We've played the depth game as far as the metro markets are concerned: Harshad Jain, Fever FM

Fever FM's CEO speaks at length about the FM player's strategy for the Phase III auctions, the high cost of acquisition of Delhi and Mumbai and more

Shanta Saikia | Delhi | September 22, 2015

Harshad Jain

HT Media, which runs Fever FM, emerged as one of the most successful bidders at the recently-concluded first batch of FM Phase III e-auctions, securing 10 stations, including Delhi and Mumbai. The media group also bagged seven stations in key cities of Uttar Pradesh – Kanpur, Lucknow, Agra, Allahabad, Aligarh, Bareily and Gorakhpur – as well as Hyderabad.

Harshad Jain, CEO, Fever FM, speaks to BestMediaInfo.com on the FM player's strategy for the auctions, the salient features of the auctions, the investments made and more.

How would you rate the Phase III auctions?

In our assessment, the auctions have been an absolute, resounding success and there are a couple of reasons for this success. Firstly, from a Government standpoint it is obviously a very big success – against the Rs 480 crore-Rs 490 crore that the Government had set as reserve price, it has around Rs 1,185 crore. The auctions have been very successful from an industry standpoint as well. Firstly, I think this entire auction process was extremely well-conducted, very well-organised, transparent and I think a tremendous way of auctioning what I would like to believe as critical resources or geo-spectrum.

Secondly, it was very inclusive. The policy was originally announced in October or November 2011 and the auctions started from July 23, 2015. Throughout this period, the Government followed a very inclusive process with the industry. There were separate meetings held with the AROI, everyone was well aware of the rules and regulations and terms and conditions, considering that this was the first time that we were getting into the simultaneous, multi-round ascending order auction, which had its own nuances.

Thirdly, for the entire policy, if I were to say, a lot of inputs from the industry were taken, and finally you had auctions which were organised very well. Everybody from day one entered a very level field.

This success apart, there were 38 stations that remained unsold across 11 cities. What was the reason for this, were they not attractive or lucrative enough for the bidders?

I don't think that the problem was that they remained unsold, I think it was a question of priority. Every company walks into such auctions with a certain strategy which is best suited to their business model. So, some of these markets may not have made the cut for each company for the unsold frequencies. But if you look at the other side, there were several small markets that did extremely well. For instance, look at a market like Shillong or Aizawl or Srinagar, they've seen resounding success. I don't think the unsold frequencies need to be seen from a point of view that the auctions have not worked there, I think it needs to be seen from a company's strategy standpoint and those markets making the cut or not making the cut.

What was HT Media's total spends to bag the 10 FM station licences?

Our total investment has been about Rs 340 crore. If you look at our entire outlay, the bulk of the money has got invested in two of the biggest markets in India, in this case Delhi and Mumbai. Other than that, all the other frequencies we virtually picked up at the reserve price. So, I think we've got a bouquet that we thought we should get into. What we planned before the auctions and what we finally landed up with is exactly aligned with our thinking and strategy that we had developed for the Phase III auctions.

Of the 10 stations that HT Media has bagged, seven are in the Hindi heartland. What kind of strategy and investments have you lined up for these markets?

If you look at our entire strategy, it was predicated on two clear verticals – one was our metro strategy; we are very clear about this, we have a four-station network and we have just acquired a station in Chennai, which is the 91.9 frequency which was earlier called 'Aha' and has now been converted to Fever, and then we have added Hyderabad to that. Then we went ahead and added two more stations – one in Delhi and we bought another one in Mumbai. We were very clear that we wanted a six-metro strategy, which we got. So we played the depth game as far as the metro markets were concerned.

Uttar Pradesh was a very strategic buy for us, we were very clear that we wanted to get into UP. If you look at us as an organisation, we run a very successful English newspaper in Delhi and Mumbai, we also run one of India's largest Hindi newspapers, Hindi Hindustan. So we wanted to leverage the strength of our newspaper brand and leverage our strength as a media organisation in UP and build a very robust business.

