The Cabinet on Thursday cleared the third phase of expansion of FM radio by approving e-auctioning of a record 839 private radio stations in 227 towns and cities. In the past two phases, the government had offered 250 stations in 86 cities. The Cabinet also allowed private radio channels to broadcast All India Radio news.
The government expects to earn Rs 1,733 crore as auction fee in phase-III.
The Cabinet also increased the foreign direct investment (FDI) limit in private FM radio broadcasting companies from 20 per cent to 26 per cent.
This is in line with the Telecom Regulatory Authority of India’s recommendation of June 2010, but much lower than the 49 per cent limit it had suggested in 2008.
To make it easier for owners to sell stakes and get partners, the Cabinet also reduced the lock-in period for the shareholding pattern from five years to three years.
To encourage operators to launch channels in remote areas such as the northeastern states, Jammu & Kashmir and the island territories, the Cabinet reduced by half the licence fee for these areas for the first three years.
It also provided operators the flexibility of offering a range of programming by allowing them to launch multiple channels within a licence. But a private operator cannot own more than 40 per cent channels in a city. There cannot be more than three players in a city.
PAN-INDIA PLUS
In a bonus to pan-India operators, the Cabinet also decided to allow networking of channels within an FM broadcaster’s own network. At present, this is permissible only in ‘C’ and ‘D’ category cities of a region. This means companies with national infrastructure can broadcast content from a single city and will not have to open studios across the country. This will lower their costs.
However, the limit of 15 per cent on ownership of channels at the national level by a single entity has been retained. However, this limit has been eased for Jammu & Kashmir, the northeastern states and the island territories.
I&B Minister Ambika Soni said the phase-III would cover all cities with a population of 100,000 and above.
The government had earned Rs 1,733 crore in Phase-I and Phase-II up to May this year through a one-time entry fee, migration fee and annual fee. Phase-III will bring in an equal amount.
INDUSTRY WELCOMES MOVE
“Radio will benefit because it will be able to enter new towns. For the first time, radio will be able to compete with regional print publications in small cities. This will increase radio’s share of advertising from 5 per cent to 7.5-8 per cent. It should grow at least 25 per cent per annum for the next five years,” said Prashant Panday, chief executive officer, Radio Mirchi.
Though the FDI cap has been increased to 26 per cent to bring in more investments, the industry is sceptical. “I doubt if it will affect anything materially. For FDI inflows to happen, profitability has to improve. We must wait and see what happens on this front,” said Panday.
Tarun Katial, CEO, Reliance Broadcast Network (RBNL), another large FM player, said, “Phase-III will allow us to further expand footprint. The permission to air news bulletins and sports events will benefit us in terms of revenue.”
Katial said the increase in the FDI cap would lead to more investments. “At RBNL, we will be looking at multiple frequencies, which will be a revenue multiplier without huge incremental capex/opex. In addition to key urban centres and a network of ‘C’ and ‘D’ cities, the significant increase in radio inventory and the pricing power offered by multiple frequencies in cities will lead to content innovations and drive growth,” he said.
The FM radio industry’s annual turnover is Rs 2,000 crore. However, companies say, except a few, most operators are not making money. Annuradha Prasad, chairperson, Association of Radio Operators of India, said, “The high royalty on music has taken a toll on private radio players and they are in the red.” After the new policy, which allows national networking and saves cost, they are expecting 30 per cent revenue growth. “As networking has been made permissible, radio will become more attractive to advertisers as they will be able to reach pan-India. The advertising pie will expand.”
