The Federal Communications Commission has granted a request by iHeartMedia to take on additional foreign investors in excess of the 25% cap on offshore ownership, concluding the move is in the public interest. In a nine-page decision, the FCC said the move would put iHeart in a “stronger financial condition” post-bankruptcy and also provide the company with “greater flexibility” to access foreign investment capital that could be needed in order for iHeart to “better compete with other media companies, enhance its programming, and better serve the public interest.” The ability for radio’s largest company to attract that attention overseas could also potentially encourage reciprocal investment opportunities for U.S. companies in foreign markets, according to the FCC. Under the ruling, iHeartMedia is authorized to raise its total foreign ownership from 25% to as much as 100%.
The company estimates that if all its outstanding warrants are fully exercised, iHeart would have less than the maximum it is now allowed with foreign equity interests totaling 63.9%. That would include 33%% ownership held by the German-based Pacific Investment Management Company (PIMCO) and up to a 20% stake held by Bermuda-based Invesco.
In a July 2019 petition, iHeartMedia had requested the FCC allow it to raise its foreign ownership limits saying the move would help its ability to “compete and innovate.” After going through the intra-agency review for national security, law enforcement, foreign policy and trade policy implications, the FCC agreed. “We find that the public interest would not be served by prohibiting foreign investment in iHeart, the owner of over 850 radio broadcast station licenses, in excess of the 25% benchmark,” it said.
Under the FCC’s guidelines iHeart will need to get additional clearance if it seeks to bring on any additional foreign owners with a five percent or more proposed stake in the company. Holders of iHeartMedia warrants will receive instructions regarding how to participate in the exchange of warrants in the coming days and weeks, according to the company in a statement announcing the long-awaited decision.
More Radio Groups Looking Overseas
Radio groups have increasingly been looking to bring overseas investors onboard as capital lenders in the U.S. have become less willing to back broadcasters. Cumulus Media secured approval in June to become as much as 100% foreign-controlled once the FCC adds its approval in the coming months. Similar to iHeart, the Cumulus move was, in large part, an extension of its bankruptcy reorganization plan. A similar proposal currently pending before Team Telecom is an application filed in April by Univision’s proposed new owners. It came just a few months after the FCC in December gave Univision Radio permission to allow Mexico-based subsidiary Notivision to surpass the 25% cap that dates to the 1930s.
The FCC has increasingly been more open to waiving broadcasters past the caps on foreign ownership for radio that date to the 1930s. In an effort to simplify that process, the FCC voted in 2016 to streamline the process and standardize the review procedure for deals that proposed going past the 25% foreign ownership benchmark.
In April President Trump issued an executive order that formally established the review process that applications need to go through in order to be approved by the FCC. Two months ago, the FCC unanimously adopted its new procedures saying the improvements to the transparency and timeliness of the cross-agency review process will help attract foreign investors to participate in the U.S. telecommunications market, including radio.
Among other requirements, the new guidelines say most applications referred to the Team Telecom group will get 120 days for initial review, plus an additional 90 days for secondary assessment if the group determines that the risk to national security or law enforcement interests requires extra scrutiny. Some companies will also be required to make certain certifications that the FCC said should allow for faster reviews.