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FM radio: companies chart expansion drive

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India’s radio broadcasting landscape is set to change as a bunch of FM companies get ready to launch their stations this year. Close to 100 new FM stations will come up in the next one year on the frequencies that were auctioned by the government in phase III of radio privatization, taking the total number of stations to almost 345.

On 9 March, HT Media Ltd announced the launch of its second radio station, Radio Nasha 107.2 FM, in New Delhi. The company already operates FM station Fever 104 in the city. The launch of Radio Nasha is the first of the phase III radio launches by HT Media. The company acquired 10 new frequencies in Delhi, Mumbai, Hyderabad and several towns of Uttar Pradesh during the phase III FM radio auctions held by the information and broadcasting (I&B) ministry beginning in July last year.

Entertainment Network (India) Ltd (ENIL), the radio company of the Times Group, which won 17 frequencies, plans to roll out its stations shortly. Of these, seven are in new cities and 10 are the second and third frequencies in towns where it already has a presence. Prashant Panday, chief executive of Radio Mirchi, the FM radio brand of ENIL, expects to launch the Bengaluru, Kochi, Guwahati and Chandigarh stations first.

HT Media, publisher of Hindustan Times and Mint, and Times Group, which brings out The Times of India and The Economic Times, also compete in some print media markets.

Tarun Katial, CEO of Reliance Broadcast Network Ltd, is also looking to expand his radio business under the Big FM brand across key cities such as Pune, Nagpur, Lucknow, Varanasi and Patna as well as other geographies such as Uttar Pradesh, Bihar, Maharashtra and the North-East.

“We acquired 14 new stations across these markets as part of the bidding process and continue to be the largest radio network in India with 59 stations. The network now covers all four ‘A+’ category towns, seven out of nine ‘A’ category towns and 12 out of 17 ‘B’ category towns,” said Katial.

Radio City, the FM brand of Music Broadcast Ltd, will also increase its footprint as it launches 11 stations to add to its current 28. Since Radio City will be venturing into new cities, it will use the same brand name, unlike HT Media, which has launched its second frequency in Delhi under a new name.

Radio Nasha will play retro music from the 1970s to 1990s, said Harshad Jain, CEO (Radio and Entertainment) at HT Media.

“The launch of new stations will depend on when the common transmission infrastructure (CTI) being built by Becil (Broadcast Engineering Consultants India Ltd) gets ready,” said Abraham Thomas, CEO of Radio City, which is now part of Jagran Prakashan Ltd, which publishes Dainik Jagran.

After the phase II auctions, the government permitted radio firms to put up interim facilities in some cities so that they could start operations immediately. However, in phase III, no such allowances have been made and radio operators are waiting for Becil to complete the work.

Any delay in launching channels affects the radio companies’ return on investment as the auction had concluded six months ago and the firms paid Rs.1,187 crore upfront to the government.

The companies, which are on the cusp of expansion and waiting for the next batch of frequencies to be put up for auction, are irked about a few other issues apart from the delivery of CTI.

For starters, some want the removal of a clause in the policy that puts nationwide and city-specific restrictions on permissible market share percentages.

Katial of Big FM said radio operators are keen to have the cap on ownership removed so that “strong national and regional players can emerge and consolidate operations, bring in economies of scale to the industry, reach grass-roots level and acquire more frequencies”.

So, some firms are seeking the withdrawal of the 40% cap on the total number of channels that an operator can run in a city and the 15% cap on a national level (the 15% cap is not applicable to channels located in Jammu and Kashmir, north-eastern states and island territories).

No such caps exist in television or in print, they argue.

Agrees Ashish Pherwani, head (advisory, media and entertainment) at consulting firm EY: “This is a regulatory challenge for FM radio. There is no limit on TV channels being launched, or on newspapers, magazines or digital media. However, radio expansion is regulated through the licensing process. This results in a natural curb on growth of the industry.”

Those in favour of the caps say they may have been designed to address concerns around the creation of monopolies. But there are regulatory bodies such as the Competition Commission of India that can look into issues related to unfair trade practices, those against the caps counter.

There has also been a controversy over the three-year lock-in period condition, which is part of the policy. This mandates that the stake of the largest Indian shareholder in a radio broadcasting company cannot be reduced below 51% for a period of three years from the date on which all the channels allotted to the radio company become operational. While ENIL is lobbying for this clause to be waived, Jain of HT Media said that asking for its removal is against the law of the land.

