New Delhi: The government is likely to hold the third auction for FM radio spectrum by March, officials in the department of telecommunications said.
“The eGoM (empowered group of ministers) will decide on the timeline and the reserve price in the next meeting,” one of them said, requesting anonymity.
The panel of ministers that finalized the rules for the 2010 3G spectrum auction and the latest one for 2G frequencies will make the key decisions on the third phase of the FM radio auction, Mint reported on 26 September.
Apart from the minimum price and the time, the group will decide on the total number of channels to be auctioned. The move to change the number of channels comes in the wake of Telecom Regulatory Authority of India’s (Trai) 19 April recommendations to reduce the gap between channels to 400Khz from the existing 800Khz.
The panel will also decide on an electronic auctioneer and the fees, if chargeable, for migration of phase two FM licencees to phase three.
Unlike phase two, in which licences were issued for 10 years in 2006, phase-three licences will expire after 15 years.
The panel, headed by finance minister P. Chidambaram, includes defence minister A.K. Antony, information and broadcasting minister Manish Tewari, communications minister Kapil Sibal, law minister Ashwani Kumar, Planning Commission deputy chairman Montek Singh Ahluwalia and V. Narayanasamy, minister of state in the Prime Minister’s Office.
Broadcasters are opposed to the government’s decision to auction FM radio services, fearing that paying for the spectrum will make the business case for radio channels unviable.
“We have been eagerly awaiting the phase-three auction process. However, there are many flaws in the announced policy,” said Prashant Panday, chief executive of Entertainment Network (India) Ltd that runs FM channels under the brand name Radio Mirchi. “We hope the government has learnt its lesson from the failure of the 2G auction and will correct the policy to avoid a similar fate. The e-tendering (single-step electronic auctions) is a better way of allocation of spectrum to FM players than ascending e-auctions.”
Panday was referring to the recently concluded 2G auction that ended with only 42% of the available air waves being sold and the government making less than one-third of its expected revenue from it.
“Further, the reserve-fee formula decided by Trai needs to be thrown out and a new low-fee one developed. E-tendering takes care of the reserve fee problem as the reserve fee is set post bidding rather than before,” Panday said.
Earlier on Wednesday, Ahluwalia admitted to errors related to the 2G auction. “It was a mistake to fix the reserve price of the auction at a level close to what the government expected to get from it. But it doesn’t matter because we will discover the price when we re-auction the remaining spectrum,” Ahluwalia said.
He also said the government now needs to consider how best it can re-farm spectrum, saying he doesn’t think it has a comprehensive answer, yet. “If you believe in auction, you should also believe on spectrum trading and it will eliminate the issue of discovering price,” Ahluwalia said. “But these are big policy changes that need to be discussed.”
India’s radio industry grew by 15% in 2011 to Rs.1,150 crore in revenue from Rs.1,000 crore in 2010, according to a media and entertainment industry report earlier this year by industry lobby Federation of Indian Chambers of Commerce and Industry and consulting firm KPMG.
The radio broadcasting sector is expected to grow at a compounded annual growth rate of 16% till phase-three stations begin operations by mid-2013, they said in the report, adding that they expect the government will earn Rs.1,500-1,700 crore from the third auction of FM radio spectrum.
Phase three is expected to cover 227 new cities, in addition to the current 86. Of 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 phase two, 245 FM channels are operational in 86 cities.
Kirthi V. Rao contributed to the story.