Govt okays FDI in radio

Regulatory fee outflow to decline 50%.

In a decision that comes as sweet music to private FM radio companies, the government today allowed 20 per cent foreign direct investment in the sector and ushered in a revenue share regime of 4 per cent a year to replace licence fees.

However, the Cabinet, which met in New Delhi to thrash out the policy for the second phase of FM radio licensing, decided to continue the ban on news and current affairs programmes.

Thus far, the only foreign investment allowed in private FM radio companies was foreign institutional investment up to 20 per cent of equity.

The operators will now have to pass on 4 per cent of their revenue every year to the government.

The current regime is based on city-specific licence fees (Rs 15 crore for Delhi, Rs 12.5 crore for Mumbai, Rs 7.5 crore for Chennai etc.), which increases 15 per cent every year.

Those who have defaulted on licence fee payments will not be black-listed.

Shares of Mid-Day Multimedia Ltd, which operates a private FM channel, rose 13 per cent to Rs 72 on BSE yesterday and of TV Today, whose parent operates an FM channel, rose 10.4 per cent to Rs 82.55.

"The time has come for the revival of radio in the country and the government has planned a huge expansion of the private FM radio network which will lead to generation of employment and opportunities and encourage talent," Information and Broadcasting Minister S Jaipal Reddy said.

The licence fee regime has been talked off as the primary reason for the off-tune financial performance of the sector which today has only 21 frequencies operating out of the 108 for which bids had been invited. Of the 21, two were preparing to shut shop.

The 21 private FM radio companies together earned revenues of Rs 116 crore in 2003-04, more than double the previous year, but incurred losses of Rs 130 crore after paying the government Rs 200 crore in licence fees.

Bidding for the second phase (for 330 stations in 90 cities) would start in about a month, Reddy said, observing that the government had not looked at the revenue aspect at all while framing the new policy.

In the second phase, he said, cities would be divided into four broad categories, from metros down to the smaller towns.

The number of operators in the A category (metros) will be restricted to 10-11. The number will be six in the B cities, four in C and two in D.

"The new players will have to pay a one-time entry fee through close bidding process, and each successful bidder will pay as per his bid amount," Reddy said.

The existing operators will have to pay the average amount bid by the new entrants. Reddy said the government planned to set up a quasi-judicial regulatory authority to deal with disputes, pending which the ministry will have regulatory powers.

To discourage monopoly and facilitate generation of local content, the government has decided not to permit networking between radio stations in A and B cities.

"However, in C and D they have permission to network," he added, pointing out that they can share certain programmes.

Also, to check monopoly by a single big operator, a company cannot have radio stations more than 15 per cent of the total national number, he said, adding that a company cannot run two channels in the same city.

Striking the right notes

• Regulatory fee outflow to decline 50%
• FDI potential estimated at Rs 200 cr
• Shot in the arm for HT Media and Virgin Radio
• Private equity funds may get interested
• Tie-up with foreign stations on cards