New Delhi/Mumbai: The empowered group of ministers (eGoM) that finalized the rules for the 2010 3G spectrum auction and the coming one for 2G frequencies, will now do so for the third phase of FM radio auctions.
“In addition to its existing terms of reference, (the eGoM) will also consider the matter of relating to e-auction of FM radio broadcasting services,” according to an internal, 18 September, cabinet secretariat note reviewed by Mint.
The additional terms of reference for the eGoM include reconsidering of the total number of channels to be auctioned after the recommendation of the Telecom Regulatory Authority of India (Trai) on 19 April to reduce the gap between channels to 400Kkz from the existing 800Khz. The eGoM will also be responsible for the request for proposals to select an e-auctioneer as well as to decide on the fee (if chargeable) for migration of phase two FM licencees to phase three.
The eGoM headed by finance minister P. Chidambaram, also includes defence minister A.K. Antony, information and broadcasting minister Ambika Soni, communications minister Kapil Sibal, law minister Salman Khurshid, Planning Commission deputy chairman Montek Singh Ahluwalia and V. Narayanasamy, minister of state in the Prime Minister’s Office.
The decision to auction FM radio broadcasting services has received mixed reactions.
“We welcome the move and look forward to a fair and transparent e-auction process that will result in greater value for our stakeholders,” said Tarun Katial, CEO, Reliance Broadcast Network Ltd, the largest radio operator in the country with 45 stations under the Big FM brand. “We have a strategic plan to further expand reach for 92.7 BIG FM while maximizing value.”
Harshad Jain, business head at Fever 104 FM, which is owned by Mint’s publisher HT Media Ltd, said: “An e-auction is not the right thing to do as... there is a high probability of the licence fee being inflated. It could also lead to non-serious players participating in the auction.”
Unlike phase two in which licences were issued for a 10-year-period in 2006, phase three licences will expire after 15 years.
One key concern of the industry is that the base price for some cities may be too high, given one policy change for the phase three auction. The base price for new channels in existing FM phase two cities will be the highest bid amount received for that city in the last auction. In the case of cities being newly bid, the reserve price will be the highest bid price received during phase two for that category of cities in the region.
“We are not for the e-auction as it restricts variety in programming. An operator cannot improvise in its content offering since all frequencies are then at the same price level,” said Prashant Panday, chief executive officer, Radio Mirchi, promoted by Entertainment Network India Ltd, which operates 32 stations. “One of the conditions set under the e-auction regarding the base price makes the radio business economically unviable and a costly medium as the licensing suddenly becomes expensive. We prefer the e-tender, which was adopted during the phase two.”
According to a 2012 media and entertainment industry report by Federation of Indian Chambers of Commerce and Industry and KPMG, the radio industry grew 15% in 2011 to Rs.1,150 crore in revenue from Rs.1,000 crore in 2010. The radio broadcasting sector is expected to grow at a compounded annual growth rate of 16% till the phase three stations begin operations by mid-2013. After the phase three stations start, the industry is expected to grow by 22% CAGR. The radio industry’s media ad spends too are estimated to increase to 5% in 2016 from around 4% currently.
According to the Ficci-KPMG report, the government will earn an estimated Rs.1,500-1,700 crore from the third phase. Phase three is expected to cover 227 new cities, in addition to the current 86. In the four metros, only Kolkata will not get a new FM channel. Mumbai will get two while Delhi and Chennai will get one each.
Under the current phase two, 245 FM channels are operational in 86 cities, with a population of over 300,000 or more each.