FM e-auctions: Radio operators spend big bucks on licences5 min read . Updated: 14 Mar 2016, 12:53 AM IST
Govt makes over `3,000 cr from the auctions, including migration fee from stations that will move from Phase 2 to Phase 3
HT Media Ltd, the owner of the Fever FM radio station, outspent rivals to win 10 licences, including one for the sole available frequency in Delhi, in the electronic auctions for private FM radio. The company spent ₹ 340 crore in the auctions that concluded on 8 September.
Entertainment Network India Ltd (ENIL), the radio broadcasting unit of Bennett, Coleman and Co. Ltd, won 17 licences for ₹ 339 crore.
Other radio operators that won licences include Music Broadcast Pvt. Ltd, which is now a part of the Dainik Jagran Group, Reliance Broadcast Network Ltd (RBNL), DB Corp. and Rajasthan Patrika Pvt. Ltd. RBNL invested ₹ 117 crore in the auctions.
The results of the first batch of the Phase 3 of FM radio auctions were declared by the ministry of information and broadcasting on Wednesday and posted on its website. However, the ministry withheld the results for three Sun group companies—Sun TV, South Asia FM and Kal Radio— in compliance with a Madras high court order.
After these auctions, Fever 104, the FM radio brand of HT Media, will expand its presence from four cities to 13 with 15 licences. The company, which picked up Delhi for ₹ 169.2 crore, also won frequencies in Mumbai and Hyderabad and bought a number of stations in Uttar Pradesh.
“We are entering the UP market with seven new stations. Lucknow, Kanpur, Agra, Aligarh and Gorakhpur purchased at reserve price along with Bareilly and Allahabad," said Harshad Jain, chief executive of Fever 104 FM. Fever FM hopes to leverage its synergy with Hindustan, the Hindi newspaper of HT Media, in expanding in Hindi-speaking markets. Jain added that with Hyderabad in its kitty, the company had completed its six-metro strategy.
ENIL’s Radio Mirchi will now own 49 stations all over the country, up from 32. Radio Mirchi’s 49 station network also includes the licences it bought for Amritsar, Patiala, Shimla and Jodhpur from Oye FM of the India Today Group. Among the new cities, the company has acquired frequencies in Chandigarh, Kochi, Kozhikode, Jammu, Srinagar, Guwahati, Shillong and second frequencies in Bengaluru, Hyderabad, Ahmedabad, Pune, Kanpur and Lucknow, among others.
Big FM, the FM brand of RBNL, has added 14 new stations to its existing 45. “We continue our leadership position in India…focusing on key cities such as Pune, Nagpur, Lucknow, Patna, Varanasi, Kolhapur among others. We now have an overall presence of 59 stations with newly acquired frequencies in key states of Maharashtra, Uttar Pradesh, Bihar and northeast India," said chief executive Tarun Katial.
The Dainik Jagran group, too, won 11 frequencies and will now have a network of 39 stations, including the stations under the Radio Mantra and Radio City brands. Apurva Purohit, CEO, Radio City 91.1 FM, said that Music Broadcast Pvt. Ltd (owned by Jagran) had won frequencies in the markets that it was keen on. “This increases our footprint across important cities in each state as we become a 39 station network. Together Radio City and Radio Mantra will be dominant players in important state clusters and continue our successful phase 2 strategy of concentrating on advertiser relevant markets," she said.
The electronic auctions that ran 125 rounds and lasted 32 days had on offer 135 channels in 69 cities. The total value of sold channels was ₹ 1,187 crore. However, the government made more than ₹ 3,000 crore from these auctions, including the migration fee from 245 stations that will move from Phase 2 to Phase 3.
Pleased with the company’s success at the auctions, Fever 104 FM’s Jain said that radio has a huge growth potential with its high listenership among youth, the biggest population segment in India. “Fever...is in a commanding leadership position in its existing markets of Delhi and Bengaluru and is the fastest growing station in Mumbai and Kolkata. With our investment in the FM Phase 3 e-auction…we are expecting impressive returns from our new stations as well."
ENIL CEO Prashant Panday said that the company will roll out the Mirchi brand in all the new towns it has got, including the four cities acquired via Oye FM. Katial, too, is hoping to launch some of the new frequencies within this fiscal.
Fever 104, the radio station brand of HT Media that publishes the Hindustan Times and Mint, competes with different radio stations in several markets which participated in these auctions.
To be sure, some licences in the metros such as Delhi, Mumbai and Bengaluru were sold steeply even as 30% of the stations and 20 cities remained unsold. Delhi, for instance, was sold for ₹ 169.2 crore, while the two frequencies in Mumbai were picked up for ₹ 122.8 crore each. Bengaluru too went for a high ₹ 109.2 crore.
According to Smita Jha, media practice head at consulting firm PriceWaterHouseCoopers, the auctions can be deemed successful on two counts—that it fetched the government 110% on its reserve price and that it was an absolutely transparent ascending e-auction. Agreed Jehil Thakkar, partner and head of media and entertainment at KPMG: “In terms of revenue to the government, the auctions were hugely successful." However, he added that the scarcity of spectrum in the metros pushed the prices very high for radio operators in these cities.
According to Panday, there were too few frequencies in the metros. “After 9.5 years, the government offered one frequency in important cities like Delhi, Bengaluru, Chennai, Jaipur, and Ahmedabad...clearly, the prices reached in these cities is because of ‘scarcity premium’. These are not fair market prices, and the government must consider the auctions to be a failure, not a success."
He does not think that some of these stations will make money in a hurry at these prices. “Not for at least five years. At these prices, the winners will have to do more revenues than even their first frequencies are doing. This is difficult, even if not impossible. And if there is one bad economic patch in the next five years, then the loss period will be extended further," he said.
However, Fever’s Jain disagrees. He said that the metro markets are the largest advertising markets for FM radio channels. Besides, the second stations will come up at no significant additional infrastructure cost. Fever, which now has two frequencies each in Delhi and Mumbai, could tap the same sales team for advertising. “That’s not all. This time, the licence period is 15 years giving us a better leeway to make money," he added.
Currently, the radio sector is seeing a compound annual growth rate of 18% and will touch revenue of ₹ 3,950 crore in 2019 compared with ₹ 1,960 crore in 2015, according to the 2015 media and entertainment industry report by the Federation of Indian Chambers of Commerce and Industry and KPMG.