With a tough year behind it, the response from FM radio operators to the next round of auctions for frequencies is likely to be lukewarm.
With a tough year behind it, the response from FM radio operators to the next round of auctions for frequencies is likely to be lukewarm. “Advertising revenues were expected to grow by about 15-16% but have grown by just about 9-10%,” Apurva Purohit, president, Jagran Prakashan, and director, Music Broadcast, said. Purohit observed slow advertising from sectors such as real estate had hurt revenues of operators. Ashish Pherwani, head, media practice, EY, noted that with most frequencies in metro cities already sold out, the last batch of frequencies were in smaller cities. “As advertising may be hard to get for these markets, they may be hard to crack. As such, there may not be too many takers for the third batch of frequencies,” Pherwani added. Analysts believe the reserve price, at previous auctions, may have been relatively high for smaller cities given advertising rates are not too high.
Researchers at CRISIL point out advertising rates in tier 2 cities such as Kanpur and Lucknow are as low as Rs 250-Rs 660 per 10 second slot compared with Rs 1,150-Rs1,900 in Delhi or Mumbai. Nonetheless, radio operators are expected to try and share networks in most of the acquired frequencies rather than setting up full-fledged stations which might not be financially feasible. That way, new frequencies are likely to break even and turn Ebitda positive from the very first year.
The information and broadcasting (I&B) ministry indicated, in December, another round of auctions of 683 channels in 236 cities would be held though no dates have been announced. At the last auction for the second batch of Phase III, held in late 2016, only about a fourth of the 266 frequencies on offer of were finally acquired fetching the government close to Rs 200 crore. In all, the I&B ministry sold 66 frequencies in 48 cities. Of these, bidding above the reserve price was seen in just 8 cities and Sun Group and Entertainment Network India Limited were among the key bidders.
The total reserve price for the second batch of FM Phase III auctions was Rs 915.9 crore in 92 cities;the reserve price for the first batch of 135 frequencies in 69 cities, auctioned in 2015, was Rs 550.1 crore, Rajyavardhan Rathore, junior minister for I&B had said in Parliament.
Analysts at CRISIL believe the FM radio industry has the potential to double revenues in the next five years to an estimated Rs 3,900 crore from Rs 2,000 crore in CY 2015. They say advertising volumes would get a fillip with more reach following the regulations in Phase III; radio is expected to cover 294 cities — from 86 at present – and reach 85% of the country’s population. Phase III offers more flexibility because it allows ownership of multiple frequencies or channels in one city and sharing of network infrastructure. Also, the licence period has been extended to 15 years as against the earlier10 years.