UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

þ		Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2006,

o		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     .

CLEAR CHANNEL COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

Texas		74-1787539
(State of Incorporation)		(I.R.S. Employer Identification No.)

200 East Basse Road
San Antonio, Texas 78209
Telephone (210) 822-2828
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
Common Stock, $0.10 par value per share		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES þ NO o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. YES o NO þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by checkmark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). YES o NO þ

As of June 30, 2006, the aggregate market value of the Common Stock beneficially held by non-affiliates of the registrant was approximately $10.0 billion based on the closing sale price as reported on the New York Stock Exchange. (For purposes hereof, directors, executive officers and 10% or greater shareholders have been deemed affiliates).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerate filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ          Accelerated filer o          Non-accelerated filer o

On February 22, 2007, there were 496,173,900 outstanding shares of Common Stock, excluding 130,304 shares held in treasury.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our Definitive Proxy Statement for the 2007 Annual Meeting, expected to be filed within 120 days of our fiscal year end, are incorporated by reference into Part III.

 

 

CLEAR CHANNEL COMMUNICATIONS, INC.
INDEX TO FORM 10-K

		Page
		Number
PART I.
Item 1. Business			3
Item 1A. Risk Factors			20
Item 1B. Unresolved Staff Comments			26
Item 2. Properties			26
Item 3. Legal Proceedings			27
Item 4. Submission of Matters to a Vote of Security Holders			28
PART II.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			29
Item 6. Selected Financial Data			30
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			32
Item 7A. Quantitative and Qualitative Disclosures about Market Risk			53
Item 8. Financial Statements and Supplementary Data			54
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			94
Item 9A. Controls and Procedures			95
Item 9B. Other Information			96
PART III.
Item 10. Directors, Executive Officers and Corporate Governance			97
Item 11. Executive Compensation			98
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			98
Item 13. Certain Relationships and Related Transactions and Director Independence			98
Item 14 Principal Accountant Fees and Services			98
PART IV.
Item 15. Exhibits and Financial Statement Schedules			99
Statement re: Computation of Per Share Earnings
Statement re: Computation of Ratios
Subsidiaries
Consent of Ernst & Young LLP
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART I

ITEM 1. Business

Agreement and Plan of Merger

     On November 16, 2006, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), with BT Triple Crown Merger Co., Inc. (“Merger Sub”), B Triple Crown Finco, LLC and T Triple Crown Finco, LLC (together with B Triple Crown Finco, LLC, the “Fincos”), which provides for our recapitalization by the merger of Merger Sub with and into us. The Fincos were formed by private equity funds sponsored by Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. solely for the purpose of entering into the Merger Agreement and consummating the transactions contemplated by the Merger Agreement. Pursuant to the Merger Agreement each share of our common stock, other than those shares (i) held in our treasury stock or owned by Merger Sub immediately prior to the effective time of the merger, (ii) held by shareholders who properly exercise their appraisal rights under Texas law, if any, and (iii) shares held by certain employees of ours who have agreed with the Fincos to convert equity securities of ours held by them into equity securities of the surviving corporation will be converted into the right to receive $37.60 in cash, without interest, and less any applicable withholding tax.

     In addition, if the Merger becomes effective (the “Effective Time”) after January 1, 2008, shareholders will also receive an amount equal to the lesser of (i) the pro rata portion, based upon the number of days elapsed since January 1, 2008, of $37.60 multiplied by 8% per annum, per share, or (ii) an amount equal to (a) our operating cash flow (as more fully described in the Merger Agreement) from January 1, 2008 through the last day of the month before the closing date, less any dividends paid or declared following that period and prior to the closing date and amounts committed or paid to purchase equity interests in us or derivatives thereof with respect to that period (to the extent that those dividends or amounts are not deducted from operating cash flow for any prior period), divided by (b) the total number of outstanding shares of our common stock, and shares underlying options with exercise prices less than the merger consideration.

     The terms of the Merger Agreement allow us to continue our policy of paying quarterly cash dividends of $0.1875 per share of our common stock through the Effective Time. However, any future decision by our board of directors to pay cash dividends will depend on, among other factors, our earnings, financial position, capital requirements and regulatory changes.

     The consummation of the merger is subject to shareholder approval, antitrust clearances, FCC approval and other customary closing conditions. We will hold a meeting on March 21, 2007 for our shareholders of record on January 22, 2007 to consider the merger. Assuming satisfaction of the closing conditions, the parties expect to close the merger during the fourth quarter of 2007.

The Company

     Clear Channel, incorporated in 1974, is a diversified media company with three reportable business segments: radio broadcasting, Americas outdoor advertising (consisting primarily of operations in the United States, Canada and Latin America) and international outdoor advertising. On November 11, 2005, we completed the initial public offering, or IPO, of approximately 10% of the common stock of Clear Channel Outdoor Holdings, Inc., or CCO, comprised of our Americas and international outdoor segments. On December 21, 2005 we completed the spin-off of our former live entertainment segment, which now operates under the name Live Nation. As of December 31, 2006, we owned 1,176 radio stations and a leading national radio network operating in the United States. In addition, we had equity interests in various international radio broadcasting companies. For the year ended December 31, 2006, the radio broadcasting segment represented 52% of our total revenue. As of December 31, 2006, we also owned or operated approximately 195,000 Americas outdoor advertising display faces and approximately 717,000 international outdoor advertising display faces. For the year ended December 31, 2006, the Americas and international outdoor advertising segments represented 19% and 22% of our total revenue, respectively. As of December 31, 2006 we also owned television stations and a media representation firm, as well as other general support services and initiatives, all of which are within the category “other”. This segment represented 7% of our total revenue for the year ended December 31, 2006. Prior to December 21, 2005, we also operated a live entertainment and sports representation business, which are reported as discontinued operations.

     On November 16, 2006, we announced plans to sell 448 of our radio stations, all located outside the top 100 U.S. media markets, as well as all of our television stations. The sale of these assets is not contingent on the closing of the Merger Agreement. Definitive asset purchase agreements were signed for 39 radio stations as of December 31, 2006. These stations, along with 5 stations which were sold in the fourth quarter of 2006, were classified as assets held for sale in our consolidated balance sheet and as discontinued operations in our consolidated statements of operations.

The closing of these radio station sales is subject to antitrust clearances, FCC approval and other customary closing conditions. Additionally, in connection with the Merger Agreement, we may be required to dispose of radio stations in certain markets that do not currently conform to the FCC’s market ownership rules.

     Our principal executive offices are located at 200 East Basse Road, San Antonio, Texas 78209 (telephone: 210-822-2828).

Operating Segments

     Our business consists of three reportable operating segments: radio broadcasting, Americas outdoor advertising and international outdoor advertising. The radio broadcasting segment includes radio stations for which we are the licensee and for which we program and/or sell air time under local marketing agreements or joint sales agreements. The radio broadcasting segment also operates radio networks. Our Americas outdoor advertising segment consists of our operations primarily in the United States, Canada and Latin America, with approximately 94% of our 2006 revenues in this segment derived from the United States. Our international outdoor advertising segment consists of our advertising operations in Europe, Australia, Asia and Africa, with approximately half of our 2006 revenues in this segment derived from France and the United Kingdom. The Americas and international outdoor advertising segments include advertising display faces which we own or operate under lease management agreements. We also own television stations and a media representation business.

     Information relating to the operating segments of our radio broadcasting, Americas outdoor advertising and international outdoor advertising operations for 2006, 2005 and 2004 is included in “Note O — Segment Data” in the Notes to Consolidated Financial Statements in Item 8 included elsewhere in this Report.

Company Strategy

Utilize media assets to serve the needs of local communities

     Our strategy is to serve the needs of the local communities in which we operate by using our media assets to provide products and services on a local, regional and national level and to be a contributing member of the communities in which we operate. We believe that by serving the needs of local communities, we will be able to grow revenues and earnings, creating economic value that will ultimately be translated into value for our shareholders.

Provide compelling content on our media assets

     We are trusted with public radio and television airwaves. This trust requires our constant focus and determination to deliver the best product in order to attract listeners and viewers. We attract listeners and viewers by providing compelling musical, news and information content on our stations. We conduct research to determine what listeners and viewers want and deliver it to them on a continuous basis. We strive to maintain compelling programming to create listener and viewer loyalty. In addition, we bring content to our outdoor business to make our displays interesting and informative for consumers.

Provide diverse product mix to assist clients in selling their products and services

     We believe one measure of our success is how well we assist our clients in selling their products and services. To this end, we offer advertisers a geographically diverse platform of media assets designed to provide the most efficient and cost-effective means to reach consumers. Our entrepreneurial managers work creatively and expertly to help our clients, at all levels, market their goods and services. If we are successful helping advertisers and sponsors reach their consumers, we believe we will gain their continued business and long-term commitments. Those commitments build our revenue and ultimately build value for our shareholders.

Maintain an entrepreneurial culture

     We maintain an entrepreneurial and customer-oriented culture by empowering local market managers to operate their businesses as separate profit centers, subject to centralized oversight. A portion of our managers’ compensation is dependent upon the financial success of their individual business units. This culture motivates local market managers to maximize our cash flow from operations by providing high quality service to our clients and seeking innovative ways to deploy capital to further grow their businesses. Our managers also have full access to our extensive centralized resources, including sales training, research tools, shared best practices, global procurement and financial and legal support.

Pursue strategic opportunities

     We evaluate strategic opportunities both within and outside our existing lines of business and may from time to

time purchase or sell assets or businesses. On November 16, 2006, we agreed to be acquired by a group of private equity funds sponsored by Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. The transaction is subject to shareholder approval, antitrust clearances, FCC approval and other customary closing conditions. On November 16, 2006, we also announced plans to sell 448 of our radio stations as well as all of our television stations. The closing of these radio and television station sales will be subject to antitrust clearances, FCC approval and other customary closing conditions.

Radio Broadcasting (52%, 53%, 56% of our revenue in 2006, 2005 and 2004, respectively)

Strategy and Business Strengths

     Our radio strategy centers on providing programming and services to the local communities in which we operate. By providing listeners with programming that is compelling, we are able to provide advertisers with an effective platform to reach their consumers. Our radio strategy also entails improving the ongoing operations of our stations through effective programming, reduction of costs and aggressive promotion, marketing and sales. Our broad programming and content across our geographically diverse portfolio of radio stations allows us to deliver targeted messages for specific audiences to advertisers on a local, regional and national basis. We believe owning multiple radio stations in a market allows us to provide our listeners with a more diverse programming selection and a more efficient means for our advertisers to reach those listeners. By owning multiple stations in a market, we are also able to operate our stations with more highly skilled local management teams and eliminate duplicative operating and overhead expenses.

Sources of Revenue

     Most of our radio broadcasting revenue is generated from the sale of local and national advertising. Additional revenue is generated from network compensation, internet generated revenue, air traffic generated revenue, event generated revenue, barter and other miscellaneous transactions. Our radio stations employ various formats for their programming. A station’s format can be important in determining the size and characteristics of its listening audience. Advertising rates charged by a radio station are based primarily on the station’s ability to attract audiences having certain demographic characteristics in the market area that advertisers want to reach, as well as the number of stations and other advertising media competing in the market and the relative demand for radio in any given market.

     Advertising rates generally are the highest during morning and evening drive-time hours. Depending on the format of a particular station, there are certain numbers of advertisements that are broadcast each hour. We determine the number of advertisements broadcast hourly that can maximize available revenue dollars without jeopardizing listening levels.

Competition

     We compete in our respective markets for audience, advertising revenues and programming with other radio stations owned by companies such as CBS, Cox Radio, Entercom and Radio One. We also compete with other advertising media, including satellite radio, television, newspapers, outdoor advertising, direct mail, cable television, yellow pages, the Internet, wireless media alternatives, cellular phones and other forms of advertisement.

