Clear Channel Outdoor Holdings Inc (CCO) 2006 Q3 法說會逐字稿

Good day, everyone and welcome to today's Clear Channel third quarter 2006 earnings release conference call. As a reminder this conference is being recorded. At this time for opening remarks and introductions I would like to turn the call over to Senior Vice President of Investor Relations, Mr. Randy Palmer. Please go ahead, sir.

Thank you operator and good morning and thank you for joining us for the Clear Channel Communications and Clear Channel Outdoors third quarter 2006 conference call. Joining me today for the call are Larry Mays, Chairman; Mark Mays, Chief Executive Officer; Randall Mays, President and Chief Financial Officer;John Hogan, Chief Executive Officer of Clear Channel Radio; and Paul Meyer, Global President of Clear Channel Outdoor. Mark will open up the call, to be followed by Randall. After Randall's comments we'll open up the lines for questions. Let me know that statements made during this call may contain forward-looking information. These forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to be different from many future results, performance, and achievements expressed or implied by these statements..

The following important factors, among others could affect future results causing these results to differ materially from those expressed in our forward-looking statements such as changes in general economic conditions both domestically and internationally, industry conditions, fluctuations, and exchange rates and currency values, capital expenditure requirements, and legislative, or regulatory requirements. A complete list of risks and uncertainties are noted in the Clear Channel Communications and Clear Channel Outdoors securities filings and the press releases that were released this morning. If did you not receive a copy of the releases please contact our Investor Relations department at 210-822-2828, or go to our website at www.clearchannel.com, or www.clearchanneloutdoor.com. A replay of this conference call will be available for 72 hours. I will now turn the call over to Mark Mays.

Thanks, Randy, and good morning everybody, and thanks for taking the time to join us on this beautiful Monday morning for the Clear Channel Communications and Clear Channel Outdoor call. I'm going to review each of the operating segments including commentary on Clear Channel Outdoor. After I have completed my opening commentary I am going to pass it to Randall for review for some of the highlights of the Company. We're then going to open up to Q&A.

I would like to begin my discussion this morning by reviewing our announcement that was made last Wednesday, October 25. The Company confirmed its Board of Directors is evaluating various strategic alternatives to enhance shareholder value. It was also noted there could be no assurance that this process will result in any specific transaction and the Company does not intend to comment further publicly with respect to the exploration of strategic alternatives unless a specific transaction is approved by its Board. I'd like to make it clear that we will not comment any further regarding last Wednesday's announcements during this call. We are unable to address any questions, commentary regarding this evaluation of strategic alternatives and ask that you please respect that. In fact, as the evaluation continues, we will not be commenting on anything that is non operational. The focus of this call will be the Company's third quarter results, fourth quarter, and operational discussions.

Now let me review each of the Company's performances during the quarter. For the third quarter of 2006 Clear Channel Communications reported revenues of 1.8 billion, which represented year-over-year growth of 7%. OIBDAN, which we define as operating income before depreciation and amortization, noncash compensation expense and gain or loss on disposition of assets, was 595 million, or 10% year-over-year growth. Net income for the quarter was 186 million, or $0.38 per share. Clear Channel Outdoor reported 720 million in revenues, or 8% year-over-year growth for the third quarter. OIBDAN was 204 million, reflecting year-over-year growth of 18%. Net income for the quarter was 32 million or $0.09 per share. Now let me turn it over to the operating divisions and go through them.

First, radio. Radio revenues grew 5% during the quarter. The radio segment saw revenue growth across all its revenue streams including local, national, network, traffic, and the Internet. National was stronger than local during the quarter. While our third quarter was strong, September was weaker than the other months. However, it is clear, at least as we see it today, that the month was not necessarily a good barometer for the remainder of the year. We are currently pacing up 8.8% for the fourth quarter, which we feel really good about. Categories that were good include automotive and entertainment. As we have noted throughout the year, we expected radio expense growth to be in the 3 to 3.5% range for the year with higher growth at the beginning of the year versus the back half of the year. We still believe that we will see relatively lower expense growth in the back half of the year versus the first half. However, based on our current revenue pacing for the fourth quarter, there's now a chance that it may be above that range for the year.

Moving to the outdoor sector, Clear Channel Outdoor, during the third quarter we continued to experience growth in our outdoor business both for the Americas and internationally. As noted in my opening comments, reported outdoor revenues increased 8% during the quarter and OIBDAN growth after corporate for Clear Channel Outdoor was 18%. The Americas business experienced 12% revenue growth and 14% OIBDAN growth during the quarter. The growth was led by our bulletin and airport businesses. Top categories during the quarter included autos, business, and consumer services, entertainment, insurance, and retail.

