SPIRITS IN THE MATERIAL WORLD : CAMARILLO RADIO NETWORK ENLARGING RELIGIOUS NICHE.

Byline: Jeremy Bagott Staff Writer

Marquee radio shows like ``Focus on the Family,'' ``Grace to You'' and ``Insight for Living'' have powered its stations into prominence.

As a network, its syndicated political programs, like ``The Michael Medved Show,'' ``Janet Parshall's America'' and ``The Cal Thomas Commentary'' are picked up by more than 1,400 stations nationwide.

Yet, officials at Camarillo-based Salem Communications Corp. think the company still has a lot of growth in it, despite already being the nation's eighth-largest radio broadcasting company. And thanks to Salem's initial public offering in July, Wall Street analysts appear to be on the same wavelength.

While its market niche may be Christian, when it comes to the bare-knuckle business of radio, there is little ethereal about the way Salem harnesses the ether.

Of its 46 stations, 34 broadcast in 19 of the nation's top markets.

Salem also operates Salem Radio Network, a national radio network offering syndicated talk, news and music programming to about 1,450 affiliated radio stations.

But at its core, Salem is in the business of owning and operating radio stations. Brothers-in-law Edward Atsinger III, the president and chief executive officer, and Chairman Stuart Epperson - both of whom had been involved with radio since the '60s - saw an opportunity in the '70s to build a franchise within the religious broadcasting niche.

``The IPO does position us for this type of growth,'' said Eric Halvorson, chief operating officer of Salem Communications.

``It will allow us to enter top markets we're not in now. In some cases, it will allow us to buy second and third stations in markets we are already in to provide complementary programming,'' said Halvorson. ``I wouldn't be surprised to see our number of stations go north of 50 by year's end.''

That's what makes Salem unique: Its focus on America's metropolitan markets instead of the rural heartland where religious broadcasting has traditionally found its audience.

``The large-city locations Salem operates in have typically been underserved by religious broadcasting,'' said Brandt Gustavson, president of the Manassas, Va.-based trade group National Religious Broadcasters.

``Some of their 50,000 watt, clear-channel `superstations' like WMCA in New York and WHK in Cleveland cover enormous populations. Also, the quality and background of their management is top-drawer. When they come into these major markets, they know what it's all about.''

With the proceeds from the $140 million IPO, Salem has already announced it will acquire Atlanta's WNIV-AM and WLTA-AM from Genesis Communications for $8 million. Atlanta is the 12th-largest media market in the nation.

Salem has also acquired the operations of KCBQ-AM in San Diego, the nation's 16th-largest market, and holds an option to purchase the station from the Concord Media Group for $5 million.

The addition of the stations gives Salem a presence in two more top-25 markets. Salem's stations in the Los Angeles region are KIVE-AM (870), KLTX-AM (1390) and KKLA-FM (99.5), all in Los Angeles; and KDAR-FM (98.3), covering Ventura and Santa Barbara counties.

``We're also in the process of buying two radio stations in Louisville, Ky.,'' said Halvorson, ``and (we have) four acquisitions pending in Honolulu with anticipated fourth-quarter closings.''

Of the three analysts tracking Salem, Deutsche Bank Alex. Brown gives Salem shares a ``buy'' recommendation; ING Barings, a ``strong buy''; and Salomon Smith Barney, an ``outperform.''

Adding momentum, Salem announced last month an exclusive agreement with Internet firm RealNetworks to offer family-oriented radio broadcasting on the Net through Salem's Greensboro, N.C.-based Internet portal OnePlace.

The deal makes OnePlace the exclusive branded provider of Christian radio broadcasting for RealNetworks' RealPlayer spiritual ``presets.''

A preset is the Internet radio equivalent of a button on a car radio that automatically takes the listener to a preselected station.

``People will click on the spiritual preset,'' said Halvorson, ``and be directed to three of our radio stations, a (separate) teen-age-oriented format with Christian lyrics, a talk radio selection and another station that plays solely Christian music,'' which, says Halvorson, is the fastest-growing music segment in the United States.

Despite Salem's aggressive growth, Wall Street seems unimpressed. Shares of Salem, which trade on Nasdaq under the SALM ticker symbol, have fluctuated between a high of $29.9375 and $21.375 since it closed at $25.50 on its first day. Salem closed Wednesday up $1 at $28.50 on light trading.

Salem stock may be weighted down by its aggressive growth.

In its first quarterly report since going public, the company said last month that it lost $3.5 million in the second quarter ended June 30, with $2.6 million of it due to a one-time charge for a stock grant associated with Salem's initial public offering.

The quarterly loss, which amounted to 21 cents per share, compared with a net loss of $785,000, or 5 cents per share, for the same period last year.

Revenue climbed to $22.7 million from $18.7 million due to increased revenue from properties Salem acquired and growth at existing stations.

CAPTION(S):

Photo, chart

PHOTO (color) Eric Halvorson is chief operating officer of Camarillo-based Salem Communications.

Michael Owen Baker/Staff Photographer

CHART: Baby Steps

Shares of Camarillo-based Salem Communications Corp. has been flat since the July 1 IPO.