Global offers to sell Midlands stations to ease competition concerns

by Tristan O'Carroll, Media Week 08-Aug-08, 13:05

LONDON - Global Radio has proposed to divest several radio stations in the Midlands to appease the OFT's competition concerns over its £375m acquisition of GCap Media.

The OFT announced that it is considering undertakings proposed by Global Radio that are aimed at remedying its competition concerns over the deal.

Global has offered to divest a package of radio stations to purchasers approved up-front by the OFT. Global's Heart 106 in the East Midlands has been accepted by the OFT as a remedy to minor competition issues in the East Midlands. This will be either by way of a disposal or the station continuing to operate under the Heart brand as a franchise. This is the first time the OFT has accepted a franchise based remedy in the sector.

Disposal of GCap's BRMB, Beacon, Mercia & Wyvern in the West Midlands has been accepted by the OFT as a remedy to competition issues in the West Midlands.

In addition, Global has been allowed to retain its ad sales contract with GMG Radio.

In principle, the OFT said, such a move would resolve the OFT's concerns, by restoring competition to pre-merger levels in the Midlands.

Most of GCap's 71 local stations across the UK do not compete with Global for the same audiences or advertisers, the OFT said. In the Midlands, however, Global had what the OFT termed "a substantial pre-merger presence" through its regional stations - Heart in the East Midlands and Heart and Galaxy in the West Midlands.

Meanwhile, the OFT has cleared the London aspects of the transaction. Although each party had what the OFT estimated was a 20 to 30% share of radio advertising in London, the regulator concluded that there is no realistic prospect of harm to London advertisers or listeners, because neither Heart nor LBC (Global Radio) were close competitors to Capital, Choice or Xfm (GCap). This was due substantially to differences in audience demographics.

The OFT also said that it expects the deal to generate "significant efficiencies that will benefit advertisers and listeners, for example, by delivering cheaper prices for multi-station advertising packages, and programming changes capable of attracting larger and more focused radio audiences, thereby enhancing rivalry in the London market".