8 Apr 2011

Papers warn deal for radio networks risked setting precedent

6:27 pm on 8 April 2011

Official documents show the Government was warned that allowing radio broadcasters to defer payments on their licences would risk setting economic precedents.

The papers show that requests to stagger payments were turned down until Mediaworks, the company that owns Radio Live and TV3, began lobbying Prime Minister John Key.

Communications and Information Technology Minister Steven Joyce originally turned down requests by the Radio Broadcasters Association and Radio Rhema to be allowed to pay the $96 million licensing fees in instalments.

The Treasury said commercial processes should run their course and intervention is only justified for firms with important strategic or significant economic impacts.

But the papers say the Prime Minister was then lobbied by Mediaworks about the risk to its business that paying $43 million up-front would have imposed. The Cabinet later approved a payment plan.

Mr Key says he raised the issue of staggering radio license fee payments with the Cabinet after talking to the chief executive of Mediaworks at a social event.

Mr Key says the deal made sense to him as it is a commercial loan made under circumstances where there could otherwise have been redundancies.

He says officials had one perspective, and the Cabinet had another.

The Labour Party says the paper trail shows that the Government did a sweetheart deal for the overseas-owned company Mediaworks.

Associate finance spokesperson Trevor Mallard says the company has been propped up by the Government.