Even as the government is busy clearing the decks to start the auctioning of phase-III FM radio stations, there are varied opinions on the extent of impact that recessionary environment will have on the bidding process.
The FM radio players feel that the tight cash situation in the current economic environment will definitely act as a spoiler coupled with factors like the unresolved music royalty crisis, bleeding balancesheets, the fact that most of the stations to be auctioned are tier-II and tier-I towns clubbed as category C and D centres with limited revenue generation opportunities.
Over and above, in this round of bidding many of the stations don?t have ready infrastructure like transmission towers, which according to information and broadcasting ministry plans, would have to be set up by a fund pooled in by the successful bidders of the concerned centre.
Analysts and industry watchers, however feel that the recessionary forces are unlikely to affect the competition in phase-III as the amount involved is not significant for the larger players.
In many small centres like Panchkula or Aligarh the total investment to be incurred in setting up a FM station is less than Rs 1 crore, an amount less than the cost of a shop in a posh metropolitan locality.
At a time when banks, bikes, telecom and retail players are heading to tap the rural populace, the reins to FM radio stations in those locations will remain lucrative.
?If the market conditions don?t improve, cash tight situation prevails till the bidding process commences and the music royalty issue is not solved, the FM radio players would not be greatly enthused about the phase-III auctions. The decision to bid then will be guided by other factors. Players would go for selective bidding on strategic factors like presence in geographies among others,? said Prashant Pandey, CEO, Radio Mirchi.
Also at a time when banks are not keen to lend to the sector and most of the players are still suffering losses, what is clear is bidding amounts and government realisation this time will be lower, added Pandey. It is worth noting that none of the major players including Radio Mirchi, Big FM, Fever 104 have been able to break even till now.
Apurva Purohit, CEO Radio City and president AROI also said that phase-III auction will be a non-starter unless the ongoing music royalty row is solved, economic environment becomes more conducive and multiple frequencies are allowed.
According to Purohit, the FDI limit should be increased to 26% from the existing 20% and the royalty row solved by linking the royalty of a centre to its size.
Otherwise there will be centres which will end up paying an amount for music royalties that will be in excess of their total revenues, creating an anomalous situation. Such business will be non-viable and there will hardly be anyone interested in such situation.
However, analysts feel otherwise. ?The licences are given for at least 10 years?that too, from the date of putting a station on air. And it takes one to two years to start operations, particularly this time when the operators are expected to put up their own transmission infrastructure, including towers. By such time, recession should be a thing of the past,? said Sunil Kumar,managing director, Big River Radio (India) , a FM radio consulting firm who disagreed that current meltdown will have significant impact on the bidding process.
And considering that the industry is growing at the rate of 30-40% annually, any impact due to the adverse economic conditions will only mean slight slowing down of the rate of growth, according to Kumar adding that radio as a low cost, flexible medium tends to become the preferred medium during the times of recession.