What were the key differences between the Phase II and Phase II auctions?

The biggest difference between the two phases was that Phase II was close ended auction, which means that your bid goes in a piece of paper in an envelope and you have no idea what you've bid. In Phase III, you could see the bids on your screen and you knew exactly what the bids were, how many rounds were happening, you could see the aggregate demand on each channel, whether there was excess demand or negative demand, you could figure out how many players were participating, you didn't know their names, but you knew how many were in the fray.

For instance, when Delhi opened up at Rs 31 crore, which was the highest price in Phase II, till Rs 100 crore or so there were four or five players bidding for Delhi. So you knew how many players were participating, you knew what was the price increase happening round by round. So it was very open and transparent. Phase III auctions went on for 44 days during which 145 rounds were held, which is higher than for telecoms.

The opening bid for Delhi was Rs 31 crore and you paid Rs 169.16 crore to acquire Delhi in Phase III, that's a huge difference. Do you think the scarcity of spectrum in the metros have pushed up the prices?

I don't think that's really the case. Let me put this in context and reply to that in three different parts. One is that if you look at Delhi at Rs 169 crore and if you look at Bangalore at Rs 109 crore; needless to mention here that Delhi is four times that of Bangalore in terms of size of the market. The market potential of Delhi is far higher than that of Bangalore. So I could safely make a comment saying that we got Delhi cheap.

As far as we are concerned, Fever FM has been a dominant No. 1 in Delhi for around four or five years, where we have 8-8.5 million listeners. We also have the legacy of our newspaper brand here. Obviously it makes strategic sense for us to stay invested in this market.

The third and most important point for us is that had we missed out on Delhi, we would have missed it out for the next three years. And there is a reason for that. If you look at the policy right now, there is no station available in Delhi for the next three years, so we had no option but to stay invested and buy a radio station at the auction because we would have been locked out of the Delhi market for the next three years. If you look at the policy, you cannot buy out a radio station in Phase III because you have a promoter lock-in period of three years. So it was very important that we got it.

It is also important for me to say that some of our competitors who invested very heavily in Phase III have not bought out Delhi and Mumbai. This is because they have gone ahead and made a part-acquisition of another company. That company also has presence in the three metros where our competitor also has presence, as per the Phase II policy you cannot own two stations in the same city. So while our competitors, who've gone and bought out that radio station, four stations have got allocated to them because they did not have presence in those cities. And now, there could be a chance that they could look at, what I would like to believe, a back door entry into the markets of Delhi and Mumbai. For markets where we have paid Rs 300 crore, they would have got it at a fraction of the cost. We were also at some stage contemplating to buy another radio station in Delhi and we were very close to signing up a deal, but when we took legal opinion, it was very clear that it was against the rule of the land and it was illegal to have done that M&A.

We had no option but to safeguard our interests in Delhi and Mumbai and then stay invested in them.

How do you now propose to extend the Fever FM branding to the new stations that you have bought?

Since the results have only come out last week, a lot of research work is happening at the various cities where we are getting into to check the kind of format, product and programming we will get into.

When can we expect these stations to be launched?

We are working closely with the Government and requesting it to allow us to launch as soon as possible, pull out all technical hurdles – there are the CTIs (Common Transmission Infrastructure), where the transmission towers have to be set up. We would like to launch as of yesterday, because given the cash which has gone out, there is a huge interest burden on us as a company and we will be crashing our deadlines.

Where do you see industry bodies like AROI stepping in to smoothen out the process of setting up the new stations?

AROI is putting together a committee that is about common technical infrastructure, where the industry will work together and each company needs to nominate a few people who will be liaisoning with the Government to get all the techno-commercial part right. The Association has picked up the right issues and there is going to be a body within the AROI which will work with the Government. There is going to be enough momentum behind this. All of us have started work on our new stations and you should see the launches happening from the first quarter of next year.

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