Local Advertising Dampens Viacom's Sunny Estimates

Viacom has trimmed its revenue expectations for 2003, with the media giant citing lower-than-expected local advertising.

While the New York-based conglomerate owns a number of national companies - including CBS and the cable channels of the MTV Networks - it also holds a substantial local portion through its CBS owned and operated television stations and the 185 stations owned by Infinity Broadcasting.

For many quarters, Viacom has trumped its ability to capitalize on the national advertising market. Advertising grew 11% in the second quarter, including a 31% increase in cable, 9% in television and 9% for Viacom's outdoor business. Advertising sales rose 8% overall in the first six months of 2003, with a 25% jump in cable, 7% in television and 9% in outdoor.

In August, Viacom said its owned-and-operated stations group saw advertising revenues increase 11% in the second quarter. Yet radio's revenues dropped 3% in the second quarter and 2% in the first six months of the year. It said the lower radio revenues were primarily due to low single-digit increases in spot rates.

On Wednesday, Viacom said its "robust" national advertising sales growth hadn't trickled down locally.

"The pace of recovery in local advertising markets going into the fourth quarter is not as rapid as had been anticipated," Viacom said in a statement.

Revenues will still rise, with Viacom predicting they will be in the mid- to high-single-digit growth instead of the high single-digit-growth predicted earlier.

Viacom took a hit on Wall Street during Wednesday trading, dropping 3.58% to close at $38.83, a six-month low.

But the news wasn't all bad. Viacom said that it still expected record growth in revenues, operating income, net earnings and earnings per share. And 2004 was looking god, too.

"The company is extremely well positioned to reap the benefits of an expected improvement in local advertising markets in 2004, driven by an improving economy, political advertising, and the Super Bowl on CBS," Viacom said.

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