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The Sydney Morning Herald

DMG bids $80m for Brisbane FM licence, completes set of cities

Author: Wendy Frew
Date: 23/04/2004
Words: 614
Source: SMH
          Publication: Sydney Morning Herald
Section: Business
Page: 17
It was an expensive ``homecoming" for Paul Thompson.

The DMG Radio chief executive, who hails from the Queensland capital, yesterday paid the Federal Government $80 million for a new Brisbane FM radio licence.

Mr Thompson's winning bid at the Australian Broadcasting Authority's latest auction completes DMG's national FM network, adding to licences in Sydney, Melbourne, Perth and Adelaide.

It also makes plans by Virgin Radio Australia an alliance between UK entrepreneur Sir Richard Branson and ad man John Singleton to launch a rival network that bit more difficult.

However, in a market that only generates about $70 million of advertising revenue a year, the Brisbane licence is one of DMG's most expensive on a per capita basis. Last week, Mr Thompson paid $106 million for his second Sydney licence, $1 million more than Virgin offered in a market that generates about $200 million ad revenue.

After that auction, Mr Thompson predicted bidding for Brisbane would be even more aggressive, pushing the price sky high and making losers out of everyone.

``Brisbane was part of the Nova network that was missing so for us it might have had a value that was slightly greater than for anybody else," Mr Thompson said.

``[Brisbane] is absolutely booming, the city has been booming for a long time, the radio market is also booming . . . in fact, for this year so far it is leading Australia quite a long way."

DMG's UK owner, Daily Mail & General Trust, will fund the acquisition. The group has now spent $481 million on seven metropolitan city licences in Australia in the past few years, a market that last year generated total ad revenue of $737 million.

The new Brisbane station will be based on DMG's Nova format, which has rated strongly elsewhere with people aged under 40. Mr Thompson said slight changes to the format might be made but the station would retain Nova's policy of playing no more than two commercials in a row.

No launch date has been set because DMG has only just finished building a new station on the central coast of NSW, has not completed its Adelaide station after winning a licence there in October, and has yet to set a launch date for its second Sydney station.

Mr Thompson said that, on top of the licence price, DMG could expect to pay between $6 million and $7 million to build each station.

DMG's latest win has derailed the plans of its competitors.

Virgin, which pulled out of the bidding at $15 million, is not now expected to bid aggressively for a Melbourne licence due to be auctioned in August.

Rural Press, the only other serious bidder yesterday, was hoping to team a Brisbane station with one it has in nearby Ipswich but pulled out at $70 million. DMG also beat it for a Brisbane licence in 2001.

For Hot Tomato, owned by the former wife of Rupert Murdoch, Anna Mann, and her two brothers, Hans and Jaan Torv , Brisbane was considered vital for expansion. Two years ago, Hot Tomato became the first new commercial FM broadcaster for 14 years on the Gold Coast when it paid $26 million for a licence.

There is some hope for yesterday's runners-up. DMG runs a station on the Sunshine Coast, considered by the ABA as part of the Brisbane market, as well as owning half a Brisbane licence with Australian Radio Network. ABA regulations stipulate a maximum of two licences per market, which means DMG has six months to decide which one to sell.

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