By Peter Kaplan

WASHINGTON (Reuters) - Sirius Satellite Radio Inc's $3.3 billion purchase of XM Satellite Radio Holdings Inc was approved with conditions by U.S. communications regulators on Friday, clearing the way for a deal that will leave just one U.S. satellite radio service.


The FCC's commissioners voted by a 3-2 margin in favor of a proposal that would allow the deal to proceed as long as the companies met a series of consumer protection conditions, including a three-year cap on prices, setting aside 8 percent of their channel capacity for minority and non-commercial programming and payment of a $19.7 million penalty for past FCC rule violations.

"I think this merger is in the public interest and will ultimately benefit consumers," FCC Chairman Kevin Martin said.

The companies also will have to make available to consumers radios that receive both Sirius and XM. As part of the order, the FCC also will conduct an inquiry into whether it should require that all satellite radios be built with technology that allows them to also receive high definition terrestrial radio signals.

Martin said the conditions the FCC imposed on the merger would ensure that satellite radio customers would be able to access the best programming from both XM and Sirius and choose smaller, lower-priced packages of programming if they want.

With the approval, XM and Sirius cleared the final hurdle in a regulatory marathon that began after the merger was first announced in February 2007. Antitrust authorities at the U.S. Justice Department gave their approval in March.

The merger would bring entertainers such as Oprah Winfrey and shock jock Howard Stern under the same banner. It has been criticized as anti-competitive by the traditional radio industry, and by some U.S. lawmakers.

A major obstacle was removed on Thursday when XM and Sirius said they expected to pay a total of about $19 million to settle FCC compliance issues involving certain radios that include FM transmitters and terrestrial repeater stations.

The companies also said they would take steps to make sure their ground-based transmitters are brought into compliance with FCC rules. Critics have complained that some of the transmitters have exceeded allowable signal strengths.

The approval came over the objections of the FCC's two Democratic commissioners. They have warned against allowing further consolidation of the U.S. media, and have said the concessions sought by Martin were not strong enough to protect consumers and preserve competition.

However, a 2-2 logjam over the deal was broken on Wednesday after Martin reached a compromise with the final commissioner to vote on the deal, Republican Deborah Taylor Tate and won her support for the deal.

(Editing by Leslie Gevirtz and Carol Bishopric)
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