Radio Stations

     As of December 31, 2006, we owned 356 AM and 820 FM domestic radio stations, of which 150 stations were in the top 25 U.S. markets according to the Arbitron rankings as of December 31, 2006. Included in the 1,176 radio stations owned or operated by us are 7 stations that were sold in 2007 and 77 stations for which we have definitive asset purchase agreements with third party buyers as of February 22 , 2007. In addition, we currently own equity interests in various international radio broadcasting companies located in Australia, New Zealand and Mexico, which we account for under the equity method of accounting. The following table sets forth certain selected information with regard to our radio broadcasting stations.

				Number
		Market		of
Market		Rank*		Stations
New York, NY		1		5
Los Angeles, CA		2		8
Chicago, IL		3		6
San Francisco, CA		4		7
Dallas-Ft. Worth, TX		5		6
Philadelphia, PA		6		6
Houston-Galveston, TX		7		8
Washington, DC		8		8
Detroit, MI		9		7
Atlanta, GA		10		6
Boston, MA		11		4
Miami-Ft. Lauderdale-Hollywood, FL		12		7
Seattle-Tacoma, WA		14		5
Phoenix, AZ		15		8
Minneapolis-St. Paul, MN		16		7
San Diego, CA		17		8
Nassau-Suffolk (Long Island), NY		18		2
Tampa-St. Petersburg-Clearwater, FL		19		8
St. Louis, MO		20		6
Baltimore, MD		21		3
Denver-Boulder, CO		22		8
Pittsburgh, PA		23		6
Portland, OR		24		5
Cleveland, OH		25		6
Sacramento, CA		26		4
Riverside-San Bernardino, CA		27		5
Cincinnati, OH		28		8
San Antonio, TX		30		6
Salt Lake City-Ogden-Provo, UT		31		6
Las Vegas, NV		32		4
Milwaukee-Racine, WI		33		6
San Jose, CA		34		3
Charlotte-Gastonia-Rock Hill, NC-SC		35		5
Providence-Warwick-Pawtucket, RI		36		4
Orlando, FL		37		7
Columbus, OH		38		5
Norfolk-Virginia Beach-Newport News, VA		40		4
Indianapolis, IN		41		3
Austin, TX		42		6
Raleigh-Durham, NC		43		4
Nashville, TN		44		5
Greensboro-Winston Salem-High Point, NC		45		5
West Palm Beach-Boca Raton, FL		46		7
New Orleans, LA		47		7
Jacksonville, FL		48		7
Memphis, TN		49		6
Hartford-New Britain-Middletown, CT		50		5
Oklahoma City, OK		53		5
Rochester, NY		54		7
Louisville, KY		55		8
Richmond, VA		56		6
Birmingham, AL		57		5
Dayton, OH		58		8
McAllen-Brownsville-Harlingen, TX		59		5
Greenville-Spartanburg, SC		60		6
Tucson, AZ		61		7
Albany-Schenectady-Troy, NY		62		7
Honolulu, HI		63		7
Ft. Myers-Naples-Marco Island, FL		64		4
Tulsa, OK		65		6
Fresno, CA		66		8
Grand Rapids, MI		67		7
Allentown-Bethlehem, PA		68		4
Albuquerque, NM		70		8
Omaha-Council Bluffs, NE-IA		72		5
Akron, OH		73		5
Sarasota-Bradenton, FL		74		6
Wilmington, DE		75		2
El Paso, TX		76		5
Syracuse, NY		77		7
Harrisburg-Lebanon-Carlisle, PA		78		6
Monterey-Salinas-Santa Cruz, CA		79		5
Bakersfield, CA		81		6
Springfield, MA		82		4
Baton Rouge, LA		83		6
Toledo, OH		84		6
Little Rock, AR		85		5
Charleston, SC		88		6
Columbia, SC		90		6
Des Moines, IA		91		5
Spokane, WA		92		6
Mobile, AL		93		5
Melbourne-Titusville-Cocoa, FL		94		4
Wichita, KS		95		4
Madison, WI		96		6
Colorado Springs, CO		97		4
Ft. Pierce-Stuart-Vero Beach, FL		100		5
Various U.S. Cities		101-150		150
Various U.S. Cities		151-200		132
Various U.S. Cities		201-250		132
Various U.S. Cities		251+		99
Various U.S. Cities		unranked		164
Total (a) (b)				1,176

(a)

Excluded from the 1,176 radio stations owned or operated by us are 8 radio stations programmed pursuant to a

			local marketing agreement or shared services agreement (FCC licenses not owned by us) and 1 Mexican radio station that we provide programming to and sell airtime under exclusive sales agency arrangements. Also excluded are radio stations in Australia, New Zealand and Mexico. We own a 50%, 50% and 40% equity interest in companies that have radio broadcasting operations in these markets, respectively.
(b)			Included in the 1,176 radio stations owned or operated by us are 7 stations that were sold in 2007 and 77 stations for which we have definitive asset purchase agreements with third party buyers as of February 22, 2007. The sale of these stations is not contingent on the closing of our Merger Agreement.

Radio Networks

     In addition to radio stations, our radio broadcasting segment includes a national radio network that produces or distributes more than 70 syndicated radio programs and services for more than 5,000 radio station affiliations. Some of our more popular radio programs include Rush Limbaugh, Delilah and Bob and Tom Show. We also own various sports, news and agriculture networks serving Alabama, Virginia, Florida, Oklahoma, Georgia, Ohio, Iowa and Kentucky.

Outdoor Advertising

Strategy and Business Strengths

     We seek to capitalize on our global network and diversified product mix to maximize revenues and increase profits. We believe we can increase our operating margins by spreading our fixed investment costs over our broad asset base. In addition, by sharing best practices from both the Americas and internationally, we believe we can quickly and effectively replicate our successes throughout the markets in which we operate. We believe that our diversified product mix and long-standing presence in many of our existing markets provide us with the platform necessary to launch new products and test new initiatives in a reliable and cost-effective manner.

     We seek to enhance revenue opportunities by focusing on specific initiatives that highlight the value of outdoor advertising relative to other media. We have made and continue to make significant investments in research tools that enable our clients to better understand how our displays can successfully reach their target audiences and promote their advertising campaigns. Also, we are working closely with clients, advertising agencies and other diversified media companies to develop more sophisticated systems that will provide improved demographic measurements of outdoor advertising. We believe that these measurement systems will further enhance the attractiveness of outdoor advertising for both existing clients and new advertisers.

     We continue to focus on achieving operating efficiencies throughout our global network. For example, in most of our U.S. markets, we have been transitioning our compensation programs in our operations departments from hourly-wage scales to productivity-based programs. We have decreased operating costs and capital needs by introducing energy-saving lighting systems and innovative processes for changing advertising copy on our displays. Additionally, in certain heavy storm areas, we have converted large format billboards to sectionless panels that face less wind resistance, reducing our weather-related losses in such areas.

     We believe that customer service is critical, and we have made significant commitments to provide innovative services to our clients. For example, we provide our U.S. clients with online access to information about our inventory, including pictures, locations and other pertinent display data that is helpful in their buying decisions. Additionally, in the United States we recently introduced a service guaranty in which we have committed to specific monitoring and reporting services to provide greater accountability and enhance customer satisfaction. We also introduced a proprietary online proof-of-performance system that is an additional tool our clients may use to measure our accountability. This system provides our clients with information about the dates on which their advertising copy is installed or removed from any display in their advertising program.

     Advances in electronic displays, including flat screens, LCDs and LEDs, as well as corresponding reductions in costs, allow us to provide these technologies as alternatives to traditional methods of displaying our clients’ advertisements. These electronic displays may be linked through centralized computer systems to instantaneously and simultaneously change static advertisements on a large number of displays. We believe that these capabilities will allow us to transition from selling space on a display to a single advertiser to selling time on that display to multiple advertisers. We believe this transition will create new advertising opportunities for our existing clients and will attract new advertisers, such as certain retailers that desire to change advertisements frequently and on short notice. For example, these technologies will allow retailers to promote weekend sales with the flexibility during the sales to make multiple changes to the advertised products and prices.

Competition

     The outdoor advertising industry is fragmented, consisting of several larger companies involved in outdoor advertising such as CBS, JC Decaux S.A. and Lamar Advertising Company as well as numerous smaller and local companies operating a limited number of display faces in a single or a few local markets. We also compete with other media in our respective markets including broadcast and cable television, radio, print media, the Internet and direct mail.

Outdoor Advertising — Americas (19%, 18%, 16% of our revenue in 2006, 2005 and 2004, respectively)

Sources of Revenue

     Outdoor advertising revenue is derived from the sale of advertising copy placed on our display inventory. Our display inventory consists primarily of billboards, street furniture displays and transit displays, with billboards contributing approximately 70% of our 2006 Americas revenues. The margins on our billboard contracts also tend to be higher than those on contracts for other displays.

Billboards

     Our billboard inventory primarily includes bulletins and posters.

	•		Bulletins
			Bulletins vary in size, with the most common size being 14 feet high by 48 feet wide. Almost all of the advertising copy displayed on bulletins is computer printed on vinyl and transported to the bulletin where it is secured to the display surface. Because of their greater size and impact, we typically receive our highest rates for bulletins. Bulletins generally are located along major expressways, primary commuting routes and main intersections that are highly visible and heavily trafficked. Our clients may contract for individual bulletins or a network of bulletins, meaning the clients’ advertisements are rotated among bulletins to increase the reach of the campaign. “Reach’’ is the percent of a target audience exposed to an advertising message at least once during a specified period of time, typically during a period of four weeks. Our client contracts for bulletins generally have terms ranging from one month to one year.
	•		Posters
			Posters are available in two sizes, 30-sheet and 8-sheet displays. The 30-sheet posters are approximately 11 feet high by 23 feet wide, and the eight-sheet posters are approximately 5 feet high by 11 feet wide. Advertising copy for posters is printed using silk-screen or lithographic processes to transfer the designs onto paper that is then transported and secured to the poster surfaces. Posters generally are located in commercial areas on primary and secondary routes near point-of-purchase locations, facilitating advertising campaigns with greater demographic targeting than those displayed on bulletins. Our poster rates typically are less than our bulletin rates, and our client contracts for posters generally have terms ranging from four weeks to one year. Two types of posters are premiere panels and squares. Premiere displays are innovative hybrids between bulletins and posters that we developed to provide our clients with an alternative for their targeted marketing campaigns. The premiere displays utilize one or more poster panels, but with vinyl advertising stretched over the panels similar to bulletins. Our intent is to combine the creative impact of bulletins with the additional reach and frequency of posters. “Frequency’’ is the average number of exposures an individual has to an advertising message during a specified period of time. Out-of-home frequency is typically measured over a four-week period.

Street Furniture Displays

     Our street furniture displays, marketed under our global Adshel^TM brand, are advertising surfaces on bus shelters, information kiosks, public toilets, freestanding units and other public structures, and primarily are located in major metropolitan cities and along major commuting routes. Generally, we own the street furniture structures and are responsible for their construction and maintenance. Contracts for the right to place our street furniture in the public domain and sell advertising space on them are awarded by municipal and transit authorities in competitive bidding processes governed by local law. Generally, these contracts have terms ranging from 10 to 20 years. As compensation for the right to sell advertising space on our street furniture structures, we pay the municipality or transit authority a fee or revenue share that is either a fixed amount or a percentage of the revenues derived from the street furniture displays. Typically, these revenue sharing arrangements include payments by us of minimum guaranteed amounts. Client contracts for street furniture displays typically have terms ranging from four weeks to one year, and, similar to billboards, may be for network packages.

Transit Displays

     Our transit displays are advertising surfaces on various types of vehicles or within transit systems, including on the interior and exterior sides of buses, trains, trams and taxis and within the common areas of rail stations and airports. Similar to street furniture, contracts for the right to place our displays on such vehicles or within such transit systems and sell advertising space on them generally are awarded by public transit authorities in competitive bidding processes or are negotiated with private transit operators. These contracts typically have terms of up to five years. Our client contracts for transit displays generally have terms ranging from four weeks to one year.

