Phase III auctions have been a controversial affair since the very beginning. The e-auctions were slated in to take place in mid 2012 with the GOPA migration date decided in March 2012. This date was later postponed to June 2012, then December 2012 and is now on June 30, 2013.
While the Ministry of Information and Broadcasting claimed that the Phase III auctions will now be materialised on priority basis, there are a number of concerns that haunt the radio players.
In an earlier conversation with exchange4media, Prashant Panday, Executive Director and CEO, ENIL said, “The radio industry wants electronic tendering (single step bidding) and not electronic ascending auctions (multi-step bidding) because the former will be able to allot frequencies at different prices, thus promoting programming variety, while the latter will allot all frequencies at the same price and hence kill variety.”
Panday explained that the formula for reserve fee needs to be re-looked at. If the government agrees to electronic tendering, then the reserve fee formula is automatically solved, since reserve fee will be calculated post-bidding.
Commenting on concerns regarding Phase III auctions, Harish Bhatia, CEO, My FM said, “Apart from the base price rationalisation, the classification of stations under each category is not as per their revenue potential, further making them unviable due to high entry cost, especially in smaller towns.”
According to a report released by CII-Ernst & Young, government opinion on reserve price methodology model was that the Phase III FM radio policy was approved through a cabinet decision in June 2012. Going back to alter the reserve price seems to be difficult despite the fact that it has led to disproportionate reserve prices in the North and West of the country. If done, it may end up delaying the auction process.
A number of other concerns regarding Phase III auctions were seen across the platform including the method of auction, separation between frequencies, license period and lack of clarity on increase in license period which is currently 10 years. “In fact, like TV, there should be a one-time license for radio as well, offering it a level playing field with other media,” added Bhatia.
However, the government appointed an ‘Empowered Group of Ministers’ to find solutions for a number of Phase III related problems.
A study done by CII-Ernst & Young suggests that the industry is expected to grow at a CAGR of 18 per cent after the initiation of Phase III. Radio’s advertising industry is also expected to grow from three to four per cent to five to seven per cent within five years. Accordingly, the FM radio industry is expected to exceed Rs 123 billion within three years of Phase III being rolled out.