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Clear Channel Outdoor Holdings, Inc. (NYSE:CCO)

Q3 2011 Earnings Call

October 31, 2011 2:00 p.m. ET

Executives

Bob Pittman – CEO

Tom Casey – EVP, CFO

Brian Coleman – SVP, Treasurer

Randy Palmer – IR

Analysts

Marci Ryvicker - Wells Fargo Securities, LLC

James Dix – Wedbush Securities

Tim Daggett – Citigroup

Bishop Sheen – Wells Fargo Securities

Tobey Steiner – JP Morgan

Doug Arthur – Evercore Partners

Nadia Lovell – JP Morgan

Lance Vitanza – CRT Capital Group

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Clear Channel's Third Quarter Earnings Call. At this time all participants are in a listen-only mode. Later we'll conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to our host Mr. Randy Palmer. Please go ahead.

Randy Palmer

Good afternoon and thank you for joining us for our third quarter 2011 earnings call. On the call with me today are Bob Pittman, Chief Executive Officer of CC Media Holdings and Clear Channel Communications, Tom Casey, Executive Vice President and our Chief Financial Officer, and Brian Coleman, Senior Vice President and our Treasurer.

Bob will be making a few opening remarks and then Tom will give an overview of the third quarter financial and operating performances of CC Media Holdings, Clear Channel Communications, and Clear Channel Outdoor Holdings.

For purposes of this call, when we describe the financial and operating performance of CC Media Holdings, we are also describing the performance of its subsidiary, Clear Channel Communications.

After Tom’s comments, we’ll open up the lines for questions.

Before we begin, I would like to remind everyone that this conference call may include forward-looking statements that involve uncertainties and risks. There could be no assurance of the management’s expectations, beliefs and projections will result, or be achieved, or that actual results will not differ from expectations.

Please see our annual reports on Form 10-K and our quarterly reports on Form 10-Q filed with the Securities and Exchange Commission for a discussion of important factors that could affect our actual results.

Pacing data or information may be mentioned during this call. For those not familiar with pacing data, it reflects revenues spoke to the specific date versus a comparable date in the prior period and may or may not reflect the actual revenue growth at the end of the period.

The company’s revenue pacing information includes an adjustment to prior periods to include all acquisitions and exclude all divestures in both periods presented for comparative purposes. It also excludes the effects of movements in foreign exchange rate.

During today’s call, we will provide certain performance measures that do not conform to generally accepted accounting principles. We have provided schedules to reconcile these non-GAAP measures with our reported results on a GAAP basis as part of our earnings press releases, which can be found on the investor section of our website.

A webcast of this call and the earnings press releases that were issued today can be found on the investor section of our website at clearchannel.com, clearchanneloutdoor.com or ccmediaholdings.com. A replay of this conference call will be available for a period of 30 days.

With that, I will now turn the call over to Bob Pittman.

Bob Pittman

Thanks, Randy, and good morning everyone. Before Tom walks you through the details of the company's solid financial performance in the third quarter, I'm going to take a few minutes to say hello and to tell you how excited I'm to be here and take on this new role.

I had a chance that very few people get, I got to test drive the car before I bought it. Actually I liked the car so much I didn’t want to get out of the seat. Usually, as a newcomer, the more you look at a company, the worst it looks. But in this case, the more I saw, the better Clear Channel looked to me.

So, after working with John Hogan and his team on Clear Channel Radio for most of the past year, the idea of taking this job truly became irresistible. And here's why. I see real upside in a company that has incredible fundamentals and is capable of leveraging its infrastructure and capitalizing on its strengths to create new and incremental value. The opportunity to create and promote Outdoor and Radio, but let me talk about radio first, where I spent most of my time so far.

The big three in media used to be television, radio and newspapers. Now it's TV, radio and the internet. Radio continues to be strong even though that might not be as public perception, but when you look at the big three today, radio's advertising dollars are clearly not what they should be given radio's reach and the amount of time people spend with it. People spend over two hours a day with the radio each day second only to TV at just under 3.5 hours a day and has been nearly two hours people spend on the internet per day.

Radio is the America's companion with the reach that's been remarkably consistent overtime, in fact, the percentage of people who listen to the radio weekly have increased slightly since 1970 to 2010. Now, the reach is 93% weekly. The consumer loves radio and radio is built around big brands with great loyalty, C100, KISS FM and KFI are just some of the examples of those clear Channel brands. With its incredible reach and time spent, radio is a great business with a big upside, although radio is doing very well with consumers, it is underutilized and undervalued by advertisers.

The TV sector gets over $74 billion in ad revenue for the year. While internet businesses do about $26 billion, and only $15 billion goes to radio. With less usage and a lower reach, the internet is bringing in an almost twice the advertising revenues of radio and TV is getting slightly more ad dollars than it deserves, if you correlate revenue to usage.

