Tribune Media shares are up 5.8% in mid-day trading, and Sinclair Broadcast Group is +3.0%, after the U.S. Court of Appeals in D.C. agreed to let an FCC decision that should ease the way for TV station mega-mergers take effect while judges consider its merits.
At issue is an FCC rule that only counts half of the viewers reached via UHF stations when determining whether a merger of TV station owners would exceed the government’s ceiling. Companies are supposed to be barred from reaching more than 39% of the nation.
The FCC scrapped the so-called UHF discount in September. It determined that UHF stations are no longer weaker than VHF ones now that both transmit digital signals — and are largely viewed via cable and satellite distributors.
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But the agency revived the discount in April after President Trump took office and appointed Ajit Pai to be FCC chairman.
Activist group Free Press asked the court to stay the recent decision while justices consider the merits of the UHF discount. Today they declined to do so.
That could be important for Sinclair, which last month agreed to pay $3.9 billion for Tribune. Without the UHF discount, Tribune reaches 43% of the U.S. while Sinclair reaches 38%. With the discount, Tribune only reaches 26% while Sinclair falls to 25%.
With the discount, Sinclair and Tribune could justify a merger if the FCC also raises the national ownership cap.
That’s what RBC Capital Markets’ Leo Kulp expects. The UHF discount “is really just a milestone on the way to a broader review and updating of the ownership rules by the FCC,” he says.
Wells Fargo Securities’ Marci Ryvicker adds that today’s ruling suggests that the court will side with the FCC, and against Free Press, when it rules on the merits of the UHF discount.
“Recall that one of the major factors the Court considers when deciding on stay is the likelihood that the petitioner’s win the case on its merits,” she says.
That’s “clearly a positive” for the Sinclair-tribune deal, she adds.
But Andrew Jay Schwartzman of Georgetown University’s Institute for Public Representation — who represents Free Press in the case against the UHF discount — calls today’s decision “not very surprising, since stays are rarely granted” although it’s “extremely disappointing.”
Still, he adds, “the case is far from over, and we feel that we have a strong case once it is fully briefed and argued.”
The National Association of Broadcasters says it supports today’s decision to deny the stay. The effort in September to eliminate the UHF discount “was made without a comprehensive review of broadcast media ownership rules,” EVP Dennis Wharton says.
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