KEY POINTS:
The two companies that control New Zealand's biggest radio network - The Radio Network - are drawing up separation plans.
Industry sources say APN News and Media (which owns the Herald) is in talks with Clear Channel, its American joint venture partner in the Australasian radio business, over
the dissolution of their commercial marriage.
The two companies control the Radio Network and the Australian Radio Network.
Clear Channel apparently pulled the plug on their equal joint venture arrangement late last year after deciding to concentrate on markets closer to home and new commercial options based on technology convergence.
Speculation over the Radio Network discussions joins conjecture over the ultimate ownership of CanWest Mediaworks, which owns Radioworks, TRN's rival.
Fairfax Media's local boss, Joan Withers - a former chief executive of TRN - has indicated her company might be interested in acquiring Radioworks to consolidate Fairfax's position in the New Zealand media market, much of which is under the duopoly control of Fairfax and APN.
Much of the speculation about New Zealand radio industry ownership changes suggested any movements would come from a desire by the big Australasian media companies to reposition themselves for the media shake-up in Australia as ownership controls are relaxed.
But that's only part of the story.
The desire of big international radio owners such as Canada's CanWest Global and America's Clear Channel to focus closer to their home markets - and in bigger markets than Australasia - comes from different motives.
Both companies now have significant tie-ups with major private equity funds - balance sheet expanding exercises which will enable them to make bigger acquisitions closer to their own HQs and move to increase their dominance by getting into the geek end of the business.
CanWest Global is buying Alliance Atlantis Communications in conjunction with Goldman Sachs in a deal worth $2.85 billion.
Clear Channel is bedding down a merger with a private equity consortium led by Bain Capital Partners, LLC and Thomas H. Lee Partners which values the world's biggest radio conglomerate at US$26.7 billion ($38.4 billion).
It's now got bigger fish to fry as it moves into new areas by forming a deal with Microsoft to build a US nationwide data delivery service using HD radio technology.
The move, announced on January 7, will be branded MSN Direct HD and is an extension of Microsoft's MSN Direct service which transmits a variety of information including traffic, weather, movie times, sports and stocks to Smart Watches, weather stations, GPS navigation devices and small home appliances.
It's complex stuff - but the type of cutting-edge technology which will ultimately flow to this part of the world if CanWest's Radioworks and APN's The Radio Network ensure they retain access to software technology after any ownership change.
It's understood APN's senior radio staff on both sides of the Tasman were briefed before Christmas on the implications of any ownership change.
If APN buys Clear Channel's stake, it will be business as usual - but with the potential to lose the cost-effective access it has enjoyed to Clear's cutting-edge software which has helped TRN integrate more than 100 radio stations in NZ. If a "foreigner" comes in, it will be up to the radio bosses to make their numbers or else.
Under their equal joint venture deal, APN or Clear Channel must offer its 50 per cent stake to the other party first if it wants to get out.
It's not in either's interests for this highly successful partnership to be dissolved in other than a friendly fashion.
APN's joint deputy chairman, Ted Harris, and APN chief executive Brendan Hopkins are understood to be leading discussions from APN's side. Harris also chairs the Australian Radio Network.
Hopkins is keeping mum about the talks.
But it's understood three or four potential bidders are circling, seeking to take Clear Channel's place in the joint venture structure with APN, buy the radio assets outright by acquiring APN's shareholding as well as that of Clear Channel, or form a new consortium arrangement with APN that might subsequently lead to a separate radio company float.
Australia's Austereo group, which owns radio stations in all mainland Australian state capitals, is one of those said to be hovering.
It has a joint venture with Australian Radio Network in a couple of Australian stations. Other radio companies are also interested in a slice of the action.
A more interesting situation will be if a complex deal is ultimately finalised in which APN's Australasian radio assets end up in a new entity.
That could happen if APN's 41 per cent owner, Sir Tony O'Reilly's Independent News and Media, comes back into the picture with a bid for APN in conjunction with a consortium of private equity funds.
On this score, no-one is saying much.
APN's radio assets were originally separate operations.
But the Radio Network was effectively tucked under the Australian Radio Network a couple of years ago when APN took the then-radical step of structuring its news and media business on transtasman lines.
Since Martin Simons was appointed chief executive of APN in New Zealand last year, the company has concentrated its NZ publishing interests under his wing here.
The Commerce Commission is thought to be concerned at the increasing convergence of the local media market.
Fairfax has cemented its position by gobbling up TradeMe to add to its newspaper and magazines business. If it buys CanWest's Radioworks it will be able to cross-promote editorial products in the way TRN promotes the Herald.
The radio industry is very profitable for those who get it right.
Judging by APN's latest annual reports it has done well to get double-digit earnings for the radio division.
Any potential acquirers will be pleased that two particular issues are settled - the Australian Government has allowed a gradual introduction of digital radio and a six-year moratorium on the introduction of new licences. In New Zealand, negotiations have been finalised for the renewal of radio spectrums in 2011. The new licence will have a 20-year lifetime.