So, why hasn’t radio gotten it share? It’s probably because radio is not focused of getting money to the sector. The radio industry basically waits for radio to be allocated a share of a media budget and then we all fight for our share of it or more if we do it well.

But, the real upside is for the radio industry to do what the internet has done and thus bring revenue to the sector. With media like newspapers, magazines, and yellow pages probably getting more revenues than they deserve, there’s a lot of revenue that can be brought to the radio sector without increasing the total media spend for any advertisers.

Additionally, if advertisers substituted some radio or just some of their TV, they can maintain their reach, frequency and impact and actually save money.

During my time with MTV and AOL, we had to do the same thing; shift advertising dollars into work world, in both cases new sectors. But, the idea is the same for underrepresented sectors like radio and by the way outdoor as well.

And now, that’s what we at Clear Channel intend to do for ourselves and in the process radio as well. And then, radio with our national platform Clear Channel is unique. We are number one in the United States in terms of reach of all the media players. Our radio stations alone reach a 158 million listeners a month, but that total increases to nearly 240 million a month when you add in all of our affiliates to other broadcast radio properties that nicely outpaces and in the broadcast TV network's reach and its even ahead of the monthly reach of such power houses as Google or Facebook and their audiences in the United States.

Clear Channel with its national reach can also even substitute nicely and at a lower price for national reach network television, plus seeing a lot of growth potential for Clear Channel in just our broadcast radio segment alone.

But another big area of growth potential for us is digital. We see all our radio stations as brands, not just towers and transmitters, and our strategy is to be where our customers want to find us, including online in mobile with the products and service they expect.

As you probably know, we launched the iHeartRadio, the new iHeartRadio in the quarter to nothing but rare reviews, solidifying our rightful places to leader in all things radio whether broadcast or digital.

But, we’re not planning to stop there. We’re going to think and act like a nimble start up that way we can maximize opportunities to serve all of our constituencies from listeners to marketers and advertisers regardless of the device or platform. And we can be a leader or at least the fast follower with all these opportunities.

And we’re also partnering like a startup, one of our major partners has been Facebook and they have even featured our new iHeartRadio product as one of the two products at their annual FA Developer Conferences opening session. We demonstrated the power of our reach and our multi-platform strength with our record setting promotion of the iHeartRadio music festival, which also instantly put the new iHeartRadio on the map.

On July 11, our 850 radio stations from 150 cities across the country announced the iHeartRadio music festival at the exact same time. The first time we ever roadblock all over stations in all of our markets. With that roadblock announcement plus all the teaser sword, we reached an estimated 100 million people with news about the biggest music festival in radio history, which then sold out in just 10 minutes.

Since, we began promoting the new product and the festival, our Facebook fan base grew from fewer than 100,000 fans to more than 1.5 million for iHeartRadio alone surpassing both Pandora and Spotify on Facebook in the process. For all of our products, the total is almost 12 million Facebook fans. We also now have nearly 44 million downloads of the iHeartRadio app and upgrades and according to our internal measurements, last month we had about 33 million monthly uniques for all of our digital products and brands.

So, I am excited about continuing to collaborate with John and his talented radio team, for the year I've been here, I've been very impressed with the way they've responded to the needs to the market and built innovative products and solutions to fill those needs. The opportunities at our outdoor company are just as attractive, of course, I am new to the industry and I am still getting to know our business.

But, what I am seeing is very exciting. These are very stable franchisees especially with people spending more time in the cars and marketers more interested in reaching the consumers closer to the point of purchase, which is a core advantage of outdoor. With advertisers looking for efficiencies in today's economy, outdoor like radio is cost effective.

Once again, we need to illustrate the efficiency of this sector and bring in more advertising dollars from outside the sector. Of course, we'd like to be a little less cost effective over the time, the stat show that radio and outdoor should come entire pricing based on what they provide. In the meantime, the users of radio and outdoor getting a great deal and our challenge is to use that to bring in new revenue for us, specifically in both the outdoor and radio sectors.

In addition, as in radio, new technologies, we don’t think are a risk to growth in outdoor but instead an opportunity. Our digital boards both here and internationally have been clear successes for us, I look forward to spending more time with Ron Cooper and William Eccleshare, supporting them while doing a deep dive to learn more about their opportunities for growth.

Finally, the operating characteristics of Clear Channel are impressive. And as a percent of revenue at radio is about 40% and outdoor is about 30% and incremental margins on digital revenue are much higher. So, if we can succeed in bringing new revenue to these sectors and using digital to create new growth opportunities, the return to create meaningful new value for us.

