Media General may have to sell properties -analyst

By Peter Kaplan and Robert MacMillan

WASHINGTON/NEW YORK, Nov 15 (Reuters) - Media General Inc (MEG.N) may have to sell properties in some markets where it owns newspapers and television stations under new media ownership rules being considered by U.S. regulators, an analyst said on Thursday.

The rules, proposed by Federal Communications Commission Chairman Kevin Martin, are designed to loosen restrictions in large U.S. cities, but they could leave Media General in a "tough fight" to keep newspaper-TV station combinations that it owns in eight small markets, said Stanford Group analyst Paul Gallant.

"Martin's proposal carries the risk that Media General might need to divest some TV stations or newspapers in those eight (or more) markets," wrote Gallant. "Based on Martin's rule, Media General's TV-newspaper combos could face a tough fight to remain intact."

A representative of Media General was not immediately available for comment.

Under Martin's proposal, media companies would be allowed to own newspapers and broadcast stations in the top 20 cities, something they cannot do now unless they have waivers from the FCC to own the necessary broadcast licenses.

Companies could seek approval for cross-ownership in smaller markets, but would have to address FCC concerns, including demonstrating there are enough competing news outlets in the market and that they would maintain separate editorial control of their newspapers and TV station.

Media General, which operates primarily in the southeastern United States, has waivers from the FCC to own TV-newspaper combinations in those markets.

The small markets cited by Gallant where Media General owns newspaper-TV combination are Bristol, Virginia; Johnson City, Tennessee; Myrtle Beach and Florence, South Carolina; Marianna and Panama City, Florida; Columbus, Georgia; and Opelika-Auburn, Alabama.

Media General said last month it may sell five TV stations to reduce debt and bolster its balance sheet as it grapples with an continuing advertising slump in its newspaper business. The Panama City station is among them, the company said.

Martin has said he wants the agency to wrap up its examination of media ownership and reach a decision by Dec. 18 on whether to ease limits on how many media outlets a company may own in a single market.

The latest proposal is less ambitious than rules the FCC approved in 2003 to scale back ownership restrictions, but were struck down by the federal courts the following year.

However, even the scaled-back proposal has been criticized by consumer groups and skeptics in Congress, who fear that more consolidation in the industry would eliminate independent voices and degrade local news coverage.

Some consumer advocates argue the changes would make it easier for media companies to get FCC waivers for cross-ownership.

Large publisher-broadcasters, Gannett Co Inc (GCI.N) and Tribune Co TRB.N, oppose Martin's proposal because they say it does not loosen the rules enough.

Media General shares were up 1.8 percent to $27.98 in afternoon trading on the New York Stock Exchange. Gannett shares were down 0.7 percent to $40.08, and Tribune shares were 2.6 percent higher to $30. (Editing by Tim Dobbyn)