Radio deal falls through

WASILLA -- The merger of KMBQ 99.7 FM and Anchorage-based radio company Ubik Broadcasting fell through in its 11th hour when the financing bank put the deal on hold last month.

KMBQ's owner John Klapperich said the deal was 17 months in the making, and that he was ready to sign when Silicon Valley Bank of Santa Clara, Calif., put the deal on ice the first week of October.

"I was at the closing table and it was all ready to roll," Klapperich said. Klapperich said the decision at Silicon Valley Bank had nothing to do with the solvency of either of the Alaska companies. The Outside bank simply said money was tight and Ubik's loan to buy KMBQ would have to wait.

Given a year-long nationwide recession which took a steep drop after the Sept. 11 terrorist attacks, Klapperich said he has no ill feelings toward Silicon Valley Bank.

"It's a cool, high-glossy bank," Klapperich said. "They got a big television and radio division."

Ubik general manager Mike Robbins said in a press release earlier this year that Silicon Valley Bank was brought in to finance the deal specifically because of its expertise in media company loans. Robbins told the Frontiersman last week that he, like Klapperich, didn't think the bank's decision reflected poorly on the deal.

"The bank did not say no to the loan," Robbins said. "The bank said 'We'd like to wait a few months.'"

Robbins said he didn't want to comment further on the deal.

"Until we have a clearer direction of where we're headed I don't want to say anything," he said.

KMBQ and Ubik both remain members of a small and shrinking class of American commercial broadcasters -- they both operate small companies without the support of large media groups. KMBQ Inc. is what broadcasters refer to as a "stand-alone" station. Ubik owns and operates KNIK 105.7 FM, and operates KZND 87.7 LP-FM under an agreement with its owners, Fireweed Communications. Ubik also markets Fireweed's KYES channel 5 TV station.

For comparison, Clear Channel -- the nation's largest broadcaster -- owns six radio stations in Anchorage. Clear Channel's Web site claims it owns 37 U.S. TV stations, has an interest in 240 radio stations outside the U.S., and owns "approximately 1,225" U.S. radio stations. That the company's PR team can only put an approximate number on its station count is a pretty good indicator of how large it is. The Federal Communications Commission (FCC) limits license owners to six stations per radio market. Companies that publish newspapers can also be subject to FCC limits in regards to single-market holdings.

Because KMBQ is licensed to broadcast 100,000 watts [the station currently broadcasts at 51,000 watts] and can be listened to in Anchorage, both Clear Channel, and Georgia-based Morris Communications -- which also owns six Anchorage radio stations -- are prohibited from buying KMBQ.

Klapperich told the Frontiersman he wasn't obliged to continue negotiating with Ubik, and that KMBQ might just remain a stand-alone station.

"The good thing is that I've busted my butt for the last 17 months," he said. Klapperich said the station's ratings were up and that it had earned broadcasting awards in the last year.

Both Ubik and KMBQ spent time and money working on the deal. Assessments were made of both companies before the bankers could approve Ubik's loan. Klapperich said the scrutiny might have been healthy, but was also expensive.

"There's seven pounds of documents here, 13 inches thick," he said.

Klapperich said that while the deal was in the works KMBQ had avoided new projects, but that has changed since the October announcement.

"This last month we've added a newscast and we've added three new people and I anticipate more by the end of the year," he said. KMBQ could employ about 16 full-time and six part-time people by January, Klapperich said.

In a press release earlier in the year, Silicon Valley Bank announced a $2.5-million line of credit for Ubik's growth plan, which included the KMBQ purchase. That can't be seen as a reflection of KMBQ's current value, however -- the same press release said Ubik had other plans for some of the money.

One part of the Ubik plan involved an FCC auction for a new FM radio frequency to serve the Valley. Klapperich and Robbins said the FCC auction was delayed, although not because of the flagging U.S. economy. The FCC is currently writing regulations that give a priority to non-commercial low- power broadcasters, and frequency auctions have been delayed in the meantime.

When the auction was originally scheduled, the FCC had put a minimum bid of $220,000 on the new Valley frequency.

"It's my understanding that the whole system is on hold at this point," Robbins said of the FCC frequency auction. "My guess is that when the auction comes back around that number could be the same or higher."

Meanwhile, KMBQ remains a locally programmed stand-alone station. Klapperich said the Ubik deal wouldn't have changed KMBQ's strategy of covering local events on the radio -- and any future deals will have to be made on those terms as well.

"The cool thing that happens here is that we sit down in this board room and decide for ourselves if we want to cover the local Red Cross," Klapperich said. ". . . We can succeed at what we do, despite whatever else is going on in the world."