Radio: Takeovers back on the agenda.

Speculation over SMG move highlights consolidation in commercial radio

by Jim Larkin

With speculation growing concerning a takeover of Virgin Radio owner SMG, experts are predicting that the consolidation that has marked the industry for the last two years is set to open a new chapter.

TalkSport owner Ulster Television is said to be preparing a #300m takeover of SMG which, while viewed as far from a formality by analysts and industry sources, is nevertheless indicative of a widespread belief that there needs to be further consolidation among the commercial radio groups.

"There's a large gap between GCap and Emap and the string of smaller players below them, and it makes sense for consolidation to take place if they're going to compete in the advertising market, with the big two picking up groups where the regulations allow them," says Richard Menzies-Gow, media analyst at Dresdner Kleinwort Wasserstein.

Menzies-Gow believes that within two to three years SMG will either have a different ownership structure or be split up. Its problem, he says, is that it is spread thinly across radio, television and advertising. "It's a bit player in all its markets," he says. "Virgin's a big name, but really it's all they've got in radio. They've tried cross-media selling, but it hasn't really worked."

However, the biggest obstacle to Ulster taking over SMG is funding. Ulster bought the Wireless Group for #98.2m last year and at the end of the 2005 financial year reported bank debts of #120m. As one radio executive puts it, "The SMG deal is a real possibility, but it's not a straightforward transaction because UTV don't have the money."