Univision Radio Deal Facing New Static in Washington

By DARRELL SATZMAN
Staff Reporter

Under stepped-up pressure from opponents of the merger of Univision Communications Inc. and Hispanic Broadcasting Corp., the Department of Justice is exploring a novel antitrust interpretation that could block the deal, according to several parties in the matter.

The idea would be to declare a joint advertising market for Spanish-language radio and television stations an unprecedented move that could create new regulatory hurdles for two of the nation's largest Spanish-language broadcasters.

Under current Federal Communication Commission rules, an owner of two television stations in a market, such as Univision in Los Angeles, would be permitted to buy up to six radio stations in that market.

The interpretation being explored would set up different guidelines for Spanish-language stations, making language not types of stations the determining factor in how many outlets a company could own. Owners of these stations would not able to own as many outlets as their English-language counterparts because penetration of the market would be greater, due to the fewer number of Spanish-language stations.

"It's my impression that this is getting a serious look by the Department of Justice, in part because of the aggressive advocacy of opponents of the merger," said Andrew Schwartzman, president of Media Access Project, a Washington-based public interest law firm. "It's unusual, but the case that has been made is anything but frivolous."

Besides its two local stations, Los Angeles-based Univision owns 46 Spanish-language television stations nationwide, as well as a 31 percent stake in Santa Monica-based Entravision Communications Corp., which also owns Spanish-language radio and television stations.

Dallas-based HBC owns five local radio stations and 50 others nationwide.

Because the combined number of HBC and Entravision radio stations in Los Angeles would exceed FCC limits, Univision has sought to restructure its ownership interest in Entravision once the merger with HBC is complete.

For opponents, the most odious aspect of the deal is the role of media giant Clear Channel Communications Inc., which owns eight local radio stations, as well as a 26 percent stake in HBC. That stake would convert to 7.6 percent ownership of Univision if the $3.5 billion stock transaction is approved.

Delay expected

Univision and Clear Channel rivals, led by Spanish Broadcasting System Inc. of Coconut Grove, Fla., have been urging the Justice Department and FCC to reject the deal, charging that Clear Channel is trying to control the national Spanish advertising market.

Univision officials declined comment other than saying that the company is complying with all Justice Department requests and that completion of the deal is still expected by the end of the year.

HBC and Clear Channel officials did not return calls.

"The people at Spanish Broadcasting System are using every device they possibly can to prevent the merger," said one attorney familiar with the matter. "They see themselves as a jilted partner in the consolidation process that's taking place in Spanish media."

Spanish Broadcasting has enlisted David Boies, who served as counsel for the Justice Department in its suit against Microsoft Corp., to argue its case.

"It's probably going to get a little more tedious and time-consuming to get through the process," said CIBC World Market analyst Jason Helfstein. He points out that many investors believe Univision overpaid for HBC, and they are unlikely to be reassured if the regulatory review drags on.

Univision's stock was trading at $25.89 a share late last week, vs. $37.70 in June when the HBC deal was announced.

Spanish Broadcasting maintains that since Clear Channel is the nation's largest radio broadcaster, it and Univision would control advertising rates in a particular market across several media.

If federal officials find that the deal restrains the ability of competitors to raise prices, it could oppose the merger. Calls to the Department of Justice were not returned.

Not everyone believes the deal would have a substantial impact on local ad markets.

Leon Potasinski, director of marketing services for La Agencia de Orci, a large Spanish-language media buyer, said the idea of combining radio and television markets to ensure competition makes some sense in theory. In reality, however, there is little coordination in setting advertising rates among stations in the Spanish advertising market even those stations with common ownership.

"Take a look at what Univision owns now," he said. "It's very difficult to put together a cross platform deal where all the parts are working in sync."

The primary objective of the merger, Potasinski said, appears to be bringing more national advertisers into the Spanish-language marketplace, which would benefit everyone.


Broadcast Properties
Local radio and television stations owned by companies involved in the merger battle.

Univision: KMEX-TV (Channel 34); KVEA-TV (Channel 52)



Hispanic Broadcasting Corp: KSCA-FM (101.9); KLVE-FM (107.5); KRCD-FM (98.3); KRCV-FM (103.9); KTNQ-AM (1020)



Spanish Broadcasting Systems Inc.: KLAX-FM (97.9); KXOL-FM (96.3)

Clear Channel Communications Inc.: KIIS-FM (102.7); KHHT-FM (92.3); KBIG-FM (104.3); KOST-FM (103.5); KYSR-FM (98.7); KFI-AM (640); KLAC-AM (570); KXTA-AM (1150)



Entravision: KSSC-FM (103.1); KCAL-AM (1410)

Source: Business Journal research

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