Urban One Inc (UONE) 2006 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the AT&T Radio One third-quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (OPERATOR INSTRUCTIONS)

As a reminder, this conference call is being recorded. I would now like to introduce your hosts for today's conference, Mr. Alfred Liggins and Mr. Scott Royster. Gentlemen, you may begin.

Thank you, everybody. This is Alfred Liggins, and welcome to our third-quarter results conference call.

As you know, we have released our earnings, and, as I was quoted in the press release, we feel that the quarter was actually fairly decent one, with the exception -- and a large exception of the continuing poor performance that we're having in our Los Angeles radio stations, and also softness in Atlanta, which is a very large market for us. However, in fact, if the LA station had performed in line with market industry results, we would have actually outperformed the industry.

We are working very hard to correct the problems there. We made some senior management changes. We've got a consultant focused on it. We are right in the midst of a turnaround, and I will be happy to answer more questions about that in the Q&A period.

Right now, I'd like to turn over to our Chief Financial Officer, Scott Royster, who will say a few things and then dive right into the numbers.

Thanks, Alfred. Good morning, everyone. This conference call includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Because these statements apply to future events, they are subject to risks and uncertainties that could cause actual results to differ materially, including the absence of a combined operating history with an acquired company or radio station and the potential inability to integrate acquired businesses, need for additional financing, high degree of leverage, the seasonal nature of the business, granting of rights to acquire certain portions of the acquired companies' or radio stations' operations, market ratings, variable economic conditions and consumer tastes, as well as restrictions imposed by existing debt and future payment obligations.

Important factors that could cause actual results to differ materially are described in Radio One's reports on Forms 10-K and 10-Q, and other filings with the Securities and Exchange Commission.

For the third quarter of 2006, Radio One reported mixed results. While on one the hand we are disappointed that we underperformed the radio industry in the quarter, we can actually isolate our challenges to a couple of problem spots, with Los Angeles in particular continuing to be the Company's biggest hurdle to industry outperformance.

In fact, as Alfred stated, with our L.A. station historically representing our single largest radio station and with performance down approximately 50% from last year, the results of that one radio station will have a disproportionate impact on our consolidated results.

That is what has been happening this year and certainly what has happened this quarter. In fact, according to Miller Kaplan Reports, if our Los Angeles radio station had just performed in line with the 5% decline in radio revenue experienced in the L.A. market for Q3, we would have outperformed the radio industry overall in the quarter.

If you take that same analysis to Los Angeles and Atlanta, the Company's revenue growth would have been modestly positive for the quarter. We are hopeful that, given ongoing management changes we have made, the Company's various challenged areas will improve as we prepare for what we believe can be a stronger 2007 from a very disappointing 2006.

On a consolidated basis, net revenue came in at $99.1 million, down 2% from last year, while station operating income was $48.5 million, an increase of 2% from last year. As stated above, most of this revenue decline was due to the declines in Los Angeles, with some softness in Atlanta and Charlotte. Pockets of strength included Houston, Baltimore, St. Louis, and Washington D.C., which you may recall had a tough second quarter, so it's bounced back nicely.

The radio industry continues to be an entirely mixed bag of results, as the industry fell more than 9% in Raleigh and was up 20% in Augusta. In fact, in the 20 markets where we receive Miller Kaplan industry information, 11 markets were negative and nine were positive.

The growth in station operating income was due primarily to higher expenses in last year's quarter due to the onetime charge associated with terminating the Interep national sales representation contract. If you normalize expenses for this termination charge last year, as well as various noncore expenses for this year, station operating expenses grew under 2% for the quarter.

Adjusted EBITDA was $39.7 million, a decrease of 4% from 2005. The difference between station operating income and adjusted EBITDA is non-cash compensation, stock-based compensation, and Corporate expenses. Adjusting for FAS 123 stock-based compensation would lead to adjusted EBITDA being flat year-over-year. And the growth in Corporate expenses was primarily driven by expenses associated with the Company's 25th anniversary event held in August 2006, which is obviously non-recurring, and expenses associated with a transaction that never occurred. Without these two items, Corporate expenses actually decreased approximately 1% for the quarter.

Net income applicable to common shareholders was $0.08 a share.

From a category perspective, most sectors that we analyzed were negative, but entertainment was flat, health care was up over 8%, and government business was up almost 25%. Auto was down 5% for the quarter, financial down 6%, and telecom down 10%.

The number of spots in the quarter was up approximately 11%, while pricing was down about 15%, further indication that pricing has yet to firm in our industry.