Internationally, reported revenues were up 4% for the quarter with OIBDAN growing 33% for the quarter. Our street furniture business led the way with good growth in Spain, Denmark, Turkey, Norway, Africa, and Belgium. As we look into the fourth quarter, the Americas business is currently pacing up 9.2% and the international business is pacing flat. It is important to note that all pacing information is given excluding any foreign exchange effects, so it's on a constant dollar basis. We have noted during the year we expected outdoor expense growth to be in the 2 to 3% range for the year. As with radio, if we see accelerated growth during the fourth quarter, there is now a chance that it may be above that range for the year.

As you know, our international business was weak in the third quarter. However, as we look into the fourth quarter, we feel that most all of the countries that were weak in the third quarter are having much better fourth quarters. The only country that has not improved dramatically in the fourth quarter is the U.K., and we would expect the U.K. to turn around the first half of 2007. Moving to the television and other category, that segment also had great performance during the quarter, with overall revenue growth for the segment of 10%, and OIBDAN growth of 30%. As you can see, we were extremely pleased with the third quarter results for both Clear Channel and Clear Channel Outdoor, and we hope to see that continue into the fourth quarter and into next year. With that, I will turn the call over to Randall.

Great. Thanks, Mark. I have just a couple of quick highlights, then I'll turn it over to questions. I'll go through Clear Channel Communications first and then Clear Channel Outdoor. Looking at Clear Channel Communications, CCU's long-term debt at September 30 was 8.1 billion, with leverage defined as debt net of cash divided by trailing 12-month EBITDA of 3.7 times. CapEx for the second quarter was 84 million for CCU with 59 million of that related to outdoor. We still expect our 2006 CapEx to be in the 350 to 360 million range for the year.

Now looking at Clear Channel Outdoor, total debt for CCO at September 30, was 2.7 billion with leverage defined as debt net of cash divided by the trailing 12-month EBITDA of 3.3 times, CapEx for the quarter was 59 million for CCO. We expect our 2006 CapEx to be in the 230 to 240 million range for the year. With that, I'll open it up for questions. For those of you who may not have been on the call right at the beginning and didn't hear Mark's opening commentary, we will be unable to address any questions that relate to the evaluation of strategic alternatives, and we sincerely request that you respect that when you ask your questions. With that, I will go ahead and turn it over to -- open it up for Q&A.

Thank you. [OPERATOR INSTRUCTIONS] We'll take our first question from Victor Miller.

Thank you. Thanks for taking the questions. First question maybe for John, what do you see driving the 400 basis points of differential between 4Q pacing and third quarter actual? On the expense side, maybe Randall, you expected 3 to 3.5% for the year for radio, which would have implied you would have had to be flat for fourth quarter. Now you're saying it's mildly higher. Are we talking maybe low single-digit type of expense growth for fourth quarter, and does the 9.2% domestic outdoor include intraspace? Thanks.

Let me -- Victor this is Mark. Let me answer a question. There were a lot of them in there. Before I turn it over to John. Interspace is, we always give our pacings on a pro forma basis. So it would not be on a reportable basis that that 9.2% increase. I think that was the question, correct?

Exactly.

The expense side for radio, it will be varied, depending upon our revenue increases. So at this time it's difficult for us to pin that exact number down because we don't know where our revenues will come out. You should anticipate that as we perform better that our expenses are going to be over a little bit more than we expected, and if not, then we should come in line with what we expected. So a lot of those are going to be dependent upon the revenues, which is driving clearly some of the variable expenses associated with it.

The final comment I'll make, Victor, before I turn it over to John, is with regard to revenues for the radio sector, and I think the comment is is what are we seeing and why are we performing so much better. And I think one of the things that I would tell you is that, again, we look at ourselves different than the rest of the radio industry. We believe that we have a platform that we have management that is focused on being different than the rest of the radio business. We look at ourselves more than just an analog spectrum that is broadcasting to a bunch of 100 million listeners each week. We really focus on additional revenue streams and our platform and our people are focused on developing those additional revenue streams. So with that, obviously we're starting to see that in the numbers, and with that I'm going to turn it over to John.

