FCC rules near: Media giants gird for merger mania

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The Federal Communication Commission's June 2 vote on loosening media consolidation rules is expected to spark a landgrab for media properties.

Even as the proposed rules changes trickle out, some media company executives are already examining deals.

William Dean Singleton, vice chairman and CEO of the Media News Group, is eyeing TV stations in cities where the company owns newspapers. Such cross-media purchases are currently barred, but the new rules are expected to allow newspapers and broadcasters to buy each other in all but the smallest markets.

"We have some ideas on what we would do, but I can't go shopping `til they open the store," said Mr. Singleton. "We might buy broadcast properties in several markets. In Salt Lake City [where the company owns the Salt Lake Tribune], we would be very interested." He acknowledged he was also looking in Denver, home to Media News Group's Denver Post.

hands full

In Boston, there was speculation News Corp., which sold the Boston Herald to a former Murdoch executive Patrick Purcell a decade ago to permit broadcast purchases, might reacquire the paper. Lachlan Murdoch, deputy chief operating officer of News Corp., which owns one daily in America, The New York Post, said he does not expect any American newspaper acquisitions "in the near-term." He said the company "has its hands full" after buying a controlling stake in Hughes Electronics Corp., the parent of DirecTV.

Mr. Murdoch suggested that another rule change, allowing a broadcaster to reach up to 45% of TV households (up from 35% in the current rule) could draw greater attention. "Our strategy is to focus on the top 25 markets in the U.S., and-where we can-acquire and operate duopolies in those markets," he said.

Mel Karmazin, Viacom president-chief operating officer, told a Senate committee last week that loosening current rules was necessary to maintain expensive sports programming on free broadcast TV rather than on cable or pay TV. He declined to name potential acquisition targets: "We don't discuss any deals we are thinking about."

FCC Commissioner Jonathan S. Adelstein, who last week unsuccessfully sought to delay the vote and warned about the FCC acting too precipitously, said, "I've heard a number of deals have [already] been made on a handshake." The vote is expected to be challenged in court by all sides and legislation was introduced in Congress last week to keep the 35% cap.

`flabbergasted'

Some analysts suggest the dealmaking will be hampered by high purchase prices. "Some of the more logical [acquisition] targets" already have an acquisition premium embedded in their stock prices, said Bear Stearns analyst Kevin Gruneich. Ed Atorino, an analyst with Blaylock & Partners, said market conditions aren't conducive to a sudden flood of deals. "Newspapers who want to buy TV will take their time. Earnings are down, and broadcast properties valuations are pretty high."

Media buyers reacted angrily to the specter of further ownership concentration. "I'm flabbergasted," said Jean Pool, exec VP-director of North American operations for Interpublic Group of Cos.' Universal McCann. "We should all understand what oligopoly means."

Neither the American Association of Advertising Agencies nor the Association of National Advertisers has taken a position on the FCC proposal, citing the mixed views of their members. But some senators and public-interest factions said the shift would facilitate a boost in ad rates.

"We are talking about market power," said Sen. Conrad Burns, R-Mont., a former broadcaster and ad salesman. "We are talking about the advertising dollar."

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