The chief executive of one of the leading investors in the Irish broadcasting market warned yesterday that a Government proposal to claw back up to half the profits made from the sale of radio and TV interests could damage values in the sector.
The Irish Times reported yesterday that Minister for Communications, Mr Ahern, has asked Dutch consultancy Ox to establish if the Exchequer can cash in on profits made from the sale of radio and television stations.
Mr Ahern is arguing that the State should benefit from these profits because it owns the broadcasting spectrum on which they operate, which he says is a finite resource. He wants Ox to establish how the Exchequer could recoup anything up to 50 per cent of profits on these deals. Any clawback would be in addition to capital gains tax levied on the profits earned in these deals.
Mr Richard Finlay, chief executive of Scottish Radio Holdings (SRH), which recently paid €30 million for Dublin radio station FM 104, said yesterday that the scheme would be unlikely to work and would hit the value of these investments.
"It would certainly depress prices," he said. "It's something that should be approached with a great degree of caution, as it could destroy the very thing you are trying to nurture. I don't believe that it's a practical proposition - it's not worked anywhere else in the world."
Goodbody Stockbrokers analyst Mr Neil Clifford echoed Mr Finlay's criticisms. He argued that such a tax would make investing in radio and television less attractive in this country, as it would limit the potential to generate a return from the sector.
"I don't think it would be positive for investors in local radio. I think it would only end up discouraging investors," he said. "At the moment they are talking about issuing new licences. They are almost contrasting aims. On one hand, he wants people to make that investment while, on the other hand, he wants to limit their ability to make a return from the same investment."
Mr Clifford, whose firm is broker to UTV, added that, while the State ultimately owned the broadcasting spectrum, it was the investors who took the commercial risk involved in its development. He added that the arrival of digital radio would mean that the spectrum was no longer a finite resource.
UTV has paid €14 million for Dublin's Lite FM and €36 million for County Media in Cork. UK independent Granada invested €48 million in TV3.
