FM Phase III: Bhubaneshwar surprises with multiple bids
As the second day of FM frequency auctions concluded yesterday, there were some cities that clearly received the most interest. We analyze the bids behind cities like Bhubaneshwar, Chennai, Pune, and Ahmedabad
As the second day of FM frequency auctions got over yesterday, there were some cities that clearly received the most interest. Some of these were anticipated, for example, the metros like Mumbai, Delhi and Bangalore, but there were also a number of smaller cities that received excess number of bids.
For example, Ahmedabad received 4 bids for its one frequency with the provisional winning bid for the day standing at just under Rs 17 crore. Ahmedabad already has Radio City, Red FM, Radio Mirchi, My FM and Radio One present and it is unlikely that these would spend such a high amount to get a second frequency in the city.
Similarly, Fever FM is only present in the metros currently, viz, Mumbai, Delhi, Kolkata and Bangalore and if this is a strategy it is planning to follow then it is more likely that it will concentrate on getting additional frequencies in these cities and then target the northern belt, which would be more of a match for the kind of programming Fever FM has. There were rumours before the auctions that Chandigarh would be of interest to Fever FM but no bid had been received for the city as of Tuesday evening.
However, Fever FM does have money to spend, Rs 250 crore according to its earnest money deposit; so it could consider taking this opportunity to enter into new markets.
Big FM, also seems a viable candidate. It is present in 45 cities across India and in Gujarat has a strong network across Rajkot, Vadodara, and Surat. Another station in the state would give it a firm hold of the capital. It also has a budget of Rs 200 crore so it can afford to still go after the higher priced metros.
Chennai is another interesting case. It has received 4 bids for a single frequency. Currently, the city, which is considered one of the more lucrative ones in the south sees the presence of Big FM, Red FM, Radio Mirchi, Radio City, Radio One, Hello FM, Chennai Live FM and Aaha FM. Though the potential acquisition of Aaha FM by Fever FM green lit by the MIB in May, there has been no further news on the matter, but if this is a possibility then Fever FM would likely be out of any bidding.
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The Chennai market could be one where multiple frequencies would make sense for those stations who want to cater to both the regional language and Bollywood loving audiences. For example, Suryan FM is already present in Chennai but Red could go for another frequency to bring its more generic content to the city. The same would hold true for the other national players as well as the more regional players.
However, with the provisional winning bid for Chennai standing at just over Rs 17 crore on Tuesday, Hello FM, which has a budget of Rs 12.7 crore, can be safely discounted. Also, the network has stated its aim of having a station in every city in the state so it is more likely that they would go for some of the other frequencies available like Madurai, Tiruchy, Tirunelveli, Tuticorin and Tirupati. Interestingly, apart from Madurai, which has received one bid of Rs 6.49 crore, none of these cities had received a bid at the end of Round 8 on Tuesday.
The Muthoot Group-owned Chennai Live 104.8 was not listed in the final pre-qualified bidder list released by the MIB, so they will not be participating in the auctions. This keeps in line with what Prem Kumar, COO of Chennai Live, had told us earlier when he said that the company would not participate in these auctions as the focus was on breaking even (in terms of capital) and profitability.
So, this means that Chennai is turning out to be a battleground for the larger networks who want a second frequency. It is also possible that a new entrant might be trying to get into the city but with the Chennai market considered to be highly competitive, this does not seem very likely.
Bhubaneshwar is also another city that is seeing, surprisingly perhaps, a lot of activity. It had received 5 bids for 1 frequency by the end of Monday with a provisional winning price of just under Rs 1 crore. In fact, it is one of only three cities (the others being Mumbai and Delhi) which has seen an excess demand of 3 or more. By the end of the second day, the number of bids had fallen to 4, though the bid amount increased to around Rs 1.35 crore.
Bhubaneshwar currently has three radio stations in the form of Big FM, Red FM and Radio Chokolate, which is not participating in these auctions. It is safe to assume that three of the five bids came from new entrants—Odisha Television Ltd, Sarthak Films Pvt. Ltd. and Venus Autoworks Pvt. Ltd. In fact, Venus Autoworks had a bidding cap of Rs 79 lakh, which could explain the lessening of number of bids.
Radio Mirchi is doing quite well in Kolkata and so it might think about trying its luck in Bhubaneswhar too. The head of one radio operator based in the east also suggested that Radio City might also be an interested party post the takeover by Dainik Jagran. “Bhubaneshwar, being the capital, is seeing an increase in development and business. If you also compare the reserve price with the other metros, it is much more reasonable for Bhubaneshwar,” said the person.
Hyderabad, surprisingly, had just received one bid of Rs 18 crore for its 4 frequencies by the end of Day 1 though this increased to 3 by the end of Day 2. Hyderabad is also considered an upcoming market and maybe it will see more bids in the coming rounds. Radio Mirchi, Red FM, Big FM, Radio City are also present in the city. It is possible that one of the bids might have come from Radio One, which has been trying to change its focus in the south, for example, recently it went all Bollywood in Chennai.
Pune is another city that lies somewhere on the narrow space between a city that is lucrative but perhaps not enough to warrant multiple frequencies. It has received 4 bids for its two frequencies, with the closing provisional price of just under Rs 20 crore. With Radio Mirchi, Radio City, Red FM and Radio One, all present in the city, it is more likely that the bids are by new players wanting to get an entry to the market. Conversely, it could also act as a second best option for someone like Radio One, or even Radio City, who cannot compete with the likes of Mirchi and Red FM for Mumbai, especially if they want to start a second regional language station.
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