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MSG Radio Gets Waiver to Transfer WTOK to WFI

Petition to Deny from RAAD Broadcasting denied

The FCC says it’s okay for MSG Radio to transfer the license for WTOK(FM), San Juan, Puerto Rico to WIAC-FM Inc. (WFI). The station previously used the call letters WIAC until 2011 when it became WTOK

The case is interesting because the agency waived its local radio market limits to do so and rejected a petition to deny the transaction from RAAD Broadcasting, licensee of fellow San Juan station WXYX(FM).

Back in 2007, Luis Mejia, owner of Bestov Broadcasting, applied for permission to sell then WIAC to MSG for $4 million. At that time two opponents filed Petitions to Deny, alleging the companies withheld documents germane to the transaction from the commission. Specifically, the opponents said they could provide another agreement between Bestov Broadcasting and Madifide Inc. in which Bestov proposed to sell the station’s facilities to Madifide, including the studio office and transmitter site, for $12,500,000. They also said there was a shared services agreement between MSG and Madifide, under which Madifide would give MSG access to the station studio and tower.

In 2008, the Media Bureau rejected those claims. The agency granted the Mejia application that August and the MSG deal closed in January 2009. MSG subsequently filed an application asking for the commission’s okay to assign the WTOK license to WFI.

Madifide and WFI, the current proposed assignee of WTOK, are commonly owned by members of the Soto family, according to the FCC. WFI and the Soto family have attributable interests in 14 radio stations in Puerto Rico. Thirteen of those were acquired by complying with the commission’s former contour overlap methodology for defining radio markets.

But now the agency uses a geography-based definition based on Arbitron Radio Metros. Puerto Rico is now considered a single radio market for ownership purposes. According to BIA, the island has 115 commercial and 12 noncommercial stations. That means one entity may own up to eight commercial stations, with no more than five in the same AM or FM service.

Since WFI is over the limit for a market of this size, three FMs more than allowed, it needs a waiver to acquire WTOK.

RAAD objected to the transfer, alleging that part of the application is an undisclosed scheme to permit unlawful control of WTOK by the Soto family, contending the 2007 assignment application of the station to MSG was part of a plan to warehouse the station. RAAD also argues granting the application would allow the Soto family to have an “undue concentration” of market power in the metro.

The FCC said in its decision it looked at the “scant” new evidence from RAAD, primarily the contention that some MSG employees used to work for the Soto family. That’s based on “inferences, conjecture and erroneous information,” according to the agency in rejecting the unauthorized transfer of control argument.

Concerning the ownership waiver request, WFI says the unique geography and topography of Puerto Rico make it impossible for stations across the island to compete with each other, and that the island is really not a single radio market. The commission previously agreed with that argument in a different ownership waiver request, noting the mountainous terrain limits signal propagation in some areas.

Moreover, Puerto Rico has become more competitive since 2007, with 71 separate radio station owners, according to the FCC.

RAAD relies mostly on advertising revenue shares in asserting its competition concerns, however the FCC has concluded that ad revenue share is of “decreasing relevance” as a barometer of competition and says RAAD failed to offer sufficient economic data to substantiate its claim.

The FCC rejected RAAD’s petition to deny. The agency evaluated the proposed deal using its interim contour overlap methodology and concluded the proposed transaction forms five separate radio markets and complies with local radio ownership limits in all five.

It okayed transferring the license from MSG to WIAC.