Thanks, Mark. Good morning, Victor. I think what I would add to Mark's comments is that what you're seeing in Clear Channel radio is increased momentum. As Mark indicated, we really are differentiated from the rest of the industry in specifically that we have a different platform, and we offer I think more and different opportunities for both our listeners and our advertisers, as it relates to revenue opportunities we're offering different spot lengths, different spot positions, different spot prices. We're offering a wide variety of innovative, creative ways for our advertisers to connect with our listeners. It is not just using the great terrestrial platform that we have. It's using that platform in combination with our on-line opportunities, which continue to grow. It's using both of those with the really innovative, creative ideas that our management team and sellers have been working on. I think to say it really simply, we offer more and better opportunities and solutions for advertisers. We have more and better managers and sellers on the Street, and I think that what you're seeing is that momentum manifested in increased revenues.

Thank you very much.

Thank you. We'll now hear from Jonathan Jacoby with Banc of America.

Hi. Nice quarter. Two questions here. The first is if we look at your summer book ratings, 25 to 54 seems to be down about 5%. Curious as to your thoughts at what's driving this. We've seen sort of the first two books post, Less is More, we're down about 1 but are we hitting perhaps the end of the ratings benefits in your opinion? Just want to hear your thoughts there.

Then secondly, can you give us a little bit color on the fourth quarter in terms of the plus 8.8? So is October/November stronger than December? Any color you can give us would be great. Thank you.

With regard to the rating, I'm going to turn it over, Jonathan, Mark, with regard to fourth quarter versus third quarter as well. As we said, September was a little bit of an anomaly. We're not sure exactly why, but it was softer than all the months. So I think that also explains a little bit of the difference as we look into the fourth quarter. Again, as we see it, we're -- and that was true across lots of our business lines. So as we look into the fourth quarter, we're seeing all October, November, and December with strong pacings, and, therefore, that could be a little bit of the differentiator with regard to the fourth and the third quarter as well. With regard to the ratings, I'm going to turn it over to John.

Great. Before we talk specifically about the summer declines, let me put a little context around the summer ratings. We have really very, very good ratings performance, if you look at the top ten markets, we're the number one rated cluster in nine of those ten markets. If you look at the top 25 markets, we are the number one rated cluster in 18 of the top 25 markets. We have some of the most listened to radio stations in America, and we have lots and lots of instances where we have seen rating gains.

However, we do, as you noted, have some areas of erosion. Those are of concern to us, most notably we've seen that erosion on our AC stations over the past summer, and we've seen it also on our Hispanic stations. We are -- we're aware of that. We have done a fair amount of research into that, and we are getting into action on those stations, which have seen erosion, just like we have done on other stations over the years.

As it relates to LIM, I would suggest pretty strongly that there are many factors which go into the ratings, and that the -- that the settling that you're seeing in some of these numbers is not attributable to LIM, it is more attributable to a number of other factors, competitive factors, our own execution, really a wide variety of things. We believe that LIM continues to be a huge benefit for our listeners. Again, it gets back to that basic premise that if we give more of what listeners come to radio for, if we give them more of the entertainment, the information, the companionship, they are going to stay with us longer. And we're certainly seeing that in a lot of instances. In this summer book relative to last year's summer book we have seen some erosion that I mentioned. We have identified it and we have our team of programmers very focused on that and we expect improvement as we move forward.

Mark, quickly to follow-up on the first question, if you looked historically, at least the last political cycle, radio operators, including yourselves, spoke about 300 basis points coming from political. I guess that's what I'm trying to go after. How much do you think political is benefiting the fourth quarter?

That's a great question, Jonathan. And if you look at it we believe that political will add, in the fourth quarter, over prior year, somewhere between $12 and $15 million. So if you look at it, that is not a significant amount of dollars. It is some, and if you look at it, though, we also had an incremental 6 or 7, maybe even as much as 8 million in the third quarter. So it's not a significant amount, number one. Number two is, I would tell you maybe it's 100, maybe 150 basis points of that 8 to 8.8%. So it's not like television, which is a huge amount of the increase. It is a minor position. It is clearly a wind to our back, but not a major component.

Thank you.

Thank you. We'll move on to John Blackledge with JP Morgan.

So you've outperformed the industry by about 500 basis points so far this year looks even better than that with your fourth quarter pacings. Looking out to '07 do you think the Company can achieve top-line growth above the industry by X number of basis points? Then just a quick reminder on expected on-line revenue in '06 and where the Company is at -- where you think the Company is at in terms of monetizing your on-line initiatives. Thank you.