For the quarter, capital expenditures were approximately $4.7 million versus $4.4 million last year. CapEx guidance for the year is now down to $13 million, which is actually a decrease from previous guidance of $15 million.

As of September 30, 2006, we had debt net of cash balances of approximately $957 million and our leverage ratio was approximately 6.87 times.

On the transactions front, we completed the acquisition of radio station WIFE-FM and the intellectual property of WMOJ-FM, known as Mojo, in Cincinnati, and moved that intellectual property onto the WIFE-FM frequency, greatly enhancing our strategic position in that market.

Also during the quarter, we announced the sale of WILD-FM in Boston to Intercom for $30 million. We believe that there is a good chance that the transaction will close in the fourth quarter of this year.

For Q4, we want to provide some limited revenue guidance. Based on our current outlook, we expect revenue to be down the low single digits. However, once again, our results are being materially skewed by weakness from our L.A. station that will be down more than 50% in the fourth quarter. Ex L.A., we would actually show revenue growth in the quarter.

If there is anything positive to say about L.A., it is that at some point, it cannot get any worse, and we are confident in our new management in that market, such that if they are able to make even modest improvements next year, the opportunity for growth is significant and could very well drive the Company's performance in 2007, especially if the rest of the portfolio and the industry holds up.

As for the industry overall, it continues to be choppy, but there appears to be some sequential improvement occurring through the quarter, but it is still very early.

With that, we would like turn it over to the operator and open up the call to questions. Thanks.

(OPERATOR INSTRUCTIONS) Marci Ryvicker, Wachovia.

I have two questions. Are you seeing any benefit from political in Q3 and Q4? Also, can you update us on any potential asset sales? Is demand stronger now than in the last three months?

We are seeing benefits from political.

Mostly Q4.

Mostly Q4. We basically own every black radio station in the state of Ohio for the most part, and it has been a battleground.

Also, there is a big Senate race and big Governors race here in Washington and Maryland, which we are benefiting from. So we are seeing a lift in political, mostly Q4.

Asset sales, we have seen a pickup in interest in our assets since the CBS stations have been cleared for the most part. And some of the things that we consider non-strategic are kind of the best of the lot of the available inventories at this point in time. So we are sifting through offers and deciding which make sense for us and which do not.

We are not in a position where we have got to do anything, so we just want to make the right decisions. But we are committed to cleaning our portfolio and improving our balance sheet -- as you saw what we did in Boston. So there is movement there.

Can you quantify political benefit?

Not just yet. Believe it or not, as has occurred in the past, political comes in until the very last moment. It will be a couple or several million dollars more than likely, when it is all said and done. But I do not think we can be more specific than that.

Thank you.

Bishop Cheen, Wachovia Securities.

Thanks for taking the call. Alfred, I know that you are no stranger to turnarounds. You have done it before. Can you just give us kind of how the L.A. challenge shapes up to what you have experienced in the past?

We turned L.A. around once when we bought the radio station from clear channel. It was down into the low 2s, and we took it up to the mid 3s. And now the station is down into the mid 1s.

This L.A. turnaround is a very unique situation for me as a broadcaster because the African-American population in the marketplace is only about 7.5%. It is very competitive. There are number of urban radio stations in the market. And then the fact that the market is 50% Hispanic throws another monkey wrench into it.

Which is -- one of the reasons why we got hurt was that the Spanish broadcasting station, Latino 96.3 I think it is -- or 96.5 -- I forgot what the frequency was -- came into the market and kind of did this blend of Spanish hip-hop and reggaeton that essentially went after young Hispanics, particularly males, that like hip-hop music, but they did it from a Hispanic perspective.

So stations that played hip-hop, like our station and POWER 106 had to now share their cumes and average core hours with that station, and it hurt both POWER and it hurt us. We, at that point in time, decided that given the number of competitors there, the demographic makeup of the market, that we could not be all things to all people. So we decided to make a decision to go after the adult demo and serve the adult population in Los Angeles.

And we have done a lot of research. We have made a lot of changes, on-air personality changes. We just hired the morning team -- the morning show away from one of the competitors, KJLH; we got Cliff Winston and put him in afternoon drive. He was very, very, very well-liked and popular in our research. We've got Tom Joyner in the morning, Michael Baisden in midday. We've got a new night show, a guy named Myke Julius.

The only thing we have not been able to do is market the radio station, which is key, because we changed the format. We need to tell our adult audience that we have changed. And the reason we have not been able to market the radio station is because it is extraordinarily expensive if you can even get on television due to the political elections right now.

