Newly-merged radio network Southern Cross Austereo, which held its AGM today, is trying to avoid selling radio licences it undertook to dispose of earlier this year and has commenced Federal Court action to prevent the media regulator ACMA from enforcing the requirements of the Broadcasting Services Act.
Last week the company, chaired by Max Moore-Wilton and headed by industry veteran Rhys Holleran, advised the ASX that it had commenced legal action against ACMA to compel the regulator to reconsider the company’s application for a reduction in the overlap between the Nambour and Brisbane radio licence areas. Because of the boundary overlap they are treated as a single licence area for the purposes of the BSA, so SCA must sell two of its FM licences in the Brisbane-Nambour area (it currently owns four) in breach of the Act. It acquired the Brisbane licences when Southern Cross acquired Austereo in a merger advised by Southern Cross’s part owner Macquarie Group earlier this year.
Problematically, however, the company lodged an enforceable undertaking with ACMA back in March committing it to selling two licences within a year. Sunshine Coast licences Mix FM and Sea FM have been on the market since then, but remain unsold. Now the company claims there are “strong technical and demographic grounds to remove part of the southern portion of the Nambour licence area”.
Radio licence areas often overlap because of the relative strength of broadcast signals and local propagation conditions. The BSA says that if areas overlap by more than 30%, they are to be considered for regulatory purposes as a single licence area. Earlier this year, ACMA calculated that Nambour overlaps Brisbane by 32.78%, based on 2006 Census data. That is, nearly a third of the people in the Nambour licence area get radio from Brisbane licensees. A new calculation of the overlap won’t be possible until 2011 Census data becomes available in June next year. While population growth has slowed in recent years in the region, it is still one of the fastest-growing regions in Queensland, making a fall in the overlap an unlikely eventuality.
But what’s interesting about the 32.78% calculation is ACMA didn’t calculate that because of Southern Cross’s acquisition of Austereo — it did it because Lachlan Murdoch had already been caught in the same overlap trap.
In fact, the Nambour-Brisbane overlap is well known and other media companies have avoided it by disposing of assets or withdrawing from businesses. Murdoch and his Illyria right-hand woman Siobhan McKenna found themselves in breach after they joined the board of Prime Media, when Illyria already owned half of DMG. The two companies owned four licences in the Nambour-Brisbane area between them. Murdoch quit the Prime board in November last year and McKenna quit the DMG board and the board of Illyria’s radio arm at the same time. ACMA pinged them both but took no action.
Murdoch wasn’t the first mogul to fall afoul of the Nambour overlap. In 2004, when DMG successfully bid for a new FM licence in Brisbane, it found itself in breach courtesy of the Nambour overlap. The then-ABA gave DMG and its controlling company, led by British media owner Jonathan Harmsworth AKA Viscount Rothermere, six months to offload licences. And when Macquarie Media Group first acquired Southern Cross in 2007, it too was required to deal with the overlap.
So while ACMA acknowledged that in the cases of Murdoch and McKenna it didn’t take any action because of “overlap complexities”, Southern Cross Austereo can hardly have been unaware of the issue. But it is the first to try to fight the basic premise of overlaps.
Under the 2006 changes to the BSA, ACMA can approve breaches of media ownership limits while companies rectify them in the aftermath of mergers. However, it was also given the power to accept enforceable undertakings and the SCA’s case differs from previous ones in being the subject of a legally enforceable undertaking to dispose of two licences. Now that SCA apparently wants to welsh on its commitment to sell the licences, it has two problems: overturning ACMA’s overlap calculation and disposing of the undertaking.
It is standard practice for media companies to try to game the system by breaching ownership limits and then using legal action to delay or derail attempts by the regulator to implement the requirements of the BSA. Macquarie Bank was pinged by ACMA in 2007 after it flogged several radio licences to an investment company to which it had loaned funding, which prompted an amendment to the BSA to make clear financial relationships were one of the criteria by which “control” of licences should be judged.
But the enforceable undertaking adds a new element to the hurdles facing media companies. ACMA says it will only withdraw or cancel an undertaking in “exceptional circumstances”. If SCA withdraws the undertaking, it opens itself to prosecution for breaching ownership limits. And a breach of the undertaking — a failure to sell two licences by March next year — opens SCA to civil penalties for breaching the undertaking. Gaming the system now isn’t as simple as it used to be.
SCA chief Rhys Holleran, in Melbourne for the company’s AGM, did not respond to Crikey’s request for comment by deadline.