Gannett/Belo Likely to Be Approved by FCC, Analysts Say

Gannett’s agreement to buy Belo Corp. for $1.5 billion likely will be approved by the FCC, said analysts we asked about prospects for the deal disclosed Thursday. It will give Gannett control over 43 TV stations. CEO Grace Martore said in a conference call with investors that the deal will make the “super-group” the “largest player in the top-25 broadcast markets.” Though Gannett and Belo said there are potential overlaps in five markets, the companies said the ownership of those stations would be restructured to comply with those rules. Wells Fargo’s Marci Ryvikker said in an email to investors that the restructuring would take the form of shared service agreements (SSA).

"It would be very hard to pick on Gannett and Belo without picking on someone else,” said BIA/Kelsey Chief Economist Mark Fratrik of his expectations the FCC will approve the deal. SSAs cover many different situations, and the restructurings could get different reactions from the commission based on their details, said an agency official. Those details haven’t been filed with the FCC. SSAs are arrangements in which separately owned stations in the same market share some operations, and have caused concern that they can allow broadcasters to skirt media ownership rules by giving one company control over multiple stations in a market.

"It could be very interesting if they are successful in finding a method to circumvent the current duopoly rules,” said Bob Heymann, head of the Chicago office of broadcast broker Media Services. He said the deal will provide Gannett with “more leverage in negotiating.” The “general advertising climate in America is improving, and this collection of TV assets will be very impressive -- if they can get around the duopoly rules,” said Heymann.

Free Press said it opposed the deal, while acknowledging it may well be approved. “I don’t think it should be [approved], but I think it might be,” said Policy Director Matt Wood. Companies are “gaming the cross-ownership rules in ways that hurt diversity” through the restructurings and SSAs, he said. Gannett/Belo illustrates why the commission should complete the current quadrennial review of media ownership rules, he said. “When we should be getting some inquiry, we're not getting any.” A Media Bureau spokeswoman said she couldn’t comment on Gannett/Belo.

Wood said he wasn’t sure if the commission’s approval process would change under FCC chairman nominee Tom Wheeler. “Some people will tell you that because he wasn’t a broadcast lobbyist … he'll have to be friendly to broadcasters,” said Wood. He said Wheeler has a “pro-business, pro-merger background.”