Phase III FM Radio Auctions Set to Cross Rs. 1000 Crore

Information and Broadcasting Ministry Invites Application for e-auction of 266 FM Radio Channels in 92 Cities

According to recently released report by TechSci Research “India FM Radio Market By Type (Traditional FM Radio, Internet FM Radio), By Sector (Retail, Real Estate, Automobile, Education, Others), By Ownership (Public and Private), By Region (North, East, West, South) Forecast & Opportunities, 2011-2021” FM Radio market is currently witnessing the exponential growth on the back of increasing expansion initiatives of FM Radio channels supported by the government, growing advertisement spending of brands to reach to the diverse customer base, increasing use of internet radio, and so on. Internet radio is relatively new concept to the India FM Radio ecosystem which helps the FM Radio companies to reach to diverse geographies. With the increasing internet penetration in the country more and more people are listening music via internet. Further, the growing smartphone user base which is expected to cross 390 million by 2021 is driving the internet FM radio market in the country.

Information and Broadcasting Ministry, Govt. of India announced roll-out of e-auction for 266 FM Radio Channels in 92 cities under the second batch of FM Phase III expansion plan. The aim of the expansion plan is to provide FM Radio services in small towns and cities across India including the border areas of Jammu and Kashmir, and Northeast states such as Tripura, Nagaland, Assam, Meghalaya and Mizoram. The second batch consists of 227 channels in 69 new cities and 39 channels in 23 existing cities in the country.

The rollout includes five categories – Category A (with population above 20 lakhs), Category B (with population above 10 lakhs and up to 20 lakhs), Category C (with population above 3 Lakhs and up to 10 Lakhs) and Category D (with population above 1 Lakhs and up to 3 Lakhs) and Others (Cities with a population up to 1 Lakhs).

Among 92 cities, 2 cities fall under Category B; 37 cities with 111 channels are under Category C; 41 cities with 117 channels have a population of 1-3 lakhs; and 33 channels are allocated to small towns in Jammu Kashmir and North Eastern states which have a population of up to 1 lakh. Hyderabad is the only metro which would form a part of this auction.

The ministry issued a notice regarding e-auction of the second batch of FM Phase III expansion plan on 20th June, 2016. The last date of submitting the application is 1st August, 2016 and applicants have to submit the ownership details by 16th August, 2016. On 22 August, 2016, Bidder Ownership Certificate would be issued, followed by pre-qualification of bidders on 1st September, 2016.

Ministry of Information & Broadcasting has set certain eligibility criteria for the bidding process. According to the set criteria, those companies are eligible for bidding and obtaining permission for operating FM Radio channels which are registered in India under the Companies Act, 2013 or Companies Act, 1956.

Further, companies have to provide the details of total direct and indirect foreign investments to the ministry and it shall not exceed 26% at the time of application. Moreover, the companies participating in the bidding process should have the following minimum net worth:

Further, the ministry stated that the Indian shareholder should have 51% equity share in the company excluding the equity share held by scheduled banks and public financial institutions, and the largest shareholder would have the control over the applicant entity. Further, the company’s all board of directors, channel head, CEO, and all key executives should be residents of India.

Ministry of Information and Broadcasting has also set a non-refundable application processing fees of INR 25,000.

Interested companies can secure the copy of the notice (N-38014/31/2016-FM) and related documents from www.mib.nic.in.

TechSci Research report estimates that the Ministry of Information and Broadcasting would generate at least Rs. 1000 crore after successful completion of Phase III expansion plan.

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The ministry would also be able to generate revenues from the private companies in the form of annual fee charged to the channel company, which is 4% of the Gross Revenue of its FM radio channel for the financial year or 2.5% of Non-Refundable One Time Entry Fees for the concerned city, whichever is higher. However, for the North eastern states, the government of India has fixed the fee of 2% of Gross Revenue annually or 1.25% of Non-Refundable One Time Entry Fees for the concerned city, whichever is higher, for first three years from the date annual license fee is payable.

Further, with the expansion of FM Radio in 69 new cities and 23 existing cities, India FM Radio market is expected to witness an exponential growth in the coming years, with FM Radio companies witnessing increase in their revenues from advertisements by on-boarding new customers as well as by providing wider geographical reach to their existing clientele.

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