Phase III FM Policy Approved: Boost for FM Radio Sector :Morgan Stanley Research,

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Phase III FM Policy
Approved: Boost for FM
Radio Sector
Quick Comment: We believe the Phase III FM policy
will drive radio industry growth higher, bring down radio
operators’ costs – both operational expenditures and
capex – mitigate funding issues, and improve viability for
the industry in general. We expect the larger FM radio
broadcasters, including Sun TV (to a small extent), to
benefit from this development.
Phase III FM Policy approved by the union cabinet.
The approval clears many of the long-standing demands
of the radio industry. Policy guidelines are as follows:
1) Radio operators have been permitted carriage of
news bulletins of All India Radio, which we believe can
improve listenership.
2) Private operators have been allowed to own more
than one channel, but not more than 40% of the total
channels in a city, subject to a minimum of three
different operators in the city. In our view, this reduces
the cost for radio players.
3) FDI+FII limit in a private FM radio broadcasting
company has been increased from 20% to 26%. We find
this sentimentally positive as it can mitigate funding
woes.
4) Networking of channels will be permissible within a
private FM broadcaster's own network across the
country instead of in “C” and “D” category cities only of a
region allowed at present. We believe this will also
curtail costs.


5) It is also proposed that private FM broadcasters should be
given an option to choose any agency other than BECIL when
setting up a radio station within a period of three months of
issuance of LOI, post which BECIL will automatically become
the system integrator and set up co-location facilities and CTI.
If implemented. This could curtail capex and improve the
lead time for setting up stations.
6) The lock-in period has been reduced from five years to three
years, thus allowing flexibility for owner groups.
7) Only three channels will to be allowed in “D” category cities
as against four currently, thus reducing fragmentation.
The next step will be to hold auctions for 227 cities (over the
existing 86 cities) with a total of 839 new radio channels up for
bid. As per the approved guidelines, FM stations will be
awarded on the basis of ascending e-auction.