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How the Phase III auctions could shape the private FM ecosystem

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How the Phase III auctions could shape the private FM ecosystem

As of Friday, 94 frequencies in 56 cities became provisional winning channels, which means that there have been winning bids received for these frequencies. In all, 135 frequencies in 69 existing cities were on the block in the first round of the Phase III auctions. These were basically the frequencies that were left over from the Phase II auctions held in 2006.

With all the big operators, as well as new regional players participating in the auctions, the bidding has already exceeded the government’s expectations. This, despite the fact that some of the regional players like Odisha-based Radio Choklate, Bangalore-based Indigo FM and Chennai Live have not participated in the first stage. In all, 22 companies were selected as pre-qualified bidders by the MIB.

Though the metros like Bangalore, Delhi and Mumbai have seen the most interest, frequencies in some of the other smaller cities have also seen aggressive bids. Looking at the bids that have been received, it seems that the North region is the most sought after. In the east, Cities like Bhubaneshwar, Gorakhpur, Guwahati and Shillong have also seen a lot of interest with excess demand.

Bhubaneshwar in the early days of the auction had 5 bids for its single frequency. Currently, the provisional winning price for the city stands at Rs 7.40 crore. Big FM, Red FM and Radio Choklate are the three major private FM stations in the city as of now. There were a number of private players based in Odisha who had qualified for the initial pre-bidding process but looking at their eligibility points, it is quite clear that they would not be able to go as high as this amount. With Radio Choklate not participating in the auction (another frequency in the city would not have made sense for Choklate as they want to expand to other cities in the state), Bhubaneshwar could make more sense for someone like Radio Mirchi or MY FM.

Let’s take MY FM first. Owned and operated by Dainik Bhaskar Group, its guiding principle (and the group’s) is to be numero uno in the ‘unmetros’. MY FM currently operates 17 stations, predominantly in the north. Apart from Chennai, it is not present in any of the other metros, but it has a strong presence in cities like Jaipur, Jodhpur, Ahmedabad, Bhopal and Indore. Bhubaneshwar as a capital and rapidly developing city with lower reserve price than the other metros, perfectly fits MY FM’s requirements. MY FM has 6676 eligibility points which translates to around Rs 66.76 crore so it won’t be too heavy on the pocket either.

Radio Mirchi is one of India’s largest private FM networks operating in 36 cities. It also recently acquired the radio business of Oye FM in Jodhpur, Amritsar and Patiala. Though it might be argued that it failed in its main aim of getting Oye FM’s properties in Mumbai, Delhi and Kolkata; a moved that was blocked by the MIB, it now has a stronger Tier II network post the acquisition. Radio Mirchi also charges premium rates for its ad inventory across regions, so a large network will help it spread out the inventory. Also, with a stronger network in the Tier II cities, stations like Mirchi can differentiate their content for different audiences in Tier I and Tier II cities.

Ahmedabad was a bit of a surprise with not too many bids  but this could be attributed to the fact that almost every major operator; RED FM, Radio Mirchi, Radio One, Radio City and MY FM is already present in the city. The only notable exceptions are Fever FM and Big FM. With Big FM having a presence in Surat and Vadodara, it might be tempted to increase its presence in the state with a frequency in Ahmedabad.

Fever FM operates only in the metros of Mumbai, Delhi, Bangalore and Kolkata. With about Rs 250 crore to spend, it has enough money to go around. Recently, it was learnt that Fever FM’s acquisition of Aha FM, which operates in Chennai, had been given the go-ahead by the MIB.

Fever FM-Aahaa FM deal given a go-ahead by MIB?

From this move, it is clear, that Fever’s strategy is to enter the most cosmopolitan and lucrative market in every state. In that case, Ahmedabad could be a good choice. Fever’s content mix of Bollywood and regional content would also be suited to the Ahmedabad demographic.

In the South, Hyderabad had 4 bids for its 4 frequencies on Day 1, though there has not been any excess demand in the city. Its provisional winning price now stands at Rs 18 crore. With most of the major players present in the city, the only ones absent are Radio One, My FM and Fever FM. Radio One recently announced that it would be changing its content programming for Chennai so it might see Hyderabad as another way of improving its hold in the south. Radio One’s programming consists of English music in cities like Bangalore, Mumbai and Delhi and Bollywood/Hindi music in Chennai, Ahmedabad and Pune, so Hyderabad could be a good fit for the station as it would help it to segregate its content offering even more.

Chennai is another major city, which is a mature radio market with a number of regional and national players. Currently, according to industry sources, it is dominated by Suryan FM, Radio Mirchi and Hello FM and also has Big FM, Radio City and MY FM. If the Fever-Aha FM deal goes through then Fever will be another entrant in the city. In With just 1 frequency in the offing, its current provisional winning price is Rs 53.38 crore, up from around Rs 14 crore on Day 1. It is possible that the likes of Big FM, RED FM, Radio City and Radio Mirchi might feel the need for another frequency in the city to cater to Bollywood and Hindi songs as currently the programming is skewed towards regional music and content.

Hello FM, which is part of Malar Publications, has stated that it wants to have a frequency in every city in the state and so, it does not make sense for it to invest money in getting another frequency in the city. Even if it did want to, the reserve price was higher than its eligible budget. It is more likely that Hello FM will turn its attention to other frequencies available in Tamil Nadu.

Pune is another interesting city. It has been mooted as a good option for operators who would not be able to afford the more expensive frequency in Mumbai. For operators who own frequencies in both Pune and Mumbai, the synergy in ad inventory and content will make the investment well worth it, said one operator. Currently, Pune is catered to by Radio City, RED FM, Radio Mirchi and Radio One, all of which are also present in Mumbai. Big FM, with its emphasis on retro music could find Pune a good buy if a second frequency in Mumbai is not on the cards.


Tags Phase III auctions Radio Radio Mirchi Radio City Fever

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