While the government chose the e-auction model to roll out the Phase III of private FM radio, stakeholders are concerned about prices shooting through the roof and making it a difficult business proposition.
A Group of Ministers (GoM) led by Finance Minister Pranab Mukherjee preferred the e-auction model and decided against the conventional open auction to give licenses for FM Phase-III expansion.
ENIL Chief Executive Officer Prashant Panday said: “In e-auction licence fees rise too much. The broadcaster would lose money. For telecom operators the scenario is different. The licence there is for 20 years and it’s a much bigger industry. They can charge higher amounts as 3G targets only the top-end of the spectrum. The case is not the same with radio. Radio competes with other media which do not pay any revenue to the government. If radio costs rise, they cannot increase their rates and that would result in a loss. Our concern is that broadcasters who win the bids will lose a lot and in fact many may consider it better to sit out rather than bid wrong.”
“From the government’s point of view, e-auction is a favourable mode for allotting licenses as they stand to rake in additional revenues. However, broadcasters have to keep in mind business realities while bidding. Unlike in the previous round of auctions, industry players now have a fair idea of the revenue and cost structure of the regions they would operate in, and this has to be under consideration to create a win-win situation for all,” said Ashish Pherwani, associate director, Ernst&Young.
According to a PricewaterhouseCoopers (PWC) report, the radio industry which stood at Rs 900 crore in 2009, is expected to grow at a compounded annual rate 12.2 per cent to reach Rs 1,600 crore in 2014. The other concern was e-auction could lead to the marginalisation of smaller players. A senior executive at a leading radio broadcaster said: “Since e-auction follows a step-by-step process, bigger players are able to raise their bids until they win. Smaller players will not be able to keep up and compete properly.” In open auctions, he added, since every company gets only one opportunity to bid, smaller players had a chance if they bid sensibly.
Around 800 new licences will be up for bidding in the FM III auctions for setting up private radio stations in smaller cities and towns. There are about 200 private radio stations in the country at present.
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The FM III policy would also allow broadcast of news and current affairs by private stations as they are reported by Prasar Bharati.
The e-auction route, which was used for the 3G auction in telecom, won kudos for its transparency but had been criticised by many operators for spending huge sums for spectruma allocation.
Several operators had privately said that while it helped the government to rake up revenues that were higher than their initiall expectations, it was bound to put pressure on the finances of the telcos and could see tariffs going up. However, others contended that there was nothing wrong in the e-auction process — the price of 3G spectrum skyrocketed because there was very limited spectrum available.