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Government likely to collect Rs 1,350 crore from Phase II FM radio expansion

05-January-2006
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Government likely to collect Rs 1,350 crore from Phase II FM radio expansion

It is not just the bidders for Phase II FM radio expansion who are enthusiastic about the whole process, the government, too, has every reason to feel elated as it will be raking in the moolah to the tune of nearly Rs 1,350 crore in the form of One Time Entry Fee (OTEF) for 337 FM radio stations in 91 cities, the bidding for which starts on January 6, 2006.

This is nearly half the total investment of Rs 2,600 crore that the Phase II of FM licensing will attract. Additionally, the government may earn a revenue of over Rs 50 crore every year through the 4 per cent revenue share scheme it had announced in July 2005, a study by the consulting firm Big River Radio, based on the business model being followed by a large number of bidders for these stations spread across the country revealed.

Public service broadcaster Prasar Bharati is also likely to earn Rs 70 crore for letting its land and towers in 84 cities for co-locating transmitters. The infrastructure in the remaining seven will be created by the Ministry of Information and Broadcasting in the next two years. Till such time, the government has allowed the successful bidders in these cities to operationalise their channels on an individual basis.

The successful bidders, who are required to put up their infrastructure for their services, will be investing Rs 1,200 crore on transmitters, studio equipment and common transmission facilities essential for the mandatory co-location. Around 90 per cent of the equipment for the infrastructure would be imported, mostly from the US and Europe, the study said.

Referring to the study, Sunil Kumar, Managing Director, Big River Radio (India) Pvt Ltd, said, “The study involves in-depth analysis of the workings broadcasters in India and others countries – primarily the mature radio markets like the UK and the US. Keeping in mind the returns, most bidders are only too happy about making these investments. The government allowed enough time to bidders to work out their financial projections. Our findings are based on several months of deliberations with a large number of these bidders who are most serious about the business and get into the bidding with a fairly well worked out and detailed business plan.”

The I&B Ministry has declared a total of 85 companies qualifying for the bidding process. Each of the financial bids shall be accompanied with a demand draft for an amount equal to 50 per cent of the financial bid and unconditional and irrevocable Performance Bank Guarantee (PBG) for an amount equal to 50 per cent of the financial bid valid for one year from the date of closure of the bidding process.

Successful bidders shall be asked to deposit the balance 50 per cent of his financial bid through a demand draft within a period of seven days of being declared a successful bidder.

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