As you can hear I’m very enthusiastic about the future of all of the Clear Channel businesses. I never thought I would be in this kind of chair again working so hard, but this exciting opportunity was too compelling. And it's probably also useful that my past experience in radio, TV and the internet will be useful here, which would make my job that easier as well.

I’ve had experience as an operator and as an investor in media and internet companies and last year I chose to invest $5 million in the Clear Channel equity because I was a believer and I’m a bigger believer today. In sum, I believe this is a company with tremendous assets and people including John, Ron and William as well as Tom and his corporate team.

Before I turn the call over to Tom, let me just say that he has been doing a great job on these calls to report our earnings. So, in the future I will be joining these calls only on special occasions. But, I do look forward to getting to know each of you, all in the industry events and analyst meetings in the months to come and thanks for your support. Tom?

Tom Casey

Well, thanks Bob. Today, I will focus on three areas, we’ll talk about Clear Channel Media Holdings and the radio results, then the results of Clear Channel Outdoor Holdings including the Americas and international and finally review our capital spending and liquidity profile.

In the quarter, Clear Channel Media Holdings revenues were up 7% over the year ago quarter to $1.6 billion marking the seventh straight quarter of revenues gains over the prior year periods. Excluding movements and foreign exchange rates for the quarter, our revenues rose 6%. Driving these top line results was revenue growth across all of our operations particularly our digital assets as well as the gradual advertising recovery in the US and around much of the world.

Our OIBDAN totaled $479 million, an 8% increase over the third quarter of 2010. Thanks to strong operating leverage in our model, we have been able to convert a substantial portion of our revenues over the first nine months of the year into strong cash flows from our business operations with over our OIBDAN as a percent of revenue at 29% for the same period.

These results show that we capitalize on our leadership position and global diversification of our assets as well as our focus on building an efficient organization and managing our expenses.

At the same time, we continue to invest strategically in our digital assets from our new iHeartRadio and digital board in the US to a early stage of digital networks deployment internationally.

Next month, for instance, we will be launching the UK’s first roadside digital street furniture network in key locations across London. It is just one example and overtime we are confident that these investments will drive our revenues and strengthen our strategic position.

Now, let me turn to our radio business. Despite a less than robust US economy, our radio revenues rose 7% to $798 million for the quarter that growth reflected the acquisition of Westwood One's traffic business along with an increase in national advertising and digital revenues. Revenues were up 2% excluding the Westwood One's traffic revenues that were noted in the earnings release.

Our operating expenses rose during the quarter mainly from an increase from the Company's acquisition of Westwood One's traffic business. Expenses increased 3% excluding Westwood One's traffic, expenses that were noted in the earnings release. Our expenses were also up due to higher spending related the iHeartRadio player, iHeartRadio music festival and other digital initiatives.

Radio OIBDAN reached $303 million for the quarter compared to $301 million in the year ago period. Restaurants, automotive, utilities, financial services and healthcare were among the quarter's best performing categories. We continue to see improved ratings in our performance during the quarter, driving that improvement with our market footprint, our content, our yield management systems and our digital platform and our national platform.

We have also kept our focus on our listeners wherever they are with the products and services they expect and want especially in the digital arena. We continue be encouraged by the results of our digital business as we again generated an increase in revenues. As we look at the environment going into the fourth quarter, bookings in our radio business have continued to be challenged and our visibility remains limited.

One thing to keep in mind is that last year, we benefited from political spend, which totaled approximately $32 million in the fourth quarter of 2010. At the end of the last week, radio revenue pacing is flat for the fourth quarter as compared to the prior year period. But, adjusting for the political revenues of last year, revenue pacings will be up around 4%.

Let's move on to our outdoor business. Clear Channel Outdoor Holdings reported revenues of $748 million in the quarter, up 8% from $695 million reported in the third quarter of 2010. Excluding movements and foreign exchange rates, the revenue was 4%. As a result of higher revenues CCOI's OIBDAN grew 7% over the third quarter of 2010 and OIBDAN totaled $189 million for the quarter compared to $176 million for the third quarter of 2010.

During the quarter, Americas revenues increased 4% to $347 million reflecting growth across bulletin, airport, poster and shelter display types, in particular our digital displays. We had solid performance across many of our markets with a mix of both large and small markets performing well.

Categories that were particularly strong in the quarter included telecommunications, media, healthcare and restaurants.

We continue to see great momentum in our digital display rollout, as we have deployed 760 digital displays in 37 US markets as of September 30th, including 57 displays that were installed during this quarter. Over the past 12 months we've installed over 200 digital displays.

