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Investors turning dial away from radio stock

Concensus is that record-high ad rates due to drop

Shares in radio broadcast groups marked double digital drops in August, as investors fret that ad sales will fall from the record highs seen earlier this year.

San Antonio-based Clear Channel, the nation’s biggest radio broadcaster since last week’s acquisition of AMFM, capped a 13% descent since Aug. 1 with a $3.88 drop to $68.50 amid heavy trading on Friday. Markets were closed Monday for the Labor Day holiday.

Radio has marked record-high advertising sales over the past few years thanks to a strong U.S. economy, business efficiencies gained amid government deregulation and a surge in ads from Internet companies. But analysts say it will be tough for the radio industry to maintain that pace in the third and fourth quarters as dot-com advertising slows and further rate increases by broadcasters appear unfeasible.

Switching off

“I’m not a big fan of radio right now,” said Angela Auchey, an analyst at Federated Investors. The investment firm has sold holdings in radio companies this year in anticipation of an industry slowdown, she noted.

Among other radio groups, Citadel Communications saw its shares plummet 32% in August, while Cox Radio marked a 16% decline and Radio One a 10% fall-off.

Only Infinity Broadcasting has thus far managed to run against the grain, charting a 10% rise in share price since Aug. 1. Analysts say that’s because Viacom recently made an offer to buy the 36% of Infinity it doesn’t own for $15.5 billion.

(Bloomberg News contributed to this report.)

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