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BW Businessworld

FM Gets Lucky The Third Time

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Radio is finally rocking. After a three-year wait, the central government has cleared the Phase III rollout that will see private FM radio spread its wings across 839 new stations in 227 cities. The medium has been hobbled by too many regulation over the years. After the last round of auctions in July 2005, there are currently 260 stations on air across 91 cities.
"We have not got all we want, but it is a good start," Apurva Purohit, CEO of Radio City, told BW. "The three-fold increase in FM stations will add to both reach and depth. There will be more listeners and more variety on offer."

Radio operators will be allowed to operate multiple channels in one city. An operator can now launch several channels on a single licence as long as these do not exceed 40 per cent of the stations and there are not more than three players in a city.

The increase in FDI, however, has been miserly — from 20 to 26 per cent, which is far lower than other similar media segments. For instance, it is 100 per cent in entertainment television and 74 per cent in digital cable networks. This will hinder large investments required for the big rollout of 839 new radio stations. The government has classed radio with news television and so the 26 per cent FDI. Radio, though, is more akin to entertainment media.

As expected, the Cabinet decision has not opened FM to news, but has allowed private stations to relay All India Radio capsules. "I am free to run television news channels, but the door is shut on radio," says Anurradha Prasad, president of the Association of Radio Operators and owner of Radio Dhamaal and television network News 24. Sports, traffic and current affairs — a sizeable part of FM programming — are not covered by the ban.

Radio operators have an issue with e-auctions, through which the government hopes to earn Rs 1,733 crore. They say it will lead to over-bidding and make licences expensive. "The last round of normal auctions in July 2005 was clean and transparent. There is no reason why the same process should not be used, except to drive up licence prices," Radio City's Purohit says.

Going by history, many of the new radio stations may not find takers. For instance, of the currently available licences for 330 stations, only 260-280 were picked up. Existing players may expand, but not many new players are expected. Big operators such as the Anil Dhirubhai Ambani Group's Big FM and Bennett, Coleman & Co's Radio Mirchi and Radio City can now own 100 or more stations since the limit is 15 per cent of the total stations available. With one studio now allowed to serve more than one station, this will allow for economies of scale.

The industry is cautiously optimistic. Radio operators say the number of new stations is unlikely to add much to advertising revenues as most of these are in far-flung districts or small towns. But a steady 20-30 per cent annual growth in revenue for the Rs 1,000-crore industry is on the cards. The main expansion, as expected, will be in the regional language space.

(This story was published in Businessworld Issue Dated 18-07-2011)