GWR, the owner of Classic FM, yesterday claimed that a recent Competition Commission decision on a proposed acquisition, widely thought to be adverse, was actually highly favourable to the company.
The outcome, however, was a blow to the consolidation hopes of GWR's competitors, said Ralph Bernard, the executive chairman. He said that though GWR's proposed acquisition of a radio station in Bristol was blocked last week, a close reading of the commission's verdict left open a big, national, deal to GWR. He said the ruling made clear the regulator was against excessive concentration in local markets, which would make it difficult for GWR's competitors to forge mergers.
"Our view is that 'thick consolidation' - in a single local market - is going to be difficult but 'thin consolidation' [national deals] are actually supported by the [Competition Commission] inquiry," he said.
However, reporting full-year results, Mr Bernard said GWR would not suffer from the problem of overlapping local stations if it tried for a tie-up with any of the other major radio groups, while they would all have problems if they went for a deal among themselves. In particular, he said the Competition Commission outcome went against any tie-up between Capital Radio, the market leader, and Chrysalis. "It's difficult to see now how that deal would pass muster with the competition authorities," he said.
Mr Bernard said Capital would find the local concentration concerns would also prevent any combination of Capital, Emap, Chrysalis and Scottish Radio Holdings. GWR, Capital and Emap are the three biggest radio groups, while Chrysalis and SRH are the other sizeable players.
Under legislation now passing through Parliament, the main radio groups are allowed to merge for the first time, as long as any deal leaves two commercial operators in the relevant region or regions. However, until GWR's proposed Bristol acquisition came before the regulator, it was not clear how this liberalisation would be interpreted. GWR had bought Galaxy 101 in Bristol jointly with SRH. But GWR is already a leading player in the Bristol area and the commission objected to this further concentration of local power. Yesterday GWR announced it would sell its share of Galaxy to SRH, for £17.6m.
For the year ended 31 March, GWR announced pre-tax profits, before exceptional items, of £8.6m, up £900,000.