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How does Red FM’s entry affect Phase III auctions?

28-July-2015
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How does Red FM’s entry affect Phase III auctions?

The High Court’s decision to allow Red FM to participate in the auctions could have serious implications on the ambitions of the other large network giants—Big FM, Radio Mirchi and Radio City. Operating 45 radio stations across the country, it is already among the largest radio networks in the country. With some prime frequencies available for auctions in the first stage of the auctions, the competition to win these lucrative frequencies is sure to heat up.

Red FM has made no secret of its intentions to aggressively bid for frequencies. According to the MIB, the earnest deposit money, which is 25 per cent of the overall money allowed to be spent by the company in the auctions, put in by all five radio subsidiaries of Sun TV Network (which operates under the unified brand name of RED FM) comes to approximately Rs 77 crore. This means that the brand can spend around Rs 300 crore in the first stage of the auctions.

Opposed to this is Radio Mirchi with a cap of Rs 320 crore, HT Media, which runs Fever 104 FM, with a cap of Rs 250 crore and Big FM with a cap of Rs 200 crore. Radio City, surprisingly, has the least cap of the larger players with just around Rs 38 crore. DB Corp., which runs MY FM, has a cap of Rs 66 crore.

Radio Mirchi had in fact asked the Delhi High Court to refrain from giving an interim permission to Red FM and, rather, make a final decision on whether they could participate or not. The fear was that an interim permission, which could mean that Red might be debarred later would cause it to take more risks and thus adversely affect the auctions. Some have even suggested that this was because Mirchi (and some others) were worried that the entry of Red FM in the auctions would adversely affect its own plans.
 

Then there is Big FM, another national level player that is one of the biggest networks in the country with a reach spanning 45 cities. It has earned a lot of success by playing a mix of retro and Bollywood music. If Red FM had been debarred from appearing for the auctions, Big FM had the probability of becoming the biggest radio network in the country.

 In a press statement to the media, just after being granted permission by the Delhi HC, Nisha Narayanan, COO of Red FM said, “In phase 3 also we have plans of going ahead with the philosophy of nurturing not only commercially viable bigger metro cities but also reaching out to the last corner of the country. At the end of phase 2 we had highest number of stations in North East and tier 3 & 4 cities as a network. This is something which we will continue in phase 3 also.”

Included in the 135 frequencies that will be going under the hammer are frequencies in cities like Mumbai (2), Delhi (1), Bangalore (1) and Hyderabad (4).  Other lucrative markets include Chennai (1),  Jaipur (1), Pune (2) and Kanpur (3).

Though Red FM has a presence in most of these cities, it has generally lagged behind the likes of Radio Mirchi, Big FM, Radio City, Fever FM in terms of market share (according to weekly RAM report), at least in the metros of Mumbai, Delhi, Bangalore and Kolkata. If it does bid for another frequency in the first three cities, as multiple frequencies are now allowed, it would allow it close the gap more effectively.

And RED has the financial muscle to carry this out. Only Radio Mirchi can spend more in the auctions. Mirchi’s gambit of acquiring Oye FM before the auctions did not totally work out as the MIB blocked the sale of Oye’s Delhi, Kolkata and Mumbai. This means that it will have added incentive to get the frequencies in these cities (Kolkata has no frequencies available).

The markets in Delhi and Mumbai are expected to be attractive for stations wanting to experiment with different genres. For example, Delhi is a big market for Punjabi music. Retro Indian music is expected to be a Rs 400 crore market. Red FM plays mainly Bollywood music. If it manages to get a second station, it could experiment with different genres that has worked well for stations like Big FM, Radio Mirchi, Radio City, etc.


 

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