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India’s Phase III Adds Cities, Revenue

New licenses, transfers for latest FM auction will be good for 15 years

The reserve cost of FM channels during Phase III auctions will be based on the highest bid price received during Phase II auctions for that category of city, and this will then subdivided by region, according to news reports.

Cities that already have channels and are slated to get additional channels will also receive them at the reserve price of the highest bid. If the benchmark from Phase II for a particular region is not available, the lowest overall price of the highest bids in the other regions in that category will be considered the reserve price, said Information and Broadcasting minister Manish Tewari, according to the Business Standard. For new cities located near the border with a population less than 100,000, the reserve price will be 500,000 rupees (US$909.92).

The new auction, which is expected to range over a period of three years and will occur via an ascending e-auction system — similar to the 3G auction conducted by the Telecom Ministry — will cover a total of 839 channels in 294 cities.

The Information and Broadcasting Ministry has selected the Empowered Group of Ministers, which also finalized the rules for the 2010 3G-spectrum auction and slated 2G frequencies, to handle the request for proposals, select an e-auctioneer and decide on the fee for migration of Phase II FM licensees to Phase III.

Under Phase II, licenses were issued for a 10-year period beginning in 2006, but the new licenses will expire after 15 years, motivating broadcasters to apply for Phase III licenses. The Ministry has also extended the signing period for the Grant of Permission Agreement Migration for FM Phase II operators to June 30, 2013 from the original Dec. 31 deadline.

According to the 2012 media and entertainment industry report by the Federation of Indian Chambers of Commerce and Industry and KPMG, radio broadcast is expected to grow at a compounded annual growth rate (CAGR) of 16 percent until the Phase III stations begin operation in mid-2013, and the radio industry already grew 15 percent in 2011, to Rs 11.5 billion in revenue.

After these additional stations are on-air, the industry is predicted to grow by 22 percent CAGR, and ad spends are also estimated to increase to 5 percent in 2016, from around 4 percent currently, according to cites different figures: “As per the study, ‘Poised for Growth: FM radio in India,’ the sector has been growing at a CAGR of 14 percent annually. ‘Furthermore, the sector is expected to grow to Rs 2,300 crore [10,000,000], at a CAGR of 18 percent, within three years of Phase III being rolled out,’ the report said.”

The report also estimates that the government will earn around Rs 140 billion from Phase III, which is expected to cover 227 new cities, adding to the current 86, which now host some 245 FM channels, says. The article adds that about 80 percent of this revenue will be generated by ad revenue.

Mumbai will get two new FM channels, while Delhi and Chennai will get one each; and only Kolkata will not add a channel, according to