Moving forward, we will continue to assess our opportunities to grow our digital footprint. At this point, we expect to deploy 200 or more digital displays this year, it's up from our target of 160 that we gave you during our last earnings call. This increase is due to several recent approvals that we have received including the New Dallas market opportunity.

In the fourth quarter, visibility continues to be limited with the current state of US economy. As of the end of the last week the Americas revenue were pacing flat for the fourth quarter as compared to prior year period.

Our international operations revenues for the quarter increased to 11%, excluding movements in FX, international revenues rose by 5%.

Our international team continues to advance its strategic plan and delivered another great quarter. Driving these increased revenues was the growth in street furniture across most of our markets including such countries as China and France.

We also saw growth in Switzerland driven by an increase in billboard revenues. As a result of our revenue growth and improved margins across the number of countries, international OIBDAN grew 16% in the quarter as compared to the third quarter 2010 and excluding FX’s exchange rates, international OIBDAN was up 10%. Even after adjusted for the benefits of movements in FX, international continues to deliver strong financial performance reaping the benefits from new contracts and restructuring efforts over the past few years.

During the fourth quarter our international business has continued to attract demand from the advertisers with street furniture continuing to lead the way. In addition, by the end of the year, internal digital out of home portfolio will have expanded to include several of our Belgian and markets in London.

We are still relatively early in this deployment, we are excited about the opportunity to grow our digital platform internationally. With economic uncertainty persisting in some of our markets however, our visibility does remain limited, but at the end of last week international revenues were pacing up about 2% for the fourth quarter as compared to the year ago period.

Looking at our total capital spending for the quarter, Clear Channel Media spent $79 million compared to $66 million in third quarter of 2010. The outdoor business accounted for $60 million of the spend and included the continuing build out of our digital display footprint and various street furniture and transit contracts internationally.

On the capital side, Clear Channel Outdoor Holdings net debt totaled $1.92 billion and leverage under its indexes stood at 3.3 times at the end of the quarter compared to 3.6 times as of September 30th, 2010.

Clear Channel Media net debts stood at $19 billion at September 30th. Clear Channel senior secure leverage is defined under rich agreement with 7.1 times at the end of the quarter unchanged from the 7.1 times at September 30th, 2010. So, we're pleased about where our liquidity and maturity profile ended the quarter with by $1.2 billion in cash on the balance sheet.

With very little debt maturing over the next two years, we remain focused on addressing Clear Channel's future maturities from early in 2012 and 2016. All delivering strong OIBDAN and free cash flow at our businesses.

So, I can conclude, our revenue growth has continued to reflect the gradual growth of the overall ad market and we encouraged by our performance across our diverse global portfolio. Going forward, while the economic recovery has been slower than excepted, our businesses are well positioned to continue to leverage strong OIBDAN and cash flow.

Given our leadership position, continuing with innovation and commitment to managing cost, we believe that we can continue to drive solid returns across all of our businesses.

Operator, please open the lines for questions.

Question-and-Answer Session

Operator

(Operator instructions) The first question comes from the line of Marci Ryvicker.

Marci Ryvicker - Wells Fargo Securities, LLC

Thank you. Two questions focusing on domestic outdoor, results for the third quarter did better piece than the pacing data that you provided about three months ago. So, when did you start to see better pacing data and can you touch on national versus local and also auto since you haven’t mentioned that in your description? And then the second question is, on the expense side, expenses I think were up 7% in the quarter. Can you just talk about what's driving this and what we can think about in terms of Q4 and beyond?

Tom Casey

Okay Marci, couple of questions there. I'll try to hit them as I can. I think, from a pacing standpoint, we chatted with you in late July or early August, when we gave you pacing data. I felt we saw a continued improvement through August and September. So, it’s really nothing that’s stuck out that I would say we saw an additional spike from there. So, clearly what we are seeing though is, national is strong in outdoor and domestically that has continued its strength and we're seeing that national outperform.

As far as sectors go with regard to auto, actually it was down in the third quarter. It was actually started off pretty good, but for the quarter it was down mostly due to a pretty good prior year. So, auto is a little bit softer than we would have expected.

Marci Ryvicker - Wells Fargo Securities, LLC

Okay.

Tom Casey

The last question you had I think was on expenses?

Marci Ryvicker - Wells Fargo Securities, LLC

Yes.

Tom Casey

A couple of things to keep in my mind, as you know that we've been focused on expense for quite some time. When you look at our year-to-date numbers, our margins are up 1 point for the whole company. Rest assured that all of our businesses are focused on expenses and we're managing that. What’s particularly impact the outdoor business though is two things.

One, we significantly ramped up our digital displays. So, we have some additional operating cost to ramp that up, and also, we saw a pretty significant increase in revenue in our airports business, which has a higher of sales and is driving some of that additional expense increases.

