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Yesterday speculation of a possible merger between the lone two satellite radio players, Sirius and XM peaked, and was at least temporarily squashed as FCC Chairman Kevin Martin said there's a ban in effect since 1997 preventing a single owner for both services. Sirius Satellite Radio fell 7% to $3.86 and XM Satellite Radio dropped nearly 10% to $15.45. Shares of both had been up more than 15% year-to-date. Sirius-SIRI-XM-XMSR-Nasdaq-1yr-chart-01-17-07 Sirius-SIRI-XM-XMSR-ytd-chart-01-17-07 The chairman's comments prove any attempt at a merger will face tough challenges including an FCC rule change and Dept. of Justice approval. However, Stifel Nicolaus analyst Blair Levin commented last month in a research note that the FCC rule can be changed and said, "the analysis that this is a condition and therefore the merger is a non-starter is just wrong," in an interview yesterday. Bloomberg quotes Reed Hundt, former FCC chairman and currently an antitrust laywer who said, "In my eyes the combination of two satellite radio firms would not significantly reduce choice in the music business."

• Sources: Bloomberg
• Related commentary: FCC Chairman Martin Dashes Sirius-XM Merger Hopes, Shares Tumble, XM Softens Stance on a Merger with Sirius, But DoJ and FCC Stand in the Way, XMSR and Sirius: The Street Weighs In, More From The Sirius/XM Satellite Radio Merger Rumor Mill. Conference call transcripts: Sirius Q3'06, XM Satellite Radio Q3'06
• Potentially impacted stocks and ETFs: Sirius Satellite Radio (SIRI), XM Satellite Radio Holdings (XMSR)

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Source: Sirius and XM Soar on Merger Speculation, Tank on FCC Chairman's Comments