So it is a process. We have got a new general manager. A guy named Barry Mayo, who was with Emmis and Broadcast Partners before that, is the consultant for the company. That is working full-time for the Company as a consultant, but spending, I would say 85%, 90% of his time on Los Angeles.

So it is a difficult turnaround, but I think our bogey is also low, the way I've got the station structured now from an expense standpoint. Instead of having to be a mid 3 share radio station to get back to the same cash flow, we can be a mid 2 share radio station and get back to the same cash flow. And I think we can do that, so that is our goal. And I think it is a reasonable and attainable goal.

Great color. Just real quick, any new development in blackamerica.com in a direction or marketing or --?

I know people have -- I know I have been talking about our Internet strategy and people are like, okay, when are you going to do something? Because ultimately it is critical for all traditional media companies to develop an online strategy, and for us in particular.

And we are working on something that is moving along nicely, that if it comes together, when it comes together that people will be pleased with. But as with anything that we do, as with our cable network, which took us to get forever to get done, we did it and we did it quite well, we want to do the biggest and the best and the most effective thing online. So we are taking our time until we get it right. But it is coming.

Okay, thanks a lot.

Jason Helfstein, [DC] World Markets.

Two questions. Number one, can you talk about then how much you planned on spending in L.A., let's say, post-elections? And I assume that is going to go into next year, so just a way to think about it. So that continues to weight on margins until the impact for that marketing works, it hits ratings and it hits revenues. So just how should we think about that, assuming that is a late November/early December type of spending?

Secondarily, Alfred, can you talk about how you have organized the -- call it the management structure of the Company since Mary Catherine has left and your interaction with your regional managers, and if you think that there is a more -- and how effective you think the management structure is now versus previous and if you think there is potentially a more effective way going forward. Thanks.

No, I'm not going to tell you how much money we're going to spend in marketing in Los Angeles. I might as well just send my marketing plan to my competitors so they don't have to listen to the conference call or the replay.

And the way you should think about it is that we're going to be investing in that radio station, and quite frankly, we are investing in other markets as well, to improve our competitive positions. But I would say look at our track record in the past in terms of prudently trying to manage expenses. I do not think anybody has classified us a runaway train in terms of just being prolific spenders.

But L.A. is an expensive market and we're going to have to be committed to turning that station around. So yes, it is going hit our margins. But by the same token, it is going to be a hockey stick. When we get our ratings back up, you're going to see a big jump and a quick jump in revenue. So that is how you should think about it.

Current management structure, I think, is significantly more effective. I outlined, I believe, in one earlier conference call that a couple folks got promoted in our organization -- a gentleman by the name of Doug Abernathy, who was our general manager -- still is our general manager in Houston, who did a great job, a really fabulous job -- got promoted to regional. He picked up Dallas and he picked up St. Louis as well.

A gentleman by the name of Gary Weiss ended up picking up Charlotte. He has Charlotte and Raleigh and Richmond. Rick Porter, who is in the Midwest, picked up some additional responsibilities; took care of all of our Midwest markets for the most part, all those Ohio Valley markets, and he's got Indianapolis and Louisville.

A gentleman who is a new hire since our last conference call by the name of Bruce Demps. He was the highest-ranking African-American regional vice president at Clear Channel. I've forgotten how many markets he had under him, 22 or 25. He came to work with us as a regional VP. He has got Augusta, Miami, and Atlanta. But he is stationed in the Atlanta market, in the Atlanta station.

And his primary goal is to get our Atlanta operation moving back in the right direction, since we've got enormous ratings there. We've got about 14 percent of the audience, and we're only doing about 8.5% of the revenue. So we have a real sales challenge but a lot of sales upside there, and Bruce is going to be responsible for making that happen.

And I'm now starting to begin the search in earnest to fill out the other corporate management ranks in terms of our programming and operations. We do not have a vice president of programming and we do not have anybody in charge of our online strategies directly for the radio station. And I am starting to talk to people and we're going to fill those positions, and I feel really good about where we're going.

The morale is really good at the Company. I interact with all of these people on a constant basis. I have a weekly regional managers’ call where we discuss all the issues. A number of the markets and regionals still report to me. About half the Company reports to me; the other half reports to our Vice President of Operations, Zemira Jones.

The new general manager in Los Angeles, a guy named Steve Candullo, who was a senior executive at Westwood One and before that worked for Broadcast Partners and Barry Mayo -- the GM also reports directly to me.

So we are going to get this done. I feel really good about it. Some initial upside, the Houston station that was Hispanic that we turned to gospel is already showing -- being up to about a 2 share, close to a 2 share, up from a 1 share, and we're almost doing as much revenue before our first rating book on the gospel station as we were after two years in the Hispanic format. So I'm feeling good about where things are going. I'm feeling very good about where things are going, actually.

