Where Will A New Entercom Need To Spin?

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By Adam R Jacobson
RBR + TVBR


BIA/Kelsey SVP and Chief Economist Mark Fratrik — like many industry observers — expected an Initial Public Offering for CBS Radio — not a tax-free merger with another radio broadcast company.

Now, in light of yesterday’s blockbuster announcement, “the dynamics are quite different,” Fratrik notes.

What has emerged — assuming the deal is approved — is a stronger radio industry, he says.

“The combined Entercom-CBS Radio group would be closer to the size of the industry leader – iHeart Media – which only can foster the radio industry’s ability to compete against its many new competitors,” Fratrik says.

The new Entercom will remain headquartered in Philadelphia. But, it will have a “significant ongoing presence in New York,” as Entercom’s Board of Directors will be comprised of the five current Entercom directors and four directors to be nominated by CBS Radio.

Post-merger Entercom will also see the divestment of 15 radio stations, as it will find itself over the limit in six markets.

What’s the next step for these newly maxed-out market clusters?

In a conference call with Wall Street analysts prior to the Opening Bell on Wall Street Thursday (2/2), veteran analyst Anthony DiClemente, Managing Director at Nomura Instinet, asked specifically about spin-offs resulting from CBS Radio’s merger with Entercom.

As it stands, the combined company will surpass FCC ownership limits in six markets, including the No. 1 revenue market in the U.S., Los Angeles.

The other five markets that will see spin-offs are Boston, Sacramento, San Diego, San Francisco and Seattle.

David Field, who will become Chairman/CEO of Entercom following the closing of its tax-free deal for CBS Radio, noted that it will sell one station in Los Angeles.

Meanwhile, one station will need to be sold in the San Diego market, as it can only own five stations in the same band — FM — in the market based on current FCC ownership limits.

Steve Fisher, Entercom’s CFO, tells RBR + TVBR that the company will “not be speculating on any specific brands” that would be spun until paperwork on the tax-free merger is filed with both the Department of Justice and the FCC.

In Los Angeles, CBS Radio owns 50kw Class A clear channel KNX-AM 1070, and five Class B FMs: KAMP-FM 97.1, KCBS-FM 93.1 “Jack FM,” KROQ-FM 106.7, KRTH-FM 101.1 and KTWV-FM 94.7 “The Wave.”

Entercom presently owns Class B KSWD-FM 100.3 “The Sound.”

In San Diego, CBS Radio’s KEGY-FM 103.7 and KYXY-FM 96.5 will now be joined by a trio of stations once owned by Lincoln Financial Media and, prior to that, Jefferson-Pilot: KXSN-FM 98.1, KBZT-FM 94.7, and KSON-FM 97.3. KSON has a simulcast partner — KSOQ-FM 92.1 in Temecula, Calif., and this is what puts a combined Entercom-CBS Radio over ownership limits in the market.

Perhaps the biggest overlap is seen in Northern California.

In the San Francisco-Oakland market, Entercom owns five radio stations: Urban AC KBLX-FM 102.9, Sports Talk KGMZ-FM 95.7, Adult Contemporary KOIT-FM 96.5, Rhythmic Hot AC KRBQ-FM 102.1, and the San Jose-licensed Classic Rocker KUFX-FM 98.5.

CBS Radio’s San Francisco-Oakland station group is comprised of all-News KCBS-AM 740 & KFRC-FM 106.9, Alternative KITS-FM 105.3, Hot AC KLLC-FM 97.3, and KMVQ-FM 99.7.

This means four stations will need to be divested in the Bay Area.

East on I-80, in California’s state capital, CBS Radio owns one AM — KHTK-AM 1140 — and four FMs: KNCI-FM 105.1, KSFM-FM 102.5, KYMX-FM 96.1, and KZZO-FM 100.5.

Entercom’s Sacramento cluster is comprised of one AM — KIFM-AM “ESPN 1320,” and five FMs: KKDO-FM 94.7, KSEG-FM 96.9, KUDL-FM 106.5, KRXQ-FM 98.5, and KDND-FM 107.9 “The End.” KDND is presently the subject of an FCC license review hearing tied to the death of a contestant in the infamous “Hold Your Wee For A Wii” promotion conducted a decade ago by the Top 40 station.

This market will also see the sale of four FMs.

In Seattle, CBS Radio’s KFNQ-AM 1090 “The Fan” is coupled with three FMs: KJAQ-FM 96.5, KMPS-FM 94.1, and KZOK-FM 102.5. Entercom’s Seattle cluster is comprised of four FMs: KISW-FM 99.9, KHTP-FM 103.7, KKWF-FM 100.7 and KKND-FM 107.7.

In the hub of New England — Boston — CBS Radio’s Class A clear channel WBZ-AM 1030 is joined by four FMs: WBZ-FM 98.5, WBMX-FM 104.1, WODS-FM 103.3 and WZLX-FM 100.7.

Entercom’s stations in the Back Bay are comprised of WEEI-AM 850 and WRKO-AM 680, as well as Worcester, Mass.-licensed WAAF-FM 107.3, WEEI-FM 93.7 and WKAF-FM 97.7.

SWAPS OVER SALES

In response to analyst DiClemente’s query, Field said, “We will consider cash sales of these stations, but we do think that swaps are a very likely outcome here – obviously very tax-friendly.”

Field added that swaps represent “a really attractive opportunity for this company to work collaboratively and create some win-wins with some of our peers in the industry.”

Most importantly, it gets Entercom greater national exposure by gaining properties in markets where it may not be present or still has room to grow. Entercom does not have a presence in Philadelphia, but does now. It is also been absent from the nation’s No. 3 market, Chicago. However, Entercom and CBS are still absent from two of the Top 25 markets: Tampa-St. Petersburg, where CBS Radio swapped its stations to Beasley in exchange of its Miami cluster, and Puerto Rico.

 

“In markets where we have more stations than FCC ownership guidelines allow, we will move quickly to make required divestures,” Field said.

But, what if the FCC were to eliminate the sub-cap rules presently in effect, which limit one company to five FMs and three AMs in a single market?

Thus far, no one is suggesting that this is a near-term possibility, although it would allow Entercom to retain eight FM stations in a single market, thus reducing the number of divestments.

Coming into the Entercom fold are a wide array of air personalities who are beloved and household names in their given markets, such as WCBS-FM in New York morning host Scott Shannon and KROQ-FM in Los Angeles’ Kevin & Bean. 

The merger also gives Entercom the radio broadcast rights to some 45 professional sports teams — including the New York Yankees, Boston Red Sox, Chicago Cubs, New England Patriots, Atlanta Falcons, and the Golden State Warriors.

It also gives Entercom control of the CBS Sports Radio Network, and some of the nation’s top all-News stations.

RBR + TVBR