Anticipated acquisition by Capital Radio plc of the remaining shares of Tainside Limited

Affected market: Radio broadcasting

No. ME/1548/03

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, assessment, and decision.

The OFT's decision on reference under section 33 given on 23 February 2004

PARTIES

Capital Radio plc (Capital) owns and operates 20 commercial radio stations across the UK, including three London-wide services: Capital FM, Capital Gold and Xfm.  Capital also either owns outright, or has a shareholding in consortia that own, 14 local/regional commercial digital radio multiplexes, as well as 50 digital sound programme service licences.  In the year to September 2002, Capital had a turnover of £120m.

Tainside Limited (Tainside) owns 100 per cent of the issued share capital of Soul Media Ltd (Soul Media).  Soul Media is the Tainside subsidiary which holds the two Choice  radio licences in London and operates the two London Choice radio stations.  Choice FM broadcasts in South London and Choice 107.1FM in North London.  Both Choice stations are primarily targeted at listeners of African and Afro-caribbean origin, with some cross-over appeal to other listeners who appreciate urban contemporary black music.  In the 15 months to September 2002, Tainside had a turnover of £2.5m.

TRANSACTION

In 2001 Capital acquired 19 per cent of the equity in Tainside together with an option to acquire the remaining 81 per cent.  That acquisition gave Capital a right to appoint one director to sit on the Board of Tainside, which in effect gave Capital material influence over Tainside (the initial transaction).  Following the initial transaction, Capital assumed the sale for Choice's national advertising airtime, while Choice continued to sell its local advertising airtime.

On 19 November 2003, Capital announced its intention to exercise the put and call option to acquire the remaining 81 per cent of shares in Tainside.

JURISDICTION

As a result of this anticipated transaction, Capital and Tainside will cease to be distinct.  The transaction will create a relevant merger situation under section 23(1) of the Enterprise Act 2002.

ASSESSMENT

This transaction results in Capital increasing its shareholding in Tainside from material influence to sole control.  The increment to overall share of advertising revenue in London is small, indeed less than the loss of market share by Capital over the last couple of years, and as Capital assumed all national advertising sales for Choice in 2002, this transaction only impacts on sales for local advertising in London.

The increment to share of local advertising sales is very small but as Capital's share is high, the HHI increase suggests potential concerns.  However, this is a highly differentiated product market and the stations operated by Capital and Choice do not appear to be close competitors.  Choice is a niche station that promotes contemporary urban music that attracts a distinctively different audience and advertiser than the traditional Capital audience.  Secondly, the change of control is one of material influence to sole control.  For both reasons, the HHI is likely to overstate the impact of the transaction.  In addition, Capital has been losing both listeners and advertisers since the Initial Transaction in 2001, which suggests a competitive market place.

These factors are reinforced by the lack of concern shown by third parties.  Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.

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