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When Worlds Collide: Analysing the 2CH Dilemma


Frankly, John Singleton and Alan Jones’ recent public attacks on ACMA have concerned me greatly.

Yet, in this day and age, I guess I shouldn’t really be surprised.

Using mass media to sell your displeasure or contempt of anyone, who dares to stand in the way of a deal, seems to be regarded as standard negotiating practice by many business people these days.

You may recall when negotiations for the purchase of the Fairfax stations stalled several years ago, John Singleton launched a highly publicised verbal attack on the-then Chairman of Fairfax, Roger Corbett, eventually dismissing it all by simply saying ‘we’re old mates’.

Many of us also remember Mr Singleton’s ‘guest’ appearance on the Alan Jones Show, where he used his own station, 2GB, to vent his frustrations over those Fairfax negotiations.

In retrospect, perhaps the lesson that should have been learned from that whole Fairfax Radio negotiation process was ‘be careful what you wish for, it just might come true’.

Singleton’s Macquarie Radio did, of course, end up striking a deal with Fairfax Radio and the two companies merged; MRN effectively acquiring the stations they had been so eagerly coveting.

However, right now, they have found themselves saddled with all the legal obligations resulting from that merger process.

It should be remembered, MRN went into the merger with their eyes wide open; they had the best of legal advice.

Looking for a sensational headline by screaming “who do they (ACMA) think they are” to a bunch of reporters, to my mind, is not the most appropriate way to handle a complex legal situation that should be clearly dealt with in private discussions.

WHO they are, Mr Singleton, is your broadcasting regulator, and, as such, they deserve some respect.

Unfortunately, the targets of the Singleton and Jones’ attacks are the professional public servants, who administer ACMA, and, they don’t have the luxury of getting into a public slanging match or fighting back when they’re publicly criticised.

Their hands are tied.

Nonetheless, all that aside, the one thing that’s abundantly clear is that the 2CH sale has definitely become a complex legal situation.

It’s easy, when you’re a broadcaster, to treat a radio licence as your own property .... as an asset that no one can take away from you.

However, here is the reality under which all broadcasters operate.

While you may own the business that operates a radio station, you never ‘own’ the licence.

It’s only ever yours, on loan, no matter how much you perceive that you paid for it.

Commercial radio licences actually belong to the people of Australia.

As a radio station operator, you are simply the trustee of the licence, until the next licensee takes over.

The regulator’s role is to make sure all broadcasters play by the current rules and within the limitations of their licence.

In this case, it’s the laws that existed at the time of the MRN-Fairfax Radio merger on 1 April 2015 that are important.

Right now, the rules are quite clear – two stations to a market – no more.

Sure, there have been various political discussions about changing the law on media ownership, but they haven’t changed as yet, and, at this point in time, there’s no certainty they will.

At the time of the MRN and Fairfax Radio merger, it was clear that 2CH would have to be divested.

Everybody in the industry knew that, none better than John Singleton and the MRN board.

MRN was clearly so excited to be getting the ‘keys to the Fairfax Radio Kingdom’ that they probably would have, metaphorically, signed away their first-born to get that deal done.

What they actually did was to sign a legally-enforceable Divestiture Agreement for 2CH, which I am sure they thought would never need to be exercised because they’d expected to be immediately inundated with so many lucrative offers.

ACMA has been more than reasonable over the past 18 months by allowing several time extensions from the original deadline for the sale of 2CH.

No doubt, ACMA would have been concerned about any fallout within the wider industry if its original deadline had meant Macquarie Radio could be unreasonably squeezed by potential buyers, so they appear to have handled it all very sensitively and very sensibly.

Price negotiations get pretty tough in the broadcasting business, especially when you are talking low rating AM stations.

Now, ACMA clearly believes, and I agree, that they have been more than generous in granting extensions and time has run out.

The Divestiture Agreement is now being enforced and an independent person has been empowered to sell the station.

That ‘independent person’ is a representative of the major accounting firm, Deloittes, who were previously MRN’s auditors.

A number of very reasonable offers have reportedly been made during the past 18 months, but apparently not reasonable enough for MRN.

Those offers have been saying, in essence, ‘the marketplace doesn’t see the value in 2CH that you believe it’s worth’, and, it’s always a frustration in business when potential buyers are conveying those sorts of messages to you.

There have allegedly been other offers presented, which ACMA has subsequently given the thumbs down to, allegedly because they were not considered ‘arms length’.

Sometimes, when ACMA rejects offers that it determines aren’t arms length, it is because it is concerned that a station may be being ‘parked’ with a friendly buyer while its previous owners wait for the some favorable change to the media laws, so they can buy it back and keep operating.

This type of ‘warehousing’ of media assets was outlawed several decades ago.

Now, I am not suggesting in any way that this was the basis of ACMA’s concern in respect of those specific offers for 2CH, but it is certainly one of the primary areas the Authority has an obligation to consider in its approval process.

The regular requests to ACMA for extensions on the 2CH sale also had many people in the industry speculating that Macquarie Media may have been quite happy to continue legally extending the sale process as long as possible, in the hope that the media laws would change in the interim, and, they may be able to keep all three stations in Sydney.

If that were really the case, it would have been a very risky play.

Regardless of whatever the circumstances may be, the regulator has now simply implemented its legislative obligations and is now forcing the sale of 2CH.

In doing so, it is safeguarding the interests of the Australian public, who actually own the airwaves, and, by extension, the 2CH licence.

The Authority is doing precisely what it is supposed to do.

Macquarie Media may stand to lose millions over their earlier ‘arms length’ offers for the station, but, so be it.

That is the Law as it stands.

If you want to play commercial Russian Roulette with the marketplace against the Regulator’s deadlines in the hope of holding out for a better price, then what do you expect will happen when time eventually runs out?

I do not believe, under any circumstances, including a future change in media ownership laws even before the station is sold, that the Regulator, or the Minister, should be persuaded, publicly or privately, to allow Macquarie Media to retain 2CH.

The law was clear on the day MRN and Fairfax Radio merged and the company should not be rewarded by any subsequent change in the law, that may give them a significant commercial advantage over other broadcasters.

If Macquarie Media and its shareholders don’t want to play under the current laws and regulations that bind every other commercial radio operator, then, the solution is simple - get out of broadcasting.

Disclosure: Brad Smart and several of his companies have had commercial dealings with Macquarie Radio Network (MRN Ltd) in the past (2011). As a result of those dealings, Smart and one of his companies initiated legal proceedings against MRN Ltd. in 2015.

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