Charles Allen, the chairman of Global Radio, has criticised the new strategy for GCap Media announced by its new chief executive Fru Hazlitt.
The UK’s largest commercial radio broadcaster is to eliminate digital stations in a major shake-up of the firm, which will see a sharper focus on FM listeners and more investment in London’s Capital Radio.
Mr Allen said he expected “some sort of growth strategy” from GCap, with Ms Hazlitt’s announcement focused on cost-cutting measures. “You can’t shrink your way to growth,” said Mr Allen. “The announcement lacked the passion that’s needed to win people over.”
Ms Hazlitt announced a major strategic review of GCap, widely known as her defence document, as the group has become the subject of a recent takeover approach from Global Radio, the group chaired by former ITV chief executive Charles Allen. Ms Hazlitt said that theJazz and Planet Rock would be closed or sold as the company switched its focus to its FM operations.
The firm, which has about 15 million FM listeners, is to beef up advertising on its flagship Capital 95.8 station, moving to nine minutes of advertisements an hour from a previous policy of no more than two consecutive adverts. It hopes this will boost profits by £3.6 million, as the firm tries to fight off takeover interest from Global Radio.
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Shares in GCap dropped -2.25p to 187.5p in late morning trading as the City absorbed the news.
GCap recently rejected a bid of £313 million from Global Radio, which has been given until March 5 by the City’s Takeover Panel to signal its intentions towards GCap .
Ms Hazlitt, a former head of Virgin Radio, said that the new strategy would deliver cost savings of £8.8 million a year, through disposals and restructuring.
GCap, which owns Classic FM, hopes that the savings will help to boost profit margins to 19 per cent by 2010.
Ms Hazlitt said: “We are structuring the business around the revenue streams that can deliver us the most profit going forward. Planet Rock and theJazz are brands that we do not believe can win for us.”
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In a scathing attack on digital radio, Ms Hazlitt said that take-up of DAB radio had been “incredibly slow”, that it was “not economically viable” and that GCap was doing everything it could to leave the medium.
GCap spent £8 million on digital radio in the fiscal year 2006-07, despite the medium accounting for barely 9 per cent of total radio listeners.
She announced that GCap had agreed to sell its state in Digital One, the national platform for digital stations, to Arqiva, a communications infrastructure firm, for a token £1, and would focus on FM broadcasting and broadband.
She said: “FM is the backbone of the radio industry and we believe it compares favourably to any of the digital platforms currently available to the consumer in terms of quality. It is also the source of the majority of our revenue.”
Ms Hazlitt said that GCap would also sell its loss-making regional Xfm stations in Wales, Scotland and Manchester and would focus on Xfm’s London operations.
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She said that the disposal of Xfm’s regional outlets, as well as theJazz and Planet Rock, would increase profits by £1.5 million.
The group also said today it has new deals to build applications for Apple’s iPod touch and Nokia handsets.