Marci Ryvicker - Wells Fargo Securities, LLC

Is that something that we should see continuing?

Tom Casey

Well, to the extend we continue to see growth in our airports business it will be obviously a higher cost of sales, but we continue to look at areas to keep our businesses efficient, and the outdoor business is actually kept its margins pretty consisting year-over-year. So, I feel pretty good about their position.

Marci Ryvicker - Wells Fargo Securities, LLC

All right, thank you.

Operator

Thank you. We will move to the line of James Dix.

James Dix – Wedbush Securities

Good afternoon, gentlemen. Yes, I have a two questions, I guess, first concerns what do you think is driving the change in the pacing that you are seeing in the Americas in the fourth quarter relative to how you finished up the third? Just kind of that flat pacing versus the growth you saw in the third quarter? What do think is driving that? And then, on the international side of things, do you have a sense over the 12 months of, kind of what the minimum revenue growth is that you'd need to get some positive operating leverage in that business. Thanks.

Tom Casey

Say we kind of break it down, on the fourth quarter, we wish we had better visibility on the fourth quarter, but as I told you the pacings are flat right now. They do move around week to week. So, we are not concerned about obviously where we are, but clearly we'd like to see strength – more strength there.

One thing that we do take comfort in that – keep in mind is that last year, we had a 9% revenue growth in outdoor. So, clearly a more challenging competitive comp year-over-year, given the slowdown in the market that we are seeing right now. Also, while outdoor doesn’t benefit that much from political, there is some over hang from that year-over-year as well.

James Dix – Wedbush Securities

Okay. And just on the international side of things. Just the cost structure, now that you have kind of restructured it, just any sense of what's kind of a minimum revenue growth you need to see some parts of operating leverage?

Tom Casey

Well, we continue to see terrific operating leverage coming out of our international business. Their year-over-year, they're up by 80 basis points, and so we're feeling pretty good about their performance. We like to continue to see that continue to expand as they are wining more and more tenders. And now, with there digital deployment, we think, that’s anointer growth opportunity for them. So, we are quite encouraged, I don’t have a specific revenue number that we would disclose as far as our outlook, but that business continues to perform very, very well year-over-year, this quarter alone 11% even adjusted after OpEx very, very strong performance for that business.

James Dix – Wedbush Securities

Okay, great. Thanks very much.

Operator

(Operator Instructions) We do have a question from line of Tim Daggett, please go ahead.

Tim Daggett – Citigroup

Hey, guys, I see that you bought back from 2014 bonds this quarter. Do you have any additional capacity to buyback bonds in the open market? Thanks.

Brian Coleman

Yes, hi Tim. This is Brain. We did, we bought back 80 million of the 2014 debt. We don’t get into the specifics on our baskets and our various credit agreements, but we'll continue to look for opportunities to repurchase debt if it's attracted to do so or invest in other ways.

I think to guide you towards the opportunities we have in repurchasing debt, you really would divided it in the junior debt buybacks. Since 2008, we bought back over $2 billion worth of junior debt. Spent about a $1 billion, captured about a $1 billion of discounts. So, we've been very aggressive in repurchasing senior debt and when we look at it right now we don’t have a whole lot in the 2012, 2013 area and that trades pretty close to par. So there's not a lot of discount to capture, and that’s why we focused on 2014.

With respect to other categories of debt buybacks, you could have the bank loans, but that we'd have to be compliant with the credit agreement, and so something that would be a little more complicated to look at. I mean, then you have – you have other senior debt like the PGNs which I don’t think there are any restrictions on repurchasing debt so.

We kind of look at just three buckets. We – I kind of give you little guidance on what various restrictions there are with respect to buying the debt, how aggressive we have been on the senior debt buy back. This quarter we bought in $80 million which is about 15% of the 2014 maturities, so we feel pretty good about that and we'll continue to keep eyes open for future opportunities.

Operator

Thank you. Next we'll go to line of Bishop Sheen.

Bishop Sheen – Wells Fargo Securities

Hi. Thanks for the detailed summary. The debt to the subsidiary Clear Channel Outdoor keeps growing. As we look forward, should we – do we think it’s going to grow at a similar pace of 75 million to 100 million annually? Or at some point is to anything in the structure that the – with the cap due to Clear Channel Outdoor?

Brian Coleman

Yes, Bishop. This is Brian again. Yes, I think you can continue to expect to see the intercompany links, intercompany note grow at the same pace on an annualized basis. Perhaps because you know there is quarterly variations. But Clear Channel Outdoor is a cash flow regenerator and we expect to see that continue.