Couple of questions in there. Let me just kind of give a brief overall statement for the overall company as we look at 2007. If you look at it, whether it's radio or outdoor or television, we're having great conversations with our advertisers. As you can imagine we believe our platforms and our assets are great, and people are realizing that. We have been doing creative and different things, whether it is different spot lengths in radio or digital networks and outdoor, we're doing a lot of different creative things. We're having great conversations with our advertisers, and there's great activity level for 2007. That being said, it is only October of 2006 and it's difficult for us to opine on how we're going to perform as we get into 2007. We're clearly, as we said, in radio, we're trying to distinguish ourselves from the rest of the industry because of the different revenue streams that we're enticing. We won't know until we get into next year how that basis point differential will be as you just described it.

John, as it relates to on-line, we continue to be very encouraged and really very enthused both on how we're doing from a programming and audience standpoint as well as how we're doing from monetizing that growth in our audiences. The Clear Channel on-line music and radio team has done a terrific job and continues to do a terrific job of building very rich, highly differentiated websites. We see our traffic growing incrementally, week to week, month to month, quarter to quarter, and we see our revenues growing. In fact, our Internet revenues are one of our fastest growing streams, and we expect that to continue as we move into Q4. As Mark commented about 2007, it really is very early, but what I would tell you as a specific point of differentiation is that we are sitting down with more advertisers, not just agencies, but more advertisers, talking about more ways for them to generate results. We're talking about with those advertisers and agencies, we're talking about a variety of ways of exploiting the entire Clear Channel platform, which is our terrestrial platform, our on-line platform, and the outstanding team of programmers and sales managers behind it.

Thank you.

Thank you. We'll move on to Anthony DiClemente with Lehman Brothers.

Good morning. Thanks for taking the questions. I just have a couple of straightforward questions. What was your total minutes of advertising growth in the third quarter versus last year? If you can't give numbers that are quantifiable, if you could just give us directionally, is it more minutes total, less minutes, or about the same? Then secondly, on the outdoor business, what is the revenue multiple that you're seeing on your digital billboards relative to your static billboards? And if you could just remind us how many digital billboards you expect to have rolled out by the end of '06, I would appreciate it. Thanks for taking the question.

Anthony, this is John Hogan. As it relates to the minutes I won't give you specific numbers but I will tell you that we employed fewer commercial minutes in Q3 of 2005 than we did in 2006, and we had a higher yield.

Fewer commercial minutes in 2005 than 2006?

You said 2005.

I'm sorry, fewer commercial minutes in 2006 than in 2005, and a better yield in 2006 than in 2005.

Okay. On the digital billboard?

Paul?

Sure. First, let me just say that we have very, very active plans in each one of our markets to roll out digital networks. And, in fact, given the success we've had with those markets where we have already rolled out the digital networks, those markets also have active plans to roll out second networks. But to give you a little more color on what the success has been, as you know, the first network we rolled out was in Cleveland. In Cleveland, we rolled that network out in July of last year. In the 12 months prior to conversion to digital signage, Cleveland generated approximately $380,000 on the seven locations that were converted. In calendar 2006, we will generate $3.5 million on those seven locations.

Vegas, which was the second network we rolled out, prior to conversion, the six locations that were converted in Vegas generated approximately $260,000 in revenue. Thus far in the first year of the conversion, we generated approximately $1 million in revenue on those locations. Albuquerque rolled out at the beginning of the fourth quarter, and that, by the way, was our first network of poster-size locations. So the revenue on those ten signs was obviously lower prior to conversion than our bulletin locations were. In Albuquerque, we generated about $70,000 on those ten locations in the year before conversion. As I say, we launched that network with paid advertising effective October 1. So we're really only into our first quarter. But in that first quarter we generated -- we already have on the books $260,000 in total revenue in Albuquerque. I expect that before the end of the year we will roll out another three networks, and so that if you're talking about pure network digital signs, by the end of the year we'll have almost 40 networked digital signs.

And, Anthony, I think it's important to note, to reemphasize what Paul has said, is as you look at it, in all of our test markets we've been extremely successful in proving that digital is a great opportunity, and we have now done it across different product lines, and that's giving us a tremendous amount of confidence. As you said, in every single market, we have a plan, or have developed a plan on how to roll out digital. Obviously there are gating items within each market, and each market is very different with regard to the municipal ordinances in which we are allowed to roll out digital. So we are working diligently on that, but it is taking us some time to get through some of the municipal ordinances.

