In expansion mode

The revenue sharing model may give a new lease of life to FM radio.

The private FM radio scene was revolutionised with the second phase expansion of FM radio by the government. Last year, successful bidding of 280 FM frequencies was carried out in 91 cities, which means as many FM radio stations in the country.

The government earned a revenue of Rs 1,145.47 crore through this exercise by way of one-time entry fee (OTEF) and migration fee.

Currently, 44 private FM stations are operational, and the remaining will go on air by the end of August this year.

PHASE BY PHASE

FM-Phase I

Launch 2000-01, under license fee model

Operational stations 21

Combined license fee paid till 2005 Rs 320 crore

Combined revenue loss till 2005

Combined ad-revenue till 2005

FM-Phase II

Operational stations in 2006 44

Total stations by August 2007 266

One time entry fee Rs 1,145.47 crore

Ad-revenue projections

Under the new policy provisions, the ministry of information and broadcasting has ensured that a single company does not monopolise the airwaves.

Accordingly, no entity can bid for more than one FM radio station in the same city/town. And no single entity is allowed to own more than 15 per cent of the total airwaves frequencies in the country.

Private FM radio was launched in the country in early 2000. The first phase of FM radio did not take off, even as the government had invited companies to bid for over 130 frequencies. Main reason: an escalating license fee regime. It was an open bid, with the company offering the highest money getting the licence.

This resulted in very high cost to private radio companies that paid as much as Rs 10-12 crore for a station in Mumbai. There was also the rider of 15 per cent increase in the license fee each year. Only 23 FM stations opened initially with two closing shop eventually.

Private FM companies urged the government to look into the rationalisation of the FM radio business. The government asked the Telecom Regulatory Authority of India (Trai) and FICCI's Amit Mitra Radio Committee to review the sector.

On their recommendations, the ministry of information and broadcasting agreed to move to a 4 per cent revenue-sharing model for the second phase of privatisation of FM radio.

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SNIPPETS

Give me news
While the Indian FM radio market is growing at over 30 per cent, it can grow even faster if it is allowed to broadcast news and current affairs programmes.

According to radio company officials, the demand for the inclusion of news has been pending with the information and broadcasting (I&B) ministry for a long time.

Government officials say that monitoring of news content across 91 cities and in regional and national languages is a very difficult task. "Let the second phase expansion of FM radio finish. If the industry can convince us that the absence of news and current affairs programmes leads to revenue loss, we will look into it," a senior I&B ministry official said.

Listening forward
Even as the second phase expansion of private FM radio is underway, the government has chalked out its strategy of opening a third-phase expansion, beginning later this year.

Over 700 new frequencies covering over 100 towns will be made available for bidding. As per the 11th Plan approach paper targets, the government is keen to expand FM radio coverage to 100 per cent, from 33 per cent at present.

This will make India a unique market in terms of the maximum FM radio stations launched within a short span of 2-3 years. At the end of the third phase, India will have over 1,000 private FM stations.

The ministry of information and broadcasting may earn over Rs 2,000 crore as one-time entry fee from the third phase. As per the latest estimate on its advertising potential, India would be able to generate over $237 million in the next four years.