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MIB rejects request of radio broadcasters for 15% cap removal

MUMBAI: Radio operators who were concerned about the 15 per cent cap on the number of channels a broadcaster can hold in each bidding phase have been left in the lurch as the Ministry of Information & Broadcasting (MIB) refused to accept the their request for removal of the nationwide limit.

Replying to queries raised by the private FM radio broadcasters after the pre-bid conference held on 28 January, the MIB noted that it would not remove the 15 per cent cap since the same is prescribed in the FM Phase III policy notified on 25 July 2011.

Radio players stated that in 2008 TRAI had twice recommended that the ceiling of 15 per cent should be removed. Moreover, the total number of channels depends on availability, and the fear of monopoly could no longer be considered a reason.

Furthermore, they said that bigger broadcasters would not be able to participate and bid in the auctions actively unless they surrender their existing frequencies, which could be counter-productive. Requesting the MIB not to apply the cap, the operators added that the cap could be implemented after the completion of the Phase III auctions.

They also suggested a methodology to calculate the cap, wherein all 839 frequencies approved for Phase III should be added to the existing 243 frequencies.

The radio players also sought clarification on the computation of the cap that excluded channels located in J&K, North East, and Island territories but was not segregated separately in the list. The MIB listed the 15 cities available for Phase III in these regions separately.

City wise limits

The radio players stated that as per the guidelines for calculation of city-wise limits, if the 40 per cent figure is a decimal, it would be rounded off. Under the method of rounding 1.2 becomes 1, while 1.6 is taken as 2 which would enable entities to take up second frequencies in Category B and C cities. However, the government’s logic of rounding down 1.6 to 1 would restrict the expansion of operators.

The broadcasters thus requested the MIB to round it off to the nearest whole number, which was also rejected by the Ministry.

Eligibility criteria

As per the guidelines, one would be disqualified from holding the licence if the applying/migrating entity has an inter-connected undertaking in the same city. The definition states that two entities are reckoned to be interconnected in the event that there is common shareholding of 25 per cent, or if one of them holds 25 per cent in the other directly or indirectly.

The players thus asked the MIB to clarify if the minimum threshold of common holding for entities to be ineligible to bid is 25 per cent (as per the definition) or 10 per cent (as per the Ownership Compliance Certificate). The MIB clarified that the term ‘interconnected undertaking’ shall have same meaning as in relevant laws in the country and in the OCC, substantial equity holding of 10 per cent or more stands.

Cut-off date for net worth

While the cut-off date for the net worth of the applicant company is stated to be 31 March 2014 in the memorandum, broadcasters asked the ministry for permission to submit the certificate of net worth of a recent date based on the latest audited accounts, but not earlier than 31 March 2014 or latest limited review financial statement.

The ministry replied that the companies will have to furnish annual reports and audited final accounts for the last 3 years till 31 March 2014 along with their net worth as on 30 September 2014. For a company registered after 31 March 2014, it has to submit only its net worth as of 30 September 2014.

Auction process

The radio players challenged the provision where a 1 per cent increase would apply in the clock round price when the bidders equal frequencies put up for auction in a city. They said that the increase should be 0 if there is no excess demand to avoid artificial increase in prices. The suggestion, however, was also rejected by the government.

Lock-in requirement

In Phase II, broadcasters under the Grant of Permission Agreement (GOPA) completed the lock-in period of five years under previous licence, while in Phase III the operators will be in a three-year lock-in period. They requested the MIB to waive the three-year period considering the longer tenure in Phase II, but the ministry rejected the same.

Frequency allocation

The operators further asked the MIB to change the frequency allocation process comprising Channel Allocation Stage and Frequency Allocation Stage to only the Channel Allocation Stage process similar to that in Phase II where the bidding process did not allocate frequencies. They stated that the allocation should be done after the channel allocation and in consultation with Department of Telecommunication, Wireless Planning and Coordination and Standing Advisory Committee on Radio Frequency Allocation. However, the removal of the stage was not accepted.

They further brought to the notice of the MIB that there was an absence of various unused frequencies in the list of frequencies to be allocated, to which the ministry gave out the list of possible frequencies, same as earlier.

Surrender of licences

A clarification was sought on the process for surrender of licences and the cut-off for surrendering a channel if a player wants to do so to increase the number of frequencies it can bid for.

The MIB replied, “The requests for surrender of existing channels will be examined on case to case basis subject to provisions in the Phase II and III guidelines and the existing GOPA signed.”

Migration

When requested that refunds of Kolkata CTI (including Prasar Bharati, BECIL and other local bodies where taxes are paid), which have been lying with BECIL for over a decade, be refunded or adjusted against the pending dues to BECIL, the MIB refused.

Upon further seeking clarification on migration, the ministry said that migration would be effective from 1 April 2015 and the fee would be based on results of partial auctions. After the notification of Non Refundable One Time Migration Fee (NOTMF), the players who wish to migrate will need to deposit 25 per cent of the fee within five days and the rest within 15 days.

The date for exercising the options by existing permission-holders for migration to Phase III is 7 March 2015. The permission-holders will sign a fresh GOPA within 15 days of full payment of NOTMF.

The 15-year licence period under Phase III will begin from the effective date of migration that is 1 April 2015.

Pre-qualification process

The broadcasters requested the MIB to authorise more than one person to take bidding decisions on behalf of the company, which the government stated as unacceptable. However, it did state that bidders could nominate an additional person for liaison and interaction with the ministry.

Moreover, to take care of unforeseen situations, where the bidder falls ill or his Digital Signing Certificate (DSC) is damaged, the e-auctioneer will reset the DSC only after completion of the previous clock round. Hence, it is advisable that bidders procure and test two DSCs during the mock auction stage.

Auctions

In order to maintain parity between existing broadcasters and new entrants, the radio players requested the MIB to remove the Tie Rule III from the auction process, where in case of a tie, the ranking would be done in descending order. Thus, small broadcasters would have an advantage as they would have more bidding options. The proposal, however, was rejected by the MIB.

The govt. did accept that the bidding dashboard during auctions should display the number of actual bidders per clock round for a particular city instead of the range of excess demand.

It also accepted that upon closure of auctions, the MIB would adopt the policy where auctions would close when activity requirement is 100 per cent and no new bids are received in any of the cities.

It further mentioned that the defaulters of Phase I, who had accepted revocation of their Letter of Intent and exercised the option to participate in Phase II bidding and who were subsequently permitted to participate in Phase II bidding, should be permitted to participate in Phase III bidding.

Other issues

Another issue that was put forward to the MIB was that of Delhi-based Hit FM operated by Clear Media. Its licence would expire in August 2016 and the company would lose 17 months of licence along with money. Clear Media would lose about Rs 7.4 lakh per month for the 17-month period due to premature termination of Phase II licences. However, all requests of Clear Media were rejected by the ministry.

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