In addition to not only having a plan in every single market, but those markets where we already have a digital network, we're also developing plans for going deeper in the market and rolling out a second network. So you should assume that we are focused on it. I know that it's difficult for you as an analyst to -- you'd like for us just to give you a quick, simple, clean number of, A, we're going to have X number of boards, and it's going to be X number of lift on that board, but it's difficult for us to give it to you in that simplistic of a fashion.

Just one other comment, and that is although the focus of our strategy is on rolling out networks, in addition to the networks that I described, particularly in our smaller markets, we continue to -- we continue on a market-by-market basis to convert individual signs to digital.

Got you. Thank you very much for answering the question.

Thank you. We'll now hear a question from Eileen Furukawa with Citigroup.

Thank you for taking the call. I'm just wondering is part of the strength you're seeing in your 4Q radio pacings due to what you expect is notable movement to shorter ads? In other words, in 2Q you talked about shorter ads being 35% of inventory. What was it in third quarter and what do you think that can grow to in the fourth quarter? Also, last quarter you said you saw rate increases across the board on 10s, 30s, and 60s. Wondering if that was still the case in the third quarter and are you still expecting that as well in the fourth quarter? Thanks a lot.

Good morning, Eileen. It's John Hogan. Here's what we're seeing, and that is a better focus, not just on a particular length of commercial or not just on rate, but overall increase of our yield. Our managers are getting more -- more skilled and more experienced in using the systems that we have to help them price their inventory. While we are seeing an increased embrace and demand for shorter length commercials, we're also seeing better price as it relates to all of our commercial lengths. And that translates into the higher yield that we have talked about a couple of different times. The shorter length commercials have expanded from just 30s and 15s to include now 5-second spots which we call adlets. In some instances, 1-second commercials which we call blinks.

I would tell you very quickly that the adlets and the blinks represent a very, very small percentage of our overall inventory consumption and revenue associated with that. But I think it speaks very loudly to the fact that advertisers are finding that they can use radio, particularly the length of radio spots, in a variety of different ways. As we look into fourth quarter and really into 2007 and beyond, what I would expect is that our managers will continue to get better at managing their inventory. They will continue to get better at pricing their inventory. Advertisers will continue to see the shorter length commercials really can be deployed in a variety of ways to give them an advantage, and that we will continue to see the strong performance that we have seen.

Where do you think the mix of shorter length ads can go to? Do you think you can see it moving from 35% to, say, 50% long term?

I think that where I think it will go, is not nearly as important as where advertisers think it will go. And I think that what advertisers recognize is that it is harder and harder to engage consumers today, and a 60-second spot is a long time to try and keep a consumer engaged. You have seen it in television and other media, a move to shorter length commercials, and I think that advertisers will ultimately make that happen in radio. I believe that the reliance on 60-second commercials will continue to decrease over time. It will decrease faster as advertisers see that you can get results and get very, very strong results from 30s, 15s, 5s and 1s.

It is important to note that we will remain flexible, if an advertiser needs a 60-second commercial, we'll be happy to sell him one. In fact, we have advertisers, the same advertiser within the last year has employed everything from a 1-second commercial to a two-minute commercial. And again, I think it's one of the beauties of radio and one of the real strengths of Clear Channel, is that we have the ability to offer advertisers a wide variety of choices. I do think that shorter length commercials will continue to grow as a percentage of the deployment in consumption of our capacity and just how quickly that goes, I wouldn't want to speculate.

Okay. Thanks for taking the question. I appreciate it.

Thank you. We'll now hear from Michael Nathanson with Bernstein.

I have three. Two on radio, one outdoor. First is on radio, I wonder if your Internet business is becoming more incrementally important to your reported results. Can you quantify how big Internet revenues are this year at radio and how much are they up year-over-year?

And your other question?

The other one is, September radio weakness is interesting because it's an election year. I wondered if September political spending was below previous September's election year spending. How did that look, versus '04, and '02? And then lastly why do you think the UK outdoor business will turn in the first quarter of next year?

A couple of things. Michael, I am going to try to answer the radio questions, and I'll let John clean it up, then we'll move to Paul for the U.K. color and commentary. I think we have the Internet business is a bigger part of our business. It is by far the fastest growing sector of our business. It is not the only revenue stream that is what we call an additional revenue stream. As we have said before, if you aggregate all those revenue streams that we call new initiatives they're less than 5%. However, we haven't quantified exactly what the Internet revenue stream is in a public environment, and I don't think we're ready to do that right here right now today. But you should know that it is going to become a faster growing revenue stream, while not significant today, it is fast and will continue to grow, and we would hope that over the next few years it becomes a significant portion of the revenue stream. With regard to political, it's never been a huge amount for radio, and today it is not as big probably in '06 as it was in '04, but probably comparable to what it was in '02.