Other Inventory

     The balance of our display inventory consists of spectaculars, mall displays and wallscapes. Spectaculars are customized display structures that often incorporate video, multidimensional lettering and figures, mechanical devices and moving parts and other embellishments to create special effects. The majority of our spectaculars are located in Dundas Square in Toronto, Times Square and Penn Plaza in New York City, Fashion Show in Las Vegas, Sunset Strip in Los Angeles and across from the Target Center in Minneapolis. Client contracts for spectaculars typically have terms of one year or longer. We also own displays located within the common areas of malls on which our clients run advertising campaigns for periods ranging from four weeks to one year. Contracts with mall operators grant us the exclusive right to place our displays within the common areas and sell advertising on those displays. Our contracts with mall operators generally have terms ranging from five to ten years. Client contracts for mall displays typically have terms ranging from six to eight weeks. A wallscape is a display that drapes over or is suspended from the sides of buildings or other structures. Generally, wallscapes are located in high-profile areas where other types of outdoor advertising displays are limited or unavailable. Clients typically contract for individual wallscapes for extended terms.

Advertising inventory and markets

     At December 31, 2006, we owned or operated approximately 195,000 displays in our Americas outdoor segment. The following table sets forth certain selected information with regard to our Americas outdoor advertising inventory, with our markets listed in order of their DMA^® region ranking (DMA^® is a registered trademark of Nielson Media Research, Inc.):

DMA®

Street

Region

Billboards

Furniture

Transit

Other

Total

Rank

Markets

Bulletins

Posters

Displays

Displays

Displays(a)

Displays

United States

1

New York, NY

•

•

•

•

•

16,715

2

Los Angeles, CA

•

•

•

•

•

11,715

3

Chicago, IL

•

•

•

(b)

•

14,913

4

Philadelphia, PA

•

•

•

•

•

6,944

5

Boston, MA (Manchester, NH)

•

•

•

•

7,300

6

San Francisco-Oakland-San Jose, CA

•

•

•

•

•

6,612

7

Dallas-Ft. Worth, TX

•

•

•

•

•

7,038

8

Washington, DC (Hagerstown, MD)

•

•

•

•

•

5,238

9

Atlanta, GA

•

•

•

•

3,260

10

Houston, TX

•

•

•

(b)

•

4,637

11

Detroit, MI

•

•

593

12

Tampa-St. Petersburg (Sarasota), FL

•

•

•

•

•

2,178

13

Seattle-Tacoma, WA

•

•

•

•

4,193

14

Phoenix, AZ

•

•

•

(b)

3,074

15

Minneapolis-St. Paul, MN

•

•

•

•

2,678

16

Cleveland-Akron (Canton), OH

•

•

•

•

2,303

17

Miami-Ft. Lauderdale, FL

•

•

•

•

•

(b)

4,702

18

Denver, CO

•

•

794

19

Sacramento-Stockton-Mo desto, CA

•

•

•

•

•

1,360

20

Orlando-Daytona Beach-Melbourne, FL

•

•

•

•

4,964

DMA®

Street

Region

Billboards

Furniture

Transit

Other

Total

Rank

Markets

Bulletins

Posters

Displays

Displays

Displays(a)

Displays

21

St. Louis, MO

•

•

276

22

Pittsburgh, PA

•

•

(b)

•

651

23

Portland, OR

•

•

•

•

1,557

24

Baltimore, MD

•

•

•

•

(b)

615

25

Indianapolis, IN

•

•

•

•

1,973

26

San Diego, CA

•

•

•

•

(b)

1,317

27

Charlotte, NC

•

•

390

28

Hartford-New Haven, CT

•

•

628

29

Raleigh-Durham (Fayetteville), NC

•

•

55

30

Nashville, TN

•

•

361

31

Kansas City, KS/MO

•

•

701

32

Columbus, OH

•

•

•

•

1,765

33

Milwaukee, WI

•

•

•

•

•

3,902

34

Cincinnati, OH

•

•

429

35

Greenville-Spartanburg , SC- Asheville, NC-Anderson, SC

•

82

36

Salt Lake City, UT

•

•

63

37

San Antonio, TX

•

•

•

(b)

•

(b)

2,976

38

West Palm Beach-Ft. Pierce, FL

•

•

•

503

39

Grand Rapids-Kalamazoo-Battl e Creek, MI

•

55

41

Harrisburg-Lancaster-L ebanon-York, PA

•

34

42

Norfolk-Portsmouth-New port News, VA

•

•

413

43

New Orleans, LA

•

1,449

44

Memphis, TN

•

•

•

•

•

2,186

45

Oklahoma City, OK

•

12

46

Albuquerque-Santa Fe, NM

•

•

•

1,500

47

Greensboro-High Point-Winston Salem, NC

•

360

48

Las Vegas, NV

•

•

•

•

(b)

12,783

49

Buffalo, NY

•

465

50

Louisville, KY

•

•

190

51-100

Various U.S. Cities

•

•

•

(b)

•

(b)

10,800

101-150

Various U.S. Cities

•

•

•

(b)

•

(b)

5,545

151+

Various U.S. Cities

•

•

2,248

Non-U.S. Markets

n/a

Aruba

•

1,092

n/a

Australia

•

1,190

n/a

Barbados

•

40

n/a

Brazil

•

•

•

8,182

n/a

Canada

•

•

•

4,074

n/a

Chile

•

•

1,340

n/a

Costa Rica

•

228

n/a

Dominican Republic

•

199

n/a

Grenada

•

119

n/a

Guam

•

947

n/a

Jamaica

•

133

n/a

Mexico

•

•

5,034

DMA®

Street

Region

Billboards

Furniture

Transit

Other

Total

Rank

Markets

Bulletins

Posters

Displays

Displays

Displays(a)

Displays

n/a

Netherlands Antilles

•

630

n/a

New Zealand

•

1,761

n/a

Peru

•

•

•

•

•

2,463

n/a

Saint Kitts and Nevis

•

151

n/a

Saint Lucia

•

223

n/a

Virgin Islands

•

227

Total Americas Displays

195,528

Outdoor Advertising — International (22%, 22%, 21% of our revenue in 2006, 2005 and 2004, respectively)

Sources of Revenue

     Outdoor advertising revenue is derived from the sale of advertising copy placed on our display inventory. Our international display inventory consists primarily of billboards, street furniture displays, transit displays and other out-of-home advertising displays, such as neon displays, in approximately 50 countries worldwide, with billboards and street furniture displays collectively contributing approximately 78% of our 2006 international revenues.

Billboards

     The sizes of our international billboards are not standardized. The billboards vary in both format and size across our networks, with the majority of our international billboards being similar in size to our Americas posters (30-sheet and eight-sheet displays). Our international billboards are sold to clients as network packages with contract terms typically ranging from one to two weeks. Long-term client contracts are also available and typically have terms of up to one year. We lease the majority of our billboard sites from private landowners. Billboards include our spectacular and neon displays. DEFI, our international neon subsidiary, is a leading global provider of neon signs with approximately 400 displays in 15 countries worldwide. Client contracts for international neon displays typically have terms of approximately five years.

Street Furniture Displays

     Our international street furniture displays are substantially similar to their Americas counterparts, and include bus shelters, freestanding units, public toilets, various types of kiosks and benches. Internationally, contracts with municipal and transit authorities for the right to place our street furniture in the public domain and sell advertising on them typically range from 10 to 15 years. The major difference between our international and Americas street furniture businesses is in the nature of the municipal contracts. In the international outdoor advertising segment, these contracts typically require us to provide the municipality with a broader range of urban amenities such as public wastebaskets and lampposts, as well as space for the municipality to display maps or other public information. In exchange for providing such urban amenities and display space, we are authorized to sell advertising space on certain sections of the structures we erect in the public domain. Our international street furniture is typically sold to clients as network packages with contract terms ranging from one to two weeks. Long-term client contracts are also available and typically have terms of up to one year.

Transit Displays

     Our international transit display contracts are substantially similar to their Americas counterparts, and typically require us to make only a minimal initial investment and few ongoing maintenance expenditures. Contracts with public transit authorities or private transit operators typically have terms ranging from three to seven years. Our client contracts for transit displays generally have terms ranging from one week to one year, or longer.

Other International Inventory and Other Sources of Revenue

     The balance of our international display inventory and revenues consists primarily of advertising revenue from mall displays, other small displays and non-advertising revenue from sales of street furniture equipment, cleaning and maintenance services and production revenue. Internationally, our contracts with mall operators generally have terms

ranging from five to ten years and client contracts for mall displays generally have terms ranging from one to two weeks, but are available for up to six months. Our international inventory includes other small displays that are counted as separate displays since they form a substantial part of our network and international revenues. Several of our international markets sell equipment or provide cleaning and maintenance services as part of a billboard or street furniture contract with a municipality. Production revenue relates to the production of advertising posters usually to small customers.

Advertising inventory and markets

     At December 31, 2006, we owned or operated approximately 717,000 displays in our international outdoor segment. The following table sets forth certain selected information with regard to our international outdoor advertising inventory, with our markets listed in descending order according to 2006 revenue contribution:

Street

Furniture

Transit

Other

Total

International Markets

Billboards(a)

Displays

Displays(b)

Displays(c)

Displays

France

•

•

•

•

167,314

United Kingdom

•

•

•

•

84,200

Italy

•

•

55,025

China

•

•

•

•

59,465

Spain

•

•

•

•

33,142

Sweden

•

•

•

•

110,918

Australia/New Zealand

•

•

16,599

Belgium

•

•

•

•

23,228

Switzerland

•

•

•

17,424

Norway

•

•

•

19,222

Ireland

•

•

7,483

Denmark

•

•

•

•

32,579

Turkey

•

•

•

•

7,184

Finland

•

•

•

44,684

Holland

•

•

3,198

Poland

•

•

•

12,599

Baltic States/Russia

•

•

17,045

Greece

•

•

1,193

Singapore

•

3,778

India

•

•

747

Germany

•

64

Hungary

•

36

Austria

•

12

United Arab Emirates

•

1

Czech Republic

•

6

Ukraine

•

2

Total International Displays

717,148

     In addition to the displays listed above, as of December 31, 2006, we had equity investments in various out-of-home advertising companies that operate in the following markets:

Street

Equity

Furniture

Transit

Other

Market

Company

Investment

Billboards(a)

Displays

Displays

Displays(b)

Outdoor Advertising Companies

South Africa (c)

Clear Channel

Independent

50.0

%

•

•

•

Italy

Alessi

34.3

%

•

•

•

Italy

AD Moving SpA

17.5

%

•

•

Hong Kong

Buspak

50.0

%

•

•

Thailand

Master & More

32.5

%

•

•

Belgium

MTB

49.0

%

•

Belgium

Streep

25.0

%

•

Denmark

City Reklame

45.0

%

•

Other Media Companies

Norway

CAPA

50.0

%

Holland

HOA Events

49.0

%

Other

     The other category includes our television business and our media representation firm, as well as other general support services and initiatives which are ancillary to our other businesses.

Television

     On November 16, 2006 we announced plans to sell all of our television stations. As of December 31, 2006, we owned, programmed or sold airtime for 51 television stations, including 13 television stations distributed as digital multicast stations. Our television stations are affiliated with various television networks, including ABC, CBS, NBC, FOX, CW, CW100+, MyNetworkTV, Telemundo, our internally created Variety TV network and several independent, non-affiliated stations. Television revenue is generated primarily from the sale of local and national advertising. Advertising rates depend primarily on the quantitative and qualitative characteristics of the audience we can deliver to the advertiser. Our sales personnel sell local advertising, while national advertising is primarily sold by national sales representatives.

     The primary sources of programming for our ABC, NBC, CBS, FOX, CW100+ and Telemundo affiliated television stations are their respective networks, which produce and distribute programming in exchange for each station’s commitment to air the programming at specified times and for commercial announcement time during the programming. We provide another source of programming to our stations by selecting and purchasing syndicated television programs. We compete with other television stations within each market for these broadcast rights. We also provide local news programming for the majority of our television stations.

Media Representation

     We own the Katz Media Group, a full-service media representation firm that sells national spot advertising time for clients in the radio and television industries throughout the United States. As of December 31, 2006, Katz Media represented over 3,300 radio stations and 400 television stations.

