After crossing 15% limit, FM players to give up stations

NEW DELHI: As bidding for FM-II radio is entering conclusive rounds, the industry focus is on two things: what would be the total number of radio stations to be allotted, and how will the 15% cap for acquiring frequencies work out? Here are some answers.

Around 275 to 280 private radio stations are expected to be allotted during the second phase of FM privatisation, the process for which is on, according to government estimates. Add to that the 22 existing stations which would migrate to the second phase, the total comes to around 300.

The government threw open 337 frequencies across 91 cities for bidding during the second phase. After the first three rounds of bidding for A and A plus category, northern and eastern cities and towns, 165 stations have been allotted. Another two rounds of bidding, for western and southern cities of the country, will be held next.

Although government rules on FM radio do not permit any single company to hold more than 15% of the total frequencies (radio stations) allotted, a senior official in the information and broadcasting (I&B) ministry clarified that players can continue to bid for stations till the last round, irrespective of their tally.

Any company that has crossed the threshold of 15% will have to surrender the extra stations after the bidding process is over, but it will be free to give up any station that it chooses to, the official said. The government will not have any say on which frequencies must be surrendered, he added. Companies on the waiting list will be allotted the surrendered stations.

This process may mean some loss of revenue to the government, as a player can even surrender a station for which the bid was the highest. But an industry insider pointed out that “it’s not likely that any company would give up a station for which it had bid the highest. It bid high for a station because it wanted to get it at any cost.”

Also, the qualification benchmark for awarding stations across cities will not change even if the highest bid is withdrawn by a firm after it exceeds the 15% limit. As per this criterion, any bidder, which offer to pay less than 25% of the highest bid in a city, is disqualified.

Anil Ambani group’s Adlabs’ tally of radio stations has reached 41 already, and Sun group’s 38 (including the stations bagged by Kal Radio and Sun’s existing four stations). Both are close to touching the 15% cap (or 45 radio stations) in the number of stations that each company is allowed to hold, assuming that the total number of stations do not exceed 300. 

While government authorities claim that the policy is very clear and that there’s no room for ambiguity, CEO of Music Broadcast Pvt Ltd (Radio City) Apurva Purohit says, “There’s lack of detailing in the FM radio policy on the 15% cap issue.” Another source pointed out that “the government probably did not anticipate that companies could actually exceed the 15% cap”.

After three rounds of bidding, government is set to get Rs 648 crore as one-time entry fee. Two more rounds of financial bidding are left (across towns and cities in the west and south), from where the government is expected to earn some more. In addition, existing FM radio players will pay a migration fee to the government.