Newspaper: UTV and CML may sue IRTC

Sunday Business Post
UTV and CML may sue IRTC

Sunday Business Post – February 4th 2001

UTV and CML may sue IRTC

Will Goodbody

UTV and County Media Limited (CML) could sue the Independent Radio and Television Commission (IRTC) if the proposed £31.5 million takeover of the Cork-based media group by UTV falls apart, The Sunday Business Post has learnt.

Last week the IRTC said it could not allow the takeover to proceed as it breached the commission’s policy of favouring local ownership. Although UTV and CML are still studying the decision, it is understood that both companies have been advised that if they are forced to call off the deal, they may have grounds to sue the IRTC for damages.

The IRTC suggested that a compromise could be worked out and sent more elaborate details of its decision to CML last Friday. However, an informed source said that if the two companies were not happy with the situation, they would take the matter to the courts in the next few weeks.

“We have indicated a number of quite positive things to them in the letter and we would hope that having reflected on that they would be in a position to reactivate a proposal with us,” said Michael O’Keeffe, chief executive of the IRTC.

Elsewhere, the Storm FM consortium, which lost its Supreme Court appeal against the IRTC decision to award the Dublin city and county youth radio licence to Spin FM, will return to the courts on Thursday to discuss the awarding of costs.

The Supreme Court ruled that IRTC member Dr Colum Kenny had not been biased in his decision regarding the awarding of the youth radio licence to Spin FM.

O’Keeffe said the IRTC would be seeking its costs for both actions which would be about £80,000. If the court finds in favour of the IRTC, the Storm FM consortium, which includes night-club owner John Reynolds, music manager Louis Walsh, designer John Rocha and U2’s The Edge, could face a legal bill in excess of £160,000.

A spokesman for Storm said they were obviously disappointed with the decision but declined to comment further until the consortium had studied the judgement in full.

Fat lady yet to sing in Cork radio decision

Will Goodbody

“Bizarre”, “strange” and “muddled” — just some of the words used by industry watchers to describe last Monday’s decision by the Independent Radio and Television Commission (IRTC) not to approve the proposed £31.5 million takeover by UTV of Cork radio group, County Media Ltd (CML).

The decision seemed even more surprising in the context of an approval from the Minister for Enterprise, Trade and Employment, Mary Harney, for the takeover on Thursday.

But although some in the broadcasting business found the IRTC’s rejection difficult to fathom, it did not come as a complete surprise. IRTC chairman Conor Maguire had previously stated that the sale could breach IRTC guidelines on ownership.

These guidelines say that existing media operators cannot own more than 27 per cent and a single group cannot own more than 46 per cent of any given station. The making of such a statement in public before the commission had formally considered the deal is thought to have aggravated management at UTV, an informed source said.

However, what did come as a surprise to all concerned was the IRTC’s reasoning for rejecting the application. Rather than rejecting it on the basis that UTV, which already broadcasts into Ireland, would contravene IRTC policy by owning 100 per cent of County Media, the 10-member body took another tack.

In a statement, the IRTC said that while it acknowledged the many positive aspects to the proposed involvement of UTV, its policy was “to favour a strong local representation in the ownership structures of local radio services”.

The statement continued: “This local ownership has, in the Commission’s experience, been important to the local character of the service and has been one of the key factors in ensuring the success of local radio.”

Some interpreted the commission’s reliance on this reasoning as an attempt to establish a second argument against the proposed takeover, in the event that the UTV chooses to challenge the decision in the courts. However, in both cases, the IRTC’s argument seems to be weak and, at times, self-contradictory.

To begin with, UTV and CML had argued to the IRTC that sufficient safeguards existed within the contractual arrangements between the radio stations and the IRTC to protect the local ethos of the service.

In addition, The Sunday Business Post has learned that UTV had given an undertaking to the IRTC that there would continue to be considerable local input into the running of the three stations owned by CML through the CML advisory board. UTV recognised that CML was well run and did not wish to meddle with it, an informed source said.

Secondly, while all three of the applicant stations short-listed for the potentially lucrative new radio licence for Cork city and county have some local investors, a closer look at the overall shareholding structure reveals that in each case a large amount of the interest is far from Leeside (see panel).

