WASHINGTON (Reuters) - Sirius Satellite Radio's $4.59 billion purchase of rival XM Satellite Radio was given antitrust clearance on Monday as the Justice Department concluded consumers have many alternatives, including mobile phones and personal audio players.Investors sent shares of both companies sharply higher even though the Federal Communications Commission must still approve the combination of the only two U.S. providers of satellite radio, a deal first announced in February 2007.

In a victory for Sirius Chief Executive Mel Karmazin, who lobbied hard for the deal, the Justice Department agreed the satellite radio companies face stiff competition from traditional AM/FM radio, high-definition radio, MP3 players and programming delivered by mobile phones.

"Competition in the marketplace generally protects consumers and I have no reason to believe that this won't happen here," Justice Department antitrust chief, Thomas Barnett, told a conference call with reporters.

The traditional radio industry, consumer groups and some U.S. lawmakers had criticized the deal, which would bring entertainers such as talk show host Oprah Winfrey and shock-jock Howard Stern under one roof.

The National Association of Broadcasters, which fought against the deal, said the Justice Department had granted XM and Sirius a "monopoly" and called the decision "breathtaking."

Sirius and XM, which are losing money, each currently charge subscribers about $13 a month for more than 100 channels of news, music, talk and sports.

New York-based Sirius' programming includes lifestyle guru Martha Stewart and NFL Football while Washington, D.C.-based XM is home to Bob Dylan's radio show and Major League Baseball.

The Justice Department said the combination would lead to "substantial" cost saving steps such as consolidating the line of radios they offer. It said those savings would "most likely to be passed on to consumers in the form of lower prices."

XM stock ended Monday up 15.5 percent to $13.79, while Sirius closed up 8.6 percent to $3.15, both on Nasdaq. At that price for Sirius' stock, the deal, in which 4.6 shares of Sirius are to be exchanged for each XM share outstanding, is worth $4.59 billion.

AWAITING FCC DECISION

The antitrust decision shifts the spotlight to the FCC, which must determine whether the XM-Sirius is in the public interest, and whether to enforce its 1997 order barring either satellite radio company from acquiring the other.

A source at the FCC said Chairman Kevin Martin has yet to make a proposal either approving or opposing the XM-Sirius combination, but has asked the agency's staff to draft documents for different possible outcomes.

This source said the FCC could be strongly influenced by the Justice Department decision. "I think it would be hard to go in the complete opposite direction," said the source.

Analysts at Stifel Nicolaus said the FCC could impose conditions, such as requiring the companies to adhere to promises Karmazin made to Congress last year.

Karmazin promised lawmakers that a combined company would offer packages of channels that customers could pick on an "a la carte" basis, and that customers would be able to block adult channels and get a refund for those channels.

In addition, Stifel Nicolaus said, the FCC also may require Sirius and XM to promise that all existing satellite radios will continue to work after the companies are combined.

David Bank, an analyst with RBC Capital Markets, was optimistic about FCC approval. "Now it's past DOJ, and we feel pretty optimistic it will get through the FCC," he said.

The Justice Department's decision provoked immediate criticism from a key lawmaker in Congress, Senate antitrust subcommittee chairman Sen. Herb Kohl, a Wisconsin Democrat.

Kohl took the department to task for "failing to oppose numerous mergers which reduced competition in key industries, resulting in the Justice Department not bringing a single contested merger case in nearly four years."

"We urge that the FCC find the merger contrary to the public interest and exercise its authority to block it," Kohl said in a statement.

Sirius and XM said in a brief statement that they had received antitrust clearance and that their deal was still subject to FCC approval.