Entercom Moving onto Radio's Center Stage

A company unknown outside the broadcast industry is poised to become the next big player in radio. Entercom Communications Corp, based in Bala Cynwyd, Pennsylvania, has moved to the head of the pack in the race to buy 31 FM and 15 AM stations from Sinclair Broadcasting Corporation. The $824.5 million purchase is being financed in part by a public stock offering that Entercom floated last January.

Another stock offering will help seal the deal, giving Entercom a total of 88 stations nationwide and making it the fifth-largest radio broadcaster in the US. Entercom has been aggressively adding stations to its roster since its December 12, 1998 purchase of Kansas City's WREN-AM from Mortenson Broadcasting for $2.8 million. Since then, stations have been picked up one and two at a time, until the Sinclair deal was announced July 26.

Entercom's acquisition campaign is the latest of a series of mergers and buyouts in the wake of the Telecommunications Act of 1996, which liberalized limits on station ownership. The nation's three largest radio operators—Infinity Broadcasting Corp., Clear Channel Communications Inc., and AMFM Inc.—are now so big that they each generate more than $1 billion annually in advertising revenue. Further growth, however, is limited by the available pool of stations, and by Federal Communications Commission regulations that allow each operator no more than eight stations in a single market. The fact that the big boys are as big as they can get makes maneuvering easier for smaller companies like Entercom—an effect that was intended by the authors of the Act.

But as Entercom has grown, it has begun to bump up against the same ceiling as its larger competitors. It already owns seven stations in Kansas City and plans to unload three of them in order to buy more attractive properties. It is one of the largest radio operators in Seattle, Portland (OR), Boston, Rochester (NY), and Sacramento (CA). After the Sinclair purchase is complete, Entercom will dominate four more major markets: Buffalo, New Orleans, Norfolk (VA), and Scranton.

Former federal prosecutor and tax attorney Joseph Field founded Entercom in 1968, after having an epiphany about the market values of radio stations while he was working on a radio acquisition deal for a client. Shortly thereafter he closed his law practice and began buying undervalued "niche market" FM stations. Business has boomed in the intervening 31 years. Entercom's second-quarter revenues were $55.9 million, with a net income of $7.2 million. Field plans to leverage his radio empire on the Internet, with his stations' websites offering digital downloads to music fans.

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