     Katz Media generates revenues primarily through contractual commissions realized from the sale of national spot advertising airtime. National spot advertising is commercial airtime sold to advertisers on behalf of radio and television stations. Katz Media represents its media clients pursuant to media representation contracts, which typically have terms of up to ten years in length.

Employees

     At February 22, 2007, we had approximately 25,500 domestic employees and 5,400 international employees of which approximately 30,000 were in operations and approximately 900 were in corporate related activities.

Regulation of Our Business

Existing Regulation and 1996 Legislation

     Radio and television broadcasting are subject to the jurisdiction of the Federal Communications Commission under the Communications Act of 1934. The Communications Act prohibits the operation of a radio or television broadcasting station except under a license issued by the FCC and empowers the FCC, among other things, to:

	•		issue, renew, revoke and modify broadcasting licenses;
	•		assign frequency bands;
	•		determine stations’ frequencies, locations, and power;
	•		regulate the equipment used by stations;
	•		adopt other regulations to carry out the provisions of the Communications Act;
	•		impose penalties for violation of such regulations; and
	•		impose fees for processing applications and other administrative functions.

     The Communications Act prohibits the assignment of a license or the transfer of control of a licensee without prior approval of the FCC.

     The Telecommunications Act of 1996 represented a comprehensive overhaul of the country’s telecommunications laws. The 1996 Act changed both the process for renewal of broadcast station licenses and the broadcast ownership rules. The 1996 Act established a “two-step” renewal process that limited the FCC’s discretion to consider applications filed in competition with an incumbent’s renewal application. The 1996 Act also liberalized the national broadcast ownership rules, eliminating the national radio limits and easing the national restrictions on TV ownership. The 1996 Act also relaxed local radio ownership restrictions, but left local TV ownership restrictions in place pending further FCC review.

     License Grant and Renewal

     Under the 1996 Act, the FCC grants broadcast licenses to both radio and television stations for terms of up to eight years. The 1996 Act requires the FCC to renew a broadcast license if it finds that:

	•		the station has served the public interest, convenience and necessity;
	•		there have been no serious violations of either the Communications Act or the FCC’s rules and regulations by the licensee; and
	•		there have been no other violations which taken together constitute a pattern of abuse.

     In making its determination, the FCC may consider petitions to deny and informal objections, and may order a hearing if such petitions or objections raise sufficiently serious issues. The FCC, however, may not consider whether the public interest would be better served by a person or entity other than the renewal applicant. Instead, under the 1996 Act, competing applications for the incumbent’s spectrum may be accepted only after the FCC has denied the incumbent’s application for renewal of its license.

     Although in the vast majority of cases broadcast licenses are renewed by the FCC, even when petitions to deny or informal objections are filed, there can be no assurance that any of our stations’ licenses will be renewed at the expiration of their terms.

     Current Multiple Ownership Restrictions

     The FCC has promulgated rules that, among other things, limit the ability of individuals and entities to own or have an “attributable interest” in broadcast stations and other specified mass media entities.

     The 1996 Act mandated significant revisions to the radio and television ownership rules. With respect to radio licensees, the 1996 Act directed the FCC to eliminate the national ownership restriction, allowing one entity to own nationally any number of AM or FM broadcast stations. Other FCC rules mandated by the 1996 Act greatly eased local radio ownership restrictions. The maximum allowable number of radio stations that may be commonly owned in a market varies depending on the total number of radio stations in that market, as determined using a method prescribed

by the FCC. In markets with 45 or more stations, one company may own, operate or control eight stations, with no more than five in any one service (AM or FM). In markets with 30-44 stations, one company may own seven stations, with no more than four in any one service. In markets with 15-29 stations, one entity may own six stations, with no more than four in any one service. In markets with 14 stations or less, one company may own up to five stations or 50% of all of the stations, whichever is less, with no more than three in any one service. These new rules permit common ownership of more stations in the same market than did the FCC’s prior rules, which at most allowed ownership of no more than two AM stations and two FM stations even in the largest markets.

     Irrespective of FCC rules governing radio ownership, however, the Antitrust Division of the United States Department of Justice and the Federal Trade Commission have the authority to determine that a particular transaction presents antitrust concerns. Following the passage of the 1996 Act, the Antitrust Division became more aggressive in reviewing proposed acquisitions of radio stations, particularly in instances where the proposed purchaser already owned one or more radio stations in a particular market and sought to acquire additional radio stations in the same market. The Antitrust Division has, in some cases, obtained consent decrees requiring radio station divestitures in a particular market based on allegations that acquisitions would lead to unacceptable concentration levels. The FCC generally will not approve radio acquisitions when antitrust authorities have expressed concentration concerns, even if the acquisition complies with the FCC’s numerical station limits.

     With respect to television, the 1996 Act directed the FCC to eliminate the then-existing 12-station national limit on station ownership and increase the national audience reach limitation from 25% to 35%. The 1996 Act left local TV ownership restrictions in place pending further FCC review, and in August 1999 the FCC modified its local television ownership rule. Under the current rule, permissible common ownership of television stations is dictated by Nielsen Designated Market Areas, or “DMA^®s.” A company may own two television stations in a DMA^® if the stations’ Grade B contours do not overlap. Conversely, a company may own television stations in separate DMA^®s even if the stations’ service contours do overlap. Furthermore, a company may own two television stations in a DMA^® with overlapping Grade B contours if (i) at least eight independently owned and operating full-power television stations, the Grade B contours of which overlap with that of at least one of the commonly owned stations, will remain in the DMA^® after the combination; and (ii) at least one of the commonly owned stations is not among the top four stations in the market in terms of audience share. The FCC will presumptively waive these criteria and allow the acquisition of a second same-market television station where the station being acquired is shown to be “failed” or “failing” (under specific FCC definitions of those terms), or authorized but unbuilt. A buyer seeking such a waiver must also demonstrate, in most cases, that it is the only buyer ready, willing, and able to operate the station, and that sale to an out-of-market buyer would result in an artificially depressed price. We currently own two television stations in each of six DMA^®s.

     The FCC has adopted rules with respect to so-called local marketing agreements, or “LMAs,” by which the licensee of one radio or television station provides substantially all of the programming for another licensee’s station in the same market and sells all of the advertising within that programming. Under these rules, an entity that owns one or more radio or television stations in a market and programs more than 15% of the broadcast time on another station in the same service (radio or television) in the same market pursuant to an LMA is generally required to count the LMA station toward its media ownership limits even though it does not own the station. As a result, in a market where we own one or more radio or television stations, we generally cannot provide programming under an LMA to another station in the same service (radio or television) if we cannot acquire that station under the various rules governing media ownership.

     In adopting its rules concerning television LMAs, however, the FCC provided “grandfathering” relief for LMAs that were in effect at the time of the rule change in August 1999. Television LMAs that were in place at the time of the new rules and were entered into before November 5, 1996, were allowed to continue at least through 2004, at which time the FCC planned to consider the future treatment of such LMAs in a review proceeding. The FCC, however, has not yet launched such a proceeding. Such LMAs entered into after November 5, 1996 were allowed to continue until August 5, 2001, at which point they were required to be terminated unless they complied with the revised local television ownership rule.

     We provide substantially all of the programming under LMAs to television stations in two markets where we also own a television station. Both of these television LMAs were entered into before November 5, 1996. Therefore, both of these television LMAs are permitted to continue at least through the FCC’s next periodic (now quadrennial) ownership rule review, which has not yet commenced. Moreover, we may seek permanent grandfathering of these television LMAs by demonstrating to the FCC, among other things, the public interest benefits the LMAs have produced and the extent to which the LMAs have enabled the stations involved to convert to digital operation.

     A number of cross-ownership rules pertain to licensees of television and radio stations. FCC rules generally

prohibit an individual or entity from having an attributable interest in a radio or television station and a daily newspaper located in the same market.

     Prior to August 1999, FCC rules also generally prohibited common ownership of a television station and one or more radio stations in the same market, although the FCC in many cases allowed such combinations under waivers of the rule. In August 1999, however, the FCC comprehensively revised its radio/television cross-ownership rule. The revised rule permits the common ownership of one television and up to seven same-market radio stations, or up to two television and six same-market radio stations, if the market will have at least twenty separately owned broadcast, newspaper and cable “voices” after the combination. Common ownership of up to two television and four radio stations is permissible when at least ten “voices” will remain, and common ownership of up to two television stations and one radio station is permissible in all markets regardless of voice count. The radio/television limits, moreover, are subject to the compliance of the television and radio components of the combination with the television duopoly rule and the local radio ownership limits, respectively. Waivers of the radio/television cross-ownership rule are available only where the station being acquired is “failed” (i.e., off the air for at least four months or involved in court-supervised involuntary bankruptcy or insolvency proceedings). A buyer seeking such a waiver must also demonstrate, in most cases, that it is the only buyer ready, willing, and able to operate the station, and that sale to an out-of-market buyer would result in an artificially depressed price.

     There are more than 20 markets where we own both radio and television stations. In the majority of these markets, the number of radio stations we own complies with the limit imposed by the current rule. Our acquisition of television stations in five markets in our 2002 merger with The Ackerley Group resulted in our owning more radio stations in these markets than is permitted by the current rule. The FCC has given us a temporary period of time to come into compliance with the rule. We have come into compliance with respect to two such markets and have requested an extension of time to come into compliance with respect to the other three markets. In the remaining markets where our number of radio stations exceeds the limit under the current rule, we are nonetheless authorized to retain our present television/radio combinations at least until the FCC’s next periodic ownership rule review. As with grandfathered television LMAs, we may seek permanent authorization for our non-compliant radio/television combinations by demonstrating to the FCC, among other things, the public interest benefits the combinations have produced and the extent to which the combinations have enabled the television stations involved to convert to digital operation.

     Under the FCC’s ownership rules, an officer or director of our company or a direct or indirect purchaser of certain types of our securities could cause us to violate FCC regulations or policies if that purchaser owned or acquired an “attributable” interest in other media properties in the same areas as our stations or in a manner otherwise prohibited by the FCC. All officers and directors of a licensee and any direct or indirect parent, general partners, limited partners and limited liability company members who are not properly “insulated” from management activities, and stockholders who own five percent or more of the outstanding voting stock of a licensee or its parent, either directly or indirectly, generally will be deemed to have an attributable interest in the licensee. Certain institutional investors who exert no control or influence over a licensee may own up to twenty percent of a licensee’s or its parent’s outstanding voting stock before attribution occurs. Under current FCC regulations, debt instruments, non-voting stock, minority voting stock interests in corporations having a single majority shareholder, and properly insulated limited partnership and limited liability company interests as to which the licensee certifies that the interest holders are not “materially involved” in the management and operation of the subject media property generally are not subject to attribution unless such interests implicate the FCC’s “equity/debt plus,” or “EDP,” rule. Under the EDP rule, an aggregate debt and/or equity interest in excess of 33% of a licensee’s total asset value (equity plus debt) is attributable if the interest holder is either a major program supplier (providing over 15% of the licensee’s station’s total weekly broadcast programming hours) or a same-market media owner (including broadcasters, cable operators, and newspapers). To the best of our knowledge at present, none of our officers, directors or five percent or greater stockholders holds an interest in another television station, radio station, cable television system or daily newspaper that is inconsistent with the FCC’s ownership rules and policies.

     Developments and Future Actions Regarding Multiple Ownership Rules

     Expansion of our broadcast operations in particular areas and nationwide will continue to be subject to the FCC’s ownership rules and any further changes the FCC or Congress may adopt. Recent actions by and pending proceedings before the FCC, Congress and the courts may significantly affect our business.

     The 1996 Act requires the FCC to review its remaining ownership rules biennially as part of its regulatory reform obligations (although, under subsequently enacted appropriations legislation, the FCC is obligated to review the rules every four years rather than biennially). The first two biennial reviews did not result in any significant changes to the FCC’s media ownership rules, although the first such review led to the commencement of several separate proceedings concerning specific rules.

