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Global told to sell stations in seven regions to get green light for Real Smooth deal

By | Published on Wednesday 22 May 2013

Real & Smooth Limited

So, it seems that the “irrefutable evidence” presented by Global Radio that supposedly demonstrated that it buying what was the Guardian Media Group’s radio business would not have any impact on the local radio advertising market, was, in fact, highly refutable. In the eyes of the Competition Commission anyway.

The UK competition regulator has told Global that to get the all-clear to buy GMG’s Smooth and Real Radio networks it must commit to sell stations, either its own or its new acquisitions, in seven markets. GMG Radio only operated in nine regions, and the forced divestiture is considerably more severe than the three stations Global said it would be willing to sell if it really had to in order to allay any competition fears.

The Commission has told Global that it must sell a station in the East Midlands, South Wales, North Wales, the North West, the North East, Yorkshire and Central Scotland. It will be allowed to keep its GMG acquisitions and all its current assets in London and the West Midlands.

It is not a good outcome for Global, and will likely make much of the group’s plans for its newly extended station portfolio impractical. The radio firm could also lose money. In an relatively usual move, Global took complete ownership of what had been GMG Radio as soon as its deal with the Guardian Media Group was done, taking on all the risk of any negative outcome in the predictable Competition Commission investigation.

And aside from the substantial costs involved in navigating any competition regulation, most experts reckon Global won’t be able to recoup anything like what it paid when selling on the GMG stations it is not allowed to keep.

The most obvious bidder is Bauer, but the Competition Commission ruling throws doubts on whether the number two radio owner in the UK would be allowed to acquire a GMG station in any region where it already operates either. And the other firm who bid when GMG first went on sale, UTV, was known to be offering substantially less for the stations.

Where a GMG licence has bigger reach than the licence already owned by Global in any one region, it could keep the former and sell the latter, at least upgrading the potential audience of its existing service, though that then means selling on a less attractive franchise.

Perhaps the most compelling route for Global now is to find a buyer that would be interested in acquiring a licence, but then operating it under one of Global’s brands on a franchise basis. That way Global’s quasi-national networks like Capital and Heart could continue to extend their reach, and the firm would be able to earn a licence fee from those operations. Though it would be interesting to see how long any franchisee could be locked into operating a Global brand.

Commenting on the Commission’s ruling, one radio industry bod told The Guardian: “It is about as bad an outcome as they could have imagined. They would have spent millions on legal fees on top of the purchase price, they may be lucky to get half what they spent back”.

Global now has a month to decide whether to take the Commission’s decision to the Competition Appeal Tribunal.



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