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FM Phase III and the way ahead for radio broadcasters

MUMBAI: After a wait of three years, the radio industry is beginning 2015 on an ecstatic note. The FM Phase III expansion has finally got the Cabinet approval for the first phase of auctions.

To be conducted as ‘partial auctions’ by 31 March 2015, these will see 135 frequencies in 69 existing cities. The auctions are stated to add Rs 550 crore to the public exchequer.

The cabinet also gave its approval to migration (renewal of licences) of private FM radio licences from Phase II to Phase III on payment of migration fee according to TRAI recommendations. This has come as a major relief for radio players whose 10-year licences were set to start expiring from March onwards. They can now renew their licences for a 15-year term.

While the partial auctions will be conducted now, the auctioning of the new frequencies will happen later this year, with the Telecom Regulatory Authority of India (TRAI) reviewing pending issues of reserve price and addition of new cities, among other things.

Entertainment Network India Ltd (Radio Mirchi) MD and CEO Prashant Panday told TelevisionPost.com that for the partial auctions, they will “participate in a few towns and will be keen to renew [their] licences first”.

Late last year a flutter of activity was seen in the FM radio space when print major Jagaran Prakashan decided to acquire Radio City in a deal valued to be around Rs 430 crore (Rs 4.3 billion).

Vineet Singh Hukmani

Vineet Singh Hukmani

According to Radio One MD and CEO Vineet Singh Hukmani, the FM station has earmarked Rs 200 crore (Rs 2 billion) for the renewals and auctions, and will mainly focus on adding five new frequencies to its already operational seven.

“In the partial auctions we will bid for two to three larger metro cities. Our aim is to acquire two frequencies in cities where we already exist which are Bangalore and Pune,” he said.

DB Corp, which has presence in Tier II and III cities, will invest around Rs 40 crore (Rs 400 million) in the upcoming Phase III auctions for new stations. A separate amount will be invested in renewing the licence of its existing FM radio station which operates under the MY FM brand. Its strategy is to only bid in those markets where DB Corp has a strong print presence.

Taking the auction a step ahead, the Ministry of Information and Broadcasting (MIB) recently issued a notice to radio broadcasters to furnish additional details for the security clearance it had issued on 1 January.

The MIB has also asked the broadcasters to furnish details of shareholders having shareholding of over 10 per cent. The deadline for providing the information is 21 January.

Radio broadcasters speak

Radio broadcasters are excited about the nod given by the Cabinet for the auctions.

Apurva_PurohitRadio City CEO Apurva Purohit said, “We are extremely pleased that the final sanction for the clearance of Phase III auctions has been granted by the Cabinet. This paves the way for a new era in the FM landscape. It is a much-awaited fillip and we are all happy with the movement forward.”

Red FM COO Nisha Narayanan mentioned, “This approval was critical for the industry since some of the licences were getting over on 31 March 2015. We are very excited about this development and look forward to the early culmination of the e-auction process. We have been talking about Phase III for the last five years but things did not pick up momentum due to a variety of reasons earlier. We are happy it is finally moving.”

prashant pandayPanday (of Radio Mirchi) added, “We are happy that the government has removed the last hurdles in the way of the Phase III auctions and renewal of current licences. We look forward to timely auctions now.”

Hukmani (of Radio One) stated, “We hope that the partial auctions will be done quickly to allow migration of existing players as per the TRAI formula. The government has ensured that India earns Rs 2,000 crore from FM radio this fiscal and now the MIB must ensure it sticks to the timeline to prevent loss to the exchequer.”

MY FM CEO Harrish Bhatia stated, “It’s great news and signals good days ahead. It’s time for the industry to take radio to the next level of growth.”

Way ahead

karthikWhile the expansion signifies new stations and small networks becoming big even as the big networks become bigger, private FM broadcasters also need to revamp their content strategy to have the best of both worlds.

As Madison Communications COO Karthik Laxminarayanan said, “A lot needs to be done on the framework. The ad scenario will certainly change but the content scene needs a change too.”

PM BalakrishnanAllied Media COO PM Balakrishnan said, “Networks that can improve their footprint and reach will get a larger share of the ad pie. Going ahead, radio will be of greater importance in the media mix of clients.”

With radio being a localised medium and now expanding to smaller towns, it will give local advertisers a chance to jump onto the medium for customised solutions targeted at a specific audience.

“People will lap up any new medium and a good amount of advertising will happen. But the volume won’t be large as there is a certain ratio that is followed depending on the sales that you get from a particular market,” Laxminarayanan mentioned.

However, a big advantage for the radio industry is that many broadcasters are part of networks that have a strong presence in print. With print being one of the biggest beneficiaries of localisation, advertisers can get a combined value of print and radio.

Balakrishnan said that if print and radio can give a good package deal, it will be great and they can give integrated network solutions.

But while agencies see the combination as a good way to combat the dominance of TV, it now remains to be seen how radio broadcasters play their cards in the upcoming partial auctions and then the auctions of new frequencies.