GCap Puts Plans To Sell Digital One On Hold
GCap Media’s plans to sell off Digital One, its DAB digital radio multiplex, have reportedly been put on hold as it continues talks with Global Radio about a possible acquisition.
Last week, GCap resumed talks with Global Radio after Global made a third and “final” offer for GCap Media, valuing the Capital Radio and Classic FM owner at £370 million.
The offer, at 225p a share in cash, is conditional on the recommendation of the board. The offer is around 20% higher than Global’s original offer in December of £313 million (see Global Radio Makes ‘Final’ £370m Offer For GCap).
In January, GCap had announced its intention to exit digital radio as far as possible as part of a cost-cutting strategy, raising fears about the future of the DAB medium (see DAB Dealt A Blow As Gcap Unveils Radical Measures). It said it had agreed to sell its majority stake in the Digital One multiplex for a nominal sum to Arqiva, its minority partner.
The Times has reported that Global has told the Takeover Panel, the stock market regulator, it is not happy for a sale of Digital One to take place until a decision has been made on whether or not it will acquire GCap.
The move raises the possibility of a Global vote of confidence in the future of DAB, which has also been hit by the closure of digital-only stations such as Oneword and GCap’s Life.
The Times claims Global does not have the same level of concern about the other asset sales planned by GCap, which are the three Xfm regional stations, in Wales, Manchester and Scotland, and digital stations Planet Rock and TheJazz.
GCap pioneered DAB under Hazlitt’s predecessor, Ralph Bernard (see A Fresh Start For GCap With Hazlitt), whilst Digital One became the first national commercial digital radio multiplex a decade ago.
Although DAB radio accounts for nearly 10% of all listening (see Over 16% Of All Radio Listening Now Via Digital), when GCap announced its new radical changes, Hazlitt pointed out that only 4% of total listening was to digital-only stations not already available on analogue. Hazlitt said GCap had spent £8 million on DAB in the year to March 2007.
In December, former chief executive, Ralph Bernard, said at MediaTel Group’s ‘Future Of Radio’ seminar that digital radio cannot flourish unless Ofcom sets a date for switching off the analogue radio signal.
He added that there is a £10 million loss per annum on digital and the industry “won’t sit and accept that for another 10 years.”
Bernard also said that while it currently costs GCap £8 million a year to run its analogue stations, it costs £15 million to run its digital stations. “Where’s the logic in that? It can’t be sustained,” he said (see Bernard Calls For Radio Switchover Date).
The DRDB responded to GCap’s digital withdrawal, saying: “DAB digital radio is growing strongly and, as recently published receiver sales and listening figures show, remains a strong proposition for the UK radio industry, both commercial and public.
“We believe the medium will emerge from this period of transition stronger and more attractive to both broadcasters and listeners.”
Panellists at MediaTel Group’s recent ‘Future of Online’ seminar expressed concerns over the state of DAB digital radio in the UK. Sheryl Norman, digital director, UK, at Omnicom Media Group voiced concern that the UK radio market could end up with a lack of diversity.
She said that the rise of digital radio had looked as if it would give listeners in the UK a choice as diverse as that found in the US, but that the recent announcements had made her “worry that we’re just going to go backwards” (see DAB Problems Due To ‘Unrealistic Expectations’).