Working backwards on that you have to remember that '04 was -- or 2006 was a mid-term election. There's just less political business out there, and so our numbers for '06 are less than they were for '04 at this point. As it it relates to the Internet, I think the interesting thing for us is that we view ourselves as a content creation and distribution company, and we're not particularly tied to any one platform. We look at the Internet as a terrific extension of our ability to connect advertisers with listeners, and as Mark said, we have seen very rapid growth in the Internet sector for us over the last year, and I believe that we are in the very early stages of our success on the on-line piece, and that as we look into Q4 and 2007 and beyond, we expect that the on-line portion of our business will continue to grow and be a great complement to our terrestrial business.

Can I ask one question because we're trying to understand future, the question is as you said, 5% of revenues or less are spent on new initiatives but could you quantify what the growth of those initiatives could be in '06? If five double's to ten then mathematically we're going to be mismodeling the Company.

I'm not sure that we're following that but I tell what may be a good thing for you to do, Michael, is for you to follow-up with Randy Palmer after this call who is our Investor Relations guy, and maybe he can give you some more detailed color with regard to your modeling.

Okay. Lastly, the U.K. outdoor business. Why is it going to turn the first half?

Correct. Paul.

Well, first let me say with respect to the U.K., one of our challenges in the first part of the year was making changes in a number of senior management positions. That, unfortunately, had a little bit of a disruptive impact on our U.K. business overall. We now have our new management in place, and that has stabilized the management of that business. But that management team has, in fact, launched a number of initiatives which we think are going to have a very positive impact, particularly at our billboard business in the U.K.

In the U.K., our street furniture business, even in 2006, really performed quite well. Our weakness has been and has been historically in the billboard business. In the billboard business, on the heels of our acquisition of Van Wagner's inventory, we launched a whole new product category we call our Pinnacle collection, and it's a grouping of about 150 of the most premier locations in the London metropolitan area which we are now selling as individual units as opposed to parts of networks, and we're also selling those long-term we think in 2007 we'll start seeing the impact of that initiative. We also went through a very detailed evaluation of all of our inventory categorized it in a number of different ways and enable us to target audiences -- target consumers much better. Principally by identifying where locations are approximate to various other types of businesses. Thirdly, we, even in 2006, with the U.K. overall performing rather weakly, we were having very good success with our local advertising. We are placing much, much more emphasis on local advertising. The U.K. business basically breaks down right now about over 90% national. But given the strength of our local sales force and the success they've had in 2006, we have started to release more and more of our networked inventory to that local sales force, and we expect that also to have a very positive impact going into 2007. So overall, we think there are a number of reasons why that you that U.K. business, particularly the billboard business, will improve significantly in 2007.

Thank you very much.

Thank you. We'll now hear from James Dix with Deutsche Bank.

I guess my question is really primarily to outdoor. Domestically in the third quarter what was local versus national growth and how was local and national pacing for the fourth quarter, and then we've heard from some executives have said the owe AAA, the estimate is that ultimately 20 to 25% of billboard locations could ultimately convert to digital. How does that square with what you're hearing from your local managers as they kind of draw up their plans for conversion to digital? And then finally, what are your plans for the use of free cash flow at CCO, and what's your leverage comfort for that business? Thanks.

Let me try to take those in reverse order, James, then I'll pass it over to Paul. He can add on to the. First of all, with regard to free cash flow, you should assume that the Board is going to utilize that free cash flow what they think is in the long-term best interest of the shareholders. Secondly, with regard to the digital rollout, we would not want to sit here and have you believe that we are highly confident that we can roll out 20 to 25% of our inventory because we have 180,000 signs -- 168,000 signs out there in Americas. I think it would not be an accurate assessment for us to sit here and say we're highly confident that we can roll that out today over any period of time. One of the things that we consistently have said that we're rolling this out and we're giving you all of the information as we get it, and at this point we're not going to opine or make any predictions on what percentage of our inventory we think is achievable to roll out. We know from the information that we have given you that we can deploy capital, and we can get great rates of return associated with that. So the assumption should be that we're going to roll out as many as we possibly can but we don't know where the saturation rate is yet. With regard to local and national I'll throw that over to Paul.

