Minister to have final say in radio purchase

The battle for the control of Irish airwaves reached a new front over the weekend, with the decision of the UK based media conglomerate Emap to accept a bid from Denis O’Brien’s Communicorps for its three Irish radio stations.

Since the sale of the stations – Today FM, FM104 and Highland Radio in Donegal – was announced, speculation as to the likely purchaser had been intense, with UTV, TV3 and The Irish Times among those who were involved in bids. However, among industry insiders, Denis O’Brien was always reckoned among those most likely to go the whole way, and so it was little surprise when he was named on a shortlist of contenders who were still in the race last week.

Among the other shortlisted bidders was the Vienna consortium, comprising a number of former share holders in FM104, with Dermot Hanrahan, Ulick and Des McEvaddy, accountants Pearse Farrell and Greg Sparks, impressario Maurice Cassidy and the estate of Jim Aiken, all being represented.

However, in the final analysis, the Communicorps bid of €200 million was enough to take the prize. According to Dermot Hanrahan, it was €7 million more than the bid tabled by the Vienna Consortium. The deal will now have to be ratified by both the Broadcasting Commission of Ireland and the Competiution Authority.

“Obviously we are disappointed not to have been the preferred bidder,” Dermot Hanrahan told Hot Press. “The general feeling is that we would have been the cleanest from a regulatory point of view – and since Emap had made it clear that they didn’t want to be snared in any kind of impasse from a regulatory perspective, we felt that we were in with a very good chance of submitting the winning bid. But €193 million is as high as we were prepared to go. Above that, it is very hard to make any kind of sense of the numbers and I couldn’t advise the people who were backing our bid to pay more.”

The price being paid by Communicorps is approximately 14 times the anticipated profits from the three stations to March 2008 – the highest valuation ever put on an Irish media asset.

SIGNIFICANT DEAL
There had been some speculation during the sale process that the BCI might oppose the purchase of the stations by Communicorps, if they turned out to be the preferred bidder. How likely this is remains a matter of speculation – with most industry sources agreeing that a rejection by the BCI would be a surprise.

A spokesperson for the BCI told Hot Press that they hoped to have the necessary documentation in relation to the proposed sale from Emap during August, so that it can be discussed by the Board of the BCI at their scheduled meeting on September 3rd. “Depending on the level of detail that’s required, there may be a decision on September 3rd,” the spokesperson added, “but it very much depends on everything being in place, otherwise the next meeting is on October 6th.”

If the purchase does proceed, it will give Communicorps – as the owner of Dublin’s 98FM and Spin FM – control of the three biggest independent stations in the Dublin region. It will also mean that the group will own the two independent national radio licenses – Newstalk 106 and Today FM.

While there is some ambiguity about the rules, the BCI is chiefly concerned with the number of licenses issued in the Irish market that can be held by any one operator. While there is an initial threshold of 15%, a definitive upper limit has been set at 25% of all issued licenses. In simple terms, the deal would not see Communicorps breaching that higher limit.

Asked were there any sensitivities in this particular case, the spokesperson pointed out that the BCI had arranged a meeting with Emap to set out for the sellers the information the commission is likely to look for, adding: “It (the Commission) will take into account the factors under the Ownership & Control Policy, and obviously a number of those factors will pertain to the ownership of two national stations, and we’ll look at the situation in the Dublin market as well.”

There are those in the industry who believe that the Competition Authority will prove to be more difficult to satisfy than the BCI.

“The BCI rules are odd,” one leading radio executive who did not wish to be named told Hot Press. “They treat a national license like Today FM as being exactly the same as a local one like Dublin’s Country. To that extent, someone could be in a position of owning stations that would represent 40% or 50% of the independent radio advertising market – and still be OK. However, the Competition Authority have a different remit – and they are likely to be concerned about any operator moving into a dominant position in any area of the market.”

When, in 2003, FM104 was sold to Scottish Radio Holdings – who in turn sold it to Emap – finalisation of the process was held up for close to six months by the Competition Authority. In many ways, that was a far less significant deal than the current one, so it seems likely that the sale will at least give them pause for thought.

The Competition Authority first have to be informed in relation to the sale. They then have a month to make an initial decision. If the deal is not given the go ahead, it goes into a Phase 2 investigation that can last up to 3 months.

“After that, we’ll come to our final decision,” a spokesman for the Authority told Hot Press, “which may be that it’s cleared, cleared subject to a few conditions, or that we block it. We send that decision to the Minister, and the Minister can agree with it or not, but it’s his final decision.”

The Competition Authority operates under the remit of the Minister for Trade, Enterprise and Employment, Micheál Martin, who apparently has the power to overturn any decision to block the sale.

“We’d be looking at market share, what kind of listeners listen to each station and how much do advertisers pay,” the spokesman added, “and asking if one cuts the price for advertising, would the other gain? We’d focus on the dry economics of it, but the Minister would consider the wider social and public good in terms of media diversity and pluralism.”

There is an element of consultation involved, but ultimately the core questions remain the same.

“The Authority might look at the Dublin situation and insist that Communicorps sell either 98FM or Spin before allowing the purchase of FM104 to go ahead,” another industry source suggested. “Similarly, an agreement might be reached that FM104 would be immediately put up for sale – that’s certainly been rumoured. Or thirdly, they could focus on the national picture and decide that it was not in the best interests of the Irish public to have the two current national independent stations owned by the one company and instruct that Newstalk would have to be sold before Communicorps could buy Today FM.”

According to most sources, the latter scenario would be a highly problematic one. Newstalk has been losing money over a sustained period and while the station has been performing well since its remit was extended to a quasi-national one, there would be little prospect of forcing the sale, given that a new owner would be unlikely to be either willing or able to give the station the kind of support which has been forthcoming from Denis O’Brien.

“It’ll be very interesting to see how things develop,” Dermot Hanrahan – who was involved in the sale of FM104 which was delayed by the Competition Authority – acknowledgeded. “We’ll just have to wait and see.”