     In its third biennial review, which commenced in September 2002, the FCC undertook a comprehensive review and reevaluation of all of its media ownership rules, including incorporation of a previously commenced separate rulemaking on the radio ownership rules. This biennial review culminated in a decision adopted by the FCC in June 2003, in which the agency made significant changes to virtually all aspects of the existing media ownership rules. Among other things:

	•		The FCC relaxed the local television ownership rule, allowing common ownership of two television stations in any DMA® with at least five operating commercial and non-commercial television stations. Under the modified rule, a company may own three television stations in a DMA® with at least 18 television stations. In either case, no single entity may own more than one television station that is among the top four stations in a DMA® based on audience ratings. In markets with eleven or fewer television stations, however, the modified rule would allow parties to seek waivers of the “top four” restriction and permit a case-by-case evaluation of whether joint ownership would serve the public interest, based on a liberalized set of waiver criteria.
	•		The FCC eliminated its rules prohibiting ownership of a daily newspaper and a broadcast station, and limiting ownership of television and radio stations, in the same market. In place of those rules, the FCC adopted new “cross-media limits” that would apply to certain markets depending on the number of television stations in the relevant television DMA®. These limits would prohibit any cross-media ownership in markets with three or fewer television stations. In markets with between four and eight television stations, the cross-media limits would allow common ownership of one of the following three combinations: (1) one or more daily newspapers, one television station, and up to half of the radio stations that would be permissible under the local radio ownership limits; (2) one or more daily newspapers and as many radio stations as can be owned under the local radio ownership limits (but no television stations); and (3) two television stations (provided that such ownership would be permissible under the local television ownership rule) and as many radio stations as can be owned under the local radio ownership limits (but no daily newspapers). No cross-media ownership limits would exist in markets with nine or more television stations.
	•		The FCC relaxed the limitation on the nationwide percentage of television households a single entity is permitted to reach, raising the cap from 35% to 45%.

     With respect to local radio ownership, the FCC’s June 2003 decision left in place the existing tiered numerical limits on station ownership in a single market. The FCC, however, completely revised the manner of defining local radio markets, abandoning the existing definition based on station signal contours in favor of a definition based on “metro” markets as defined by Arbitron. Under the modified approach, commercial and non-commercial radio stations licensed to communities within an Arbitron metro market, as well as stations licensed to communities outside the metro market but considered “home” to that market, are counted as stations in the local radio market for the purposes of applying the ownership limits. For geographic areas outside defined Arbitron metro markets, the FCC adopted an interim market definition methodology based on a modified signal contour overlap approach and initiated a further rulemaking proceeding to determine a permanent market definition methodology for such areas. The further proceeding is still pending. The FCC grandfathered existing combinations of owned stations that would not comply with the modified rules. However, the FCC ruled that such noncompliant combinations could not be sold intact except to certain “eligible entities,” which the agency defined as entities qualifying as a small business consistent with Small Business Administration standards.

     In addition, the FCC’s June 2003 decision ruled for the first time that radio joint sales agreements, or “JSAs”, by which the licensee of one radio station sells substantially all of the advertising for another licensee’s station in the same market (but does not provide programming to that station), would be considered attributable to the selling party. Furthermore, the FCC stated that where the newly attributable status of existing JSAs and LMAs resulted in combinations of stations that would not comply with the modified rules, termination of such JSAs and LMAs would be required within two years of the modified rules’ effectiveness.

     Numerous parties, including us, appealed the modified ownership rules adopted by the FCC in June 2003. These appeals were consolidated before the United States Court of Appeals for the Third Circuit. In September 2003, shortly before the modified rules were scheduled to take effect, that court issued a stay preventing the rules’ implementation pending the court’s decision on appeal. In June 2004, the court issued a decision that upheld the modified ownership rules in certain respects and remanded them to the FCC for further justification in other respects. Among other things:

	•		The court upheld the provision of the modified rules prohibiting common ownership of more than one top-four ranked television station in a market, but remanded the FCC’s modified numerical limits applicable to same-market combinations of television stations. It also remanded the FCC’s elimination of the requirement that, in a transaction that seeks a “failing” or “failed” station waiver of the television duopoly rule, the parties demonstrate that no out-of-market buyer is willing to purchase the station.
	•		The court affirmed the FCC’s repeal of the newspaper/broadcast cross-ownership rule, while also upholding the FCC’s determination to retain some limits on cross-media ownership. However, the court remanded the FCC’s “cross-media limits” for further explanation, finding that the FCC had failed to provide a reasoned analysis for the specific limitations it adopted.
	•		With respect to the modified radio ownership rules, the court affirmed the FCC’s switch to an Arbitron-based methodology for defining radio markets, its decision to include noncommercial stations when counting stations in a market, its limitations on transfer of existing combinations of stations that would not comply with the modified rules, its decision to make JSAs attributable to the selling party, and its decision to require termination within two years of the rules’ effectiveness of existing JSAs and LMAs that resulted in non-compliance with the modified radio rules. However, the court determined that the FCC had insufficiently justified its retention of the existing numerical station caps and remanded the numerical limits to the FCC for further explanation.

     In its June 2004 decision, the court left in place the stay on the FCC’s implementation of the modified media ownership rules. As a result, the FCC’s rules governing local television ownership and radio/television cross-ownership, as modified in 1999, remain in effect. However, in September 2004 the court partially lifted its stay on the modified radio ownership rules, putting into effect the aspects of those rules that establish a new methodology for defining local radio markets and counting stations within those markets, limit our ability to transfer intact combinations of stations that do not comply with the new rules, make JSAs attributable, and require us to terminate within two years those of our existing JSAs and LMAs which, because of their newly attributable status, cause our station combinations in the relevant markets to be non-compliant with the new radio ownership rules. Moreover, in a market where we own one or more radio stations, we generally cannot enter into a JSA with another radio station if we could not acquire that station under the modified rules.

     In addition, the FCC has commenced a separate proceeding to consider whether television JSAs, like radio JSAs, should be attributed to the selling party. Such a rule, if adopted, could prevent us from entering into a JSA with another television station that we could not acquire under the local television ownership rules.

     In June 2006, the FCC commenced its proceeding on remand of the modified media ownership rules. The rule modifications adopted in 2003, as well as any additional modifications in the pending remand proceeding, are subject to further court appeals, various petitions for reconsideration before the FCC and possible actions by Congress. In the 2004 Consolidated Appropriations Act, Congress effectively overrode the FCC’s modified national television ownership reach cap of 45% and set it at 39%. The legislation also changed the FCC’s obligation to periodically review the media ownership rules from every two years to every four years.

     We cannot predict the impact of any of these developments on our business. In particular, we cannot predict the ultimate outcome of the FCC’s media ownership proceeding or its effect on our ability to acquire broadcast stations in the future, to complete acquisitions that we have agreed to make, to continue to own and freely transfer groups of stations that we have already acquired, or to continue our existing agreements to provide programming to or sell advertising on stations we do not own. Moreover, we cannot predict the impact of future reviews or any other agency or legislative initiatives upon the FCC’s broadcast rules. Further, the 1996 Act’s relaxation of the FCC’s ownership rules has increased the level of competition in many markets in which our stations are located.

     Alien Ownership Restrictions

     The Communications Act restricts the ability of foreign entities or individuals to own or hold certain interests in broadcast licenses. Foreign governments, representatives of foreign governments, non-U.S. citizens, representatives of non-U.S. citizens, and corporations or partnerships organized under the laws of a foreign nation are barred from holding broadcast licenses. Non-U.S. citizens, collectively, may own or vote up to twenty percent of the capital stock of a corporate licensee. A broadcast license may not be granted to or held by any entity that is controlled, directly or indirectly, by a business entity more than one-fourth of whose capital stock is owned or voted by non-U.S. citizens or their representatives, by foreign governments or their representatives or by non-U.S. business entities, if the FCC finds that the public interest will be served by the refusal or revocation of such license. The FCC has interpreted this provision

of the Communications Act to require an affirmative public interest finding before a broadcast license may be granted to or held by any such entity, and the FCC has made such an affirmative finding only in limited circumstances. Since we serve as a holding company for subsidiaries that serve as licensees for our stations, we are effectively restricted from having more than one-fourth of our stock owned or voted directly or indirectly by non-U.S. citizens or their representatives, foreign governments, representatives of foreign governments or foreign business entities.

     Other Regulations Affecting Broadcast Stations

     General. The FCC has significantly reduced its past regulation of broadcast stations, including elimination of formal ascertainment requirements and guidelines concerning amounts of certain types of programming and commercial matter that may be broadcast. There are, however, statutes and rules and policies of the FCC and other federal agencies that regulate matters such as network-affiliate relations, the ability of stations to obtain exclusive rights to air syndicated programming, cable and satellite systems’ carriage of syndicated and network programming on distant stations, political advertising practices, obscenity and indecency in broadcast programming, application procedures and other areas affecting the business or operations of broadcast stations.

     Indecency. Provisions of federal law regulate the broadcast of obscene, indecent or profane material. The FCC has substantially increased its monetary penalties for violations of these regulations. Legislation enacted in 2006 provides the FCC with authority to impose fines of up to $325,000 per violation for the broadcast of such material. We cannot predict whether Congress will consider or adopt further legislation in this area.

     Public Interest Programming. Broadcasters are required to air programming addressing the needs and interests of their communities of license, and to place “issues/programs lists” in their public inspection files to provide their communities with information on the level of “public interest” programming they air. In October 2000, the FCC commenced a proceeding seeking comment on whether it should adopt a standardized form for reporting information on a station’s public interest programming and whether it should require television broadcasters to post the new form — as well as all other documents in their public inspection files — either on station websites or the websites of state broadcasters’ associations. Moreover, in August 2003 the FCC introduced a “Localism in Broadcasting” initiative that, among other things, has resulted in the creation of an FCC Localism Task Force, localism hearings at various locations throughout the country, and the July 2004 initiation of a proceeding to consider whether additional FCC rules and procedures are necessary to promote localism in broadcasting.

     Equal Employment Opportunity. The FCC’s equal employment opportunity rules generally require broadcasters to engage in broad and inclusive recruitment efforts to fill job vacancies, keep a considerable amount of recruitment data and report much of this data to the FCC and to the public via stations’ public files and websites. The FCC is still considering whether to apply these rules to part-time employment positions. Broadcasters are also obligated not to engage in employment discrimination based on race, color, religion, national origin or sex.

     Digital Radio. The FCC has approved a technical standard for the provision of “in band, on channel” terrestrial digital radio broadcasting by existing radio broadcasters (except for nighttime broadcasting by AM stations, which is undergoing further testing), and has allowed radio broadcasters to convert to a hybrid mode of digital/analog operation on their existing frequencies. We and other broadcasters have intensified efforts to roll out terrestrial digital radio service. The FCC has commenced a rulemaking to address formal standards and related licensing and service rule changes for terrestrial digital audio broadcasting. We cannot predict the impact of terrestrial digital audio radio service on our business.

     Low Power FM Radio Service. In January 2000, the FCC created two new classes of noncommercial low power FM radio stations (“LPFM”). One class (LP100) is authorized to operate with a maximum power of 100 watts and a service radius of about 3.5 miles. The other class (LP10) is authorized to operate with a maximum power of 10 watts and a service radius of about 1 to 2 miles. In establishing the new LPFM service, the FCC said that its goal is to create a class of radio stations designed “to serve very localized communities or underrepresented groups within communities.” The FCC has authorized a number of LPFM stations. In December 2000, Congress passed the Radio Broadcasting Preservation Act of 2000. This legislation requires the FCC to maintain interference protection requirements between LPFM stations and full- power radio stations on third-adjacent channels. It also requires the FCC to conduct field tests to determine the impact of eliminating such requirements. The FCC has commissioned a preliminary report on such impact and on the basis of that report, has recommended to Congress that such requirements be eliminated. We cannot predict the number of LPFM stations that eventually will be authorized to operate or the impact of such stations on our business.

     Other. The FCC has adopted rules on children’s television programming pursuant to the Children’s Television Act of 1990 and rules requiring closed captioning of television programming. The FCC has also taken steps to

implement digital television broadcasting in the U.S. Furthermore, the 1996 Act contains a number of provisions related to television violence. We cannot predict the effect of the FCC’s present rules or future actions on our television broadcasting operations.

