August 1, 2008

CBS Could Sell KDKA-AM and Three FM Stations

By Kim Leonard, The Pittsburgh Tribune-Review

Aug. 1--CBS Corp. may be putting KDKA-AM -- the nation's oldest radio station -- up for sale, along with three Pittsburgh FM stations.

Station officials told KDKA employees at 11 a.m. Thursday at their Downtown office that the station likely will be in play, as CBS moves to find buyers for 50 radio stations in midsize markets.

A similar meeting took place at noon with the staffs at KDKA sister stations Y108 (WDSY-FM), Star 100.7 (WZPT-FM) and 93.7 (WBZW-FM) based in Green Tree. Workers were told the process could take a long time, but to work under the assumption the stations will be sold.

CBS Chief Financial Officer Fred Reynolds said yesterday, as the company reported a 1.1 percent increase in second-quarter profits, that "very preliminary" discussions have been held with strategic buyers, but the list of affected markets and stations remains fluid.

The stations that will be divested, Reynolds said, deliver 10 percent of the radio division's profit and 15 percent of its revenue.

The company said it plans to focus on larger, growing markets that did "very well" in the second quarter, although CBS Radio's same-station revenues dropped by 9 percent in the quarter.

A CBS spokeswoman wouldn't confirm that KDKA, dating to 1920 and recognized as the nation's first commercial radio station, or the FM stations are on the block. "We haven't disclosed the list of stations or markets," spokeswoman Karen L. Mateo said.

Officials at the Pittsburgh stations weren't available for comment. It's unclear how any sale of KDKA radio might affect the TV station with the same call letters.

CEO Leslie Moonves said New York-based CBS is making "aggressive" cost cuts amid a more difficult economic environment and advertising slowdown.

The stations are being sold to fund share buybacks. Some investors in CBS, which gets about two-thirds of its revenue from advertising, have called for share repurchases as the stock has dropped 38 percent this year. CBS stock closed yesterday at $16.36, down 52 cents.

Net income rose for the quarter to $408.4 million, or 61 cents a share, helped by a gain from the sale of a stake in the Sundance Channel cable network. CBS' profit was $404 million, or 55 cents a share, a year earlier.

Sales were little changed at $3.39 billion, trailing the $3.41 billion average of 15 analysts' estimates.

Radio division profit dropped 16 percent to $150.7 million on a 10 percent slide in revenue because of lower advertising sales and the absence of profits from stations that have been sold in the last year.

KDKA is Pittsburgh's No. 2-rated station, behind WDVE-FM. Its story begins with radio hobbyist Frank Conrad, who broadcast music using a transmitter in his garage.

Pittsburgh entrepreneur and engineer George Westinghouse employed Conrad, learned his pet project was gaining popularity and eventually secured a call sign. KDKA went on the air on Nov. 2, 1920, in time to broadcast Warren G. Harding's victory in the presidential election from a building in East Pittsburgh.

KDKA remained part of Westinghouse Electric Corp. until, in the midst of financial troubles, it merged in 1996 with CBS. Viacom later acquired CBS.

Tom Taylor, editor of industry newsletter Taylor on Radio, noted Pittsburgh was among several markets mentioned in online speculation about the CBS sales.

CBS sold stations in 10 cities last year, including Austin, Buffalo and Rochester, N.Y., Taylor said, but the market is very different now. Credit is tight, and times are tough for publicly traded radio companies that might have been interested before, he said.

"The list of potential buyers is much smaller than a year or two ago," Taylor said.


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