Two follow-ups come to that. Number one, are looking for a President of Radio to basically allow you to be more of the CEO of all of Radio One?

Then maybe a question for Scott. Just taking all this in the bigger picture context, everything Alfred just said, as well as expectations for investing in L.A. next year, just so everyone is on the same page, does that mean we should all expect that next year, because of investment spending, could be another year where expenses grow faster than revenue? Or is it just too early to tell at this point?

I think that particularly as it relates to L.A., if we can get any sort of ratings momentum, on that station, given how poorly it has performed for frankly the last three years, the kind of revenue growth that you could see coming out of that market relative to any conceivable marketing and promotion number that you can think of that you would reasonably spend on that station, it could be a 3-to-1 ratio in theory, in terms of the actual revenue you put on the books relative to the marketing and promotion expenses.

And then, as Alfred just stated, we have got significant growth on one radio station in Houston. The other stations are doing fine. That market is doing well. We have the new station in Cincinnati. We're seeing strong growth out of St. Louis. So no, I think there is a very good chance that in '07, particularly if the industry gives us a little bit of wind at our back, that we could see higher revenue growth than expense growth, certainly.

But your first question -- I'm sorry -- President.

I am as I move through this, but I'm focused on the other corporate hires before I get to that. But I am actually -- when I am talking to people and I am interviewing people, I am thinking about that job and whether or not they are suitable. And I am also looking at some of our internal people that have all got new responsibilities to see if there's any internal candidates. So long story short, you'll see us hire a VP of Programming and Interactive and stuff like that before probably we hire a President.

But if that person comes to us, if we find that person, then we will hire them. It's not like there is a timetable. It is about the person, not necessarily the timetable. The worst thing would be to put the wrong person in the job. And quite frankly, I am focused on our operations. And I have been doing this for 20 plus years, so it would be more devastating to the organization for me to take myself out, put the wrong person in, than to just keep doing what I am doing until I find the right person.

Okay, thank you both very much.

Kit Spring, Stifel Nicolaus.

Can you remind us or give us an update of the extent of the asset sales you might be considering, any update on that?

Secondly, for Scott, can you give us an update on your tax situation as far as NOLs and amortization -- how long day last, when do you think you'll be a full taxpayer, that kind of stuff?

Also, Scott, on the CapEx that you said is going down to $13 million, is that a run rate or were some CapEx just being pushed out to 2007?

Asset sales, we said that we were looking to divest ourselves of $100 million to $200 million of non-strategic assets. That has not changed. And -- put it this way. Whether it is on the higher end or the lower end could be affected by how fast we grow our cash flow, too.

If we get things turned around quicker than expected -- it is all about reducing our leverage, putting ourselves in position to reduce our leverage, maybe resume our stock buyback and get back to really creating shareholder value, as opposed to reversing the negative revenue and cash flow slide. Sort of getting back into an offensive posture as opposed to a defensive posture. The speed at which we are able to do that might temper the swing on the asset sales magnitude.

However, there are some things that just -- we don't need to have in order to achieve our bigger picture. So we do not need to own them just to own them, but we also want to get a fair value for them.

And I think just to build on that, Kit, with regard to your asset sales question. I think the Boston transaction is indicative of the fact that in any radio company there will be assets that, frankly, are not generating, in some cases, any cash flow, but certainly not a decent return on whatever your investment was to acquire those radio stations.

So when we sold Boston for $30 million, we were basically selling radio stations that were not creating any additional value for the enterprise on an operating basis. That station, WILD-FM in Boston, is not the only station like that. There are other assets in this Company that, frankly, we could probably sell for values that are well in excess of effectively what we are getting paid for in our stock price, given that they may not have much cash flow or they have very low cash flow relative to what our multiple is and how folks generally think about value for radio assets.

So that is one of the reasons why we are being very cautious about how we move forward on this asset sales strategy, because we clearly want to sell those assets where we can generate the most value for our shareholders through whatever transaction prices we can get for some of these stations.

With regard to your NOL question, we have been looking at this much more closely, and over the past year, we sort of had to rethink some things, given the slowdown or the continuing slowdown in the radio industry and in our business, for that matter, which obviously has an impact on how quickly we become a company that generates taxable income.

Because you have this embedded $120ish million of deductible amortization associated with primarily amortizing FCC licenses that have been acquired over the years. That is a fairly fixed number at least through 2015. And so if your revenue and your cash flow or your earnings aren't growing, then obviously that continues to push you into a taxable loss position, which builds your NOL.