     Finally, Congress and the FCC from time to time consider, and may in the future adopt, new laws, regulations and policies regarding a wide variety of other matters that could affect, directly or indirectly, the operation and ownership of our broadcast properties. In addition to the changes and proposed changes noted above, such matters have included, for example, spectrum use fees, political advertising rates, and potential restrictions on the advertising of certain products such as beer and wine. Other matters that could affect our broadcast properties include technological innovations and developments generally affecting competition in the mass communications industry, such as direct broadcast satellite service, the continued establishment of wireless cable systems and low power television stations, “streaming” of audio and video programming via the Internet, digital television and radio technologies, the establishment of a low power FM radio service, and possible telephone company participation in the provision of video programming service.

     The foregoing is a brief summary of certain provisions of the Communications Act of 1934, the Telecommunications Act of 1996 and specific regulations and policies of the FCC thereunder. This description does not purport to be comprehensive and reference should be made to the Communications Act, the 1996 Act, the FCC’s rules and the public notices and rulings of the FCC for further information concerning the nature and extent of federal regulation of broadcast stations. Proposals for additional or revised regulations and requirements are pending before and are being considered by Congress and federal regulatory agencies from time to time. Also, various of the foregoing matters are now, or may become, the subject of court litigation, and we cannot predict the outcome of any such litigation or its impact on our broadcasting business.

Available Information

     You can find more information about us at our Internet website located at www.clearchannel.com. Our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and any amendments to those reports are available free of charge on our Internet website as soon as reasonably practicable after we electronically file such material with the SEC.

Item 1A. Risk Factors

     We May Be Adversely Affected if the Proposed Merger is Not Completed

     There is no assurance that the merger will be approved by our shareholders or that the other conditions to the completion of the merger will be satisfied. In the event that the merger is not completed, we may be subject to several risks including the following: the current market price of our common stock may reflect a market assumption that the merger will occur and a failure to complete the merger could result in a decline in the market price of our common stock; management’s attention from our day to day business may be diverted; uncertainties with regards to the merger may adversely affect our relationships with our employees, vendors and customers; and we may be required to pay significant transactions costs related to the merger, including under certain circumstances, a termination fee of $500.0 million, as well as legal, accounting and other fees of the proposed buyer, up to a maximum of $45.0 million.

     We Have a Large Amount of Indebtedness

     We currently use a portion of our operating income for debt service. Our leverage could make us vulnerable to an increase in interest rates or a downturn in the operating performance of our businesses due to various factors including a decline in general economic conditions. At December 31, 2006, we had debt outstanding of $7.7 billion and shareholders’ equity of $8.0 billion. We may continue to borrow funds to finance capital expenditures, share repurchases, acquisitions or to refinance debt, as well as for other purposes. Our debt obligations could increase substantially because of additional share repurchase programs, special dividends, or acquisitions that may be approved by our Board as well as the debt levels of companies that we may acquire in the future.

     Such a large amount of indebtedness could have negative consequences for us, including without limitation:

	•		limitations on our ability to obtain financing in the future;
	•		much of our cash flow will be dedicated to interest obligations and unavailable for other purposes;
	•		limiting our liquidity and operational flexibility in changing economic, business and competitive conditions which could require us to consider deferring planned capital expenditures, reducing discretionary spending,

selling assets, restructuring existing debt or deferring acquisitions or other strategic opportunities;

	•		making us more vulnerable to an increase in interest rates, a downturn in our operating performance or a decline in general economic conditions; and
	•		making us more susceptible to changes in credit ratings which could, particularly in the case of a downgrade below investment grade, impact our ability to obtain financing in the future and increase the cost of such financing.

     The failure to comply with the covenants in the agreements governing the terms of our or our subsidiaries’ indebtedness could be an event of default and could accelerate the payment obligations and, in some cases, could affect other obligations with cross-default and cross-acceleration provisions.

     Our Business is Dependent Upon the Performance of Key Employees, On-Air Talent and Program Hosts

     Our business is dependent upon the performance of certain key employees. We employ or independently contract with several on-air personalities and hosts of syndicated radio programs with significant loyal audiences in their respective markets. Although we have entered into long-term agreements with some of our executive officers, key on-air talent and program hosts to protect our interests in those relationships, we can give no assurance that all or any of these key employees will remain with us or will retain their audiences. Competition for these individuals is intense and many of our key employees are at-will employees who are under no legal obligation to remain with us. Our competitors may choose to extend offers to any of these individuals on terms which we may be unwilling to meet. In addition, any or all of our key employees may decide to leave for a variety of personal or other reasons beyond our control. Furthermore, the popularity and audience loyalty of our key on-air talent and program hosts is highly sensitive to rapidly changing public tastes. A loss of such popularity or audience loyalty is beyond our control and could limit our ability to generate revenues.

     Doing Business in Foreign Countries Creates Certain Risks Not Found in Doing Business in the United States

     Doing business in foreign countries carries with it certain risks that are not found in doing business in the United States. The risks of doing business in foreign countries that could result in losses against which we are not insured include:

	•		exposure to local economic conditions;
	•		potential adverse changes in the diplomatic relations of foreign countries with the United States;
	•		hostility from local populations;
	•		the adverse effect of currency exchange controls;
	•		restrictions on the withdrawal of foreign investment and earnings;
	•		government policies against businesses owned by foreigners;
	•		investment restrictions or requirements;
	•		expropriations of property;
	•		the potential instability of foreign governments;
	•		the risk of insurrections;
	•		risks of renegotiation or modification of existing agreements with governmental authorities;
	•		foreign exchange restrictions;
	•		withholding and other taxes on remittances and other payments by subsidiaries; and
	•		changes in taxation structure.

     Exchange Rates May Cause Future Losses in Our International Operations

     Because we own assets overseas and derive revenues from our international operations, we may incur currency translation losses due to changes in the values of foreign currencies and in the value of the U.S. dollar. We cannot predict the effect of exchange rate fluctuations upon future operating results.

     Extensive Government Regulation May Limit Our Broadcasting Operations

     The federal government extensively regulates the domestic broadcasting industry, and any changes in the current regulatory scheme could significantly affect us. Our broadcasting businesses depend upon maintaining broadcasting licenses issued by the FCC for maximum terms of eight years. Renewals of broadcasting licenses can be attained only through the FCC’s grant of appropriate applications. Although the FCC rarely denies a renewal application, the FCC could deny future renewal applications resulting in the loss of one or more of our broadcasting licenses.

     The federal communications laws limit the number of broadcasting properties we may own in a particular area. While the Telecommunications Act of 1996 relaxed the FCC’s multiple ownership limits, any subsequent modifications that tighten those limits could make it impossible for us to complete potential acquisitions or require us to divest stations we have already acquired. Most significantly, in June 2003 the FCC adopted a decision comprehensively modifying its media ownership rules. The modified rules significantly changed the FCC’s regulations governing radio ownership, allowed increased ownership of TV stations at the local and national level, and permitted additional cross-ownership of daily newspapers, television stations and radio stations. Soon after their adoption, however, a federal court issued a stay preventing the implementation of the modified media ownership rules while it considered appeals of the rules by numerous parties (including us). In a June 2004 decision, the court upheld the modified rules in certain respects, remanded them to the FCC for further justification in other respects, and left in place the stay on their implementation. In September 2004, the court partially lifted its stay on the modified radio ownership rules, putting into effect aspects of those rules that established a new methodology for defining local radio markets and counting stations within those markets, limit our ability to transfer intact combinations of stations that do not comply with the new rules, and require us to terminate within two years certain of our agreements whereby we provide programming to or sell advertising on radio stations we do not own. In June 2006, the FCC commenced its proceeding on remand of the modified media ownership rules. The media ownership rules, as modified by the FCC’s 2003 decision and as may be further modified in the pending remand proceeding, are subject to various further FCC and court proceedings and recent and possible future actions by Congress. We cannot predict the ultimate outcome of the media ownership proceeding or its effect on our ability to acquire broadcast stations in the future, to complete acquisitions that we have agreed to make, to continue to own and freely transfer groups of stations that we have already acquired, or to continue our existing agreements to provide programming to or sell advertising on stations we do not own.

     Moreover, the FCC’s existing rules in some cases permit a company to own fewer radio stations than allowed by the Telecommunications Act of 1996 in markets or geographical areas where the company also owns television stations. These rules could require us to divest radio stations we currently own in markets or areas where we also own television stations. Our acquisition of television stations in five local markets or areas in our merger with The Ackerley Group resulted in our owning more radio stations in these markets or areas than is permitted by these rules. The FCC has given us a temporary period of time to come into compliance with the rules. We have come into compliance with respect to two such markets and have requested an extension of time to come into compliance with respect to the other three markets.

     Other changes in governmental regulations and policies may have a material impact on us. For example, we currently provide programming to several television stations we do not own. These programming arrangements are made through contracts known as local marketing agreements. The FCC’s rules and policies regarding television local marketing agreements will restrict our ability to enter into television local marketing agreements in the future, and may eventually require us to terminate our programming arrangements under existing local marketing agreements. Moreover, the FCC has begun a proceeding to adopt rules that will restrict our ability to enter into television joint sales agreements, by which we sell advertising on television stations we do not own, and may eventually require us to terminate our existing agreements of this nature. Additionally, the FCC has adopted rules which under certain circumstances subject previously nonattributable debt and equity interests in communications media to the FCC’s multiple ownership restrictions. These rules may limit our ability to expand our media holdings.

     We May Be Adversely Affected By New Statutes Dealing With Indecency

     Provisions of federal law regulate the broadcast of obscene, indecent or profane material. The FCC has substantially increased its monetary penalties for violations of these regulations. Congressional legislation enacted in 2006 provides the FCC with authority to impose fines of up to $325,000 per violation for the broadcast of such material. We therefore face increased costs in the form of fines for indecency violations, and we cannot predict whether Congress will consider or adopt further legislation in this area.

     Antitrust Regulations May Limit Future Acquisitions

     Additional acquisitions by us of radio and television stations and outdoor advertising properties may require antitrust review by federal antitrust agencies and may require review by foreign antitrust agencies under the antitrust laws of foreign jurisdictions. We can give no assurances that the Department of Justice (“DOJ”) or the Federal Trade Commission or foreign antitrust agencies will not seek to bar us from acquiring additional radio or television stations or outdoor advertising properties in any market where we already have a significant position. Following passage of the Telecommunications Act of 1996, the DOJ has become more aggressive in reviewing proposed acquisitions of radio stations, particularly in instances where the proposed acquiror already owns one or more radio station properties in a particular market and seeks to acquire another radio station in the same market. The DOJ has, in some cases, obtained

consent decrees requiring radio station divestitures in a particular market based on allegations that acquisitions would lead to unacceptable concentration levels. The DOJ also actively reviews proposed acquisitions of outdoor advertising properties. In addition, the antitrust laws of foreign jurisdictions will apply if we acquire international broadcasting properties.

     Environmental, Health, Safety and Land Use Laws and Regulations May Limit or Restrict Some of Our Operations

     As the owner or operator of various real properties and facilities, especially in our outdoor advertising operations, we must comply with various foreign, federal, state and local environmental, health, safety and land use laws and regulations. We and our properties are subject to such laws and regulations relating to the use, storage, disposal, emission and release of hazardous and non-hazardous substances and employee health and safety as well as zoning restrictions. Historically, we have not incurred significant expenditures to comply with these laws. However, additional laws, which may be passed in the future, or a finding of a violation of or liability under existing laws, could require us to make significant expenditures and otherwise limit or restrict some of our operations.

