This week, the Minister for Communications, Mr Ahern, announced that he had asked Dutch consultancy group Ox to examine how the State could recoup anything upwards of 50 per cent of the sale value of radio and television stations.

The Government's reaction is in response to the well-publicised acquisitions of independent television and radio stations over the past two years.

Canwest and Granada TV own 45 per cent each of TV3, UTV has acquired 96FM and 103FM in Cork, Live 95FM in Limerick and Lite FM in Dublin, while Scottish Radio Holdings owns Today FM and has recently confirmed its purchase of Dublin's FM104.

On the face of these multimillion euro transactions, it is easy to understand why the Government feels aggrieved at not receiving a larger kickback to the State apart from capital gains tax.

Terrestrial licences are a national resource and there is no question that radio frequencies in particular are finite, at least until the advent of digital radio here.

However, in putting forward such a proposal, the Minister is sending out all the wrong signals to future investors of Ireland plc and especially in the broadcast industry.

Furthermore, he has completely failed to appreciate the basic commercial principles on which entrepreneurs and investors have helped build the success of the economy in recent years.

In order to fully recognise what has taken place in the radio and television sector, it is necessary to dispel some of the myths about the industry.

The independent broadcast sector is not a licence to print money. TV3 expects to make a small profit this year, while Today FM is posting profits in excess of €1 million, after years of heavy losses.

This is hardly huge money for a national concern when compared to, say, banks or building societies. The average net profit of the 28 or so independent radio stations is less than €300,000 - equivalent to any healthy medium- sized company such as a small supermarket.

The recent radio franchises awarded within the past three years have yet to post profits. Most in the competitive Dublin market are struggling to survive.

The broadcast media industry is exceptionally high risk. There appears to be a perception that having sufficient financial resources is a guarantee of success, which is completely untrue.

Financial resources, or in investor speak "deep pockets" is only one factor. The cost of launching a commercial Dublin radio station in today's market is around €5-6 million, sufficient funding to ensure a company can launch appropriately and stay in business long enough to survive.

To date, investors have been prepared to finance these high-risk ventures with the guidance of highly skilled radio and television professionals, who possess a deep knowledge of the behaviour and attitudes of the audience, the likes and dislikes of the commercial market, as well as a greater understanding of consumer trends. These individuals are driven on a daily basis not only to attract listeners to their station and keep them tuned in, but also to maximise that audience and turn it into advertising revenue.

In a fluid marketplace such as Dublin, with 10 radio stations, the competition is intense.

Similar to the recent newspaper wars, the radio stations, backed by expensive marketing campaigns that can be seen regularly around the streets of the city, are fighting tooth and nail just to win an extra point in the ratings war. A ratings point that could mean an extra €200,000-€300,000 in revenue.

It is these individuals who the investors are backing, investing their funds in the development of the Irish broadcast industry. However, it goes without saying that this investment is not philanthropic and requires a substantial return equal to the risks involved.

Most radio operators or senior executives do not have the financial resources to launch a commercial radio station and are forced to look for funding from private individuals or corporate financiers.

Apart from the recent acquisitions by trade investors, the majority of shareholders within the existing franchisees are purely investors within the industry and not necessarily radio operators.

Surely it is unfair to suggest that after, in some cases, 14 years of financially supporting their station, they should be penalised in trying to obtain an exit and a fair financial return. In the normal commercial environment, most investors would hold a portfolio for no more than five to seven years.

At the end of the day, the independent broadcast sector is a commercial business, with no hand-outs from the State. Investors will only invest if there is a return, either from dividends or a capital gain on exit. If an exit mechanism proved to be onerous, the alternative would be to cut overheads, providing larger annual profits.

This, ultimately, could greatly damage a growing industry and lead to severe job losses.

Furthermore, the Broadcasting Commission of Ireland has recently sought expressions of interest for four more Dublin licences. The Government's proposal would only discourage investors, as the risks of the venture in an already over-crowded market would outweigh any potential reward.

One suggestion for the Government would be to re-examine the approach to the applications of new licences. A tender process would probably be the compromise solution. In this manner, subject to a consortium's ability to provide the necessary expertise to fulfil the contract, the franchise could be awarded to the highest bidder.

In this way, the Government would receive a windfall, without having to take any of the risks expected of the investors.

Martin Block was the co-founder and former chief executive of Lite FM