FM radio auctions: zero bids for 13 cities raises concern

With the e-auction of the first batch of private FM radio, the government is set to earn ₹1,157 crore for 97 radio channels, almost double the price of the total reserve price set for the first batch.

Industry analysts did term it a ‘successful’ auction, considering the revenues generated for the government as well as benefits for key private FM radio players. However, they noted that a lack of interest by certain bidders for 13 smaller cities reflected their concern over the high reserve price.

Jehil Thakkar, Head of Entertainment & Media at KPMG India, said: “In terms of mobilisation of revenues for the government, the auction has been successful. Private FM radio will emerge as a key pan-India platform for advertising, and operators will be able to leverage on the ‘network effect’ and float pan-India advertising packages.”

However, there are concerns regarding the reserve price with certain smaller cities not seeing any bids, he added.

Analysts, nevertheless, pointed out that nearly 18 cities saw winning bids that were double the reserve price. Also, out of the 15 channels in Jammu & Kashmir and the North-East, 12 channels got winning bidders, and Guwahati’s provisional winning price was over 10-fold higher than its reserve price.

Delhi, Mumbai and Bengaluru, too, saw the winning bid price cross the ₹100-crore mark.

But, analysts say it remains to be seen how sustainable it will be for radio operators to break even with high winning bids.

Smita Jha, Leader, Entertainment and Media, PwC India, said 30 per cent of the channels not seeing interest from bidders indicates that the reserve price is not conducive.

There is need to relook the rationale or methodology of the reserve price, as the next auction batches will be for smaller cities, where FM radio channels will open for the first time, she added.

A total of 839 radio frequencies will be up for grabs in about 294 cities across the country in the future.

Prashant Panday, MD and CEO, Radio Mirchi, said the Centre should look at lowering the reserve price to attract more bidders for better determination of prices, adding that the government should also ensure that adequate spectrum is available in the auction.

The telecom regulator has, in the past, recommended reduction of channel spacing between radio frequencies to facilitate opening up of more channels.

Ashesh Jani, Partner, Deloitte Haskins & Sells, observed that the government should take some time before going in for further rounds of auctions for better price discovery, given that the players have already used up their budgets.

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