(Adds potential for consolidation, background, Breakingviews link)
By David Shepardson
WASHINGTON, March 30 (Reuters) - The U.S. Federal Communications Commission said on Thursday it would vote in April to reverse a 2016 rule adopted by the Obama administration that limits the number of television stations some companies can buy.
Under rules adopted in 1985, broadcasters could partially count some stations with weaker over-the-air signals against ownership caps. The FCC under President Barack Obama said those rules were outdated after the 2009 conversion to digital broadcasting and revoked them in September.
The 2016 rule did not require any company to sell existing stations but could bar new acquisitions.
Twenty-First Century Fox, Inc in September challenged the FCC rule.
FCC Chairman Ajit Pai said in a statement the FCC was likely to lose the legal challenge before the U.S. Court of Appeals. He said he wanted to revoke the rule and “launch a comprehensive review of the national ownership cap” later this year.
Current rules limit companies to owning stations serving no more than 39 percent of U.S. television households, but the Republican FCC could seek to eliminate or revise them.
The broad FCC ownership review could launch a new wave of consolidation in the broadcast television industry, analysts and companies said.
Sinclair Broadcast Group Inc has approached rival U.S. broadcaster Tribune Media Co to discuss a potential combination, Reuters reported earlier this month, citing sources, in a deal that would hinge on regulations being relaxed.
Sinclair and Tribune opposed the decision to relax the rule for certain stations last year. The FCC said in September it was time to abolish the 32-year-old regulation because it “restores meaning to the rule in today’s marketplace where technological change has eliminated the justification.”
Restoring the previous rule would not be enough for Sinclair and Tribune to merge, analysts said, noting that they would either need to divest some stations or win additional regulatory changes.
Tribune already is above the FCC cap, reaching 44 percent of U.S. households, while Sinclair is at 38 percent, Jefferies LLC analyst John Janedis said.
Sinclair Chief Executive Christopher Ripley said on an earnings call last month the company expected “this new FCC to tackle the ownership rules more broadly.”
Another U.S. broadcaster, Tegna Inc, told investors in February the company expected “a long overdue break in the logjam on outdated TV ownership rules this year” that “will likely allow both vertical and horizontal consolidation.”
Editing by Jeffrey Benkoe and Richard Chang