June 5 (Bloomberg) -- U.S. Federal Communications Commission Chairman Kevin Martin said he hopes the agency will act ``soon'' on the proposed purchase of XM Satellite Radio Holdings Inc. by Sirius Satellite Radio Inc.

``This is unlike any other merger that's come in front of us, where we have a rule that would prohibit it from going forward,'' Martin said in an interview on CNBC. ``They're asking for something extraordinary, and I think the commission is taking a close look at it.''

The FCC adopted regulations barring a merger of the only two pay-radio companies when it auctioned the spectrum that XM and Sirius use, Martin said. The $3.9 billion all-stock deal needs the approval of a majority of the five members of the FCC, which is under no deadline to act. The agency represents the last regulatory hurdle.

``I expect the commission hopefully will be able to do something on it soon,'' Martin said. ``It's one of the more difficult issues for the commission.''

Legal officials from eight states urged the FCC to reject the deal in a telephone call with Martin on June 3, according to a letter from Connecticut Attorney General Richard Blumenthal that was posted on the agency's Web site today.

The attorneys general ``were surprised and disappointed'' that the U.S. Justice Department cleared the deal in March, Blumenthal said in the letter. The Justice Department action ``does not foreclose state action'' to protect the public from harm from lack of competition, the letter said.

Eight States

Patrick Reilly, a Sirius spokesman, didn't immediately return a phone call seeking comment. XM spokesman Nathaniel Brown declined to comment.

New York-based Sirius is offering 4.6 of its shares for each of XM, its larger rival. Sirius gained 4 cents to $2.70 at 4 p.m. New York time in Nasdaq Stock Market trading. Washington- based XM rose 9 cents to $11.61.

Blumenthal and staff members from attorney general offices in Iowa, Maryland, Missouri, Ohio, Tennessee, Washington and Wisconsin participated in the call with Martin, the letter said. Four of the eight states had urged the FCC to reject the merger in an April letter.

If the FCC approves the deal, it should require the combined entity to lease at least 20 percent of its channels to a commercial competitor, the officials said.

Regardless of the merger's fate, the FCC should boost consumer choice by requiring production of radios that can receive both services, as well as traditional radio stations' digital signals, the officials said. XM and Sirius ``have openly ignored'' an 11-year-old requirement for radios that can receive both services, they said.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

Last Updated: June 5, 2008 16:17 EDT