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FCC Approves Clear Channel Deal
WASHINGTON -- January 24, 2008: The FCC on Thursday approved the $27.4 billion buyout of Clear Channel Communications by a private equity consortium led by Bain Capital and Thomas H. Lee Partners. Clear Channel CEO Mark Mays and President/CFO Randall Mays remain with the company, and retain seats on the new company's 12-person board of directors.
In the approval, the FCC concluded that the acquisition would not be anticompetitive or result in a lack of diversity, or that it would harm competition in any broadcast market.
In fact, the commission concluded that the deal will improve competition, as it requires the company to divest grandfathered clusters in 42 separate broadcast markets that violate the Arbitron-based local market definition rules that the agency adopted in 2003.
The FCC "strongly encouraged" the new owners to sell those grandfathered clusters to minority- or female-owned businesses, as they are permitted to retain those grandfathered clusters intact. If the stations in those clusters are sold to non-eligible entities, they must be broken up to comply with the Arbitron-based market definition rules.
The commission also directed Bain and Lee to divest or convert to non-attributable interests their stakes in Cumulus Media Partners, the private equity collaborative that Cumulus Media assembled to acquire Susquehanna Radio.
In approving the deal, the FCC dismissed petitions to deny the merger that were filed by Mt. Wilson FM Broadcasters and Goodrich Radio, and also dismissed informal objections filed by two individuals, Leonard R. Kahn and Geoffrey M. Young.
Although both men consented to the deal, FCC Commissioners Jonathan Adelstein and Michael Copps -- who hold the minority Democratic seats on the five-person dais -- expressed concern about possible repercussions.
"This case is a close call and one that I approach with decidedly mixed feelings," said Copps. "On the one hand, this transaction could lead to a measure of de-consolidation in the radio industry. The largest radio chain in the country will be divesting 42 radio stations in the top 100 markets. Although at this point we do not know who the purchasers will be, by definition they will be companies with far fewer stations than Clear Channel. At the same time, Clear Channel is in the process of selling many of its stations in smaller markets. So while the new company will remain a media giant—now re-focused on the largest markets—there are some potential public interest benefits to this deal. "
However, Copps repeated his earlier concerns about the effect of allowing private equity investors into the broadcasting business. "I have repeatedly called for the commission to examine the potential impact of private equity on our ability to ensure that broadcast licensees protect, serve and sustain the public interest. Unfortunately, that has not happened, and nothing in today’s order indicates that the commission has had a change of heart. Instead, we once again close our eyes and pretend that nothing has changed—as if these new entities are no different than our traditional broadcast licensees."
For his part, Adelstein expressed concern that even with the divestiture of some stations, large groups like the one that will remain after the buyout can wield significant control in radio markets.
He said, "Approval of this transaction will result in less consolidation in the radio industry. While I support this order generally, I concur in part to highlight my concern regarding alleged anticompetitive practices with respect to advertising in the radio industry. As I have traveled throughout the country, small and minority broadcasters have complained about the dominance of major radio station groups and the use of their size and scope to increase their share of local advertising revenue."
Adelstein continued, "As the commission’s own examinations of the radio industry have repeated shown, a very limited number of stations command the lion share of advertising dollars in local markets across the country. Based on the commission’s 2003 and 2007 analyses of the radio industry, the largest station in each radio market has, on average, 46 percent of the market’s total radio advertising revenue. The two largest stations in each market command 74 percent of the market’s radio advertising revenue. These figures are troubling, especially in light of the fact that radio advertising rates have nearly doubled since 1996."
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