Could something happen at Outdoor such as an acquisition or ramped up investment in digital or international contrast? Sure, into the extent that happens that would use up cash and thus could slow the increase in the due to – due from note. But I think right now we don’t have any plans in that area.

Bishop Sheen – Wells Fargo Securities

Right, and did – if I understand it, the cash that Holding company is paying to Outdoor is at the higher rate, at the 9¼ rate?

Brian Coleman

That’s correct. In December 2009 our intercompany note was amended and so to rate that Clear Channel would pay an amount owing to Clear Channel Outdoor is 9¼ %.

Bishop Sheen – Wells Fargo Securities

Thank you.

Operator

Thank you. One moment please. Next question comes from the line of Tobey Steiner

Tobey Steiner – JP Morgan

Hi, gentlemen. Thank you for taking the questions, I am going to run through a couple of quick ones here. Just on the Q4 pacing for radio, I just wanted to be cleared, does that exclude the traffic division just acquired?

Unidentified Company Representative

Yes, it does.

Tobey Steiner – JP Morgan

Thank you and then on the bonds, you just buy back. Can you confirm those remain outstanding, I don’t know if I heard that in the last question?

Tom Casey

You mean do we retire them?

Tobey Steiner – JP Morgan

Yes.

Tom Casey

We did not retire them.

Tobey Steiner – JP Morgan

Okay. A couple of more here. You recently changed your programming strategy, I'm just reading all the press reports in small and medium sized market, curious what the thought process was there and then what if any cost saving may come from that?

Bob Pittman

Can I take that one, Tom?

Tom Casey

Yeah, Bob. I think this one is right down the middle.

Bob Pittman

I think in terms of the press, I'm not sure anybody got it exactly right. What we’ve done and John Hogan has done this with his team and taking quite a bit of applaud in is really looking at our smaller markets that really don’t have an economic structure that allows them to do the same quality of programming as the big markets, and looked at how we can use the assets of the big markets to help the small markets.

Therefore, obviously giving an advantage to Clear Channel station because we have more of the big markets we can call upon. And, I also think just having been around, although maybe a new media is that any company started before the internet is almost by definition outmoded in terms of its operational structures. And so, what we did was, take a very hard look at the smaller markets and trying to figure out, okay, it’s 2011, we have all the assets at Clear Channel, how can we make the products better and the product better? And that was really the driving force. I mean, the horrible thing is that, it means, some people lose their jobs, we got rid of some jobs. By the way, at the same time that we’re getting rid of jobs, there we’re adding jobs and national programming platforms, strategic partnerships and digital.

So, it is a reallocation of resources and a different way of doing business realizing and understanding and acknowledging that the world is different in 2011. It is – the importune side is the layoff, the good side is that I think after this reorganization, the businesses will be in great shape to, you know, its operating better to improve the quality and the performance. Therefore hopefully, attracting more listeners and generating more revenue. It was not about cost savings, I mean, certainly there will be some there, but remember we’re also adding cost and digital, national programming platforms and strategic partnerships.

So, this was not one of the efforts to just reduced cost in the company, it was an effort to truly improve the quality that we offered those people and by the way having been a local disc jockey, started out in Brookhaven, Mississippi at 8:15. I know what you’re up against in a small market in terms of the financial limitations. And I’m actually very excited about what John and his team have put together here.

Tobey Steiner – JP Morgan

That is helpful, maybe while I have you. And you talked about radio taking a share and this is somewhat big picture. But, how do you convince the advertisers today who see more enamored with digital, what digital world broadly can offer versus just traditional media and what you’re trying to sell with terrestrial radio?

Bob Pittman

What's interesting I think with digital, we’re in pretty good shape because we have pretty good digital offerings. So, when we look at an internet category, we actually, they just want internet, we can sell them that. But, I think part of is getting to the market about what trying to accomplish, and you know, the agencies are great and we work well with them. But by the time it gets to a media buyer, all they’re doing is just negotiating price and who is going to get the buy. If you get back up to the media plan or even the people who are conceptualizing what the client need or getting to the client at the CMO, CEO, CLO level. What you really begin to understand is what are their plans, what are they trying to accomplish? And then, we can look at our assets. And say, okay, what assets have we got here that we can put together for them to help them achieve the goals? And when I go in companies and spent money on marketing, I'm not really concerned about what my CPM is. I'm concerned about what return on investment I get. And I think that’s true with every marketer, but right now the radio business basically waits until the media buyer has it before they interact for the business. I think we will do a great job of just talking at different levels in the agency and the client to get in.

