Analysts want to know what Capital plans to do with the estimated pounds 20m it will raise from selling its 18 per cent holding in Metro Radio and 20 per cent stake in Chiltern Radio.
"You have to wonder if Capital has it eyes on something, but I can't see any obvious acquisitions," says one sector follower. Uncertainty about Capital's future plans recently prompted broker James Capel to downgrade its recommendation from buy to hold.
London-based Capital has 13 radio licences covering Birmingham, Kent, Sussex and Hampshire. Under the new rules, an operator is free to increase the number of radio licences from 20 to 35, but opportunities for expansion look limited.
Patrick Taylor, Capital's finance director, admits one reason for pulling out of Newcastle- based Metro was distance: "Geographically, we were a long way apart." Although he insists that Capital remains committed to developing its radio interests in the UK, critics say restricting further piecemeal acquisitions of local radio licences closer to London is not enough to justify the shares' premium rating, despite strong forecast growth in radio advertising revenues.
Capital has also been frustrated in its efforts to move Capital Gold, its London-based "golden oldies" station, from AM to the sharper FM frequency because operators are allowed to hold only one FM licence in the same area.
Mr Taylor makes no secret of Capital's desire to own a national FM licence offering a familiar diet of mainstream pop music. But no such franchise is on the horizon.
Instead, Capital could pitch for one of the three existing national commercial stations, but only one - Classic - is on FM, the advertisers' preferred frequency.
Classic FM is understood to be very profitable three years into its eight-year licence period. Sources say the privately owned station, where GWR has a 17 per cent stake, could be worth up to pounds 10m. "We already have an indirect interest in Classic FM through our 18 per cent stake in GWR," says Mr Taylor. "Classic FM is a well-run, very successful company."Reuse content