Network, Affiliates Tell FCC That Offer Is Financially Unsound : CBS Files Objections to Turner Bid

Seeking to thwart a hostile takeover by cable broadcaster Ted Turner, CBS on Monday filed a petition with the Federal Communications Commission, claiming that, under Turner’s proposed merger, the company would run “a high risk of financial ruin.”

Turner, chairman of Atlanta-based Turner Broadcasting, which owns Cable News Network and “superstation” WTBS, in April outlined a plan to acquire 67% of CBS stock through cashless, “junk-bond” financing, valued by CBS at $4.5 billion.

The CBS petition, a 90-page document delivered to the FCC minutes before the deadline for petitions objecting to Turner’s bid, claims that CBS’ debt would jump from an estimated $80 million this year to $742.5 million next year if Turner were successful.

Along with the CBS petition, the FCC received scores of other petitions to block Turner’s application for a transfer of ownership, including comments and filings from more than 100 of the network’s affiliated stations.

One surprise was the number of public interest groups--including many not normally on the side of big broadcasters--who filed petitions against Turner. Groups lining up with CBS included the AFL-CIO, Action for Children’s Television, the Urban League, the National Organization for Women and the California Assn. for the Physically Handicapped.

Evidentiary Hearings

The CBS petition asks the FCC to use “special procedures” in reviewing Turner’s application for ownership. The network asked for evidentiary hearings, an extended process that would give CBS the ability to investigate Turner’s finances.

However, meeting the requirements for holding such hearings “is a very high burden to meet,” according to Charles Firestone, a former FCC attorney who is now the director of UCLA’s communications law program.

“I wouldn’t really expect this (the CBS bid for an evidentiary hearing) to be successful,” he said. “Even if it (CBS’ claim) is true, the FCC today has taken more of a hands-off position on all these types of cases. Perhaps a more activist commission might want to delve into (Turner’s finances). But their record today is more of a laissez faire approach.”

In addition to the financial grounds outlined in CBS’ petition, the document notes that a merger with Turner’s company would reduce diversity in programming, especially news, and substantially lessen competition in national advertising.

In the financial scenario that the CBS petition envisions, the high cost of servicing the debt would force Turner to cut programming and program development costs, because administrative, overhead and personnel costs account for only 4% of total expenses and cuts in those areas would not have enough of an impact on the budget.

According to CBS, cutbacks in programming costs would lead to a sharp falloff in ratings, with disastrous economic consequences. The loss of one point (1% of the nation’s households with televisions) in prime-time and daytime ratings would mean a loss of $1.7 billion over the next six years, CBS said.

Turner has 10 days in which to respond to the CBS petition. Should the FCC deny the CBS petition, CBS can appeal to the U.S. Court of Appeals in Washington.

May Ignore Politics

Asked about the potential effect on the FCC of the dozens of other petitions to deny Turner’s application, attorney Firestone said: “This may sound hard to believe, but I don’t think the FCC would look at the politics of the situation. I think that the commission would look at the merits of each petition.”

According to Joe Carriere, chairman of the board of directors of CBS affiliates, the more than 100 station owners who petitioned the FCC on Monday were not organized by CBS management.

“For whatever it’s worth, the network had nothing to say to us,” he said. “When we question the ability of Turner . . . to run this thing properly, I would hope the FCC would take it seriously. Most of us have been pretty good operators for a number of years, and we’re not prone to cry wolf.”

However, Arthur Kern, general manager of San Francisco’s KPIX-TV, a CBS affiliate, said that affiliates received telexes asking them to copy the network’s petition.

The AFL-CIO filed its petition because the labor group has “a policy against corporate raiding in general,” said Murray Seeger, director of information. “We’ve also known Ted Turner to be an anti-union employer, and we’re against further concentration in communications,” he said.

Some of the petitions from groups that ordinarily wage war with CBS were apparently prompted by a feeling that a known enemy is preferable to an unknown one.

Lax on Affirmative Action

For example, the California Assn. for the Physically Handicapped is unhappy with CBS because it doesn’t caption most programming and lacks affirmative action programs to hire qualified handicapped people.

But Turner hasn’t made a commitment to those goals either, said Stanley Fleishman, who represents the association.

“We’re all saying that, unless (Turner) is committed to doing the things that we believe ought to be done, he is not a fit applicant to get the license. It would not be acting in the public interest.”