Sinclair CEO Tells Investors Spectrum Auctions Are Not Imminent
Talk of incentive spectrum auctions in Washington is overblown, Sinclair CEO David Smith said during the company’s Q4 earnings call Wednesday. “Based on what I've seen on the Hill, it’s conceivable there will be no auction any time in the near future,” Smith said in response to an analyst’s question about spectrum bills. “I'm not sure it ever gets into any kind of final legislation because there are fundamental disagreements between the Democrat side and the Republican side about what the final legislation has to say,” he said. Negotiations between House Republicans and Senate Democrats are under way. (See separate report in this issue.)
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"If they promulgated a law tomorrow, based on history, it might be two to five years before they even craft the rules for the auction,” Smith said. And even then it’s not clear how many broadcasters would participate, he said. “You've heard an enormous amount of broadcasters come out and very publicly say ‘we have nothing for sale,'” at auction, Smith said. “The notion of an auction getting into legislation is up for grabs, and then whether anybody shows up is even more up for grabs.”
Despite that lack of interest in selling in incentive spectrum auctions, some station owners are interested in selling to other operators. Sinclair has been an active buyer and will continue to be, Smith said. “We're certainly prepared to get bigger if need be, and we see the benefits of [financial] leverage associated with it.”
But the number of stations that have changed hands or may be for sale is largely a factor of how long the owners have held the assets, rather than an indication that investors are fleeing broadcasting, Smith said. “I think it’s a coincidence of timing that a number of folks out there may be contemplating a sale and may be doing so because it’s time to move on,” he said. The transactional activity is motivated “not by people’s desire to exit the business because of any fear, but the amount of time they've held the assets,” he said.
Smith also said he doubts the video competition bill introduced by Sen. Jim DeMint, R-S.C., will become law. “I don’t think it ever gets any traction in the grand scheme of things,” he said. “It’s all background noise on the part of the cable folks trying to get government to come in and do their work for them,” he said. “They'll do what they got to do and we'll do what we've got to do. Not to worry."
Meanwhile, 2012 is shaping up to be a “very interesting” year for political ad sales as stations await a wave of spending from the so-called super political action committees (PACs), said Smith and Chief Operating Officer Steve Marks. “That PAC money we've witnessed so far is more than interesting,” Marks said: “It’s a real eye opener. It’s clearly different than what we've experienced before.” But most of the PAC money is waiting on the sidelines until the nominating contests are over, Smith said. “The further into the year that happens, the more interesting it will be for broadcasters to manage their inventory,” Smith said. “It’s just going to be fascinating to watch, because we've never seen anything like this before."
Q4 sales at Sinclair fell 5.7 percent from a year earlier to $212.7 million. Net income fell 29 percent to $23.3 million.