His argument is that removing this clause will help ENIL get a back-door entry to own second frequencies in cities such as Mumbai, Delhi and Kolkata.

His contention is based on the fact that ENIL acquired seven radio stations (Oye FM) from TV Today Network last year. However, the government granted permission only for four of them in Amritsar, Jodhpur, Patiala and Shimla. The buyout of the three stations in Mumbai, Delhi and Kolkata was rejected as the proposed sale did not conform to the FM radio guidelines.

According to Jain, in phase II, second frequencies were not permitted through the acquisition route. “The policy clearly said that second frequencies in cities like Mumbai, Delhi and Kolkata cannot be acquired. To get those frequencies, the companies have to go through the auction route,” he said.

Indeed, that seems to have been the government’s thinking as well. Otherwise, given that the FM business has its share of laggards that are up for sale, the auctions would have flopped.

ENIL, meanwhile, rebranded the four Oye FM stations as Radio Mirchi. However, the remaining three stations—Delhi, Mumbai and Kolkata—are still not with the company, Radio Mirchi’s Panday claimed. The company is in litigation with the I&B ministry on the issue. HT Media is an intervener in this case and the next hearing is on 30 March.

Panday does not see the acquisition of the three stations (in cities where ENIL already had a station) as a back-door entry. He argues that ENIL had signed a deal with TV Today in February 2015, much before the auction started and applied to the I&B ministry for approval that same month. He said the company could not have known the auction amounts at that point and the auctions could have ended at a very low price. Still, this argument doesn’t address the fact that the phase II regime did not allow a company to acquire a second licence in a city.

During the phase III auction, the second frequency in Delhi went for Rs.169.2 crore, while the two new frequencies in Mumbai were picked up for Rs.122.8 crore each. (The reserve price for phase III auction for Delhi and Mumbai was the highest bid price received for that city in the phase II auctions, which was Rs.31.42 crore for Delhi and Rs.35.20 crore for Mumbai.)

There are two issues involved here: sanctioning the purchase of a second licence awarded in the same city under phase II rules (which would mean an exception), and allowing a licence thus acquired to be migrated to phase III by paying a sum far less than what it would have cost to buy the same licence in a phase III auction (which would be another exception).

Still, back-door entries are not new in India. They were quite common in telecom, where the government ended up allowing companies that had won fixed-line licences to offer mobile services and, later, those that had won licences to offer mobile telephony on one technology platform to do so on the other dominant platform. This happened after a lot of lobbying and litigation and, fortunately for the government, because spectrum wasn’t being auctioned at the time of these controversies, the matter was resolved, albeit, uneasily, with the telcos that secured back-door entry paying a so-called unified licence fee.

It isn’t clear whether the government will ask ENIL to pay the amount the winning bidder paid in the case of the three licences it wants to migrate to phase III.

In telecom, for instance, according to a policy put in place in November, the government allows companies to share and trade spectrum, as long as they pay the spectrum price determined at the most recent auction to it.

Panday’s position is that ENIL will not pay the auction winning amount. He cites other acquisitions of phase II licences involving other companies to make his point—only all those acquisitions had companies buying licences in cities where they did not have a first station, which was the only form of acquisition allowed under phase II rules.

The operators are also unhappy that the government is keeping news out of the purview of FM channels. Currently, they are only allowed to carry All India Radio news bulletins in exactly the same format. This clause has been persistently questioned as it goes against promoting plurality of views. Since most operators are backed by media firms, they can easily source their news in-house.

Big FM’s Katial said that radio being a free-to-air medium for the masses should not be restricted in terms of sourcing of news and information.

“It should be considered as the primary medium for dissemination of information at national and local level, which will assist in formation of pluralistic opinions and higher awareness among listeners,” he said.

Thomas of Radio City agreed: “Keeping out news and current affairs from FM channels does not make sense in a digitally wired world.”

Like television, private radio should also be liberalized and the standard rules of checks and balances as applicable to other news media should apply to FM radio as well, he said.

The radio sector is positive about prospective growth with the launch of new stations.

“We estimate that phase III could grow the industry size by 25% within a year of operationalizing the new stations. Radio will become a more valuable medium to advertisers, by providing a deeper region-wise bouquet of channels. It will become a stronger alternative to print and regional TV,” said Pherwani of EY. In advertising terms, FM radio is a Rs.2,000 crore industry.


source:-

FM radio: companies chart expansion drive - Livemint
 

Manu

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I think Radio One Gujarat... Indian's first Retro fm station
 
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