A combined GCap and Global Radio would control 46 per cent of London's commercial listening hours, sparking speculation that the deal may be investigated on competition issues by the Office of Fair Trading.

Sources at Global Radio, the media group which agreed to buy Capital Radio-owner GCap for £375 million yesterday, however, are confident that they will not be forced to make any major disposals.

Global's management is understood to have taken some comfort from industry regulator Ofcom's Future of Radio document, which has encouraged consolidation in a fragmented commercial radio industry. However, the 46 per cent share of London commercial listening hours is a sizeable figure that could lead to some concern.

While advertising groups highlighted concerns about the combination of the Capital 95.8 and Heart 106.2 owners leading to a decrease in competition, many believe that increased programming budgets will make commercial radio a much more attractive proposition.

A spokesman for media buyer ZenithOptimedia, said: “Obviously consolidation does mean a decrease in competition, which we see as an issue, but a stronger radio operator means better funded programming and greater strength to take on the BBC. It will make radio a much better proposition for advertisers.”

The radio industry today voiced its support for the deal, saying it will create a strong competitor to the BBC.

Michael O’Brien, the operation director at the RadioCentre, said: “The BBC is a very strong competitor. The deal is great news for the radio industry, as the ability for commercial radio to compete with the BBC will be greater then ever.”

It is widely thought that competition issues will be investigated further, considering the dominant position that the combined group would hold in London.

The Office of Fair Trading said: “The OFT is aware of the announcement and is monitoring the corporate developments. At present, we have not received any formal submission on this matter. If the merging parties eventually decide not to notify to us, we will investigate it if we believe consumers may be at risk of adverse consequences flowing from the merger.”

Investors backing Global Radio’s acquisition include the Irish businessmen JP McManus, John Magnier and Dermot Desmond, and Michael Tabor, the father of Global Radio’s chief executive, Ashley Tabor. Private backers are understood to have agreed to provide three quarters of funding, while an £84 million loan will be provided by HBOS and the Bank of Ireland.

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