Media Perspective: Global will be ready to pounce on GCap's digital climbdown

The GCap chief executive, Fru Hazlitt, surprised few observers this week when she announced that the radio company would essentially be pulling out of digital radio.

Its decision to sell its 63 per cent stake in the Digital One platform and close down Planet Rock and TheJazz had been predicted as she sought to tempt shareholders with cost savings of £8 million that should boost group profits. GCap will now focus on broadband, mobile and FM distribution.

You could argue she had no choice. DAB is something the City has never got. Investment levels have been high compared with its audiences and ad revenues and analysts were beginning to espouse the view that digital radio technology was, at best, an intermediate option - soon to be redundant as internet radio takes off.

Digital radio just wasn't delivering for GCap in the short term. "It is about here and now, and what we believe is right for the future of the new GCap," Hazlitt said as she went on to describe DAB as "not viable". A new chief executive, a new strategy. But this comes just a few months after Ralph Bernard, Hazlitt's predecessor, and known everywhere as a "digital evangelist", despite building a reputation based on a bunch of traditional local stations and oldies favourite Classic FM, was lobbying the Government for analogue signal switch-off.

Not everybody is pleased about the volte face. As one former radio company boss puts it: "GCap has put the knife into digital radio because it had nowhere else to go. It's ironic that a company that was lobbying for analogue switch-off is pulling the plug and, at the end of the day, it reflects badly on radio."

Of course, this is about survival, for both Hazlitt and GCap. She will hope that her strategy is strong enough to stave off interest from Global Radio, which has already failed with one bid of £313 million. It now has less than a month to convince GCap shareholders to back a renewed offer.

It's not clear though what Hazlitt's strategy offers in the longer term. It looks like she's making the company more reliant on some established analogue brands, some of which have been underperforming in the market in recent years. On the facing page, Paul Jackson, Capital Radio's managing director, talks about plans to revitalise the station, and this may well happen, but London is a more competitive market, and GCap can no longer rely on being number one.

It has finally dumped its ill-fated "no more than two ads in a row" policy, which may increase revenues on the back of increased minutage. Overall, though, it's hard to see how the announcement will deter Global from lobbying GCap shareholders in a bid to land brands such as Capital and Xfm.