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FM Phase III: No reduction of reserve price or frequency gap, but migration formula accepted

02-September-2014
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FM Phase III: No reduction of reserve price or frequency gap, but migration formula accepted

The Ministry of Information and Broadcasting (MIB) has accepted TRAI’s recommendations on increasing license period as well as the TRAI migration fee formula. This moves the FM Phase III auctions a step closer to completion. The Government had actually intimated this in a letter a couple of weeks back. (Govt writes to radio operators, accepts TRAI's recommendations)

However, the Ministry has turned down a review of the reserve price for FM Phase III auctions that had been recommended by TRAI. Also, reduction in FM frequency gap in cities, which would have allowed more radio channels per city, has been ruled out.

TRAI in its recommendations at the start of the year had pointed out that there were inconsistencies with the proposed methodology of deciding reserve prices for existing Phase II cities. Also, in case of new cities to be added during Phase III, the Government proposed fixing reserve price as the highest bid price received during FM Phase II for that category of cities in that region. So, for example, Chandigarh, which had a price of Rs 15.62 crore, is the reference city for operators wanting to start operations in Shahjahanpur, who will therefore have to bid a minimum of Rs 15.62 crore for Shahjahanpur.

As TRAI observed, the fresh cities, now going to auction in Phase III, are largely the Tier 3 cities, unlike Phases I and II, which covered the four metros, Tier 2 cities, state capitals and other larger cities. TRAI, along with radio operators, have maintained that the prices might become too prohibitive and would lead to people giving a miss to these cities. However, it seems the Government is willing to take the risk.

Uday Chawla, Secretary-General of Association of Radio Operators for India (AROI) confirmed that the Government is willing to let the market decide on these cities, though he did not rule out that prices might be reduced later on. “The important thing is to make the auctions happen as soon as possible,” he said.

Another industry insider also opined that most operators would not want to split straws with the Government and risk the Phase III auctions getting further delayed, especially since the two important recommendations, namely, extension of license period and TRAI’s migration fee formula, have been accepted.

Stay tuned for views from other radio operators on this issue.
 

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