Optimism rises on Phase III rollout of FM radio services

This story first appeared in DNA Money edition on Tuesday March 29, 2011.

Eight hundred new frequencies across 300 towns. That’s what the rollout of Phase III of FM radio services in the country will mean. While the development has been eagerly awaited by stakeholders of the Rs1,000 crore sector for some time now, the refrain now is that a rollout should happen sooner than later this year.

Tarun Katial, CEO, Reliance Broadcast Network, said 2010 was a year of waiting for the industry at large. “While there has been some delay in the process, we feel 2011 will be a year of action and the exercise (Phase III) should happen sometime this year,” he said. Katial was speaking on the second day of the Ficci Frames 2011 conference in Mumbai recently.

Under the phase, private FM radio stations can come up in every town with a population of over 1 lakh, there will be multiple frequencies in bigger towns (which is expected to engender content plurality), the licensing will be for 15 years from 10 now, and news broadcasting will be allowed through feeds from Prasar Bharati.

“This will allow players to make considerable investments, afford a lot of networking which will make smaller radio stations viable,” said Prashant Panday, executive director & CEO, ENIL.

But beyond the optimism lurk concerns. For instance, strategic investors are yet to find the best exit routes. Salil Pitale, head of media and telecom at broking house Enam Securities said the policy today is still very restrictive in terms of exits for strategic investors. “Also, I don’t think there are too many cities that can absorb more than five or six radio stations which will eventually restrict the diversity of programming that is being spoken of,” Pitale said.

There are worries over the auction process to award new frequencies too. “There is talk of e-auctions similar to what the government did to award 3G licences. But this could lead to unusual rise in costs, which can test viability. We have already seen the outcome during Phase I. There could be new players wanting to foray which will skew the pitch for existing ones,” said Rahul Gupta, director, SPML, which runs Radio Mantra in Tier II and III markets.

While policy matters are being mulled over for long, its implementation is getting even longer thereby putting hurdles in the overall growth process. “I think it is very important for the government to identify ways and to make radio profitable. Speeding up of policy matters and implementing them can help the players grow and make their businesses profitable,” said Harrish Bhatia, CEO, 94.3 MY FM.

However, there are others in the radio media monitoring/ research sector who feel the industry is being too cautious. L V Krishnan, CEO, TAM India, said, “The sector is growing in the right direction. While there are issues, the fraternity seems more worried about them than working to overcome them,” he said.