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Business News/ Opinion / Columns/  Despite tweaks in FM Radio policy, big hitches remain
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Despite tweaks in FM Radio policy, big hitches remain

Private FM radio firms are currently focused on stabilizing their operations

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Last week, the government amended the FM Radio Phase III policy guidelines, in an attempt to aid the ailing sector. It removed the three-year window period for restructuring of FM radio business within the same management group during the licence period of 15 years. It also did away with the 15% national cap on channel holding, and lowered the net worth of firms bidding for FM licences in category C and D cities (smaller towns) from 1.5 crore to 1 crore.

The amendments will accrue some benefits to private FM radio companies, but the industry was hoping for bigger support.

The three-year window for restructuring of FM business in a group prevented several deals from happening earlier. It meant if a media organization had print and radio business under the same company, it could spin off the radio business into a separate subsidiary only within the first three years of operations and not after that. “This was a big deterrent to any merger and acquisition, as many radio operators were structured this way," said Prashant Panday, MD & CEO, Mirchi. This prevented Mirchi owner ENIL from acquiring Ishq FM stations of TV Today. Now, restructuring is permitted any time during the 15-year licence period and will foster some M&A activity.

Similarly, no radio firm was allowed to operate more than 15% of total licences available nationally. Now, that cap has been lifted and big companies will eye smaller operators without the worry of crossing permissible limits. But a major roadblock in M&As is still not addressed. This is the city-level cap which exists. “In a city, a broadcaster cannot hold more than 40% of the number of channels. Let’s say a city has four channels; so 40% is 1.6. So a broadcaster can operate only one channel," said Panday. This will again hamper M&A deals.

Neeraj Saraswat, chief revenue officer, Fever Network, HT Media Ltd, which also publishes Mint, doesn’t foresee much M&A activity in the immediate future. “The health of the industry doesn’t really permit it at the moment," he said.

Private FM radio firms are currently focused on stabilizing their operations after two devastating years of covid pandemic. In revenue terms, the 2,300 crore industry crashed by about 50% in FY21 and made a partial recovery of about 25% to 1,300-1400 crore in FY22. “The industry is doing better in FY23, but it will not be until FY24 or FY25 that it regains its FY20 numbers," said Panday. Hence, there might be sellers available, but not many buyers, radio operators said.

Unfortunately, the industry’s bigger demand regarding licence fee rationalization hasn’t been met. The current policy sets a very high “flooring" for annual fee at 2.5% of the auction value of Phase-3. So, for example, if the Phase-3 auction price of the lone frequency auctioned in Delhi was 168 crore, at 2.5%, the annual licence fee for Delhi comes to 4.2 crore. This annual fee has to be paid by all the nine operators of Delhi, every single year, Panday said.

During covid, the licence fee became a huge burden, driving broadcasters to losses. The industry has been requesting for the licence fee to be linked to the actual “migration fee" which is much lower. For Delhi, the migration fee was about 32 crore.

Saraswat said the industry has also asked for two to three year extension of licence period, as they lost valuable business years to covid and the licences expire in 2030. “Additionally, central government expenditure on radio for promotion of schemes, public interest and welfare announcements has reduced by more than 50% in last 2-3 years. Our request has been to increase the share of radio advertisements to pre-covid levels. Government ads have contributed significantly to radio revenues in the past," he said.

To expand FM radio reach, operators have also petitioned the government and National Disaster Management Authority (NDMA) to make it compulsory to have active FM tuners in mobile handsets. Device manufacturers and operating systems (iOS, Android) are turning FM tuners off, possibly to support their own paid music services, said Panday. Countries like Brazil and Mexico have made it compulsory for mobile handsets to come with the FM tuners, he said. If the industry is able to address these challenges, it will be quicker to bounce back.

Shuchi Bansal is Mint’s media, marketing and advertising editor. Ordinary Post will look at pressing issues related to all three. Or just fun stuff.

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Published: 13 Oct 2022, 01:24 AM IST
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