So with all that said, we actually now think that we're going to continue to see our NOL increase over the next several years, which means that we expect that we will continue to generate taxable losses for the next several years. And then we believe we will become positive in terms of taxable income, but that taxable income will be sheltered by the very significant NOL that is in place today and that we expect to continue to grow, such that it's possible that we will not be a federal taxpayer of any magnitude for perhaps another seven or eight years.

And so that is obviously something that we are excited to convey to the marketplace. The only caveat -- or really two caveats, if significant growth resumes such that income grows significantly, then that timeframe will be shortened. And then additionally, depending on the size ultimately of the asset sales that we do, the other good thing about this NOL is it is able to shelter any taxes, any federal taxes from capital gain associated with asset sales, which there undoubtedly will be. So the more assets that we sell and the more gain we realize, the more we will even to that NOL in the near-term associated with those asset sales.

But on a purely operational basis, independent of asset sales, we probably have another seven, eight years at least of not being a federal cash taxpayer.

With regard to CapEx, the reduction in guidance from $15 million to $13 million is really a combination of things, some of it timing, some of it just finding some things that quite frankly we do not need to do, or found ways to do cheaper. And then also, just given the environment that we're in, deciding to spend less money than we had originally budgeted to spend.

And so I would say -- we have always said that sort or the CapEx range for a company of this size is around $12 million to $15 million. That is not changing. In any given year, we will probably come in somewhere within that range, all other things being equal. So this year it looks like it's going to be about 13. Can't really tell you what next year is going to be, but I can tell you it will probably in that $12 million to $15 million range.

Thank you.

James Dix, Deutsche Bank.

Scott, I appreciate the color that you gave on 4Q revenue trends. Do you have an assumption as to what you think your markets are going to be? I know you talked a little bit about the impact of L.A. But just the fourth quarter, how your markets are shaping up.

Then on the operating expense side, you talked a little bit about L.A. Are there any other items of note on the expense side which are kind of special or non-recurring, either from fourth quarter of last year or that we should be thinking about for this fourth quarter?

Then I guess my last thing is just a little bit more on L.A.; any sense of what the timing of that turn should be in terms of the traditional lag between revenue from ratings? Is that a three to six-month lag or could it be quicker, given that you do have Tom Joyner?

Ultimately, do you think the power ratio of your new format could be higher than the hip-hop format?

A couple things. Timing, we expect to see some momentum coming out of the winter book in Los Angeles, and from a power ratio perspective I think the power ratio in L.A. was pretty high already. So I've not looked at the power ratio side, but it was well above a 1 in that market.

In terms of the outlook for the market, you know that that is really tough to call. Overall, our markets were down 1.6% in the third quarter. They were down 3.7% in the most recent month for which there is information, and that's September, which obviously is third quarter.

So what is October, November, and December going to look like? Really tough to say. I think to whatever extent political is benefiting the industry, you might see October have a little strength to it. November, there is only going to be a couple of days of political, so I don't think it will have much of an impact on November.

I think, obviously, the holiday selling season plays a big role in how strong the quarter can be, so it is really tough to call. We certainly do not have more insight than you, unfortunately. I think you probably talk to more folks than we do who can give you different data points that allow you to triangulate on what you think the industry might be doing.

In terms of your question about expenses in the fourth quarter, we did mention I believe on our last conference call that one of the initiatives of the industry is to generate demand for HD radios, and we have committed to purchasing $0.5 million worth of radios that we would then give away to get demand going and actually get radios into the marketplace. There is a good chance that maybe half to a little bit more of that giveaway will occur in the fourth quarter.

That is going to be an operating expense because, obviously, we are buying these radios and then we are giving them away to listeners, so it is effectively a marketing and promotion expense. So that could be several hundred thousand dollars that we will see in the fourth quarter.

Otherwise, there is always some noise here and there, but for the most part, there will be some marketing and promotions dollars that we spend in Q4 theoretically in certain markets to continue to drive our performance in some of those markets. But at this time, I think in terms of the kind of unusual spending that we described in last quarter, the second quarter, there will not be nearly as much of that in Q4.

And then of course in Q3, we did have the 25th anniversary expense, which was around $900,000, and a couple of other modestly sized items, such as the write-off of some expenses incurred for a transaction that we were pursuing that did not occur. So for the most part, I think it will be a fairly normal quarter, with a few exceptions, with regard to expenses.

Okay, that is very helpful. Excuse me if I missed it. Did you indicate with the write-off or the size of the write-off for the transaction was last quarter?

