Single entry fee for FM operators mooted

Trai recommends a one-time entry fee and a revenue share of 4% in 2nd phase.

In a move that could provide some relief to troubled private FM radio companies, the Telecom Regulatory Authority of India (Trai) today recommended a low one-time entry fee and a revenue share of four per cent in the second phase of private FM radio licensing. Apart from this, the regulator also suggested that existing licence holders would be allowed to migrate to the second phase.

Trai also called for a review of the foreign direct investment norms in the sector as well as the ban on airing news and current affairs programmes. The regulator also recommended a review of cross-media ownership issues so that monopolies did not emerge in news dissemination.

Under the existing regime, the licence fee is determined by an auction, and it escalates 15 per cent every year. For example, the annual licence fee for the Delhi circle in the first year was Rs 7.18 crore, which will go up 15 per cent this year. FM radio companies have been pushing for a change in the present regime to a revenue share model for quite some time.

"This is a welcome move, and will make our business more viable. The high licence fee has been the major hurdle in our growth," said an executive with Red FM, the radio channel owned by the India Today Group. Private FM radio companies had said they had suffered a loss of Rs 200 crore in the last financial year on account of unfriendly policies.

The losses incurred by private FM radio companies in 2002-03 has been estimated at Rs 110 crore. Trai also recommended that all bidders in phase-I should be eligible to bid for phase-II, subject to them dropping the cases they have filed against the government.

It, however, pointed out that bidders, both new and those having the phase I licence, would be evaluated and the highest bidders for any location would be selected.

To prevent non-serious players in the sector, it was also recommended that all qualified bidders would have to deposit 50 per cent of the reserve price of phase I along with the financial bids. In addition each successful bidder would have to pay the licence fee within a week awarding the licence.

The entry fee, along with the performance bank guarantee (PBG), which will be 50 per cent of the entry fee, will be forfeited if there is a default at any stage -- the bank guarantee will be returned after the station is operational and the first installment of licence fees has been paid. Trai also favoured co-location of facilities of private FM radio companies.

It recommended removing the current ban on multiple licences in one centre, adding that the maximum number of licences that one entity could hold should not be more than 3 or one third of the licences in one city, whichever is less.

"Such multiple licences should be given only in cities with at least 6 licences. There should be no restriction on the number of licences that can do news and current affairs. There should also be a restriction on the number of licences that can be owned nationally -- at 25 per cent," Trai said in its recommendations.