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PM Modi says he was pressured to not hold FM Phase III auctions

18-August-2015
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PM Modi says he was pressured to not hold FM Phase III auctions

In his Independence Day speech, the Prime Minister said that he was put under a lot of pressure from certain quarters who questioned the need of auctions for FM frequency.

“A lot of big people were worried. They told me, “FM radio was for common people, there is no earning so why do you want to hold auctions?” I was put under a lot of pressure but I said that Team India, which comprises of 125 crore people wants transparency,” said Prime Minister Narendra Modi.

He further added, “When I asked day before yesterday it had already crossed Rs 1,000 crore and this money is going to go to the poor.” Speaking on corruption, the PM had earlier also touched upon the successful Coal auctions, which he said would add Rs 3 lakh crore to the government funds.

The first stage of the Phase III FM auctions is being currently carried out and have seen a lot of money being pumped in especially for lucrative frequencies in the metros like Mumbai, Delhi and Bangalore. These include 135 FM channels across 69 cities. As of August 12, 2015, cumulative provisional winning price had reached Rs 1005 crore against an aggregate reserve price of about Rs 425 crore.

Thus the summation of provisional winning prices surpassed the cumulative reserve price of the corresponding 87 channels by Rs 580.23 crore or 136.5 per cent.  Overall, cumulative provisional winning price exceeded the total reserve price of the first batch i.e. Rs 550.18 crore by Rs 455.08 crore or 82.7 per cent. The government, at the outset of the auctions, had hoped to generate revenues of around Rs 550 crore from the auctions; a figure that has been clearly surpassed.

Bidding for cities like Mumbai and Delhi has exceeded all expectations. For example,  before the auctions it was expected that Delhi’s single frequency would fetch around Rs 40 crore, with the more generous suggesting a figure around Rs 70 crore. At the end of Day 15, however, Delhi’s provisional winning price stood at Rs 169 crore. Mumbai, too, has seen its provisional winning price for its two frequencies reach in excess of Rs 112 crore. Bangalore is another city that has crossed the Rs 100 crore mark and its provisional winning price now stands at Rs 107 crore.

The intense competition for metros like these is sure to burn a hole in the pockets of FM operators. The fact that it would further take time to get a station up and running after getting the frequency will also play in their minds. Most radio operators are of the opinion that it takes at least 10 years for a radio station to start becoming profitable and with the amount of money being spent, it is no wonder that some operators wanted the government to increase the number of frequencies available in these markets.

Earlier today, Vineet Jain, MD at Times Group, had tweeted about the need for more frequencies -

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Times operated Radio Mirchi, in fact, has been quite vocal about the need to reduce frequency spacing to allow for more frequencies in cities like Mumbai and Delhi.

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