     Government regulation of outdoor advertising may restrict our outdoor advertising operations

     U.S. federal, state and local regulations have a significant impact on the outdoor advertising industry and our outdoor advertising business. One of the seminal laws was The Highway Beautification Act of 1965 (HBA), which regulates outdoor advertising on the 306,000 miles of Federal-Aid Primary, Interstate and National Highway Systems roads. HBA regulates the locations of billboards, mandates a state compliance program, requires the development of state standards, promotes the expeditious removal of illegal signs, and requires just compensation for takings. Size, location, lighting and the use of new technologies for changing displays, such as digital, are regulated by federal, state and local governments. Some states have enacted bans on billboard advertising altogether. Changes in laws and regulations affecting outdoor advertising at any level of government, including laws of the foreign jurisdictions in which we operate, could have a significant financial impact on us by requiring us to make significant expenditures or otherwise limiting or restricting some of our operations.

     From time to time, certain state and local governments and third parties have attempted to force the removal of displays under various state and local laws, including amortization. Amortization permits the display owner to operate its display which does not meet current code requirements for a specified period of time, after which it must remove or otherwise conform its display to the applicable regulations at its own cost without any compensation. Several municipalities within our existing markets have adopted amortization ordinances. Other regulations limit our ability to rebuild or replace nonconforming displays and require us to remove or modify displays that are not in strict compliance with applicable laws. In addition, from time to time third parties or local governments assert that we own or operate displays that either are not properly permitted or otherwise are not in strict compliance with applicable law. Such regulations and allegations have not had a material impact on our results of operations to date, but if we are increasingly unable to resolve such allegations or obtain acceptable arrangements in circumstances in which our displays are subject to removal, modification or amortization, or if there occurs an increase in such regulations or their enforcement, our results could suffer.

     Legislation has from time to time been introduced in both the United States and foreign jurisdictions attempting to impose taxes on revenues of outdoor advertising companies. Several jurisdictions have already imposed such taxes as a percentage of our gross receipts of outdoor advertising revenues in that jurisdiction. While these taxes have not had a material impact on our business and financial results to date, we expect states to continue to try to impose such taxes as a way of increasing revenues. The increased imposition of these taxes and our inability to pass on the cost of these taxes to our clients could negatively affect our operating income.

     International regulation of the outdoor advertising industry varies by region and country, but generally limits the size, placement, nature and density of out-of-home displays. Significant international regulations include the Law of December 29, 1979 in France, the Town and Country Planning (Control of Advertisements) Regulations 1992 in the United Kingdom, and Règlement Régional Urbain de l’agglomération Bruxelloise in Belgium. These laws define issues such as the extent to which advertisements can be erected in rural areas, the hours during which illuminated signs may be lit and whether the consent of local authorities is required to place a sign in certain communities. Other regulations limit the subject matter and language of out-of-home displays. For instance, the United States and most European Union countries, among other nations, have banned outdoor advertisements for tobacco products. Our failure to comply with these or any future international regulations could have an adverse impact on the effectiveness of our displays or their attractiveness to clients as an advertising medium and may require us to make significant expenditures to ensure compliance. As a result, we may experience a significant impact on our operations, revenues, international client base

and overall financial condition.

     Additional restrictions on outdoor advertising of tobacco, alcohol and other products may further restrict the categories of clients that can advertise using our products

     Out-of-court settlements between the major U.S. tobacco companies and all 50 states, the District of Columbia, the Commonwealth of Puerto Rico and four other U.S. territories include a ban on the outdoor advertising of tobacco products. Other products and services may be targeted in the future, including alcohol products. Legislation regulating tobacco and alcohol advertising has also been introduced in a number of European countries in which we conduct business and could have a similar impact. Any significant reduction in alcohol-related advertising due to content-related restrictions could cause a reduction in our direct revenues from such advertisements and an increase in the available space on the existing inventory of billboards in the outdoor advertising industry.

     Future Acquisitions Could Pose Risks

     We may acquire media-related assets and other assets or businesses that we believe will assist our customers in marketing their products and services. Our acquisition strategy involves numerous risks, including:

	•		certain of our acquisitions may prove unprofitable and fail to generate anticipated cash flows;
	•		to successfully manage our large portfolio of broadcasting, outdoor advertising and other properties, we may need to:

	Ø		recruit additional senior management as we cannot be assured that senior management of acquired companies will continue to work for us and, in this highly competitive labor market, we cannot be certain that any of our recruiting efforts will succeed, and
	Ø		expand corporate infrastructure to facilitate the integration of our operations with those of acquired properties, because failure to do so may cause us to lose the benefits of any expansion that we decide to undertake by leading to disruptions in our ongoing businesses or by distracting our management;

	•		entry into markets and geographic areas where we have limited or no experience;
	•		we may encounter difficulties in the integration of operations and systems;
	•		our management’s attention may be diverted from other business concerns; and
	•		we may lose key employees of acquired companies or stations.

     We frequently evaluate strategic opportunities both within and outside our existing lines of business. We expect from time to time to pursue additional acquisitions and may decide to dispose of certain businesses. These acquisitions or dispositions could be material.

     Capital Requirements Necessary to Implement Strategic Initiatives Could Pose Risks

     The purchase price of possible acquisitions, share repurchases, special dividends and/or other strategic initiatives could require additional debt or equity financing on our part. Since the terms and availability of this financing depend to a large degree upon general economic conditions and third parties over which we have no control, we can give no assurance that we will obtain the needed financing or that we will obtain such financing on attractive terms. In addition, our ability to obtain financing depends on a number of other factors, many of which are also beyond our control, such as interest rates and national and local business conditions. If the cost of obtaining needed financing is too high or the terms of such financing are otherwise unacceptable in relation to the strategic opportunity we are presented with, we may decide to forego that opportunity. Additional indebtedness could increase our leverage and make us more vulnerable to economic downturns and may limit our ability to withstand competitive pressures. Additional equity financing could result in dilution to our shareholders.

     We Face Intense Competition in the Broadcasting and Outdoor Advertising Industries

     Our business segments are in highly competitive industries, and we may not be able to maintain or increase our current audience ratings and advertising and sales revenues. Our radio stations and outdoor advertising properties compete for audiences and advertising revenues with other radio stations and outdoor advertising companies, as well as with other media, such as newspapers, magazines, television, direct mail, satellite radio and Internet based media, within their respective markets. Audience ratings and market shares are subject to change, which could have the effect of reducing our revenues in that market. Our competitors may develop services or advertising media that are equal or superior to those we provide or that achieve greater market acceptance and brand recognition than we achieve. It is possible that new competitors may emerge and rapidly acquire significant market share in any of our business segments. Other variables that could adversely affect our financial performance by, among other things, leading to decreases in overall revenues, the numbers of advertising customers, advertising fees, or profit margins include:

	•		unfavorable economic conditions, both general and relative to the radio broadcasting, outdoor advertising and all related media industries, which may cause companies to reduce their expenditures on advertising;
	•		unfavorable shifts in population and other demographics which may cause us to lose advertising customers as people migrate to markets where we have a smaller presence, or which may cause advertisers to be willing to pay less in advertising fees if the general population shifts into a less desirable age or geographical demographic from an advertising perspective;
	•		an increased level of competition for advertising dollars, which may lead to lower advertising rates as we attempt to retain customers or which may cause us to lose customers to our competitors who offer lower rates that we are unable or unwilling to match;
	•		unfavorable fluctuations in operating costs which we may be unwilling or unable to pass through to our customers;
	•		technological changes and innovations that we are unable to adopt or are late in adopting that offer more attractive advertising, listening or viewing alternatives than what we currently offer, which may lead to a loss of advertising customers or to lower advertising rates;
	•		unfavorable changes in labor conditions which may require us to spend more to retain and attract key employees; and
	•		changes in governmental regulations and policies and actions of federal regulatory bodies which could restrict the advertising media which we employ or restrict some or all of our customers that operate in regulated areas from using certain advertising media, or from advertising at all.

     New Technologies May Affect Our Broadcasting Operations

     Our broadcasting businesses face increasing competition from new broadcast technologies, such as broadband wireless and satellite television and radio, and new consumer products, such as portable digital audio players and personal digital video recorders. These new technologies and alternative media platforms compete with our radio and television stations for audience share and advertising revenue, and in the case of some products, allow listeners and viewers to avoid traditional commercial advertisements. The FCC has also approved new technologies for use in the radio broadcasting industry, including the terrestrial delivery of digital audio broadcasting, which significantly enhances the sound quality of radio broadcasts. In the television broadcasting industry, the FCC has established standards and a timetable for the implementation of digital television broadcasting in the U.S. We have substantially completed the implementation of our digital television broadcasting. We have currently converted approximately 350 of our radio stations to digital broadcasting. We are unable to predict the effect such technologies and related services and products will have on our broadcasting operations, but the capital expenditures necessary to implement such technologies could be substantial and other companies employing such technologies could compete with our businesses.

     We May be Adversely Affected by a General Deterioration in Economic Conditions

     The risks associated with our businesses become more acute in periods of a slowing economy or recession, which may be accompanied by a decrease in advertising. A decline in the level of business activity of our advertisers could have an adverse effect on our revenues and profit margins. During the most recent economic slowdown in the United States, many advertisers reduced their advertising expenditures. The impact of slowdowns on our business is difficult to predict, but they may result in reductions in purchases of advertising.

     We May Be Adversely Affected by the Occurrence of Extraordinary Events, Such as Terrorist Attacks

     The occurrence of extraordinary events, such as terrorist attacks, intentional or unintentional mass casualty incidents or similar events may substantially decrease the use of and demand for advertising, which may decrease our revenues or expose us to substantial liability. The September 11, 2001 terrorist attacks, for example, caused a nationwide disruption of commercial activities. As a result of the expanded news coverage following the attacks and subsequent military actions, we experienced a loss in advertising revenues and increased incremental operating expenses. The occurrence of future terrorist attacks, military actions by the United States, contagious disease outbreaks or similar events cannot be predicted, and their occurrence can be expected to further negatively affect the economies of the United States and other foreign countries where we do business generally, specifically the market for advertising.

     Caution Concerning Forward Looking Statements

     The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. Except for the historical information, this report contains various forward-looking statements which represent our expectations or beliefs concerning future events, including the future levels of cash flow from operations. Management believes that all statements that express expectations and projections with respect to future matters, including the success of our Merger Agreement and the planned sale of radio and television assets; our

ability to negotiate contracts having more favorable terms; and the availability of capital resources; are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. We caution that these forward-looking statements involve a number of risks and uncertainties and are subject to many variables which could impact our financial performance. These statements are made on the basis of management’s views and assumptions, as of the time the statements are made, regarding future events and business performance. There can be no assurance, however, that management’s expectations will necessarily come to pass.

     A wide range of factors could materially affect future developments and performance, including:

	•		the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement;
	•		the outcome of any legal proceedings that have been or may be instituted against us relating to the Merger Agreement;
	•		our inability to complete the merger due to the failure to obtain shareholder approval or to satisfy any other conditions to completion of the merger;
	•		the impact of the substantial indebtedness incurred to finance the consummation of the merger;
	•		the impact of general economic and political conditions in the U.S. and in other countries in which we currently do business, including those resulting from recessions, political events and acts or threats of terrorism or military conflicts;
	•		the impact of the geopolitical environment;
	•		our ability to integrate the operations of recently acquired companies;
	•		shifts in population and other demographics;
	•		industry conditions, including competition;
	•		fluctuations in operating costs;
	•		technological changes and innovations;
	•		changes in labor conditions;
	•		fluctuations in exchange rates and currency values;
	•		capital expenditure requirements;
	•		the outcome of pending and future litigation settlements;
	•		legislative or regulatory requirements;
	•		interest rates;
	•		the effect of leverage on our financial position and earnings;
	•		taxes;
	•		access to capital markets; and
	•		certain other factors set forth in our filings with the Securities and Exchange Commission.

     This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

ITEM 1B. Unresolved Staff Comments

Not Applicable

ITEM 2. Properties

Corporate

     Our corporate headquarters is in San Antonio, Texas, where we own a 55,000 square foot executive office building and a 120,000 square foot data and administrative service center.

Operations

     Radio Broadcasting

     Our radio executive operations are located in our corporate headquarters in San Antonio, Texas. The types of properties required to support each of our radio stations include offices, studios, transmitter sites and antenna sites. A radio station’s studios are generally housed with its offices in downtown or business districts. A radio station’s transmitter sites and antenna sites are generally located in a manner that provides maximum market coverage.

