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Following a closely watched court decision last week, mergers and acquisition activity in the broadcasting industry promises to stay on the slow track.

And that's a good thing, says one leading media investor.

On Thursday, the U.S. Court of Appeals for the Third Circuit, based in Philadelphia, told the Federal Communications Commission that it hadn't sufficiently justified various media concentration rules the FCC issued in the summer of 2003.

The impact, say sell-side analysts, will be to limit -- temporarily, at least -- consolidation among TV and radio station groups, and among newspapers and broadcasters in the same geographic markets.

A legal stay that's preventing the existing results from taking effect "should freeze related M&A activity for some time," Legg Mason analysts wrote in a report Friday. "The ruling is complex and the November elections add uncertainty to the FCC's future course, but

Thursday's development is clearly a disappointment for broadcasters and newspaper publishers looking to buy or sell outlets."

At least one major radio owner doesn't appear to be interested in further consolidation; on Thursday, according to a Merrill Lynch report of a question and answer session it conducted with

Viacom

(VIAB) - Get Viacom Inc. Class B Report

, executives indicated they anticipate making 40 to 50 of its 185-station radio chains available for sale. Following chief operating officer Mel Karmazin's departure from Viacom earlier this month, speculation had arisen that Viacom would get out of the radio business, which Karmazin had long championed. But Merrill indicated it believed Viacom would hold onto its large-market clusters of stations.

Meanwhile, the hold-up on dealmaking is fine with Mark Greenberg, the portfolio manager of the

(FLISX)

Invesco Leisure Fund.

Greenberg says he finds only limited synergies from combining TV and newspaper properties in the same market -- say, from

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Tribune's

(TRB)

current ownership of the

Chicago Tribune

and WGN, or its past ownership of the

Daily News

in New York, where it still owns the station WPIX.

Not only that, says Greenberg -- whose fund owns Tribune -- but companies tend to overspend on media acquisitions. He'd rather see them spend money on stock buybacks, saying that would be a better return for shareholders. Most media companies, he says, would make more money for shareholders by selling off media properties individually, rather than running them.

In its opinion, the appeals court addressed a variety of issues in the FCC's decision. These include rules covering the number of radio stations one company can own in a single market (and how that market is defined), the number of TV stations a company can own in a single market, and the circumstances under which a company can own both a newspaper and a broadcasting outlet in the same market.

The court upheld the FCC's new method for defining local radio markets, noted Credit Suisse First Boston's William Drewry, but also ruled, he wrote, "the explicit limits embodied in the new rules were not supported by the logic posited."

The court rejected the FCC's position that one party owning multiple TV stations in a market was okay, as long as there are approximately six TV-station owners in that market, according to the Media Access Project's analysis of the ruling. "Bottom line, meaningful

TV M&A activity is dead in the water until we get some clarity," wrote Drewry. Rather than large deals involving one company buying another, he wrote, "we think station swaps and sales will predominate where rules permit."

Given the likelihood that the FCC won't take a hard look at the disputed rules until next year, and taking into account the subsequent legal review of any new rules -- not to mention the likely appeals -- it will take three years at a minimum to sort the rules out, says Greenberg.

"The only people I know who will be making money out of this are the lawyers," he says.