Under current proposals, a total of 52 per cent of the shares in Magic FM would be held by existing shareholders in Dublin station Lite FM. Forty per cent of the shares in Redhot FM would be controlled by shareholders and senior executives of Dublin’s FM104.

Beat FM, the third applicant, also has a strong Dublin influence in the form of majority shareholder Radio Ireland’s 40.5 per cent holding. Indeed the IRTC’s decision to even short-list the Beat FM application, given that the Radio Ireland stake breaches the ownership guidelines, in itself caused a few eyebrows to be raised.

When questioned by Maguire at the oral presentations of licence applications in Cork last week about why the consortium had made an application which clearly breached the guidelines, Willie O’Reilly of Beat FM replied: “We are asking the IRTC to look at the guidelines because we have always seen them as that, rather than statutory regulations.”

O’Reilly later told The Sunday Business Post: “We feel the guidelines are punitive for our shareholders considering the amount of expertise and the amount of insight and industry knowledge we bring to the grouping. If our proposition is the best proposition for Cork, then we would like to sit down with them and if they want to talk about shareholding, we’ll talk about it.”

However, should the Beat FM application be successful in its current format, the door could be thrown open to a legal challenge from one of the other unsuccessful applicants. A number of the consortia who failed to even get short-listed for oral hearing are believed to be extremely aggrieved that another application which is contrary to IRTC policy made the cut.

Finally, the IRTC’s announcement in December that it had given approval in principle to British television company, Granada Media, taking a 45 per cent share in TV3, casts further shadows on the reasoning behind the UTV decision.

At the time Maguire said Granada had a “wealth of experience and knowledge to bring to the Irish market”. But presumably UTV contends that it could bring similar expertise to the Irish local radio market.

In last week’s statement, the IRTC indicated that it would be reviewing its ownership policy at its next meeting in April. Given that large print-based media organisations, which in some cases are foreign owned, have been allowed buy out Irish local newspapers, and considering the IRTC’s lack of clear policy on the subject of ownership, most industry sources feel a considerable change in policy is long overdue.

Such a change of policy could enable the UTV bid to be reformatted in consultation with the IRTC, retabled and subsequently accepted. It is unclear whether a commitment to change by the IRTC could convince UTV and County Media not to apply for a judicial review and hold out until April. However, one way or the other, industry analysts are agreed that the deal is certainly not yet dead.

The reality is that although local radio reaches a large audience, the industry itself is a small world and for some time the pool of potential experienced and willing investors has been slowly evaporating away, industry sources said.

The time has come, many feel, to allow large players use their money and expertise to develop the local airwaves. Indeed, by including Radio Ireland as a 40.5 per cent shareholder, Beat FM — like Granada and UTV before it — is “putting it up” to the IRTC to let the bigger more experienced players take worthwhile stakes in the market.

It would certainly be ironic if in the same week as the state appointed body won a protracted court challenge to one of its earlier decisions, it had made another decision which led to a similar fate.

On Friday the Supreme Court turned down an appeal by unsuccessful applicant for the local Dublin city and county youth radio licence, Storm FM, against the decision to grant the licence to Spin FM.

But as one industry source said about the UTV debacle last week: “The fat lady hasn’t sung yet.”

The three contenders for the new Cork city and county radio licence are Magic FM, Redhot FM and Beat FM. All three presented their applications to the IRTC and the public in Cork last Monday. A decision is due by the end of February

Magic FM

25-44 age group. Total share capital pledged — £2 million

Fox Radio Limited

27 per cent (£350,000)

A recently-incorporated investment vehicle with the stated intention of acquiring further interests in Irish radio stations. Its directors include Lite FM executives Scott Williams, Howard Block and Martin Block.

Lite FM

10 per cent (£250,000)

Local easy listening station which went on air on May 25 last year.

Registered directors of the holding company, City Broadcasting Limited, are Scott Williams, Martin Block, Howard Block, Travis Baxter and Deirdre Kelly.

Gerry Murphy — 15 per cent (£297,500) — Entrepreneur, deputy-chairman of Sherry Fitzgerald Group, founder of private venture capital company Strategic Equity Partners, Lite FM shareholder and former director of First Active Building Society.

