In what may be a first for the private FM radio industry, the Ministry of Information and Broadcasting (I&B) may soon examine the financial details of leading companies to get a measure of financial losses, operational expenditure and other details before announcing the policy for the third phase of private FM radio broadcasting (FM-III).
This comes after the owners and promoters of several leading FM radio brands met Ambika Soni, the I&B minister, recently to ask for an extension of their 10-year radio licences (2006 to 2015) by another five years (till 2020) before announcing FM-III, due to mounting losses and non-viability of FM radio business under the current norms.
According to government sources, the I&B ministry is keen on the FM-III policy, which will see an additional roll out of over 700 FM stations. But, because of concerns raised by the current radio operators, it has not been able to place the FM-III draft policy for Cabinet approval.
Around 40 radio companies operating 251 private FM radio stations between them say their combined losses (one-time entry fees or OTEF, plus operational expenditure) have crossed Rs 2,300 crore in just four years of their operations, on an annual revenue of only around Rs 800 crore. Because of this, investors are not willing to put in more money for participating in FM-III, unless the government addresses their immediate concerns, operators say.
“Once the OTEF is amortised to over 15 years instead of 10 years now, the radio industry will become lucrative for investment due to the increased time-based valuation. The I&B ministry has asked us to show our financial statement for the last four years on our demand.”
“We want to tell the government that the FM radio business can become viable, provided it makes certain changes in the FM-III policy,” said a top executive of a FM company, requesting anonymity.
A top I&B official said: “We are open to addressing the concerns of existing radio firms and will do everything possible within the law to help them.”
Sources say the I&B ministry may rope in the sector regulator, the Telecom Regulatory Authority of India (Trai), to look at the issue of extension of radio licences of current operators by another five years while it sends the note on FM-III for cabinet approval.
Top I&B officials and the owners and promoters of several FM radio companies will meet later this week to discuss the matter. “We are going to discuss three things with the I&B officials. Current losses faced by radio industry, how increasing the licence period will not cause a loss to the government exchequer, and solutions to any possible legal hurdles in getting the licence period extended,” said a top executive of a company involved in the issue.
Several radio companies have told the I&B ministry that FM-III may become unviable for them under the present conditions. “The 700-800 new stations proposed in FM-III are all in smaller towns and districts, where the potential to earn revenue is minimum. Radio has become an organised sector; therefore, government needs to be more responsive in its approach, going forward,” says a media consultant who sets up radio stations on behalf of the companies.
