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Rs 550 crore Phase III auctions finally underway

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Rs 550 crore Phase III auctions finally underway

The Delhi HC’s decision to allow Red FM to participate in the first stage of the Phase III auctions today caused the FM industry to heave a sigh of relief, which was dreading another reason for delay on the eve of the auctions.

With 135 frequencies in 69 channels up for grabs in the first phase from a total of 829 frequencies overall in more than 200 cities, the government exchequer is expected to raise more than Rs 2,000 crore, which will be a very welcome windfall for the government. In the first phase beginning today, the government expects to earn around Rs 550 crore. To get an idea of the kind of money up for grabs, if we take the earnest deposit money submitted by ENIL and HT Media, two of the largest networks in the country, they can potentially spend more than Rs 500 crore just between the two of them.

Now, with RED FM also entering the fray, this amount will definitely jump even higher. According to 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.

One reason why this first stage of the auctions is more exciting for neutral observers and the FM industry alike is because it actually features all the remnant inventory from the Phase II auctions. This means that we are going to see the lucrative markets like Mumbai, Delhi, Bangalore, Kolkatta, Chennai and Hyderabad go under the hammer.

Also, with Phase III regulations allowing FM stations to hold multiple frequencies in the same city, big stations like Radio City, Big FM, Fever FM, Radio Mirchi, Red FM, etc. will all be eyeing these cities with interest. But though the demand is there, the supply is quite limited----Delhi and Chennai have 1 frequency each while Mumbai and Bangalore have 2 frequencies.

This means that any interested party will have to get their strategy in place. On the government side, these cities will be ones they will hope to earn the most from. For example, radio operators we spoke to say Delhi could fetch as high as Rs 75-80 crore, while Mumbai could go for around Rs 70 crore.

Also, with the first set of auctions out of the way, it will put to rest fears about existing licenses that were set to expire in September, after receiving a reprieve earlier this year.

It is also important from the larger perspective of the Phase III auctions. According to TRAI’s migration formula, the market price for many of the new cities up for auctions later this year are also linked to the auction rates which will be received for some of the cities going into auctions today.

So, the successful conclusion of the first stage of the auctions could well put the remainder of the auctions back on track for completion before the end of the year. Industry sources had earlier suggested that the entire Phase III auctions will get completed by late September but the number of delays and roadblocks over the last few months had created doubts in the minds of money. Now, there is hope that all these fears will turn out to be unfounded.

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