OFT faces pressure for GCap to drop GMG Radio contract

by Emma Barnett, Media Week 01-Jul-08

LONDON - Radio groups and media agencies, responding to the OFT's probe into Global Radio's £375m GCap acquisition, are calling for GCap to be forced to give up its GMG Radio ad sales contract.

In May, the OFT invited agencies and radio companies to comment on Global's acquisition, setting a deadline of 10 June for submissions, which was extended to 25 June.

However, the consensus among respondents in their submissions to the OFT, according to a Media Week survey, is that the addition of GCap to Global Radio's stable hands it dominance of the radio ad market.

Most are calling on the OFT to force Global/GCap to give up the GMG sales contract.

A senior radio sales figure from a rival radio company said: "Global will occupy approximately 60% of total radio sales in the UK and we believe it will have to divest the GMG radio contract to eliminate some of these competition issues. That's what we are submitting."

Richard Menzies-Gow, director of media research at Dresdner Kleinwort Wasserstein, said: "The concentration of ownership and the fact Global will be selling so much in one area, for example, London, is the main problem. Getting rid of the GMG sales contract would be an easy way to placate those people causing an uproar, but it wouldn't deal with all the issues."

However, another senior radio industry figure said that Global's rivals are simply trying to make life difficult for the company: "Most of the smaller players will kick up a fuss as it's the only way of ensuring the bigger players are as constrained as possible," the source said.

A GMG Radio spokesman said it was "business as usual" with GCap. Global Radio declined to comment.

The OFT is expected to come to a decision about whether to refer Global's acquisition of GCap to the Competition Commission within a couple of months.

Should the OFT refer the deal, the finalising of the takeover could be delayed by a further six months.

GMG moved its sales contract into GCap on 19 October last year, after an acrimonious split with Global. GMG's contract with Global was ended amid claims GMG had presented "commercially unacceptable" new terms and conditions, forcing Global to request an "orderly parting of the ways".

Others claimed that GMG played GCap and Global off against each other, which resulted in GMG demanding an increase to GMG's advertising revenues of more than 80%. It is believed the GMG sales contract would have been worth £1.5m to Global.