I did not, but it was somewhere between $400,000 and $500,000.

Okay, great. Thanks a lot, guys.

Anthony DiClemente, Lehman Brothers.

Just curious about the competitive landscape in terms of -- clearly, this year your major competitor, Clear Channel, probably had some more pricing power just given the benefits to ratings of Less is More. But with the ratings books for Clear Channel down a couple of quarters, do you see that sort of pricing power in the marketplace deteriorating as we head into '07?

And will you and your non-Clear Channel peers potentially benefit from that reversal of the share shift in the first quarter?

I don't think that we have seen pricing power in -- even from Clear Channel. I think what their Less is More has done is yielded them more revenue per minute. But there's actually more units out on the street. So we're you're selling more units, the industry is selling more units. But I think overall, pricing has, at least in this most recent quarter, gone down.

So the question is what is the opposite effect of Less is More, once Clear Channel laps this whole year? I don't know the answer yet. (multiple speakers) I am assuming that if we all got hurt by it, as we lap it, that we're going to do better. I just don't know to what magnitude.

One of the things that is happening is that you are starting to see Clear Channel's Less is More initiative for 30s and shorter length spots filter into, in a much larger way, (technical difficulty) -- you're starting to see more demand for advertisers for 30s and 15s. And so I think the industry is going to have to adjust to that. Certainly, we are going to have to adjust to that as well, because advertisers are taking to it and we are going to have to respond to what advertisers are looking for these days. And it was obviously prompted by Clear Channel.

So I don't know if the effect -- I think you do see some bounceback effect for non-Clear Channel radio stations. I just don't know to what magnitude. Okay?

That's great. It seems like you would. I am just trying to understand -- because it does seem like they have experienced some pricing power, right? Because they're pacing up 9% on their radio revenue line for the fourth quarter, which is like dramatically outperforming the industry. And I'm just wondering if that reverses --.

I don't know if that is pricing power or them just taking share, because they are taking out more dollars with using more units but less --

You also have to be careful. You really need to almost look at a two-year trend on pricing. Because if their pricing was down, let's say, last year some double-digit percentage because of the challenges that they were having associated with Less is More, their "pricing power" may be somewhat artificial and based solely on the fact that prices were so low for them last year that they are just kind of making up for that deficit.

That's true. Good point. I agree with that. Thanks for taking the question.

Benjamin Swinburne.

I wanted to come back a little bit to the last point you were just discussing. And you mentioned, I think, in the quarter spots were up 11, CPMs down 15. Your summer ratings books looked like the year-over-year trends are getting a little better than maybe the spring books and the books before that. So I know there is a lag in timing, but is it your expectation you'll see that CPM trend, which was down 15, improve over the next several quarters?

Along those same lines, as you add more spots, are you worried about somewhat sabotaging those ratings improvements (technical difficulty) if you've added more commercial minutes?

We're not adding more spots. What Scott said is we're selling more units than we have in the past; but we're certainly not selling out all of our units.

Got you.

It's a cash utilization issue. It is going to depend on the demand that the industry has. And, again, what Less is More has done is essentially created -- it has not reduced the number of units or the number of clients that can be on radio; it's reduced the amount of minutes that commercials take up.

So I guess my point is that it is possible to grow your share, it's possible for Clear Channel to grow their share without having the effect of raising prices in the industry. When Less is More first came out, everybody said, we're going to reduce inventory, prices are going to go up. And we are here to tell you that prices have not gone up. So from a pricing standpoint, Less is More has not been effective in raising CPMs for radio. It has been effective in helping Clear Channel this year grab more share, but it has not raised pricing in the overall radio --.

And we also have to be a little more careful that we connect this pricing softness in the radio industry solely to the Less is More initiative. We have to remember that as an industry we have been challenged for five years. We, like lots of other traditional media, newspapers, broadcast TV, are losing share to other media. I think you have heard of the Internet.

And so there is probably a combination of things going on that is making radio pricing more challenged than it has ever been. That, combined with Less is More, makes it perhaps more difficult to analyze those two things discreetly. But clearly it is more than just this Less is More dynamic.

And what I said on our last conference call, I think the radio industry has bottomed out -- and I still believe that. I think if you look at the industry as a whole, you are seeing, I think, some stabilization. Now it is really up to us as an industry how we [chance] more and more for ourselves to better serve advertising and gain some of our share back.

And I think online is a big opportunity. Because what we have is we have the ability to push people toward some online site and ultimately monetize that. We've just got to get our act together and do it.

Great. Thanks for the color.

Eileen Furukawa, Citigroup.

