New Delhi : The FM Phase III auction for Private Radio stations have come to an end after 32 days and 125 rounds. The bids in metro cities had far exceed the expectations of operators.
The bid price for a station in Mumbai was Rs 122.8 crore, Delhi Rs 169.2 crore and Bangalore Rs 109.3 crore, while 38 stations in 13 cities had received no bids at all.
The three metro circles account for 45% of the total bids received, causing a significant scarcity premium while in the rest of the country the bidding has been along expectations.
The Scarcity premium factor is a direct result of reducing the number of stations being auctioned in the “premium” locations like top cities into which all operators will rush, in order to preserve their businesses. However, if a few more slots in these premium locations were on offer, the absolute prices may not have risen as much.
The amount being spent on the top four major metro cities is equivalent to that being spent on the rest of the country, and these are cities that already have several channels on air.
Analyst point out that in no international market would such an auction be conducted with just one or two additional frequencies — metro circles need at least four to six more frequencies to overcome the scarcity factor.
In February last year, the Telecom Regulatory Authority of India (TRAI) recommended reduction of frequency gap between channels to half, as that would double the number of channels in a market. The move would automatically have address scarcity issue. However, the Information & Broadcasting Ministry did not heed the regulator’s advice.
TRAI also suggested increasing the term of license to 15 years, which was accepted by the Ministry.
Analysts feel that this might lead to deferred investment in tier III or media dark zones of India and more licenses would eventually lead to consolidation of the sector with the weaker operators not able to sustain themselves financially and others pursuing M&A after the mandatory lock-in.
Operators say that setting reserve prices as the highest price paid in a previous phase was also a flawed strategy and wanted the floor or reserve price of the auction for radio waves should be rationalised for future auctions.
There were 13 cities that received no bids because of a high reserve price, while bidding in some places was also limited due to the 15% cap for each radio operator, meaning that big operators cannot get all the radio stations they might want.
They also feel that the current auction also allows for malicious tinkering by bidders trying to game the system, by trying to raise costs for competitors in circles that the malicious bidders are not interested in via parking of bids in highly wanted cities ensuring they would later get an exit while also increasing the price for serious bidders and wanted the government to take steps to ensure that such gaming of the auction system to artificially push up prices does not happen.
