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As stock values go, so do station prices

As the worth of publicly traded radio companies continues to slide, so
do prices for radio stations.

According to station brokers, the 10-month decline in stock prices is
affecting how much radio companies are willing to pay for new stations and the
number of deals. Even the industry's most aggressive buyer, Clear Channel
Communications, is slowing its acquisition pace.

It would be a "fair assessment" that Clear Channel is cutting back on
deal-making, says Randy Palmer, spokesman for the San Antonio-based company.
With "the stock price being at this level ... we have to evaluate all our
opportunities" for spending available cash. That means judging whether it's
better to buy new radio stations or to buy back company stock.

Industrywide, station broker George Reed sees a "definite slowdown [in
station sales] and the deals that are going to get done are going to get done
at lower prices." Reed is director of Media Services Group in Jacksonville
Beach, Fla.

Elliott Evers, a broker with Media Venture Partners in San Francisco,
characterizes the current deal-making atmosphere as more of "a pause while
people try to figure out what [their Wall Street losses] mean to them." While
"we haven't seen any deals canceled ... any publicly financed buyers will be

Radio companies' stock prices have been falling since January as the
growth of radio revenue has slowed. While industry executives say the
astounding 20%-plus revenue growth in the first five months of this year is now
settling to more realistic levels, investors don't see it that way. Wall Street
notes only that growth is slowing (B & C, Oct. 9).

Radio revenue started to decline in June after posting a 25% increase
in May, to $20.1 billion, the biggest take in industry history, according to
the Radio Advertising Bureau. (Percentages reflect comparisons with the same
month a year earlier.) Growth dropped to 14% in June, 11% in July and 10% in
August, the most recent month documented.

Even though radio executives say double-digit growth is commendable,
Wall Street has walloped industry stock prices. Cases in point: As of last
Wednesday, Radio One was trading at $6.125 per share, 79% lower than the
$29.144 at which it closed on Jan. 3. Citadel Communications plunged 72.9% from
the first trading day of 2000, to $16, while Emmis Communications was down
63.3%, to $20.875. Even Wall Street darling Clear Channel has taken a hit,
falling 43.2% last Wednesday to $49.875.

When stock prices get that low, a company can make better use of its
money by repaying debt or repurchasing its own stock than by buying new radio
stations, brokers say. On Oct. 5, Clear Channel gave notice that it might buy
back up to $1 billion of its own stock. Three days earlier, Saga
Communications, which has seen its stock price fall about 22% this year,
increased the size of its stock-buyback program by $2 million, to $6 million.
And Hispanic Broadcasting Corp., of which Clear Channel owns 26%, said on Sept.
27 that it may repurchase up to 5 million shares of its stock.

"A year ago, everybody pretended they didn't care what their stock
price was. Now they're checking it every hour," says Fred Kalil, vice president
of station brokerage Kalil & Co. in Tucson, Ariz.

Privately held radio companies, which do not depend on Wall Street
fluctuations, are now finding relative bargains as stations go for lower prices
than they did just seven months ago, Kalil says. Stations in good-sized markets
are now selling at about 15 times cash flow, down from the 20 to 25 times they
were bringing in March, he says. "The private groups have moved up a notch
because the [station] prices have come down."

The price drops are also encouraging would-be buyers in small markets,
says Bob Connelly of Tampa, Fla.-based brokerage Connelly Co. Inc. "There are
some new companies out there, [and] they see an opportunity in some places
where they can do well. ... They consider this a good market."

Multiples in small markets had reached 12 to 15 times cash flow in the
past few years, Connelly says. "Now, I don't think we'll ever see [those
numbers] again." Multiples are now 10 times, tops, he says. And some would-be
sellers "are mightily regretful that they didn't sell" when prices were

Radio's troubles are not over yet, Kalil says. "It's a question of how
much time it will take to come out." He expects six to nine months to pass
before the wildly fluctuating price of stocks levels off.

Reed expects a correction in "fairly short order. ... These are
fundamentally good companies in a great business, and they will rebound."