The main sticking point is the high reserve price. Other issues include permission to broadcast news, introduction of 400 KHz to launch more channels, 15% national and 40% city cap elimination among others
Archit Ambekar | Mumbai | October 27, 2016
The second batch of FM radio Phase III auctions began yesterday completing a total of four clock rounds of bidding on day 1. The bidding will continue today for 266 FM channels in 92 cities comprising 227 channels in 69 fresh cities and 39 unsold channels from 23 cities of batch I of Ph III auctions.
At the close of the first day of bidding, 58 channels in 42 cities became provisionally winning channels with cumulative provisional winning price of around Rs 182 crore against their aggregate reserve price of about Rs 179.2 crore.
Even as the bidding process has kicked off, the many big players have openly raised their concerns resulting in no participation or limited participation in the auction. While Radio City seems to be content with the stations it won in the last auction, Radio One doesn’t see viability in small towns.
Big FM is disappointed because a few recommendations were ignored by the industry. Radio Mirchi is a part of the auctions but is participating for a limited number of stations. There also seems to be a challenge of high reserve prices for smaller towns because of which some of the major players are not part of it. But that is not the standalone reason. To know more BestMediaInfo.com spoke to leading players in the industry.
There were recommendations by players to allow them to broadcast news but it has fallen on deaf ears. Highlighting some issues, Prashant Panday, MD and CEO, ENIL (Radio Mirchi), said, “There are many other issues that the industry has raised with MIB. These include: a) 15 per cent national and 40 per cent city caps are not required; b) three-year lock-in is not required for those who have already served their five-year lock-in in Phase-2; c) News must be permitted without any fetters; d) 400 KHz separation must be introduced so that more channels can be launched.”
Currently, the Ministry of Information and Broadcasting (MIB) has certain guidelines in place since the time it began Phase III auctions. A radio player is not permitted to air news bulletins apart from that of All India Radio in the exact same format (unaltered) in mutual agreement with Prasar Bharati.
Panday says the reserve prices are too high and hence the big boys like Big FM, Radio City, My FM, Radio One and Fever have stayed out. “At least two-thirds of the frequencies will not be taken up because of the high reserve prices,” he said.
Despite of these issues, Radio Mirchi is part of the auctions because, as Panday said, “We have our list of towns and we have our maximum bid limits. We will stick to these limits.”
Tarun Katial, CEO, Reliance Broadcast Network, in some way agrees with Panday on the issues. He said, “While the government kept its promise and showed determination in announcing batch two of Phase III, we are disappointed that it has ignored key recommendations made by the industry with reference to the shortcomings in the Phase III policy. The reserve prices have made it very difficult to make a justifiable business case with the requisite amount of investments to create quality content and generate employment in tier two and tier three towns.”
Big FM’s disappointment seems to be one reason why it is not part of the auctions. On the other hand, Radio City is not participating because it already got the stations it was looking for in the last batch. Radio One too is not part of this auction. Being the only player that offers English music for the metro audience, it makes sense for the player not to be a part of these auctions which include small towns.
For the second batch of the Phase III FM auctions, there is a certain financial eligibility. The minimum net worth required as per city category in each region is given as below:
D category cities and cities with population up to 1 lakh: Rs 50 lakh; C category cities: Rs 1 crore; B category cities: Rs 2 crore; A category cities: Rs 3 crore and all categories of cities in all regions: Rs 10 crore.
The highest reserve price is Rs 18 crore for Hyderabad while the lowest is Rs 5 lakh for cities in border areas of J & K and NE states.