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FM radio Phase II expansion: Time for a reality check

FM radio Phase II expansion: Time for a reality check

Author | Asit Ranjan Mishra | Monday, Jan 23,2006 7:42 AM

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FM radio Phase II expansion: Time for a reality check

With three rounds of bidding for the Phase II expansion of FM radio over, it is time for a reality check of the ongoing bidding process, which will come to an end on February 3, 2006.

Out of the 206 frequencies for which bidding has been completed, 165 have been allotted prima facie, thus leaving one-fourth of the frequencies (41) vacant – the highest 18 frequencies from the Eastern region, 13 from Northern region and 10 from the most lucrative A+ and A category cities.

If this trend continues, then at least 70 frequencies would see no takers by a conservative estimate, and only 267 frequencies available for operationalisation.

Even that would have been an ideal figure, but thanks to some faulty policy measures and loopholes therein, some big players like Adlabs and South Asia FM, who are bidding very aggressively throughout the country, have to vacate the frequencies exceeding the permitted ‘15 per cent of the total frequencies allotted’ limit.

As per estimates, a single player may be allowed around 45 stations only, if one takes into account the 22 stations of Phase I and estimated 267 frequencies to be allotted in Phase II.

That would mean Reliance-owned Adlabs and Sun group are almost on the verge of the permitted limit. Adlabs has so far bagged 41 stations, whereas the Sun-promoted South Asia FM and Kal Radio together have 38 frequencies in its kitty, including the four operating stations from the Phase I. With the home regions for these two big players in terms of Western and Southern India set to go for bidding, both players are expected to be gung ho in their bidding.

However, at the end of the bidding process, the two major players have to surrender a majority of seats that they would win in the West and South zones. Out of the 132 frequencies yet to go for bidding, these two players are expected to win around 60 frequencies between themselves, if one goes by the aggression they have shown in other regions. In that case, they will have to vacate almost 50 frequencies throughout the country, thus leading to the number of vacant frequencies to 120, including the 70 frequencies that are not likely to find any takers.

The casualty would be faced by the cities with lesser revenue potential, specifically the Category D cities. If these cities lose out for lack of attractive opportunities, then it would nullify the inherent purpose of the FM expansion to allow smaller towns to enjoy their own FM radio stations with local flavour. Also, the intention of the government to cover 50 per cent of the population through Phase II expansion might not be accomplished.

So, where have things gone awry? “I think the 15 per cent cap should have been applied at the moment a player touches the limit. Then the big players would have bid more judiciously. Also, a reserve fee in each city would have encouraged more players to enter, especially in smaller cities where local players have no clue how to bid. This would have also rationalised the whole bidding process,” felt P S Sundaram, former Chairman and MD of BECIL, who was instrumental in the first phase of FM expansion.

“As and when the government invites rebidding, some changes should be made in the Phase II policy framework,” he added.

Nisha Narayanan, a media consultant, said that the policy should have been more enabling with incentives for players interested in bidding for smaller cities. “One cannot use the same yardstick while measuring the value of spectrum in an urbanised big city and in a small rural town.”

“As per TRAI recommendations on rural spectrum, the license fee in rural areas should be zero as the supply of spectrum in such areas is more than the demand for spectrum. Hence, there should be a relook at the OTEF regime for C and D category cities. The government might collect only the 4 per cent revenue share in such cities,” she suggested.

However, Sunil Kumar, MD, Big River Radio, opined that it was not a very bad or disturbing trend if some cities lost out in the process. “The next round of bidding, when it happens, would invite more cautious and lower biddings in these cities. Who gets it first and who gets it second does not matter much. Stiff competition is in fact not a very good idea. It makes the situation more difficult for all the players.”

He, however, added that the government should immediately come out with an announcement for rebidding for all the unoccupied stations. “This would also save the cost of co-location for operators,” he pointed out.

Replying to whether the government should relax the 15 per cent cap to allow big players like Adlabs and Sun group to keep more than the allowed frequencies as some of them had already evinced such interest, Sundaram answered in the negative. “Cap is a must or else only few players will dominate the whole process. There would be hardly any variety and other players won’t get encouraged to participate in the process,” he maintained.

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