Radio operators such as Radio Mirchi, Red FM and Radio City have sought a near 70% reduction in reserve price of the radio channels in the upcoming auction. Their contention is that auction is for cities where there is not much of business opportunity due to weak subscriber base, ad revenues, etc, but the cost of operating the channels is high.
Further, audience behaviour has changed from listening music on FM channels to online content via several apps. According to an industry executive, these days smartphones have also stopped coming with built-in FM radio receivers, which has affected listenership, thus impacting revenues.
The Union Cabinet last week approved a proposal to hold a third batch of e-auctions for 730 channels under Private FM Radio Phase III policy. The plan is to cover 234 new cities, by auctioning radio channels at an estimated reserve price of `785 crore.
“Flaws remain in auction methodology which may adversely affect new auctions, especially in C&D category cities where there is a little interest due to low revenue possibility and the high fixed cost (annual fees, Prasar Bharti fees, spectrum fees, etc.,” Association of Radio Operators for India (AROI) told the Telecom Regulatory of India (Trai), which is currently working on recommendations on reserve prices for auction of FM radio channels. AROI represents various private FM radio companies.
According to AROI, the last batch of frequencies auctioned failed (with less than 25% frequencies offered being bid for) due to high reserve prices. The FM broadcasters have recommended that the reserve price for the auction should be obtained by multiplying the valuation price of FM radio channel in a city by 0.25 and not by 0.8. The same if accepted, will reduce the reserve price of the channels by up to 70%.
They said in the phase 2 auctions, bids of 25% and above of the highest bid were considered successful and allocated. “This (a reduction) will ensure greater participation and successful bidding. There will be gain to the government as highly successful auctions ensure that less frequency will lie dormant which give no contribution to public exchequer,” AROI said.
Currently, for calculating the reserve price of FM radio channels, Trai takes into consideration the approach used for calculating the spectrum price for telecommunication services – a multiplication factor of 0.8. The same is obtained by multiplying the valuation price of access spectrum by 0.8, based on past domestic as well as international experience, according to Trai.
Earlier, this year Fever FM announced shutting down its radio station, ‘due to the evolving trends in the media industry’, the company had said in a post.
As on March 31, there were 388 operational private FM Radio channels across 113 cities with operational 36 private FM Radio broadcasters, according to Trai data.
With the upcoming radio channel auction, the government’s intent is to expand the network of FM radio especially in aspirational districts, many of those are left wing extremism (LWE)-affected areas. The target is to offer new and native content in local languages and also strengthen government outreach.
Under private FM phase III policy, the government increased the foreign direct investment (FDI) limit in the sector to 26% from 20%. The companies were also allowed to carry news bulletins from All India Radio in an unaltered form.
Notably, in 2017, the auction of the third batch of 683 private FM radio frequencies in 236 cities, that was approved by the Cabinet did not happen. The same was owing to disagreements over multiple issues with the industry.