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04|07|06

Ofcom announces financial terms for INR operators

The Independent National Radio (INR) operators - Classic FM, TalkSPORT and Virgin Radio – have applied to Ofcom for an extension to their INR licences. Following this request, Ofcom has undertaken a review and is today announcing revised financial terms which will apply to the licence extension periods.

The revised terms represent a reduction in the amounts that will be payable during the extended licence period when compared to payments which are currently made. This reflects the reduced value of analogue licences in an increasingly digital radio environment.

Background

Under Section 253 of the Communications Act 2003 INR licensees can apply for a licence extension of up to four years.

Legislation requires that for the period of the extension, Ofcom considers varying the Percentage of Qualifying Revenue (PQR) payable by the licensees and determine an amount which, in Ofcom’s opinion, reflects the cash bid that the licensee would have made had the licence been put out to auction.

Together, the PQR payment (which is levied on revenues attributed to analogue listening) and the cash bid (which is a fixed sum, annually rising in line with RPI) make up the licence fee payment. These payments are collected by Ofcom on behalf of HM Treasury.

When determining the financial terms Ofcom has taken into account current developments in the broadcasting market, including:

• Growth in digital broadcasting which has led to a decline in analogue radio listening.
• Developments in the radio advertising market which have led to an increase in competition for advertising revenue.

Outcome

Taking these factors into consideration, Ofcom has decided to reduce the financial terms paid by INR licensees, compared with previous payment terms.

The financial terms are effective from the start of the extension period until the revised end date of the licence. The licensees have until 4 August 2006 to inform Ofcom whether they wish to accept the terms.

Details of the new financial terms can be found in the Related Items.

Ends.

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