Chairman Talks of Acquisition Plans : Capital Cities May Sell ABC Station

One of ABC’s prized television stations may be sold if a planned acquisition of American Broadcasting Cos. by Capital Cities Communications Inc. goes through, Capital Cities Chairman Thomas S. Murphy said Thursday.

The five ABC stations, located in Los Angeles (KABC-TV Channel 7), New York, Chicago, San Francisco and Detroit are regarded as the most profitable of the station groups owned by the three television networks.

However, Capital Cities’ has seven television stations of its own, including four ABC affiliates, and, if the companies are combined, some of the TV stations will have to be sold in order to comply with a variety of FCC regulations. On Monday, Capital Cities proposed to buy ABC in a “friendly” $3.5-billion merger.

Telephone Interview

In a telephone interview Thursday, Murphy said his company will do “whatever is necessary to keep” its ABC affiliate in Philadelphia, WPIV-TV, which some analysts regard as the most profitable network affiliate in the country.

Many industry professionals believe that, in order to keep the Philadelphia station, the combined new company would be forced to sell an ABC station to comply with an FCC regulation that prohibits companies from owning station groups that reach in excess of 25% of the country’s homes.

Apparently, selling Capital Cities’ six other TV stations, the largest of which is a Houston station, would not be sufficient to meet the 25% rule.

To hold onto the Philadelphia station, Capital Cities would have to receive a waiver from the FCC because it shares some service areas with ABC’s New York station, WABC-TV, which would violate the FCC’s “signal overlap” rule.

It now appears that Capital Cities may ask for such a waiver, although Murphy said the company has not yet decided.

Asked if the Philadelphia station is more profitable than than either of ABC’s two smallest stations in San Francisco and Detroit, the easygoing Murphy replied: “You suspect correct. We would love to keep Philadelphia.”

“We would also love to keep ABC’s radio stations in New York and Los Angeles (KABC-AM and KLOS-FM),” he said.

That would require another waiver, exempting Capital Cities from the FCC’s “broadcast combinations” rule that forbids companies from owning TV and radio stations in the same city.

Such combinations are in existence now because the FCC “grandfathered” existing combinations when the ruling was made.

Murphy, regarded as a brilliant laissez-faire manager who runs a highly decentralized business, discounted analysts’ speculation that, because ABC is so big, Capital Cities will break with its traditional management style and run ABC itself.

That speculation is fueled by ABC’s weakened condition as the lowest-rated of the three TV networks with serious programming problems and sagging profits.

“ABC is bigger, but I don’t think we would change our operating philosophy,” he said. “Tell them (employees of ABC’s Los Angeles- based entertainment division) I don’t intend to read any scripts. We’re broadcasters, but we’re also businessmen,” he said, adding “the professionals are going to run the networks.”

As the deal is now structured, ABC President Frederick S. Pierce would run the ABC Inc. division of the combined companies, but he would report to Daniel Burke, the current president of Capital Cities who would have the same position in the new company.

“I would think Dan Burke will have the same relationship with ABC as he has with Capital Cities’ other companies,” Murphy said.