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Cumulus eyes communications savings
Reprinted with permission from:
SNL Financial/SNL Kagan
April 14, 2009 3:59 PM ET
By Dave Hendrick
In its latest bid to cut costs, Cumulus Media Inc. entered into an arrangement to streamline its telecom expense management.
The radio operator on March 31 announced a deal to outsource communications expenses to Cass Information Systems, a move Cumulus Vice President and Controller J.P. Hannan said should both unify various billing systems and save cash.
"The radio industry has been a business with no top-line growth for seven years, and last year it was down, and it's expected to be down again this year, so the whole industry has really been focused on cost control," Hannan told SNL Kagan on April 13. "Given the broader environment, we just had to dig a little deeper, and telecom expenses for us was a sizable expense category that nobody had ever really gotten into."
Cass Senior Telecom Auditor Sean Flynn, who put early cost savings at $17,000 per month, said initial steps included converting paper to electronic invoices and looking at ways to consolidate assorted calling plans to take advantage of better rates.
Hannan said: "Cumulus is a company that was built over a history of 10 years or so through upwards of 100 acquisitions, so we had all these small businesses that were acquired, and a lot of the telecom infrastructure was basically what was there when we acquired them. So they had different rate plans and different features.“
Since the switch to Cass was rolled out in January, all billing matters have been removed from local control, a change Hannan credited with freeing up time as well as dollars.
"A few of our local offices had pretty significant issues with their local carriers where they were promised a rate or promised a plan and they didn't get it, to where we were disputing charges for eight and 10 months, and they are not dealing with any of that anymore," Hannan said. "It's all out of their hands."
The Cumulus executive, who said the company's cost savings were "well in excess" of what the company was paying Cass, also credited the new system with ferreting out small charges for certain unneeded items.
"Those little expenses to me are the ones that really hinder a business," Hannan said.
Cumulus has been aggressively cutting costs as it looks to battle intensifying industry headwinds, reporting a 9.2% year-over-year decline in station operating expenses in its most recent reported quarter.
SNL Kagan analyst Justin Nielson said broadcasters are generally in a cost-cutting mode in the current environment, and said Cumulus would likely continue to squeeze out efficiencies where possible.
"I really think that they are just going to tread water for a while, take care of their debt load through cost reductions and then maybe raise some capital in the market," Nielson said. "But I don't see them divesting a whole lot of stations, especially where the multiples are right now."
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