By Liana B. Baker
(Reuters) - A federal regulator dismissed John Malone's Liberty Media Corp's application to take control of Sirius XM Radio Inc with its current stake of 40 percent.
Friday's decision by the U.S. Federal Communications Commission came after Liberty Media, Sirius XM's largest shareholder, in March requested approval to take over the company's operating licenses, arguing that it had de facto control of Sirius XM with its large stake and board seats.
Liberty acquired its 40 percent stake in 2009 as part of deal in which it loaned the satellite radio provider $530 million to help it avoid bankruptcy.
But its strategy to use the FCC to transfer control of Sirius XM's operating licenses failed.
The FCC said Liberty's application was not "sufficient" to show it was in control of the company. Liberty was not able to get passwords, signatures and other information from Sirius XM to properly submit its application, the FCC said.
Liberty still has other options to gain control of Sirius XM, whose 22.3 million subscribers make it the largest U.S. satellite radio provider.
Executives at Liberty have said the company could boost its stake above 49.9 percent. It already holds five of Sirius XM's 13 board seats.
Sirius XM CEO Mel Karmazin said on a conference call last week that Sirius XM was not currently "combative" with Liberty. He said he did not know what Liberty planned to do with its 40 percent stake.
"If the time comes that Liberty's interests are different than the other 60 percent of shareholders, we will do what we have to do to protect the interest of our 60 percent of shareholders," he said.
Sirius XM and Liberty Media did not immediately respond to a request for comment on Saturday.
(Reporting By Liana B. Baker in New York; Editing by Jonathan Stempel, Bernard Orr)