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New FM licences likely to hit earnings at Austereo Austereo

  

   SYDNEY, March 30 AAP - Citigroup Smith Barney has pared its earnings estimates for Austereo Group Ltd, citing the competitive effects of upcoming FM licences to be issued in Sydney, Brisbane and Melbourne.

   While the influential broker has kept its 2003/04 forecasts for Austereo unchanged, the earnings per share estimate for financial year 2005 has been cut by 4.1 per cent, reflecting the likely impact of increased competition.

   Citigroup said that with the disruptive impact of the first round of FM radio licences still ongoing, incumbent metropolitan radio companies now faced the prospect of another wave of competitive pressure.

   This was in addition to longer term structural threats to the commercial radio industry such as the internet, DVDs, pay TV, gaming consoles and MP3, Citigroup said in a research report to clients.

   "The continuing proliferation of alternative media and entertainment options is likely to underpin a trend of declining radio consumption," it said.

   "This poses a threat to the industry's share of the overall advertising market."

   Eight bidders have lined up to vie for Brisbane's new FM radio licence and six will compete for another up for grabs in Sydney.

   The Australian Broadcasting Authority said last week the applicants for Sydney's licence included British company Daily Mail Group (DMG), Harbour View Radio, Southern Cross and Sydney Radio Company.

   Stations lining up for the Brisbane licence a week later include DMG, Brisbane Radio Company, Star Broadcasting Network, Hot Tomato Australia, ARN Brisbane and River View Radio.

   Each is expected to fetch at least $70 million, particularly when considering the announcement yesterday that Sir Richard Branson wants to bring his Virgin Radio brand to Australia.

   While the Citigroup report was written before the announcement about Mr Branson's joint venture alongside John Singleton's Macquarie Radio Network (MRN), it believes DMG will "bid aggressively" for the licences.

   Since 2000, DMG has spent $295 million buying all or part of five metropolitan radio licenses, four of which boast its Nova brand, with Brisbane the only capital city to not yet have a taste of the youth network.

   "(The new licences) will give DMG the opportunity to create a dual national network targeting different age or gender demographic groups, thereby, further enhancing its appeal to national advertisers," Citigroup said.

   "And the additional fixed costs of operating a second station in each market are relatively low."

   In results released today, Nova continued its dominance of the Sydney radio market, lifting its listener share in 2004's second survey by 0.2 percentage points.

   The gain meant the station finished with an overall audience share of 12.0 per cent, ahead of its nearest rival, Austereo's 2Day FM, which rose 0.3 percentage points to 10.7 per cent.

   Austereo's other Sydney station, 2MMM gained 0.6 points to 6.4 per cent, with chief executive Michael Anderson welcoming the results as an indication the network's recent restructuring was on track.

   "We are ahead of where we expected to be, so naturally, we are very happy with the gains we have made in survey two," Mr Anderson said.

   "Today's survey results demonstrate that our new shows around the country are achieving traction. Our strategy is working."

   Mr Anderson said Austereo would be a year ahead of most of the new stations created by the latest round of licence auctions.

   "Our programming will be the freshest of the existing product available," he said.

   When Austereo released its results in February, chairman Peter Harvie said the group expected revenues to remain flat because of increased competition as more new licences were issued.

   Austereo shares closed today down two cents at $1.38.