18 Nov 2017
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Radio Mirchi to pursue acquisition route

MUMBAI: Ahead of the FM radio Phase III auctions, market leader Radio Mirchi is looking to expand its current strength of 32 stations through the acquisition route.

Entertainment Network India Ltd (ENIL), which operates its FM radio business through the Radio Mirchi brand, is in talks with multiple radio players to explore acquisition deals.

Parallelly, TV Today Network has put its loss-making FM radio business on the block. The company’s radio business operates under the Oye FM brand.

There is market speculation that ENIL is in talks with TV Today Network to acquire Oye FM. ENIL MD and CEO Prashant Panday declined to comment on the issue.

Speaking to TelevisionPost.com, Panday said, “A lot of players want to exit because the migration fee is too steep, or they don’t have strategic plans. We are talking to national as well as regional players to explore possible deals, but it has to be a strategic fit.”

ENIL board has approved constitution of a committee of directors to explore, negotiate and conclude merger and acquisition opportunities in the private FM broadcasting space.

According to sources, the committee comprises of three directors including Times Group MD Vineet Jain, ENIL director Ravindra Kulkarni, and Panday. Its aim is to take quick decisions in case the company decides to acquire a FM radio company.

With the FM radio Phase III expansion slated to be conducted in 2015, the FM broadcasting space has been witnessing a lot of action lately. While larger players are finalising their strategy, smaller players are looking to make a quick exit owing to the large cash flow needed for bidding and paying the migration fee for renewal of licenses.

The new policy allows FM operators to buy second and even third FM radio frequencies in the same market besides looking at M&As. This has opened up the market for consolidation.

But does the M&A strategy make business sense considering the large amount of migration fee one will have to pay for the licences even if it is a small player?

Not deterred by the fact, Panday said that it depends on the network and the kind of business they have. In fact, a lot of national and regional players are willing to exit now.

“It depends on your strategy and how much money you are willing to pay for it. Acquiring can make sense but one has to be careful because there are issues that need to be looked into. The most important thing is that it has to be commercially viable,” he states.

The acquisition movement started in the latter half of 2014 when print major Jagaran Prakashan acquired private FM network Radio City, which has 20 stations in seven states.

Explaining the logic behind a big network with less number of stations exiting, Panday says that complications arise because of the migration fees.

“Mergers and acquisitions are not an easy subject and most importantly it is dependent on regulatory clearances. The MIB has to approve it. There are lock-in rules for three years after you sign the migration GOPA. So it’s not that simple for radio broadcasters,” he asserts.

In Phase II there was a tendering system where different people bid different amounts. So if X was a lower beneficiary of Phase 2 in Delhi where the highest person bid Rs 32 crore and X bid Rs 13 crore; when the payment of the migration fee comes up, that will be over and above the reserve fee which is Rs 32 crore already. So for a person who has paid a smaller amount like X, it can be difficult to survive.

Panday explained, “If you have a network with 4 or 7 stations, then the amounts can really add up. All the money has been paid in advance and most radio companies don’t have assets that they can mortgage and take loans. So whatever loans you take have to be made up of your own cash flows or guarantees. So it’s very difficult to put that much money upfront. Therefore, a lot of people would be looking at exiting if they are not serious.”