FM policy to provide revenue sharing, minimum guarantee

New Delhi, March 29 | Updated: Mar 30 2005, 05:30am hrs
The second phase of FM radio policy is likely to roll out a revenue-sharing regime, but with the condition of a minimum annual guarantee payment. That is, private FM radio companies will need to pay to the government, either the minimum guarantee amount or the revenue-sharing figure, whichever is higher on an annual basis. Revenue-sharing is expected to be finalised at the rate of 4%, sources said. The minimum guarantee would vary from one city to another, it is learnt. On the whole, it would be a hybrid between revenue-sharing and fixed fee models.

Significantly, both Telecom Regulatory Authority of India (Trai) and the Mitra Committee had recommended a revenue-sharing regime for private FM radio companies. The Amit Mitra Committee was set up by the NDA government to recommend guidelines for FM radio. Following the Mitra panel recommendations, Trai issued guidelines on the issue.

Currently, private FM firms follow a licence fee model, that is different for every city. Also, theres a 10% escalation in the licence fee every year.

The Union Cabinet is expected to clear the policy shortly and FM-II rollout is likely after May.

Radio Raga
Private FM radio companies will need to pay either the minimum guarantee amount or the revenue-sharing figure, whichever
is higher on an annual basis
Revenue-sharing is expected to be finalised at the rate of 4%
Minimum guarantee would vary from one city to another
On the whole, it will be a hybrid between revenue-sharing and fixed fee models
Entry for phase two will be through a bidding process, and an entry fee will be charged. Thereafter, the companies would pay annual fees to the government.

As reported earlier in FE, news is not likely to be permitted in private FM radio. At present, only All India Radio is allowed to broadcast news and current affairs programmes.

Changes are not expected vis-a-vis foreign investment either. In phase one, foreign direct investment (FDI) is not permitted in private FM radio, but up to 20% FII holding is allowed.

Among other things, co-location of antennae of licensees in metros is likely to continue. In Delhi, Kolkata and Chennai, its mandatory for FM players to co-locate on a common tower during phase one. An exception was made for Mumbai due to technical reasons.

India has scope for over 400 FM radio stations, according to information and broadcasting minister S Jaipal Reddy.

Most phase I players, including Bennett Coleman, Living Media and Sun, are likely to bid for the next round of FM radio, sources indicated. Hindustan Times, which entered into a pact with UKs Virgin Radio recently, may also bid for the second phase.

Currently, 22 private FM stations are operational under phase I. While phase I marked the entry of big players into private FM, phase II would see bidding by smaller entities too.