It's a jingle out there as Capital loses crown

There was no mystery to this sound last week: it was, unmistakably, the clang of Capital 95.8FM losing its crown as London's number one station.

The latest round of listening figures from Rajar for the three months to mid-September showed that the station had been knocked off the top spot by Heart, the middle-of-the-road outfit owned by media group Chrysalis. Capital 95.8FM's market share had dipped to 7 per cent, 0.2 percentage points below Heart's.

"We do our own research and that had suggested the figures would be lower than the last Rajar numbers," says Capital's operations director, Paul Davies. "Coming in as low as it did and being overtaken by Heart was a drag."

But not a surprise. Capital 95.8FM, which currently pitches Chris Tarrant against Heart's Australian DJ Jono Coleman in the crucial breakfast slot, has been on a downward spiral as new entrants eat away at its position. Where once Capital ruled the capital, there are now stations for every taste: as well as Heart, there is dance music station Kiss, rock specialist Virgin, Classic FM and the easy-listening Magic, among others.

Capital has been trying to address the problem. Management was shaken up, with veteran programming executive Keith Pringle put in charge of the London station and Mr Davies taking a more "hands-on" role. On the talent side, ageing cheeky chappy Mr Tarrant is quitting next spring after 17 years to be replaced by younger cheeky chappy Johnny Vaughan. And Capital has also sought to lessen its dependence on one station in one city: in London, it owns Xfm and regional stations range from Kent's Invicta FM to the centuryfm network in Hampshire, the East Midlands, the North-west and North-east.

This, says Mr Davies, provides "engine room for future profit growth". Yet the City has reservations. Adrian Kearsey, analyst at Evolution Beeson Gregory, says: "In order to drive the revenues, they are having to do so at more and more cost."

Mr Davies declines to discuss the commercial impact of the figures, particularly in relation to adver- tising, until the company's final results in November. This will be a chance for Capital to prove it is more than just Rajar ratings. Yet as Charles Stanley's Omar Sheikh says, spin alone will not be enough: "Pre- sumably, between now and then, management will be polishing what they're going to say. But what Capital has to do is clear: get more people listening and listening for longer, because evidently that is not happening at the moment."

Concerns also abound about the change at breakfast. Virgin, for example, was hit hard following Chris Evans' departure two years ago. And on top of that, market conditions aren't ideal. Mr Kearsey says: "Capital has been spending on marketing and buying in celebrities but that's putting a squeeze on margins at a time when the advertising market has been really weak."

So what next? Mr Davies would like Capital 95.8FM back in the top slot, but otherwise says the future is about "running the best business we possibly can and producing good results". However, some feel Capital must be looking increasingly attractive as a takeover target. Mr Kearsey, for example, is not changing his "add" recommendation on the shares: "Operationally, things are very difficult but there's consolidation coming up."

And with overseas suitors well placed to swoop (bigger UK operators could fall foul of the competition authorities), there may yet be more changes afoot for the capital's once-favourite radio station.