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Royal Phone Hoax Costs Southern Cross Media A$3.6 Million

Southern Cross Media Group Ltd., owner of the Sydney radio station that made a hoax call to a London hospital about the Duchess of Cambridge, said fallout from the incident has cost it A$3.6 million ($3.7 million).

Advertising was pulled from 2Day FM after the nurse who answered the phone was found dead, cutting A$2.2 million from revenue, while the broadcaster set aside A$1.4 million for legal costs and compensation, Chief Executive Officer Rhys Holleran said on an investor call today.

Southern Cross suspended advertising on the station in December after two presenters phoned a London hospital seeking details about Kate Middleton, who had been admitted for acute morning sickness. Jacintha Saldanha, who put the call through to a duty nurse on Middleton’s ward, apparently hung herself and left three suicide notes after the incident, the Guardian newspaper reported Dec. 13, citing testimony at an inquest.

“We have had one of the most difficult 12 months in our history,” Holleran said in a statement today.

Southern Cross shares rose 9.8 percent to A$1.35 at the close in Sydney, the sharpest rise in 16 months, after the Melbourne-based company said it expects full-year net income to be between A$90 million and A$95 million, beating analyst estimates of A$90 million for the period.

“On-air incidents” were responsible for an 8.9 percent drop in trading revenue during the period, Holleran said in a presentation accompanying the results, with radio advertising revenue in Australia’s major cities down 7.5 percent during the six months ended in December.

Telstra, Wesfarmers

Telstra Corp, Australia’s biggest phone company, and Wesfarmers Ltd.’s Coles supermarket chain cut advertising on the station, which has the largest share of audiences aged 25 to 39 years in Sydney.

Mel Greig and Michael Christian, the presenters who impersonated Queen Elizabeth II and Prince Charles to ask questions about Middleton’s health on the prank call, were suspended from the station after the incident. Southern Cross promised to dedicate remaining first-half profits from 2Day FM to a fund nominated by Saldanha’s family.

Christian started presenting a new show at Southern Cross’s Fox FM station in Melbourne last week.

The fall in first half sales, the sharpest since the same period of 2009, was also put down to declining audiences for the programming of television station Ten Network Holdings Ltd., which it rebroadcasts in rural areas.

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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