It’s close to showtime for Philadelphia radio operator Entercom Communications Inc.
Shareholders in the Bala Cynwyd-based company will vote on Wednesday morning at Center City’s Hotel Sofitel on a $4 billion merger with the iconic and revenue-challenged CBS Radio group., owner of six Philadelphia radio stations. The deal, negotiated in February, will make the operate-under-the-radar Entercom the nation’s No. 2 radio group behind debt-laden iHeartRadio.
So far the complex transaction has cruised through federal regulatory approvals — both the U.S. Justice Department and the Federal Communications Commission approved it — and it could close Friday.
But then the real work begins for radio heir and Entercom CEO David Field, who has watched the Entercom share price drop about 30 percent this year on weak radio revenue trends, airwaves saturated with commercials, and threats from the likes of Pandora. On top of that, CBS Radio needs a large-scale turnaround.
“I’m not saying [Field] can’t do it,” said Marci Ryvicker, media analyst at Wells Fargo, on Monday. “But I have seen this play out in other industries.”
Among the immediate issues facing Entercom: replacing on-air sports talker Craig Carton at CBS Radio-owned WFAN in New York. The acid-tongued Carton, 48, co-hosted the Boomer & Carton show with ex-NFL quarterback Boomer Esiason. He was arrested in September and charged in an alleged Ponzi scheme. He resigned from WFAN and pleaded not guilty to federal charges this month. Carton’s lawyer has said he will fight the charges.
When asked about it on a Nov. 2 analysts call, Field said that replacing Carton will be a CBS Radio and WFAN decision. But he added that “it’s a pretty good gig. And I think there are a lot of people around the country who would love to be a featured personality on WFAN. It’s a plum job, and I have every confidence that it will be filled with somebody great.”
New York Daily News and Newsday first reported on Tuesday and it was confirmed by Philly.com that WFAN had hired WIP’s Chris Carlin as part of a new afternoon drive team. In addition to WIP, Entercom will gain ownership of KYW-AM (news), WTDY-FM (contemporary), WXTU-FM (country), WPHT-AM (news/talk) and WOGL-FM (classic hits) through the CBS Radio deal.
But Field — son of Joseph M. Field who founded Entercom in the late 1960s — realizes that there are deeper woes with CBS Radio.
“We have gone out and done dozens of research studies in markets all across the country and have essentially a playbook now of what we can do to improve programming across a number of [CBS Radio] stations, and we believe [will] lead to higher ratings,” he said on the analysts call.
Radio insiders say that if anyone in the industry can make Entercom/CBS Radio work, it’s Field.
But they note that the New York-based CBS Radio is much larger than Entercom and has been poorly run. The combined company will own 235 radio stations in 48 markets, reaching 100 million listeners. An Entercom spokeswoman did not return an email or phone call for comment.
Analyst Ryvicker said that the weak Entercom stock price seems related to technical aspects of the CBS Radio transaction – which is encouraging some investors to short Entercom stock and buy CBS Corp. She has an outperform rating on Entercom stock, with a price target of $15 a share.
Entercom stock was down 7 cents to $10.38 on Tuesday morning.
Entercom executives have satisfied Wall Street’s concerns with $100 million in merger synergies, or cost cuts, and a recent a recent dividend hike, resulting in a 3.5 percent yield, Ryicker said. Entercom also has said it would buy back stock.
Still, the radio industry revenue trends aren’t a cause for celebration and stations are facing pressures to cut prices for radio advertising.
Entercom has projected to grow revenues 2 to 3 percent a year. But Ryvicker said: “We choose to be conservative” and project a 1 percent revenue growth, or flat revenue, as more realistic.