Radio Industry welcomes FM Phase III at large

Find out what Prashant Panday, CEO, ENIL; Tarun Katyal, CEO, RBNL and S Keerthivasan of Fever 104 FM have to say.

BestMediaInfo Bureau | Delhi | July 8, 2011

The much awaited auctions for the third phase of FM Radio privatization has been approved by the Union Cabinet. The Cabinet has cleared the proposal of the Information and Broadcasting Ministry for conducting ascending e-auction, as followed by Department of Telecommunications for the auction of 3G and BWA spectrum, for award of licence of FM channels, as recommended by the GoM on Licensing Methodology for FM Phase-III. As a result, private FM radio operators will have to be prepared for higher payouts as they have to aggressively bid for licences through e-auctions.

FM Phase-III Policy extends FM radio services to about 227 new cities, in addition to the present 86 cities, with a total of 839 new FM radio Channels in 294 cities. Private FM radio operators, needing funding for the expansion, can now look at attracting foreign capital. The government has allowed the cap on foreign holding, in the form of foreign direct investment (FDI) and foreign institutional investors (FII), to go up from 20 per cent to 26 per cent.

The radio operators can also carry news bulletins of All India Radio (AIR).

As per the new policy, the limit on the ownership of channels at the national level allocated to an entity has been retained at 15 per cent.

However channels allotted in Jammu & Kashmir, North Eastern States and island territories will be allowed over and above the 15 per cent national limit to incentivise the bidding for channels in such areas.

Also, private operators have been allowed to own more than one channel but not more than 40 per cent of the total channels in a city, subject to a minimum of three different operators in the city.

The Phase -III policy will result in coverage of all cities with a population of 100,000 and above with private FM radio channels.

With some disagreements, the industry has welcomed the new era with Phase III policy. BestMediaInfo.com is bringing important reaction from the Industry leaders:

Prashat Pandey, CEO, Entertainment Network India Limited (Radio Mirchi)

We are very happy that the Phase-3 policy has finally been announced. It's been on the cards for a long time and broadcasters as well as investors were getting worried about the delay in bringing it out.

The announcement is a huge step forward for all of us in radio. Phase-3 will ensure that radio spreads all over the country and finally becomes a pan-India medium. Presently, many media planners accuse it of having a relatively small listenership and they ignore the fact that it is present only in about 90 cities. With this expansion, radio's listenership will go past newspapers and this is bound to help grow the radio revenues dramatically.

There are many other progressive points in the policy. For example, allowing multiple frequencies to one broadcaster in one market is a big initiative. In all media segments - be in TV, Print or Internet - owners are always allowed to own more than one media brand. It was only radio that was denied this facility. But then radio has been denied so many things that are taken for granted by almost all businesses. Even now with Phase-3, it's not as if everything has been opened up. The restriction on sourcing news only from AIR is arbitrary and anachronistic with the times.

Apart from multiple frequencies, it's good that the lock-in period for promoters has been reduced from 5 years to three years. This will help unprofitable businesses from exiting the radio business. Again, there was no reason for keeping such a high lock in period in the first place, but it's good that that's been made more reasonable.

On FDI, I am happy that the 26% number will now bring the radio FDI policy in line with the FDI policies that apply to other media segments. Apart from that really, I don't know if it will make too much material impact. Listed radio broadcasting companies have barely managed to reach the 20% limit set earlier. Whether strategic investors will come in on the back of this higher limit remains to be seen.

So overall, it's good that we've moved ahead. A policy logjam helps no one!

Tarun Katial, CEO, Reliance Broadcast Network Ltd.

Radio has the power to go to the grass root levels and reach where newsprint hasn't and TV cannot, truly a common man's medium because we charge nothing to the end customer. With phase III the doors to this growth have now been opened and we'll see an era of 30% year on year growth for the radio industry.

At RBNL, we will be looking at multiple frequencies which will be a revenue multiplier without huge incremental capex / opex. In addition to key urban centers and a network of C and D cities the significant increase in radio inventory and the pricing power offered by multiple frequencies in cities will lead to content innovations and drive growth.

With expansion of FM radio to 294 cities, FM radio will now touch 90% of Indian population making it truly a common man's medium

FDI at 26% is a welcome move, a consortium of investors or investor can largely look at a more active participation in the management of the Company. There is merit however, for increasing the FDI limit further as presently operators are only allowed carriage of AIR news, hence not in pure play of news journalism / broadcast.  It is a good time for strategic investors to look at the industry. The industry is at an inflation point and he incentives offered in phase III guidelines make it very attractive for investors to look at this sector, showing galloping growth in the next 5 years.

Supporting the Government, RBNL recognizes its role in 'building the nation' and also catering to the sensitive areas of North East and J&K. In phase II itself we had bid for these circles. We are very happy with the special incentive package announced by the government for these markets and will be happy to participate in similar clusters, extending the BIG FM brand to the furthermost areas of the country.

S Keerthivasan – Business Head, Fever 104 FM.

“The e-auction route will take the license fee to a high, specially for frequencies in metros like Delhi and Mumbai. I also feel that FDI should have been raised to 74%. It's good to allow multiple frequencies.”

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