Centre set to raise FDI in FM radios to 26%

Written by Ashish Sinha | New Delhi | Updated: Jul 30 2010, 05:32am hrs
In what may come as a good news for the private FM radio firms, the government is all set to hike the foreign investment limit in the FM radio sector from the current 20% to 26%. This comes soon after the sector regulator Telecom Regulatory Authority of India recommended hiking the foreign investment cap for the FM radio firms on June 30.

Now with the committee of sectretaries endorsing the view of the sector regulator, decks have been cleared for the extension of foreign investment cap to 26% for the third-phase for FM radio which will see 806 FM stations across 217 cities. The hike in foreign investments is expected to help radio firms get foreign investments for expanding in the FM-III. According to sources, now the information and broadcasting (I&B) ministry will include it in the FM-III policy that it is currently finalising. The policy will be finalised after it gets the approval from the Cabinet, sources said.

Considering that most FM radio firms have struggled financially to operate the existing 250 FM stations, it will be some time before serious foreign investors will show interest in the radio business. However, a 26% cap will help us attract foreign investments, a senior executive of a leading FM radio firm said.

Among other new initiatives planned for FM-III, the government is also expected to allow the radio companies to own multiple FM stations within a city. Currently, the policy does not allow any FM operator to operate more than one radio station per city. As already reported by FE, the FM-III policy is also expected to follow the clock auctions used to select winners of 3G and BWA spectrum recently.

However, several existing FM operators want the resolution of music royalty fees before the FM-III kicks off. Currently, the music royalty accounts for over one-third of the revenues of the radio operators who together generate annually around Rs 700-800 crore in advertising revenue. Coupled with music royalty, operating expenses, investments made in licence and other costs, almost all radio operators are in losses. Unless, government is able to tackle the important issues, the radio industry will not be financially viable in times to come, a top executive of a FM brand said.