Date: Thu, 18 Dec 1997 23:34:03 GMT Server: Apache/1.2.4 Last-Modified: Tue, 16 Dec 1997 21:41:27 GMT ETag: "17a97-1462-3496f587" Content-Length: 5218 Accept-Ranges: bytes Connection: close Content-Type: text/html
The Company recognized two significant factors that made expansion into the Australian market attractive. First, beginning in 1992, the Australian government relaxed broadcasting laws, allowing for 100 percent foreign ownership of radio properties. Second, this same legislation allowed for duopoly (ownership of two stations in the same market for the same service - AM or FM) in radio, changing the economics of the industry for the better. However, it was not until the Summer of 1994, that a significant opportunity came available that warrented our management's time and energy.
In the Spring of 1995, the Company entered into a transaction that combined the radio operations of three Australian entities to create the Australian Radio Network Pty Ltd (ARN). ARN combined Wesgo Limited, a publicly-traded company recently acquired by Australian Provincial Newspapers, with the Australian Radio Network, which had been owned by the Albert Family. Gold 104FM in Melbourne was purchased by ARN as a stand-alone station. Those three entities were combined and renamed the Australian Radio Network Pty Ltd, of which the Company owns 50 percent, while Australian Provincial Newspapers owns the other 50 percent.
In July 1996, ARN purchased two of the leading radio stations in Adelaide, Australia, 5ADFM and 5DNAM.
In addition to the opportunity for 100 percent foreign ownership within a rapidly consolidating industry, the Australian broadcasting industry has a number of other factors which are compelling for the Company. Australia has a stable government with a defined licensing process which eliminates the risk of losing any licenses or having new licenses that are not regulated coming into the market. It also had a stable currency which is monitored by a federal reserve board that is attuned to the monetary policy of the United States Federal Reserve. Another advantage is that English is the primary language in Australia, in contrast to other foreign markets where language differences pose significant barriers to entry. All of those factors combined to make ARN an attractive investment.
Having seen the positive effects of duopoly in the U.S., the Company is optimistic about the possibilities of duopoly in Australia. ARN and Austereo, the largest broadcaster in Australia, control approximately 62 percent of radio revenues in the two major cities of Melbourne and Sydney.
ARN, along with other Australian broadcasters, hopes to expand the usage of radio by advertisers in Australia. The long-term goal for the Australian radio industry is to provide a more cost-effective advertising medium. The dynamics of increased radio advertising and increased capital committed to radio advertising should have a significantly positive impact of ARN.
Clear Channel will continue to employ its decentralized management philosophy with regard to ARN. ARN has hired Nigel Milan, the former CEO of Radio New Zealand. He successfully turned around Radio New Zealand which owns and operates over 40 radio stations in New Zealand. We believe Mr. Milan brings a level of intensity and enthusiasm to ARN which will provide strong leadership and prosperity for ARN.
Though globalization has become quite popular for publicly traded companies, Clear Channel has not felt compelled to have an international presence. Our mandate is simply to try to create as much value for our shareholders as possible. When Australia changed its laws in 1992, allowing for duoploy and 100 percent foreign ownership, the Company recognized that it might provide attractive returns on investments. To that end, your Company continues to be opportunistic, rather than expansionary, when evaluating acquisitions in global markets.
The pro forma results for 100% of ARN, after station divestitures, for the year end December 31, 1995, are detailed below. At February 29, 1996, the foreign currency exchange rate was US $1 = A $1.31.
Revenues | A$ 83,242,000 |
Operating expenses | A$ 55,948,000 |
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Station operating income before depreciation and amortization | A$ 27,294,000 |
Corporate/other expenses | A$ 2,765,000 |
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EBITDA | A$ 24,529,000 |