Authorities moot Communicorp’s Irish radio expansion

Michael Hedges December 2, 2007

Not to worry, Denis O’Brien has places to go and people to see. Last week he increased holdings in Independent News and Media, becoming its second largest shareholder, and executive recruitment firm Imprint PLC. His mobile phone company Digicel, spanning the Caribbean to the South Pacific, bought the GSM operator in Tonga. And there’s even a possible radio venture in Jordan.

Communicorp’s bid to add all three of Emap’s Irish radio stations to its holdings was doomed from the start. The company owns just one too many Dublin outlets for the Broadcast Commission of Ireland (BCI) and the Competition Authority’s liking.

Communicorp made a deal with Emap in July for €200 million to buy three radio stations – FM104, Today FM and Highland Radio. The regulators said, to no surprise, FM104 must be sacrificed. Communicorp already owns 98FM and Spin 103.8 in Dublin and a minority holding in East Coast FM.

Bidders are said to include TV3, UTV, Vitruvian Partners; NTL’s owner Liberty Global and former FM104 shareholders grouped together as Vienna Investments. That deadline was last Monday (November 26). Local reports suggest none of the FM 104 bids come close to the 14 times cash flow O’Brien paid Emap for the lot. Based on FM104’s most recent revenue statements, that would suppose about €63 million. Local wags say most bids are between €40 and €50 million, which would at worst show the two station deal at 16 times cash flow, about normal for European radio deals.

Following the money, all bidders have strong attachment to private equity funds. TV3 is owned by Doughty Hanson & Company, purchased in 2006 from ITV and CanWest. UTV Media is a major UK and Ireland broadcasting group holding Northern Ireland’s major TV channel and, currently, Ireland’s biggest radio chain. UK private equity firm Virtuvian Partners is suspected of harboring interest in the Emap UK radio stations. John Malone’s Liberty Global is the world’s largest cable TV provider. Money, as you can see, is no object but, apparently, nobody wants to spend recklessly.

O’Brien’s deal appetite is voracious. He leveraged the highly successful 98FM in Dublin for a pan-European radio group of more than 30 stations in 8 countries. Then there was that little mobile phone deal in Ireland that made him a billionaire.

Mobile phone operations being cash-cows almost as big as energy companies, O’Brien started up Digicel, a mobile phone holding company operating in the Caribbean, South America and just getting stated in the Pacific islands. One recent company press release (November 28) touted its contribution to the GDP of Papua New Guinea. Digicel announced the purchase of Tonfon Communications, a wireless network, ISP and TV operator, from Tonga’s King George Toupu V. Digicel remains focused on specific regions where GSM and other wireless networks are underdeveloped and privatization is new, all very similar to the Communicorp model for radio broadcasting in Eastern Europe. Communicorp may be expanding into the Middle East with a joint venture radio development in Jordan.

Closer to home, O’Brien’s interest in newspapers – raising his stake in Independent News and Media (IN&M) – caused the wags to wag almost as much as his call for IN&M to sell off its (UK) Independent newspaper and for chairman Sir Anthony O’Reilly to resign. O’Brien called the Independent a “vanity project.” Ouch! IN&M owns newspapers in the UK, Ireland, South Africa, India, Australia, New Zealand… the list goes on.

Interestingly, there was barely a rumble when he raised his stake in Aer Lingus. Although Ireland being a small country with a closely-held business culture in which O’Brien has a notable presence, he seems not to have escaped the swell of global bank failures. His stake in collapsing investment bank International Securities Trading Corporation (ISTC), yet another casualty of the US subprime mortgage crash, may be lost him €50 million.

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