Actually, in the third quarter, our ratio of local to national changed a little bit over what has been our fairly consistent historical ratio. Our national -- total national sales in the U.S. all markets, all products, were close to 45%, where as historically our national sales run more like 40%. We look at -- we look at our national/local sales on a same-store basis pro forma, and on that basis, in the third quarter, our national sales were up about 7%, local sales were up about 6.5%. So in short, we showed very, very good growth in both our national and our local sales. And our basic business plan continues to be to work very hard to grow both our national sales and our local sales.

And are you seeing similarly -- fairly similar pacings for national and local thus far for the fourth quarter?

I would say about -- yes, I would say about the same.

Okay. Thanks very much.

Thank you. We'll now hear from David Miller with Sanders Morris Harris.

Yes, hi, good morning. One quick question. Mark, on clear media, could you just profile how clear media performed in the quarter? I don't see that here in the press release. And could you just talk about how Clear Media is contributing to your flat pacing profile in the current quarter? Thanks.

David, I'm sure you can appreciate that Clear Media is a separately traded company on the Hong Kong stock exchange, and it's -- we don't think it's right for us to be making any comments with regard to their performance, and they, Clear Media, will be making their own comments in due course.

Okay. Thank you.

Thank you. We'll now hear from Marci Ryvicker with Wachovia Securities.

Two questions. In radio did you see any business pushed from September into the fourth quarter? And then for Outdoor, can you remind us again of the impact you'll see in France with the repeal of the television retail ban next year?

Okay, Marci. September was really an aberrant month. It was preceded by eight very strong months for us and is being succeeded by what look to be three very strong months as well. We did not see a -- any sort of a pronounced delay of spending from September into later months. I think it was more that it was just kind of an aberrant month in 2006.

Okay.

And on France, with regard to 2007 and the retail ban, Paul?

Well, there's no question that we are going to lose some revenue as a result of that regulatory change. Right now, though, frankly it's very difficult for us to quantify it, because we're getting -- we're actually getting some encouraging signals from some of our retail advertisers. We know that there are a couple of large ones which will be reducing their outdoor spend in 2007, but based on discussions we've had with them and with others, we also know that there are some major retailers who will actually increase their outdoor spend in 2007. We also don't think that regulatory change is going to have a very large effect on our street furniture business in France. We think it's going to be pretty much isolated on the billboard business in France?

Thank you.

We'll now hear from Kit Spring with Stifel Nicolaus.

Hi. Can you talk a little bit about your plans, whether or not to use the portable people meter for Arbitron, or are you still excited about the prospects for a digital measurement system? Then maybe talk about where you are with HD radio and how you think about the impact of HD radio causing fragmentation versus improving the overall listening experience for consumers. Thanks.

Kit, I'm going to take the second one, then I'm going to throw it over to John for the question about audience measurement. As you look at it, again, we're very focused on providing compelling content to listeners. Most people who have listened to HD radio think it is a pretty compelling and great experience. You get a lot of different formats, very unique types of formats. For example, here in San Antonio, Texas, the multiplex, the side channel of the country station, is a Texas Country, which is very unique to San Antonio and is great programming. I know in Dallas, Texas, the side channel is a format that they're calling Lone Star, which is a mix. It's kind of a half classic rock, half country.

So as we look at it, there is great opportunity for the radio business to continue to be innovative and continue to provide great compelling programming for listeners. So from our perspective, that's exciting to us. We think that that absolutely has the potential to reverse what has been a trend over the last 10 years, people not listening to radio as long. So we're excited about that, and we think that that absolutely innovative content will bring people back to radio and will be overall a very strong positive over the long term. With regard to audience measurement?

We remain committed to improving the measurement techniques employed for radio. We think that radio generally and Clear Channel specifically would benefit from having better, more current ratings technology employed than we're seeing today with the old paper and pencil diary method. Having said that, this is important enough that we want to explore every opportunity that is out there. We want to look at every option that we can for what would eventually replace the diary method. We're looking for the best, meaning the one that will give us the most credible, accurate ratings, and we'll do it in a way that is affordable for broadcasters. And so we're very focused on exploring all of the options that are out there. PPM is one of those options. We are awaiting their promised accreditation by the Media Ratings Council. They have not gotten that at this point so there really isn't much for us to comment about PPM at this point.

Thank you.

Thank you. We'll now hear from Tuna Amobi with Standard & Poor's Equity Group.

