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Is the industry ready for radio Phase III auctions in Oct?

20-September-2013
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Is the industry ready for radio Phase III auctions in Oct?

Manish Tewari, Minister of Information and Broadcasting announced that the Government can look to commence the much-awaited radio Phase III auctions in October 2013. While the industry erupted in a moment of joy, everybody couldn’t help but wonder, ‘Isn’t this too good to be true?’

“The only concern is...will it finally roll out this time. The industry needs this. We are happy the I&B Minister is now serious, after the Finance Minister committed to this in the budget speech for the year,” expressed Vineet Singh Hukmani, MD and CEO, Radio One.

Post Phase III auctions, the industry is expected to grow at a CAGR rate of 18 per cent (from 2013 to 2016). Additionally, radio’s share in the advertising industry is expected to grow by five to seven per cent. With auctions rolling out next month, the huge shift of funds will shake up the sluggish economy and the radio fraternity.

However, as the auction rolls out after a prolonged delay of two years, one can still not say that the industry and MIB are on the same page as most issues are left unaddressed.

exchange4media takes a look at whether the radio fraternity is prepared to take the auctions head-on IF it roll out next month.

The unheard pleas
The base price policy, the migration fee and the license period extension were some of the main issues among radio broadcasters.

“The high reserve fee is one of the major concerns,” shared Prashant Panday, CEO, ENIL. “The government’s own experience with 2G has been that if reserve fees are kept too high, then auctions fail. The same can happen in Phase III also. That’s why we want the government to re-look the reserve fee. They can refer the matter to TRAI, or they can take the call themselves,” he suggested.

While Panday pointed out the woes of the high reserve fee, Hukmani is of the view that high or low bid is more in the hands of the broadcasters than MIB or TRAI.

Lack of clarity in the extension of license period has been holding back radio players from freezing their plans from the very beginning. “We believe that the government should offer an extension to the Phase II players to a 15-year license term prior to the auctions, so that current players can bid after consolidating their existing businesses,” expressed Apurva Purohit, CEO, Radio City.

Purohit also pointed out that an ascending auction model, coupled with high reserve fees can prove to be a heavy drain on the industry.
 
Uncertain business strategies
All said and done, radio players are seen chalking out plans to make the best of the Phase III auctions. Nonetheless, broadcasters do not have many options available in high-end towns as only 52 frequencies are available in A+, A and B category; rest of all being in C and D categories.

“We will definitely bank on an effective collaboration between our benchmarking practices and human resources in an expansion scenario,” added Purohit.

Panday on the other hand shared that bidding will depend completely on viability of the stations. “We will only go after viable stations. The radio business needs tight cost control. Any lapse and profitability is marred for the entire license period.”

Radio One is looking at profitable expansion in metros as of now. “We are looking for lucrative metros and are gung-ho about being able to expand our footprint,” added Hukmani.

Currently, the Ministry and the radio fraternity are clearly not on the same page. If not addressed on time, the industry can face a major setback, as just breaking-even a huge investment will not only affect the broadcasters, but will pull back the growth of media advertising.

With the roll-out next month, the industry and MIB need to speed things up dramatically. 

 

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