I also think that as you look at a television and I love television, I spend a lot of time in it. Tell that everyone’s enamored of a picture and a moving picture, and as much as TV maybe seem to be under any pressure, if you compare it to usage it actually gets more revenues then it would deserve on the usage and reach basis adjusting for that. And also the agencies it’s more profitable to have a TV client because they also get a markup on television or up to getting a flat fee, it certainly reflected in the fee. It’s also cooler. And I think what we have to comment some is that radio is effective as a TV commercial which it is. If you take a couple of other primetime shows and look at their cost and lay that against spending that same money on Clear Channel on a national basis, what you find is, you get about three times more for your money in Clear Channel then you would on one of those primetime network television spots.

And so, what that says is, therefore to make the TV decision you have to believe the TV is three times more effective then radio, yet every study we look at shows it to be about the same as television, maybe a little worse, maybe a little better, but in a very small band.

And so, part of ours is getting that message out, but it is also being creative. I think what we demonstrated that the iHeartRadio Music Festival is not just we can promote a new product we have. But it was also a demonstration of what we can do as Clear Channel. Think about the announcement we made that reached – with the teasers and the announcement of 100 million people that started off with us saying, well, the press conference is going to be in New York or LA, which already through, I'm on stage and suddenly you have the eureka moment of going, wait a minute, it’s 2011. What are we doing talking about those kinds of press conferences? We already talked to more people than any of the media outlets. We’re going to invite to come cover us. So ours was, let’s do our own, let's do a 2011 version of the press announcement or the press release. And do it ourselves and the air show then sort of covered it right after that. We proved to Jennifer Lopez being on that Today Show and then the press wrote about this and spread the word beyond that. And then, when you got to the promotion of the iHeartRadio Music Festival, we were national. We just used Clear Channel to promote it. We used some of our outdoor and we used our radio, and I think, everyone would say it was a success with no reservations. So, again, it’s a matter sort of thinking a new way about our assets and getting to people to talk to them in a creative ways about what we are doing, and part of this is we set up a national partnerships group, which is job it is to really go out and talk to customers and partners about partnering well. Sometimes it's to how we can partner to market something they have, sometimes it’s how we can partner to use some of their technology for something we have, but a boarder approach and not about rate spots and sort of traditional media buying. Long answer to a short question, I hope that helps.

Operator

Thank you. The next question comes from the line of Doug Arthur.

Doug Arthur – Evercore Partners

Yes, a couple of questions on the outdoor business. Can you just elaborate on the national versus local trends in the US market for starters?

Tom Casey

Yes, as I said in the opening comments, we are seeing national continued outperform our local, we don’t give specific details, but it’s quite strong compared to local. I think that’s consistent with what we are seeing in radio as well. So, I think the national players are continuing to invest and try to take share where they can. And again, we probably benefit more significantly because of our footprint as well as our assets that we have and the networks that we set up with their digital platforms and to command more of that market. So, that’s what differentiating us right now and is driving some of our performance.

Doug Arthur – Evercore Partners

Okay, and then, I know it was tough to guess, but any thoughts on what the currency impact could be for international on the fourth quarter?

Tom Casey

No, we don’t forecast FX. Obviously it is – as you know, it’s a volatile time for a number of countries and so we don’t forecast FX.

Doug Arthur – Evercore Partners

Okay. Thank you.

Operator

Thank you. We’ll go to the line of (Jennie Morris).

Unidentified Analyst

Yes, hi. I was just wondering if you could talk about any changes that you might be seeing in digital in 3Q to 4Q, is that contributing to the slowdown or is digital been just as strong?

Tom Casey

Digital continues to be just a strong, there is actually no giving up in the growth of the digital. We are accelerating not slowing down our deployment. We expect to be over 200 new signs this year alone, which is up from the prior year. And so, we are continuing to see opportunities. We just – we won a number of opportunities in Dallas which is expanding our footprint, but we are seeing that as a premium product that continues to have high demand and one that we'll continue to develop as fast as we can.

Unidentified Analyst

Okay. Thank you.

Operator

Thank you. We'll move to the line of Bishop Sheen.

Bishop Sheen – Wells Fargo Securities

Hello?

Operator

Okay, Mr. Sheen, your line is open.

Bishop Sheen - Wells Fargo Securities

Okay. Hi. You mentioned political when you were talking about domestic slowdown, and can you quantify what's your political was in Q4 2010 on the domestic side?

Tom Casey

Yes, it was 32 million in radio and we didn't break it up for outdoor, not as significant as that obviously, but for radio is up $32 million.

Bishop Sheen - Wells Fargo Securities

Right. That I got, I was more focused on the domestic side of outdoor because....

Tom Casey

Yes, we don't – obviously it is not as large piece of the pie. There probably isn't a broader media buy issue but it is as far as how much revenue we get from political and outdoor is not significant.

Bishop Sheen - Wells Fargo Securities

Okay. Thank you.

