LONDON (Reuters) - Ofcom proposed a reform of radio regulation on Thursday, seeking to give operators more scope to compete with the BBC and potentially clearing the way for more consolidation in the industry.

Ofcom said it wanted to simplify regulation and promote local content while safeguarding the interests of listeners.

Under its plans, it said all FM local radio stations should provide at least 10 hours of locally-made programming each weekday and at least four hours on Saturdays and Sundays.

But it said smaller stations may be able to share a large proportion of this programming with other nearby stations, while outside of locally-made programming requirements, stations could broadcast network programming for up to three hours a day.

It said it would also recommend to the government a simplification of ownership rules applying to radio, to allow for further consolidation within the industry, while protecting plurality.

Current rules dictate that each local area has at least two commercial competitors to the BBC.

Commercial radio has struggled in recent years due to a downturn in the advertising market and competition from the BBC, although listening hours have held up.

Chrysalis Group, which owned the popular Heart station, sold its radio assets earlier this year to investment firm Global Radio, which has been set up specifically to invest in the UK sector.

Emap's radio assets are also up for sale, while Scottish media group SMG has said it is considering either a float or sale of its Virgin Radio station.