It is really just a few follow-up questions. In the past, you have been pretty adverse to shorter length ads. So are you now saying that you have had some sort of philosophical change and are you actually now pushing shorter length ads, or are you just simply meeting the increased demand that you're seeing in the market?

I don't think we have ever been adverse to it. We've always said -- even the last Chief Operating Officer had said -- that we will sell whatever the client wants. Clear Channel had an initiative to purchase shorter length ads. And I don't think anybody else in the industry has followed them with an initiative. But we have got some clients that have requested it; we have accommodated them.

And now what I'm saying is that because their clients have been introduced to it, there are (indiscernible) coming down with shorter length ads. And so we're probably going to have -- actually not more -- we are probably going to have to institutionalize and reconfigure our inventory and thoughts to satisfy what seems like it is going to be a consistent new demand for shorter length ads.

Okay, but you're not really actually actively pushing them yet?

No, we are not actively pushing them yet.

Just follow-up on your Internet question. Last quarter, I think you cited that it was about $1 million of revenue in the quarter. Did that grow this quarter and where do you think that can be over the next several years?

And the last question, just a quick update on TV One, your sub numbers, are they continuing to increase? Where are they and are you still on track to be profitable in full-year '07?

TV One, our subs are kind of like in the mid 30s. We had a good year in ad revenue. We were not -- I never said we were going to be positive full-year '07. I said we looked at being probably breakeven in fourth quarter of '07. We may miss that by a quarter or two, primarily because at TV One we made a big, big, big, big programming investment with acquired programming from Warner Bros., which I think we announced, which was a deal in the tens of millions of dollars.

However, it was a very smart programming investment because it is paying off in ratings. Our ratings are continuing to rise. The numbers I have seen, we're starting to do 0.4s and 0.5s in primetime, which for a 2.5-year-old cable network is pretty phenomenal.

So we may miss it by a quarter or two, but it was never going to break even full-year '07. It was always fourth quarter of '07. But it will still breakeven full-year '08.

Great, and Internet?

Similar revenue base for Q2 to Q3.

And where do you think that can get to in the next couple years?

I am working on that now. I'm not going to give you an answer, but a lot more.

Okay, great. Thank you very much.

Mark Wienkes, Goldman Sachs.

Two questions for you. First, what do you think accounts for the variability across the markets that you mentioned, of nine up and 11 down?

Oh my God, I have no idea. That has always been the mystery of all time.

Is it more like local is weaker in (indiscernible) and national in others or is it consistent at all?

It is like the most complicated eye chart you can imagine, because you have -- so you have 20 markets. You have local. You have national. And then you can look at it on a quarterly basis, a monthly basis, or a year-to-date basis. There really does not seem to be any rhyme or reason in terms of the variability.

With that said, I will tell you that for the quarter, the industry was up in our markets just over 5% nationally and down 5% locally. So while you still have this huge variability -- so, as an example, national up 5, but you had one market down 12 and another market up 20. And then in local, down 5, you had one market down 12, and another market up 19.

So what is interesting is in both cases, you have high highs and low lows, but you had a very different outcome in terms of the 20 markets aggregated. So go figure. It is really hard to know what is driving that.

Is there any way to reconcile that with your comment that most of the categories were down year-over-year?

I was thinking about that, and I don't think I'm smart enough to do that.

Okay, that makes two of us. How about one follow-up. Has your sales team been running up any competition from local search sales, from like Google, Yahoo! interactive? They're putting a lot of people on the street.

Yes, I know -- they are hiring those people and nobody knows -- not even the people they have hired know what they are going to do. That is what we have heard.

I know a woman who just went to work for Google, and I said what are you going to do? She goes, I don't know, but they pay me a lot of money. I have no idea. I've heard rumors that they're cutting some deal with Clear Channel or something. I don't know.

Right. But minimal impact on local radio in the near future?

Until I know what it is, I can't tell you.

Okay. Thanks, guys.

Laraine Mancini, Merrill Lynch.

A couple quick lessons for you. CBS said on their call this morning that the remaining asset sales that they have look like the multiples might be in the 14 times range. Do you think that the private market is holding up that well and would you expect the same types of multiple for any noncore assets you sold?

Second, you said you expected to maybe go up to $100 million or $200 million in sales. What kind of book basis is associated with those assets?

Final question, in L.A., Emmis reformatted their country station to an AC. Do you expect that to have any impact on your station there or is it nonmaterial?

No, the reform of the country station in L.A. is going to have zero impact on what we're doing there. Two completely different audiences.