Thank you very much. I've got a couple as well. Regarding the 8.8% Q4 radio pacing how much of that is attributable to some kind of easier comparisons on less is more and how much of that would you say is more like the normalized -- the growth, if there's any such thing, and just also on the topic of less is more, as you're now closing in on the second-year anniversary of that program, I know it's been a lot of positive developments on that but how would you -- what would you characterize as the single biggest negative surprise, if any, that you have seen with regard to less is more with the benefit of 20/20. And finally, perhaps a question, a financial question, for Randall. Regarding the majority profile of debt at CCU, can you update us on whether anything is coming up in the short term, and at CCO, the inter-company debt, are there any attached special provisions to that inter-company debt that would kick in, for example, with regard to any change of bonus share? Thank you very much.

I'll go ahead and hit those last ones. The CCO inter-company debt is callable by Clear Channel I think at any time. So I don't think there's any issue on the change of control.

Okay.

You know what, on that I may have misstated that, so let me -- let me get back to you on that. It matures in 2010. I thought that there were provisions for Clear Channel to call that, but I don't want to misstate that on the call. It is callable on a change of control by Clear Channel Communications, if there's a change of control in CCO.

So you'll get back to me you say with more details?

I think that if that's not accurate I will. As it relates to maturities, we do have maturities coming up that we will handle. We have $1.2 billion available under our credit facility. I think that's stated in a press release, and any maturities that we have coming up in the near term will be handled out of that credit facility.

Let me talk a little bit about the radio pacings and the comment with regard to easy comparisons. First and foremost I would tell you that that's clearly a perception that is out there that we have easy comparisons for radio. I would simply make the point that we have inventory -- this is the first quarter to quarter fourth quarter 2006, versus fourth quarter 2005, where we have exactly the same amount of inventory. And, therefore, I would tell you it's the most comparable with regard to like to like inventory. Number one.

Number two is, as you're probably aware, that throughout -- as we got through 2005, we got better and better at this every single quarter, and so the fact that we're performing better in the back half of 2006 should lead to you believe that it's not necessarily just easy comparables but that it's absolutely a great management team executing extremely well. With that I'll throw less is more surprise.

As I look back over the last two years I think about LIM as being one of a number of changes that have been initiated at Clear Channel radio. I think the only negative that -- well, there are negatives about Clear Channel radio. I think that in our switch to LIM, but the one that jumps out as being the biggest is that we didn't do it sooner. I think that LIM has been a terrific advantage for both our listeners and our advertisers. It has served as a catalyst for us to continue to change the way that we operate our company and to really differentiate ourselves from the rest of the radio industry and to become more than just a radio company. And so if there is a most prominent negative associated with LIM, it is that we did not do it sooner because I think it has helped make us a significantly better and differentiated company.

It's about that time, so we're going to--.

Thank you.

It's about that time so we're going to ask for one last question then wrap it up.

And our final question will come from Laraine Mancini with Merrill Lynch.

Back to digital outdoor what is the capital cost per board to deploy now and can you talk a bit about the types of margins you're seeing on those boards relative to to your traditional billboard margins?

I would tell you that CapEx per board is differentiated depending upon whether it is a bulletin or a poster. For instance, in Cleveland and Las Vegas, first you have to realize that there is just an overall capital for rolling out a network, and then there's an incremental amount for each and every board. The incremental amount for each and every bulletin is somewhere between 350 and 400,000, depending upon the vendor and the service provided from that vendor. With regard to posters and, I forgot what the second part of the question was?

The margins.

Oh, margins. I think you should assume that it's different. So far for each one of the different markets that we have rolled it out in, you should assume that it is margin enhancing, and the fact is, is that we're not exactly sure with regard to the exact margins that we're receiving in each one of them, but you should assume that it is margin enhancing, and very positive from an overall margin perspective. Anything you want to add to that, Paul?

I think that's a very accurate summary.

Hey, one thing, Mark, just so that it's clear on that last question about the inter-company debt, because I didn't answer it very clearly, the intercompany note matures in 2010. It is callable on a change of control at CCO, and the exact terms and conditions of all that are outlined very clearly in the 10-K and in the S-1 for CCO.

Okay. Great. Well, listen, thank you all, everybody. It is exciting times here at Clear Channel. We're excited about giving you this great report. We're excited about our future. So thanks for taking the time this morning, and everybody have a great day. Thank you.

Thank you. That does conclude today's conference call. We thank you for your participation. Have a great day.