Radio Kerry

15 per cent (£277,500)

Eleven year old local radio station. The company’s shareholding is made up of a broad coalition of commercial and community interests within the county.

David Hammond — 10 per cent (£225,000) — Freelance consultant and former general manager of Today FM.

Dennis Kelleher — 10 per cent (£250,000) — Cork-born director of the Irish Investment Fund and ceo of New York based brokers Wall Street Access.

Staff Share Scheme — 5 per cent (£125,000)

Others — 8 per cent (£225,000)

RedHot FM

Youth station. Total share capital pledged — £650,000

Thomas Crosbie Holdings — 20 per cent (£130,000) — Operators of The Cork Examiner Group, Thomas Crosbie has an annual turnover of £42 million. It also has interests in County Mayo Radio and North-West Radio. Nominated directors are Alan Crosbie and Anthony Dinan.

Vivian Nathan — 20 per cent (£130,000) — Director of HLB Nathans, one of the top 20 accountancy firms in Ireland.

Henry Condon (aka Henry Owens) — 10 per cent (£65,000). Henry Owens is programme director of British radio station Virgin Radio and was a founder of Atlantic 252.

Jim Aiken — 5 per cent (£32,500) — Well known promoter, having worked with acts such as The Rolling Stones, David Bowie and Bruce Springsteen. Was actively involved in the turnaround of FM 104.

Maurice Cassidy — 5 per cent (£32,500) — Operates 57th Street entertainer/artiste agency and FM 104 shareholder. Also promoted Riverdance.

Pearse Farrell — 5 per cent (£32,500) — Founder of chartered accountants, Farrell, Grant Sparks and director of FM 104.

Dermot Hanrahan — 7 per cent (£45,500) — Dermot Hanrahan is chief executive of FM 104 and a director of Larger Than Life, Independent Broadcasters of Ireland, Fusio Limited and Flycatcher Ltd.

Ulick McEvaddy — 5 per cent (£32,500) — Responsible for the biggest private investment in the Horan International Airport in Knock, Co Mayo. Founder director of aircraft leasing company Omega and director of FM 104.

Deanna Hallett — 3 per cent (£19,500) — Chairman of Hallett Arendt, a British based radio research and marketing specialist company.

Others — 2 per cent each (£13,000) — Tim Fenn, financial director of FM 104; Colm Hayes, programme director of FM 104; Margaret Nelson, sales director of FM 104; Dave Kelly, music director and deputy programme controller of FM 104; Helena Kelly, marketing manager of FM 104.

— Management shares — 10 per cent.

Beat FM

15-34 year olds. Total share capital pledged — £1.5 million

Radio Ireland

(Today FM) — 40.5 per cent (£636,500)

The national commercial radio licence holder, Radio Ireland’s main shareholders are Broadcast Holdings, Scottish Radio Holdings, Dermot Desmond’s IIU, ICC Venture Capital and ICC Bank.

Frank Boland — 20 per cent (£314,000) — Former chairman of Aer Rianta, Boland has served on the board of many companies including Beamish and Crawford and Cork Communications. Currently he is a Commissioner of Irish Lights and honorary chairman of Cork Business News. He is also chairman and managing director of all companies within the Boland Group.

Joe O’Herlihy — 10 per cent (£157,000) — Cork-born sound engineer who has worked with well-known names such as Rory Gallagher, U2 and REM. Also a board member of the City Arts Centre.

Roy Keane — 4 per cent (£62,800) — Cork-born Manchester Utd and Irish international football team captain.

Denis Irwin — 4 per cent (£62,800) — Cork-born Manchester Utd and retired Irish international footballer.

Liberty Asset Management — 10per cent (£157,000) — Irish financial services company whose directors include founder Ian Lawrie, Marie Ainsworth, Kevin O’Shaughnessy and Brian Tyrrell.

Squareball Ltd. — 7 per cent (£109,900) — Irish multimedia company which will operate the Irish franchise for, the internet sports site. Directors and shareholders include sports journalist Cathal Dervan, Domhnail Dervan and Fintan McMahon.

Management shares — (4.5 per cent)