NewsLine Column: A Spanner In The Works For Radio Consolidation?
Following the Competition Commission’s decision to block GWR’s bid to buy Galaxy 101 and merge it with Vibe FM in Bristol, NewsLine editor, Gareth Jones, looks at what lies ahead for some of the UK’s biggest radio companies in the newly deregulated market.
Over the last few months it has been widely accepted that the relaxation of the radio ownership regulations would spark something of a takeover free for all in the commercial radio industry, with the sector’s biggest players vying for supremacy in the newly deregulated market.
The Government’s plans to allow just two commercial radio groups to operate alongside the BBC in any local area would open the floodgates to a tidal wave of mergers and acquisitions and the new light-touch regulator, Ofcom, would look on with an air of parental caution as consolidation began with gusto.
Speculation grew as to who would swallow up who, and as the industry heavy weights began to slim down in preparation for the Communications Bill, attention turned to how the market would be carved up. It was suggested that Daily Mail & General Trust, which holds a 29.9% stake in GWR, may look to bid for the remainder, whilst Emap and Capital could either be approached by Chrysalis, or perhaps make a move for it themselves.
Last summer Lowry Mays, chief executive of US-owned Clear Channel Worldwide, admitted that he would like to take over one of the UK’s major commercial radio groups. Meanwhile, Glasgow-based SMG, owner of Virgin Radio, has been steadily increasing its stake in Scottish Radio Holdings and it was widely anticipated that it might decide to make a full-on bid for the company following the introduction of the new ownership regulations.
However, analysts have been forced to reconsider their prognostications and radio groups are rethinking their take-over tactics, following the Competition Commission’s surprise decision to block GWR’s bid to buy Chrysalis Radio’s Galaxy 101 and merge it with Vibe FM in Bristol.
The deal was a relatively minor one in financial terms, but the ruling that the merger could reduce competition in local advertising services in the Bristol, Bath, Taunton and Yeovil areas, has major implications for the industry as a whole and could mean that such widespread consolidation is no longer on the cards.
The Competition Commission’s decision means it is unlikely that radio advertising will be considered as part of the wider market and will instead be considered as a separate entity. This effectively narrows the scope for mergers and acquisitions on a regional level and means that companies will have to think more carefully about the implications of any future deals on the local radio advertising market.
Richard Menzies-Gow of Dresdner Kleinwort Wasserstein told NewsLine the ruling “suggests that consolidation is likely to be messy with lots of asset swaps to satisfy competition limits.”
While the Competition Commission’s decision may reduce the tidal wave of consolidation to something more akin to a slow trickle, it more importantly draws our attention to the role the competition authorities will play in the newly liberalised radio landscape of the future.
Until now people have focused almost solely on the abolition of the media ownership regulations and the role of Ofcom as a light touch regulator. This has caused many to lose sight of the fact that the competition laws will remain largely unchanged by the Communications Bill.
However, the Vibe FM ruling and the current scrutiny of the proposed Carlton/Granada merger, emphasises the good cop/bad cop relationship that may come to exist between Ofcom and the Competition Commission: with one welcoming domestic consolidation and non-EU investment with open arms and the other appearing to rule with something of an iron fist.
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