This is about nothing less than what will happen to several hundred radio stations nationwide. It involves
Clear Channel Communication's proposed sale of more than 400 radio stations, 42 of which are in the top 100 markets.
Clear Channel is, at least for the moment, the largest owner of commercial radio stations in America -- the largest by a long shot. The company owns 1,172 radio stations and 35 TV stations in 300 markets around the country.
The Commission approved the breakup [DOC] to two private equity firms, but not without some concerns about what will happen to the rest of the stations that serve hundreds of communities around the country. The investors who are spending about $19.5 billion are Bain Capital and Thomas H. Lee Partners. The transaction was initially announced by the companies in
November 2006, but it took until now to receive FCC approval.
CNN Money reports on a related deal:
A separate transaction in which Clear Channel is selling its 35 television
stations to Providence Equity Partners, another private-equity company, was
cleared by the FCC in December. That sale still hasn't closed as Providence
Equity has indicated it wants to renegotiate the $2.1 billion price tag.
As of two weeks ago, Bain Capital and Thomas H. Lee still needed to assemble
about $22 billion worth of debt to finance the deal for Clear Channel.
FCC Commissioner Michael Copps said [DOC] he was concerned about private companies taking over radio stations because they may not serve the public interest. He also raised worries about whether Clear Channel would remain financially sound:
This case is a close call and one that I approach with decidedly mixed feelings. On the one hand, this transaction could lead to a measure of de-consolidation in the radio industry. Under the terms of this Order, 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.
But there is another side to this transaction, and it's one that concerns me greatly. 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. And there are those who accuse me of living in the past!
The Commission's lack of curiosity here is all the more troubling in light of the announcement last month by Standard & Poor’s that when the transaction closes it will cut its ratings on Clear Channel two notches deeper into "junk" territory -- and may cut them further -- due to the subordination of existing debt to new bank debt. According to news reports, Moody’s said it likely will downgrade the company to “junk” status as well when the deal closes. What is the market trying to tell us? How stable is the new company and what are the chances, given the jittery markets, that it could slip into bankruptcy? If it does, what impact would that have on its ability to serve the public interest? Clear Channel is not in the business of selling widgets; it is providing a vital public service that people depend on for emergency alerts and other important news and information. The American public has a vital interest in ensuring the financial stability of its broadcast licensees. The FCC, apparently, does not. There is no mention of last month’s events in the Order.