     The studios and offices of our radio stations and outdoor advertising branches are located in leased or owned facilities. These leases generally have expiration dates that range from one to forty years. We either own or lease our transmitter and antenna sites. These leases generally have expiration dates that range from five to fifteen years. We do not anticipate any difficulties in renewing those leases that expire within the next several years or in leasing other space, if required. We own substantially all of the equipment used in our radio broadcasting and outdoor advertising businesses.

     Outdoor Advertising

     The headquarters of our Americas outdoor advertising operations is in Phoenix, Arizona and the headquarters of our international outdoor advertising operations is in London, England. The types of properties required to support each of our outdoor advertising branches include offices, production facilities and structure sites. An outdoor branch and production facility is generally located in an industrial or warehouse district.

     In both our Americas and international outdoor advertising segments, we own or have permanent easements on relatively few parcels of real property that serve as the sites for our outdoor displays. Our remaining outdoor display sites are leased. Our leases are for varying terms ranging from month-to-month to year-to-year and can be for terms of ten years or longer, and many provide for renewal options. There is no significant concentration of displays under any one lease or subject to negotiation with any one landlord. We believe that an important part of our management activity is to negotiate suitable lease renewals and extensions.

     As noted in Item 1 above, as of December 31, 2006, we owned more than 1,100 radio stations and owned or leased over 910,000 outdoor advertising display faces in various markets throughout the world. See “Business — Operating Segments.” Therefore, no one property is material to our overall operations. We believe that our properties are in good condition and suitable for our operations.

ITEM 3. Legal Proceedings

     On September 9, 2003, the Assistant United States Attorney for the Eastern District of Missouri caused a Subpoena to Testify before Grand Jury to be issued to us. The Subpoena requires us to produce certain information regarding commercial advertising run by us on behalf of offshore and/or online (Internet) gambling businesses, including sports bookmaking and casino-style gambling. On October 5, 2006, the Company received a subpoena from the Assistant United States Attorney for the Southern District of New York requiring it to produce certain information regarding substantially the same matters as covered in the subpoena from the Eastern District of Missouri. We are cooperating with such requirements.

     On February 7, 2005, the Company received a subpoena from the State of New York Attorney General’s office, requesting information on policies and practices regarding record promotion on radio stations in the state of New York. We are cooperating with this subpoena.

     On April 19, 2006, we received a letter of inquiry from the Federal Communications Commission (the “FCC”) requesting information about whether consideration was provided by record labels to us in exchange for the broadcast of music without disclosure of such consideration to the public. We are cooperating with the FCC in responding to this request for information.

     Seven putative class actions and one shareholder derivative action challenging the merger are pending in the 408th District Court of Bexar County, Texas. The class actions, Teitelbaum v. Clear Channel Communications, Inc., et al., No. 2006CI17492 (filed November 14, 2006), Manson v. Clear Channel Communications, Inc., et al., No. 2006CI17656 (filed November 16, 2006), City of St. Clair Shores Police and Fire Retirement System v. Clear Channel Communications, Inc., et al., No. 2006CI17660 (filed November 16, 2006), Levy Investments, Ltd. v. Clear Channel Communications, Inc., et al., No. 2006CI17669 (filed November 16, 2006), DD Equity Partners LLC v. Clear Channel Communications, Inc., et al., No. 2006CI7914 (filed November 22, 2006), and Pioneer Investments Kapitalanlagegesellschaft MBH v. L. Lowry Mays, et al. (filed December 7, 2006), all raise substantially similar allegations on behalf of a purported class of our shareholders against the defendants for breaches of fiduciary duty in connection with the approval of the merger. The above complaints have been consolidated for pretrial and discovery purposes with the derivative action Rauch v. Clear Channel Communications, Inc., et. al., No. 2006CI17436 (filed November 22, 2006), which challenges the merger, as well as the terms of employment agreements between Clear Channel and L. Lowry Mays, Randall T. Mays, and Mark P. Mays.

     Additionally, two lawsuits have been filed against Clear Channel and its officers and directors in the United States District Court for the Western District of Texas: Alaska Laborers Employees Retirement Fund v. Clear Channel Communications, Inc., et al., No. SA07CA0042RF (filed January 11, 2007); and Pioneer Investments Kapitalanlagegesellschaft mbH v. Clear Channel Communications, Inc., et al., (filed January 30, 2007). Plaintiffs in the federal lawsuits allege, among other things, that our directors violated federal securities laws in the preparation and issuance of the proxy statement. In addition, the Alaska Fund plaintiff alleges shareholder derivative claims and class action claims against Clear Channel’s officers and directors for breach of fiduciary duties and gross mismanagement.

     The class action pleadings seek certification of a class of all of our stockholders whose stock will be acquired in connection with the merger, and all of the pleadings seek injunctive relief that would, if granted, prevent the completion of the merger. The pleadings also seek unspecified damages, attorneys’ fees and other relief. We believe that the allegations contained in each of the pleadings are without merit and intend to contest the actions vigorously. The individual defendants have advised us that they also believe that the allegations in the complaints are without merit and that they intend to contest the actions vigorously. We cannot assure you that we will successfully defend the allegations included in the complaints or that pending motions to enjoin the transactions contemplated by the Merger Agreement will not be granted. If we are unable to resolve the claims that are the basis for the lawsuits or to prevail in any related litigation we may be required to pay substantial monetary damages for which we may not be adequately insured, which could have a material adverse effect on our business, financial position and results of operations. Regardless of whether the merger is consummated or the outcome of the lawsuits, we may incur significant related expenses and costs that could have an adverse effect on our business and operations. Furthermore, the cases could involve a substantial diversion of the time of some members of management. Accordingly, we are unable to estimate the impact of any potential liabilities associated with the complaints.

     Additional lawsuits pertaining to the merger could be filed in the future.

     We are currently involved in certain legal proceedings and, as required, have accrued our estimate of the probable costs for the resolution of these claims. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to these proceedings.

ITEM 4. Submission of Matters to a Vote of Security Holders

     There were no matters submitted to a vote of security holders in the fourth quarter of fiscal year 2006.

PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

     Our common stock trades on the New York Stock Exchange under the symbol “CCU.” There were 3,247 shareholders of record as of February 22, 2007. This figure does not include an estimate of the indeterminate number of beneficial holders whose shares may be held of record by brokerage firms and clearing agencies. The following table sets forth, for the calendar quarters indicated, the reported high and low sales prices of the common stock as reported on the NYSE.

		Common Stock
		Market Price								Dividends
		High				Low				Declared
2005
First Quarter			35.07				31.14				.125
Second Quarter			34.81				28.75				.1875
Third Quarter			34.26				30.31				.1875
Fourth Quarter			33.44				29.60				.1875
2006
First Quarter			32.84				27.82				.1875
Second Quarter			31.54				27.34				.1875
Third Quarter			31.64				27.17				.1875
Fourth Quarter			35.88				28.83				.1875

Dividend Policy

     Our Board of Directors declared a quarterly cash dividend of 18.75 cents per share on February 21, 2007. The terms of our current credit facility do not prohibit us from paying cash dividends unless we are in default under our credit facility either prior to or after giving effect to any proposed dividend. The terms of the Merger Agreement allow us to continue our policy of paying quarterly cash dividends of $0.1875 per share of our common stock through the Effective Time. However, any future decision by our board of directors to pay cash dividends will depend on, among other factors, our earnings, financial position, capital requirements and regulatory changes.

Purchases of Equity Securities by the Issuer and Affiliated Purchases

     The Company did not repurchase any shares during the fourth quarter of 2006. No additional shares have been repurchased subsequent to December 31, 2006 as the share repurchase program has been suspended, but may be recommenced at any time without notice subject to the terms of the Merger Agreement.

ITEM 6. Selected Financial Data

(In thousands)

		For the Years ended December 31,
		2006				2005				2004				2003				2002
Results of Operations Information: (1)
Revenue		$	7,066,957			$	6,578,805			$	6,600,954			$	6,217,858			$	5,907,095
Operating expenses:
Direct operating expenses (excludes depreciation and amortization)			2,650,093				2,457,044				2,321,459				2,133,224				1,933,239
Selling, general and administrative expenses (excludes depreciation and amortization)			1,968,869				1,902,837				1,894,550				1,853,193				1,786,843
Depreciation and amortization			633,823				628,010				627,924				606,318				554,645
Corporate expenses (excludes depreciation and amortization)			201,752				171,076				167,388				152,514				160,216
Merger expenses			7,633				—				—				—				—
Gain on disposition of assets – net			69,330				51,355				39,576				6,688				35,557
Operating income (loss)			1,674,117				1,471,193				1,629,209				1,479,297				1,507,709
Interest expense			483,974				443,245				367,503				392,215				430,890
Gain (loss) on sale of assets related to mergers			¾				¾				¾				¾				3,991
Gain (loss) on marketable securities			2,306				(702	)			46,271				678,846				(3,096	)
Equity in earnings of nonconsolidated affiliates			37,478				38,338				22,285				20,669				27,140
Other income (expense) — net			(8,421	)			11,267				(30,293	)			20,783				5,625
Income (loss) before income taxes, minority interest, discontinued operations and cumulative effect of a change in accounting principle			1,221,506				1,076,851				1,299,969				1,807,380				1,110,479
Income tax benefit (expense)			(500,817	)			(425,356	)			(497,913	)			(775,058	)			(438,737	)
Minority interest income (expense), net of tax			(31,927	)			(17,847	)			(7,602	)			(3,906	)			1,778
Income (loss) before discontinued operations and cumulative effect of a change in accounting principle			688,762				633,648				794,454				1,028,416				673,520
Income (loss) from discontinued operations, net			2,755				302,014				51,345				117,175				51,303
Income (loss) before cumulative effect of a change in accounting principle			691,517				935,662				845,799				1,145,591				724,823
Cumulative effect of a change in accounting principle, net of tax of, $2,959,003 in 2004 and $4,324,446 in 2002 (2)			—				—				(4,883,968	)			—				(16,778,526	)
Net income (loss)		$	691,517			$	935,662			$	(4,038,169	)		$	1,145,591			$	(16,053,703	)

		For the Years ended December 31,
		2006				2005				2004				2003				2002
Net income (loss) per common share: (1)
Basic:
Income (loss) before discontinued operations and cumulative effect of a change in accounting principle		$	1.37			$	1.16			$	1.33			$	1.67			$	1.11
Discontinued operations			.01				.55				.09				.19				.09
Income (loss) before cumulative effect of a change in accounting principle			1.38				1.71				1.42				1.86				1.20
Cumulative effect of a change in accounting principle			—				—				(8.19	)			—				(27.65	)
Net income (loss)		$	1.38			$	1.71			$	(6.77	)		$	1.86			$	(26.45	)
Diluted:
Income (loss) before discontinued operations and cumulative effect of a change in accounting principle		$	1.37			$	1.16			$	1.33			$	1.66			$	1.10
Discontinued operations			.01				.55				.08				.19				.08
Income (loss) before cumulative effect of a change in accounting principle			1.38				1.71				1.41				1.85				1.18
Cumulative effect of a change in accounting principle			—				—				(8.16	)			—				(26.74	)
Net income (loss)		$	1.38			$	1.71			$	(6.75	)		$	1.85			$	(25.56	)
Dividends declared per share		$	.75			$	.69			$	.45			$	.20			$	—

(In thousands)

		As of December 31,
		2006				2005				2004				2003				2002
Balance Sheet Data: (1)
Current assets		$	2,205,730			$	2,398,294			$	2,269,922			$	2,185,682			$	2,123,495
Property, plant and equipment — net			3,220,956				3,237,936				3,310,132				3,457,353				3,473,930
Total assets			18,890,179				18,703,376				19,927,949				28,352,693				27,672,153
Current liabilities			1,663,846				2,107,313				2,184,552				1,892,719				3,010,639
Long-term debt, net of current maturities			7,326,700				6,155,363				6,941,996				6,898,722				7,357,769
Shareholders’ equity			8,042,341				8,826,462				9,488,078				15,553,939				14,210,092