The Hindu Business Line : Radio active again

THE GOVERNMENT'S DECISION to revamp its policy on FM radio could not have come too soon for an industry that was in danger of being crushed by the sheer weight of the huge licence fees that it was forking out. The odds were stacked against the industry when the government in March 2000 auctioned 108 frequencies with the eventual licence holders expected to adhere to a 15 per cent escalation clause every year for 10 years. In frenzied bidding, companies bid far more than the reserve price and against the Rs 80 crore the Government expected to collect, it raked in Rs 386 crore. Take the case of Mumbai: Against a reserve price of Rs 1.25 crore, the highest bid went up to Rs 9.75 crore.

Those were heady days for media houses, which hoped to offset the high licence fees with the solid valuations they got. However, industry officials admit that while everybody did bid by their commercial judgement, they also miscalculated badly. Some just walked away from the process after the bid reached stratospheric levels, leaving the serious players with the can. The upshot was that despite the government putting up over 100 frequencies on auction, only 21 are operational today. One, Win FM in Mumbai, downed shutters last year. Radio was, and still is, a nascent medium insofar as attracting advertising is concerned.

Now, the new FM radio policy — or Phase II of FM licences for private broadcasters, as the government calls it — is expected to make the players breathe easy. On offer are 330 frequencies across 90 cities. The existing licence fee regime makes way for a revenue-share agreement where the operators have to pay 4 per cent of their annual revenues as fee. Doing away with the open auction bidding of Phase I, it has plumped for the closed tender process. The new policy also allows FDI into the sector with a 20 per cent cap. The existing FM players can also pay a `migration fee' — the average bid amount of the new players — and move to the new system, which would give them a realistic chance of breaking even and making money in the near term.

But the fly in the ointment could be the fine-print. The new policy states that to "check monopoly by a single big operator", a company cannot have radio stations more than "15 per cent of the total national number" nor can it run two channels in the same city. While industry players say that investment in FM radio will now take off, listeners can get varied fare only if broadcasters are allowed to operate more than one channel in a city. Single-licence operators could well stick to programming for the mass market or where the cream is. For example, in the Chennai market, the two players, Radio Mirchi and Suryan, stick to Tamil broadcasting which attracts more listeners and consequently more local advertising. On the other hand, AIR's Rainbow FM, which does not pay any licence fee, can afford to experiment with both Hindi and English music broadcasts. The government needs to examine how it can facilitate niche broadcasting as well.

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