You've got to admire Cumulus Media's (Nasdaq: CMLS) spunk. The meandering terrestrial radio station operator has made a $2.4 billion offer to buy larger rival Citadel Broadcasting (OTC BB: CDELB.PK).

This just in: Cumulus also plans to rearrange the deck chairs on the Titanic.

I don't know what's more surprising: That tiny Cumulus with its $200 million market cap -- or $800 million in debt-saddled enterprise value -- is Citadel's lone savior, or that Cumulus was able to round up the financing to get the deal done.

Cumulus' desire to buy Citadel is nothing new. It tried to buy Citadel after the latter company emerged from bankruptcy reorganization -- yes, bankruptcy -- last year. Cumulus also rescheduled its quarterly report two weeks ago, specifically because it was in buyout talks with Citadel.

Cumulus senses a synergistic opportunity, but try telling that to Clear Channel (OTC BB: CCMO.PK) and CBS' (NYSE: CBS) radio arm. Both of those companies would presumably still be larger than Cumulus-Citadel, and they're not looking so great.

Cumulus will argue that it's living proof that the radio industry can turn itself around. After years of losses and sliding revenue, Cumulus posted a profit through the first nine months of 2010 on a 4% uptick in revenue. The wave of midterm election ads obviously helped, but Cumulus has genuinely done a solid job of whacking away at its corporate overhead. If it worked that cost-cutting magic on Citadel, it might really get rolling. Right?

Not exactly. The radio industry has changed dramatically on this side of the recession. Sirius XM Radio (Nasdaq: SIRI) now has more than 20 million subscribers -- the well-to-do heavy listeners that advertisers covet the most. The growing community of smartphone owners, and improvements in dashboard gadgetry, also mean that more people can stream Pandora or hear popular podcasts as they drive around.

Cumulus and its terrestrial peers have gotten behind Web-based streaming, but the advertising dollars aren't the same in cyberspace.

Huddling together is a better plan than dying alone, but investors are better off avoiding this industry altogether. Terrestrial radio will never be the same. Cumulus just has its head in the clouds.

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