GCap Media, the UK's largest commercial radio broadcaster, axed two of its stations yesterday, after saying digital radio stations were not pulling their weight financially.
The company, which runs BRMB and Beacon stations in the West Midlands, said it would be getting rid of theJazz and Planet Rock channels to concentrate on its core stations.
And it has abandoned its policy of never broadcasting two adverts in a row to try to boost advertising revenues - a policy it says will add £3.6 million to profits by March 2010.
The announcement came just weeks after the company rejected a takeover bid from Global Radio, headed by former ITV chief executive Charles Allen.
GCap chief executive Fru Hazlitt said digital radio "was not an economically viable growth platform for GCap Media".
She added: "We are structuring the business around the revenue streams that can deliver us the most profit going forward. Planet Rock and theJazz are brands that we do not believe can win for us."
Ms Hazlitt has promised to cut nearly £9 million a year of spending from the GCap budget through disposals and restructuring, as well as improving profit margins.
The company currently spends around £8 million a year on digital radio, despite the medium accounting for just nine per cent of radio listeners.
Ms Hazlitt said GCap would be selling its stake in national digital broadcaster Digital One, and added: "FM is the backbone of the radio industry and we believe it compares favourably to any of the digital platforms currently available to the consumer in terms of quality. It is also the source of the majority of our revenue. If digital is going to be viable on a local and regional level, it will have to be on a much lower cost platform."
The firm will also be concentrating on its London stations, with Capital 95.8 and Xfm receiving special attention.
It is planning to sell its regional Xfm branches in Scotland, South Wales and Manchester, which along with the closure of Planet Rock and theJazz will boost profits by £1.5 million.
Although the company rejected digital radio, it was still bound by transmission contracts running to 2016 that have limited break clauses, leading it to sell all its capacity on Digital One to masts company Arqiva for a nominal sum.
The moves to cup expenditure are part of a strategic review by new chief executive Hazlitt after the business rejected a preliminary approach from Global Radio that valued it at £313 million.
It has been given until March 5 to signal any further intentions towards GCap under a "put up or shut up deadline" imposed by the City's Takeover Panel.
Yesterday, Charles Allen said he was looking forward to reviewing the new strategic plan before deciding whether to make a new bid for the GCap.
Global, which unsuccessfully bid for the radio assets of media group Emap in December, wants to buy GCap as part of its acquisition strategy in the UK radio industry. The firm is already home to the Heart 106.2 and Galaxy stations.
Analyst Roddy Davidson, of Antium Securities, said: "The measures outlined look fairly sensible and if the cost reductions outlined are achieved, it would result in a more profitable business than we are currently forecasting during the year to March 2010."
