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I would any day lose a city than bid too high for it: Prashant Panday

I would any day lose a city than bid too high for it: Prashant Panday

Author | Abhinn Shreshtha | Wednesday, Sep 23,2015 8:14 AM

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I would any day lose a city than bid too high for it: Prashant Panday

Entertainment Network India Limited (ENIL), the radio arm of the Times Group, which runs under the brand name Radio Mirchi, has emerged as the second biggest spender in the first stage of the Phase III auctions. With an investment of just over Rs 339 crore overall, the operator has managed to bag 17 new channels across 16 cities. These include new cities like Chandigarh, Cochin, Kozhikode,  Jammu, Srinagar, Guwahati and Shillong. It has also acquired an additional frequency in existing markets like Bangalore, Hyderabad, Ahmedabad, Pune, Kanpur, Lucknow, Jaipur, Nagpur and Surat.

Add to this a third frequency in Hyderabad along with the four additional cities that it obtained via the TV Today (Oye FM) acquisition earlier this year (Amritsar, Patiala, Simla and Jodhpur) and Radio Mirchi now has a pretty healthy presence across India spread over 43 cities with multiple frequencies in 9 cities.

If the MIB clears the transfer of Oye’s radio operations in Mumbai, Delhi and Kolkata, something ENIL’s MD and CEO, Prashant Panday, feels confident about, it would mean that the company has a second frequency in 12 out of the top 13 markets in the country. According to him, these 13 cities account for nearly three-fourth of the radio market in India.

 “We are super-excited. We got important cities that we missed in Phase II and we now also have acquired a rock-solid second frequency network in the biggest towns. All this at a price much lower than what the industry has paid overall. We paid 2.18x over Reserve Price compared to the 3x the industry paid overall,” he told us.

A strategy that Mirchi adopted was to strengthen their presence in North India and target towns and states where radio growth is high. “Chandigarh was an obvious choice. It’s a very good city for radio, with a rich population and strong retail sector. And with our Oye acquisition we now have a very strong North India presence. We also acquired Jammu and Srinagar to strengthen our North presence. The other important towns we acquired were Kochi and Kozhikode, making Mirchi now available in the top 3 cities of Kerala (we already have Trivandrum). We also added Guwahati, Assam’s number 1 commercial city, and Shillong, a border town with vast potential,” informed Panday.

 

One thing that could upset the apple cart though is if the MIB is adamant in blocking the transfer of Oye’s frequencies in Mumbai, Delhi and Kolkata. However, Panday says that it is not something that bothers them too much. He told us, “Firstly, I don’t think MIB will continue to block these cities. We believe that the Phase III policy allows M&As and this government advertises its “ease of doing business” credentials. Hence there is no reason for them to deny us the deal any further. That aside, we are in the Delhi HC and we believe we have a solid case there. Secondly, one has to remember that radio is a long term business where cost management is the #1 determinant of profitability. Those who spend irrationally suffer. I would any day lose a city than bid too high for it.”

Hyderabad, with its three frequencies up for grabs, was hotly contended early on in the auctions though it was surprising to see that Mirchi acquired two of the three frequencies, thus taking its total assets in the city to three. Surely, it is a risky proposition?

“Because of the Telengana struggle, it has underperformed in the last few years. But now with peace and stability returning and the certainty that it will be the joint capital of Andhra Pradesh and Telengana for 10 years, Hyderabad is poised to grow faster than other metros. With 2 more channels, we can offer a lot more programming variety, and attract different sections of the population. With its high purchasing power, the Hyderabadi population is very attractive to advertisers. We believe both new frequencies will be highly profitable,” explained Panday when we put this question to him.

Panday, meanwhile says, that the company is looking to break even in 4-6 quarters after commercial launch of the channels.  With 97 more frequencies in the market, the private FM industry has finally seen an expansion after 10 years, which has already increased expectations from advertisers and operators alike. According to Panday, the FM industry would grow at a CAGR of 16-18 per cent (up from 13-14 per cent) for the next 5 years, with radio’s share of advertising set to increase to around 8 per cent.

So is Radio Mirchi going to increase its ad rates after a successful auction? “I think so. I am sure we can convince advertisers/agencies that the radio industry has supported their needs for many years now. Our pricing is lower than what we had in 2008 before the Lehman crisis. While advertisers are paying far higher now to GECs, they are paying much lower even now to radio stations. This, and the fact that radio players have had to pay Rs 3000 crores in one shot, is good reason for our agency friends to support us now,” he opined.

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