Operator

Thank you. We'll move to the line of Nadia Lovell.

Nadia Lovell – JP Morgan

Hi, thank you for taking the question. In the international segment, how much performance in some of your other larger market like the UK and Italy? And were any countries where you saw a slowdown or anything below your expectation? Any countries has stand out for on the upside or the downside based on your Q4.

Tom Casey

Yes, as I commented, I think one of the things to keep in mind is that we are continuing to see great diversification across our international business. This quarter in particular it was China and France driving that performance. Clearly offsetting, weaknesses we are seeing in Italy and in the UK and Spain. But we continue to see some good performance in Sweden. So we are – again seeing the diversification of that business pointing through. Those are some of the key markets that we are seeing good performance.

Nadia Lovell – JP Morgan

And then just one more question. You mentioned that France was specifically strong in the quarter. I think that Paris accounts for a significant portion of your revenues there. Where are you on compliant with the new Paris regulations on billboard?

Tom Casey

I think we continue to evaluate the opportunity – the risks here, the rules are going to come in over the next couple of years and we don’t see any immediate impact. But we are working through the issues right now and trying to figure out what exactly the impact is for us in that market in the next couple of years.

Nadia Lovell – JP Morgan

Okay. Thank you.

Randy Palmer

Operator, we will take one more question.

Operator

Thank you. And that will come from the line of Lance Vitanza.

Lance Vitanza – CRT Capital Group

Hi guys, thanks for taking the call. I just wanted to focus on the radio side for a second. You mentioned the cash OpEx is running about 3% in the quarter versus the organic revenue growth of about 2%. Is that 3% rate a good sort of run rate you think for the foreseeable future? And is the revenue environment in anyway putting a lid on your investments in digital?

Tom Casey

A couple of things and Bob maybe has some comments and this is well, let me give you the numbers first. From a 2% revenue and a 3% OpEx, keep in mind that our revenue is higher than our OpEx. So, we are continuing to see pretty stable margins and that's not – that's notwithstanding the fact that we'll continue invest in areas like digital and we have the radio, iHeart Festival this quarter, which obviously had increased costs that are not recurring. We'll forecast exactly what the run rates are going to be, but I would suffice to say that the margins we are seeing in radio are stable and improving.

The things that you are hearing from Bob earlier, talking about some of the programming issues as far as moving some of our investments around the business will accelerate our growth. And we would expect our margins to continue to expand as we deploy more and more efforts into higher margin areas of the company. Bob, do you have any comments on – as far as how you think of investing.

Bob Pittman

Yes, I think when you look at digital as opposed to the talk we are doing about how we can bring revenue to the broadcast radio sector. Digital is one in which you clearly have to spend upfront and it’s true in any new medium and any new product. I painfully remember in the early days of MTV, Coca-Cola didn’t come in for years nor did McDonald's, which you would think sort of crazy, but people take time to jump on new products.

I think in digital, our expectation is our audience is going to be there before the revenue that we should have from that audience shows up. And so, our priority right now is to make sure we get the audience, make sure we have products that mesh well with our radio product, because again we are not thinking of radio as terrestrial radio. We are thinking of radio as our brands, and thus we should be wherever our listeners are with the products and services takes back. If they are online, we need to be there, if they are on the mobile phone we need to be there. So, part of it is protect the franchise, be there early, don’t open ourselves up for others to take our franchise. The second is open up new revenue opportunities for absolutely new products and the custom radio feature of iHeartRadio is really a new feature and the social stuff we are doing with iHeartRadio is again new feature and both of those we do look over time to develop a new revenue, but I think, we’d be kidding ourselves we thought that was going to be an immediate response to new products, it almost never is.

Lance Vitanza – CRT Capital Group

Thank you. Just one last quick one, the political revenue I know you called it out for Q4, but could you give it to us for Q3?

Tom Casey

I don’t have it off the top of my head but it wasn't – it wasn't significant enough for us to break it out, but it was probably in the $15 million range, slightly lower than that.

Lance Vitanza – CRT Capital Group

$15 million range?

Tom Casey

15, yes.

Lance Vitanza – CRT Capital Group

Okay. Thanks very much.

Tom Casey

Okay.

Randy Palmer

Okay, that completes today's conference call. We appreciate each of you joining us today. If you do have follow-up questions, please feel free to contact us. Thank you.

Operator

Thank you. Ladies and gentlemen, this conference will be available for replay after 6:30pm Eastern today through midnight Wednesday November 30.

You may access the AT&T teleconference replay system at anytime by dialing 1-800-475-6701 and entering the access code 221011. International participants may dial 320-365-3844. Those numbers again are 1-800-475-6701 and 320-365-3844 with the access code 221011.

That does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.

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