INSIGHTanalysis: Chrysalis Looks To Lead In Consolidating Radio Landscape
Chrysalis Radio chairman, Chris Wright, has vowed to play a ‘leading role’ in the formation of the UK radio landscape that will emerge after the new Communications Bill proposals comes into force later this year.
Chrysalis’ radio management team has worked hard with other radio groups to ensure that the Communications Bill emerges as favourably as possible for the radio industry when it becomes legislation later in the year.
“I firmly believe that Chrysalis is now in a very strong position to benefit from the opportunities that the new legislation is set to deliver … Our excellent management teams have consistently exploited opportunities and successfully grown our businesses both organically and through acquisition,” claims Wright.
The radio sector Chrysalis Radio took a 10% share of all radio listening hours in the fourth quarter of 2002 and a 10% share of advertising revenues across the full year, according to RAJAR and Merrill Lynch. GWR Group is the leader in terms of listening hours with a share of 22% in Q4 2002 and Capital Radio takes the largest slice of advertising, at 22% for FY 2002.
What’s on the cards? The Communications Bill proposes that the ownership restrictions be relaxed so that a minimum of just two commercial operators is required to run stations in any given local catchment area, along with the BBC’s services.
A logical extreme of this rule is that there may be just two commercial radio groups running all of the stations in the country. In reality, though, this is unlikely to transpire as mergers and takeovers will still be subject to approval from the competition authorities – under OFCOM – on a case by case basis.
Analysts have predicted that smaller-scale asset swaps and deals are more likely than wholesale takeovers in the short-term, given the general uncertainty and lack of confidence in companies’ market evaluations (see UK Radio Update From Merrill Lynch).
The Bill also allows for non-European Union ownership of UK radio assets, potentially paving the way for US investors. However, executives believe that short-term involvement by a US group is unlikely, although this is thought to be a probable development in the medium-term.
Whatever the form, consolidation is seen by the radio sector as vital, with the main uncertainties lying in the competition law. A recent referral to the authorities of Chrysalis’ Galaxy 101 disposal to Vibe Radio was seen as somewhat at odds with the Government’s supposed new light touch approach (see GWR Questions Competition Referral Of Vibe’s Galaxy Acquisition).
For its part, Chrysalis Radio is hoping – despite its relatively small size – to snap up a larger rival, rather than be bought out itself. It has begun to sell off non-core assets in order to pay off debt and build a more radio-dedicated business. A trio of former ITV executives is currently looking at acquiring the group’s television assets (see Chrysalis To Sell Television Group To Former ITV Heads).
The major players in UK radio are Capital, EMAP and GWR Group. Daily Mail & General Trust (DMGT) holds a 29.9% stake in GWR and may look to bid for the remainder. EMAP and Capital, meanwhile, could either be approached by Chrysalis Group, or perhaps make a move for it themselves.
Meanwhile, Glasgow-based SMG – owner of Virgin Radio – last year steadily increased its stake in Scottish Radio Holdings (SRH) to 29.5% (see SMG Counts The Cost Of SRH Investment). Following the introduction of the new ownership regulations it may decide to make a full-on bid for the company.
The Q1 2003 radio audience figures are released by RAJAR tomorrow and will be available from 10.30am on MediaTel.co.uk.