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Sunday, May 5, 2013

Cabinet clears Phase-III FM radio auction

My colleague Priyanka Sahay co-authored this story appearing in DNA Money edition on Thursday, May 2, 2013.

The Cabinet on Wednesday approved the empowered group of ministers' (EGoM's) decision to e-auction 839 FM radio channels in 294 cities through private agencies. This ends the over two-year-long wait for the third phase of expansion of the private FM radio network (FM-3) in the country. The new FM radio frequencies will be opened for cities with a population of above one lakh. Currently, 86 cities are covered by FM radio services.

Wednesday's decision is part of amendments to the policy guidelines for the third phase of FM expansion, said finance minister P Chidambaram.

The migration fee, to be decided after consultations with telecom regulator Trai, will be charged from existing operators upon their migration from Phase-II to Phase-III. The specific departures from the Request for Proposals (RFP) format followed by the Department of Telecommunications (DoT) for auction of 3G and broadband wireless access spectrum proposed by the EGoM — circulated as annexure to the agenda note — for the FM radio auction were also approved with some amendments.

It has also been decided that the additional channels that may become available due to a reduction in the inter-channel spacing to 400 KHz from 800 KHz earlier could be considered subsequently, after feasibility studies are completed.

FM radio players hailed the Cabinet decision.

"We are looking forward to a fair and transparent e-auction. Our investment decisions will be driven by payback and IRR (internal rate of return) and the future projected growth of key markets," said Tarun Katial, CEO, Reliance Broadcast Network Ltd, whose '92.7 Big FM' radio reaches 45 cities and over 1,200 towns.

Apurva Purohit, CEO, Music Broadcast (RadioCity 91.1), was also gung-ho. "Being a pan-India player, we will certainly be looking to expand our footprint," she said.

Purohit, in fact, said her company has already worked out details like investment during the bidding process and capital expenditure. "We are a debt-free company with strong backing of financial institutions and private equity investors."

Similarly, 94.3 MY FM officials said they are ready for the e-auctions. Their focus will be only on Tier II and Tier III towns where the company already has a presence through its print business. "Being part of D B Corp which has an impressive cash balance, we should be able to meet the capex requirement through internal accruals," said an official.

In order to prevent monopoly, no group will be allowed to have more than 15% of all the channels, except in the North-East, Jammu and Kashmir and some Union Territories.

Uday Kumar Varma, secretary to the information and broadcasting ministry, had said earlier that the government will earn a revenue of Rs 1,500 crore from the e-auction which is expected to be completed in one year.

A CII-Ernst & Young report said earlier this year that the FM radio segment is expected to grow by Rs 2,300 crore at a compounded annual growth rate of 18% within three years after Phase-III.

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