Simon Marais, managing director of fund manager Allan Gray which recently increase its stake in Southern Cross to 17.2 per cent, said he was not keen on a long-speculated merger with free-to-air broadcaster Nine Entertainment.

"I don't think we'd be keen on [a merger with Nine]. I think the radio business is much better than the TV business," Mr Marais told Fairfax Media.

"I think that's the last thing they should worry about. If your share price is this low, you're going to get a merger at a poor ratio, that's not a good thing. They don't have to grow earnings; they just have to stabilise."

Southern Cross' outgoing chairman, Max Moore-Wilton, has lambasted the federal government for failing to relax media ownership laws. These laws prevent regional companies being taken over by their regional counterparts, and stop any one party from owning more than two of a newspaper, TV ­station and radio licence in the same market.

"To reach consensus among competitors on what the public policy framework should be may be seen as a failure of government taking responsibility on government policy," Mr Moore-Wilton said at the company's annual general meeting last week, where the company downgraded its guidance but avoided a so-called "second strike".

Shareholders punished the company on the downgrade - with first-half earnings before interest, tax, depreciation and amortisation now expected to be down 18 per cent to 20 per cent year on year - by pushing shares to a five-year low of 86¢.

"I think things were a little weaker than they expected, but I don't think it's out of many standard deviations that what you could have expected. It's just the normal fluctuations," Mr Marais said.

"At this price, all the worst things possible are priced in, very little has to go right."

Southern Cross' share price has plunged more than 50 per cent since losing star breakfast radio duo Kyle and Jackie O.

Chief executive Rhys Holleran admitted to shareholders at the company's annual general meeting that the replacement program had failed to meet expectations. There are rumours, dismissed by the company, that star hosts Hamish & Andy will return to the breakfast or drive shift.

Citi analyst Justin Diddams said the downgrade, only two months after previous guidance, raised questions about operation issues at Southern Cross. He said this might be the low point in earnings, or there could be more downgrades instead.

"It's not clear how management intends to improve the audience ratings, revenue growth and ultimately, net earnings," he said.

"Given the heavy debt load and fierce competitive backdrop, we'd argue management lacks the financial flexibility to invest in marketing and promotion of the metro radio network, something that's needed to improve the medium term prospects of the business."

Goldman Sachs analyst Jacqueline Thai said: "While we expect overall ad market conditions in [the second half] to improve, we believe Southern Cross' ratings issues and weaker market position will weigh down on its ability to participate in the modest ad market recovery."

The broker has forecast a 3 per cent improvement in the metro radio advertising market in the second half of financial 2015.