And 14 times, you know what? I don't know the answer to that question. Put it this way. Nobody is claiming that they paid 14 -- certainly Intercom and Wilks at least are not claiming that they paid 14 times for the last batch of assets that got bought. So the assets going out the door now are worse than those.

So everybody -- the seller always wants to talk up the multiple that they paid and the buyer always wants to talk it down. And unless you are in the transaction, you don't really know what is there. Because I am sure that some of those stations that were sold had [sticks], so that is going to raise the multiple. So I don't really know.

You have to be little careful with multiples. And to Alfred's point, the buyer and seller can have a very different perspective on what they've paid from a multiple perspective. Particularly if I am an in-market buyer, I might strip out 10% or 20% of the cost. And so the multiple that I am thinking I paid is "pro forma," based on lower expenses, higher income, thus a lower multiple.

Yet if I'm the seller, I might just look at the profit that is going off of my P&L, fully burdened with the full expense base, and hence it might look like a higher multiple.

I will tell you that the range of multiples that we have seen on cash flow -- forget sticks -- has been 12 to 15.

Yes, that is true. Your other question, Laraine --

The final question was the book basis for the type --.

I'm sorry. I wanted to make sure you meant book basis as opposed to tax basis. The book basis, quite frankly, probably will not be all that materially different, because the vast majority of any purchase price allocation goes to FCC license, which you are not amortizing for book purposes. I was actually wondering if what you meant was tax basis, which is much more important --.

I did mean tax basis.

Okay. Because that determines the gain and hence also, to whatever extent you have NOLs, the amount of NOLs you are going to use to shelter that gain. And I would tell you, you know, because you are for tax purposes amortizing that FCC license, depending on how long you've owned the radio station matters quite a bit. You have a 15-year amortization period.

And so we do not know what we're going to sell for what price. But in general I would say that the tax basis for the assets that we're looking to sell will probably be lower --, modestly lower, potentially significantly lower -- than the ultimate sales price. Meaning we should generate taxable gain on most, if not all, of the asset sales that we're looking at making.

Okay, but you can't give a type of level what you'd be talking about?

No, because the difference between a taxable gain in market X and a station in market Y could be millions, if not tens of millions of dollars.

Thank you.

Jonathan Jacoby, Banc of America.

Just a few questions here. First, can you give us any color on how REACH is performing right now? I may have missed it and I apologize.

Second question is -- I know it's early. Is there any sign, sort of postelection period that you have, that you get that comfort about the industry tailwinds that everybody talks about? I just want to know maybe there is something you are seeing.

Lastly, in terms of this Less is More or shorter length units that everybody has been discussing, I'm wondering if that is what we saw in the third quarter in terms of smaller units driving your 11% growth in overall units in the quarter -- or more shorter length units.

Short, I don't think that's what is driving the increased number of units that we sold, because we are not selling a significant number of shorter length units yet. So I do not think that is the case. It is too early for us to tell about tailwinds.

Yes, I guess -- what I had mentioned in my comments is that we were hopeful to see some sequential improvement with regard -- through the quarter. With regard to the actual forecast that we have for the quarter, we are seeing November looking a little bit better than October, and December looking better than November.

But we have to also remember that this industry tends -- it continues to book very late or not book very late. So to some extent, it matters as to how much optimism or pessimism you're bringing to your forecast to determine whether or not you're being accurate relative to the activity that is going to occur in the future.

I think we have a fairly realistic outlook on the business for the quarter. I do think it is possible the quarter improves as we work through November and December. But I also think, as I said earlier, that holiday selling season and how robust or not it is going to be is potentially going to be a modest part of ultimately how the industry pans out for the quarter.

With regard to REACH, what we have been saying for a while is that we really are looking at our business on a consolidated basis. We would prefer to not break out the component pieces because there is so much intermingling of the business that we kind of now view REACH almost like a programming arm of our Company.

And so I guess what I would say is REACH is doing fine. As we've said in the past, 70% of its business is guaranteed by ABC Radio Networks. Tom Joyner continues to be the top urban radio personality, and we are very happy with everything that they have brought to the table in terms of helping us create value. Obviously, some of the new initiatives that we've undertaken, our newstalk network in particular, they are an important part of. So strategically they have been a great addition to the Company.

Thank you.

Everybody, thank you very much for joining us. We really apologize for all the technical difficulties that we had today. So hopefully we will remedy those by next conference call. As always, we are available for off-line conversations for anybody who would like to delve a little further into the business.

Thank you.

Ladies and gentlemen, this does conclude our conference for today. Thank you for participating and for using AT&T Executive Teleconference. You may now disconnect.