its automotive partners indicating strong demand for entertainment products in new cars, Sirius said it anticipates providing two or three channels of premium content specifically for children.

``We will take the DVD experience to the next level, offering the best content easily available to families and consumers,`` Chief Executive Officer Mel Karmazin said in a statement.

Sirius, which along with XM has pioneered the growing satellite radio market, broadcasts about 120 channels of commercial-free music and radio programming to subscribers with satellite radio receivers, as well as via the Internet.

The company recently crossed the 1 million user mark, ending the year with almost 1.1 million subscribers, while XM reported closing 2004 with 3.1 million customers.

In pre-market activity, shares of Sirius added 2.9 percent, or 22 cents, to trade at $7.73 on the Nasdaq exchange.