GCap approached GMG four months before Global row

by Sarah Crawley-Boevey, Media Week 30-Oct-07

As GCap Media was confirmed as GMG Radio's new national sales house, Media Week has learned that GCap approached GMG more than four months before GMG terminated its contract with Global Radio.

GCap was confirmed as the new sales house for all GMG's national sales
yesterday (Monday), as tipped in Media Week last week (23 October, page
5), after the deal with Global Radio was terminated on 19 October.

The contract was ended amid claims GMG had presented "commercially

unacceptable" new terms and conditions, forcing Global to request an
"orderly parting of the ways".

But it is now thought that GMG was able to play GCap and Global off
against each other, and that a demand by GMG that Global provide a
guarantee that it would increase GMG revenues by more than 80% was
simply a reaction to promises made by GCap.

At its AGM on 23 July, the Capital 95.8-owner said it planned to
increase revenue margins to between 12 and 14% by April 2009 and it is
thought the GMG deal was central to that pledge.

Though no profits will be earned on the contract this year, it is
thought the deal will net the group £1.4m in revenue before costs
next year.

Meanwhile, it is anticipated that Global will add as much as £50m
onto the expected bid price for Emap Radio as it faces a battle to
secure the station and its future in the industry.

In losing the GMG national sales contract, Global is now the third most
powerful radio group in terms of the number of hours at its disposal to
sell.

It sells just 50 million hours compared to GCap's 200 million and Emap's
100 million, meaning agencies could sell around its network of stations
if desired.

Global Radio paid £170m for Chrysalis earlier this year, but if it
does not win Emap and remains the same size, that price tag will prove
highly expensive.

The GMG sales contract was worth just £1.5m for Global.

Emap Radio is for sale in its entirety at a price of between £400m
to £450m.

Insiders believe Global must be sure of winning it if it is to remain
competitive in the radio industry and is thought to have the financial
clout to ensure it is the highest bidder.