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E Auction of First Batch of Private FM Radio Phase III Channels

Frequency Modulation (FM) Radio broadcasting due to its versatility is considered as better medium to provide information, education and entertainment. During Ninth Five Year Plan, the Government of India adopted a policy for improving variety of content and quality of Radio broadcasting. The thrust areas for Radio broadcasting were on improvement of program content, providing wider choice of programs, improving broadcast quality and enhancing technical features. With this vision, FM phase I was launched in 1999-2000, after which 21 private FM channels became operational in 12 cities. Government introduced Phase-II for FM Radio broadcasting vide its policy notification dated 13th July 2005. After FM Phase II, there are 243 FM channels in operation in 86 cities.

Due to exponential growth of FM Radio Industry and demand for further expansion and to cover cities with population of more than one lakh through private agencies, Government notified FM Phase-III policy guidelines on 25.07.2011. Subsequently, it consulted Telecom Regulatory Authority of India (TRAI) to give its recommendations on migration of existing Phase-II licensees to Phase-III. After government approval dated 16.01.2015 on TRAI Recommendations, Government notified the migration policy on 21.01.2015 for migration to Phase-III.

Earlier, the Government had appointed an Independent External Monitor in consultation with the Central Vigilance Commission to oversee the entire process of FM Phase-III roll out including the e-auctions.

For allocating FM Phase III channels, The Simultaneous Multiple Round Ascending (SMRA) e-Auction methodology has been adopted, which is the same model being used by Department of Telecommunications for its spectrum auctions since 2010. Through global bidding, an independent external agency namely M/s C1 India Private Limited has been selected for SMRA e-auction of FM Phase III.

Government issued the Information Memorandum (IM) on 21.01.2015 as per Cabinet approval dated 16.01.2015 for the first batch of 135 channels in 69 cities under Phase-III and also held a pre-bid conference with all stakeholders on 28.01.2015. Government received 85 queries and suggestion in this pre-bid and all queries were duly replied on 17.2.2015. Government also accepted some of industry’s suggestions prominent among them being the display of aggregate and excess demand, auction closure rule as per DOT’s auctions, relaxation in cut-off date for determining the net worth of an applicant Company, identification of all possible frequencies for 135 channels.

Government then issued the Notice Inviting Applications (NIA) after incorporating suggestions accepted on IM for bidding for the first batch on March 2, 2015, which was followed by another pre bid conference with prospective bidders on March 10, 2015. Government received 76 queries in this conference and again all queries were duly replied, followed by an amendment to NIA on 20.03.2015.

After receiving 28 applications by the cut-off date of 27.03.2015 (5 PM), Government published the ownership details of all the applicants, which were then complied by the bidders. To create awareness for the bidders, Government conducted a training session on 22, April, 2015 which was attended by all stakeholders.

An Application Review Committee (ARC) appointed by the Government with representatives from Ministry of Law, Corporate Affairs, Finance, and Communications and IT, examined all the 28 applications.

After releasing list of pre-qualified bidders and including bidders as per the orders of the Hon’ble Madras and Delhi High Courts, there are 26 applicants for the first batch of FM Phase III. Government conducted another training session on 17.07.2015 with all the eligible bidders followed by mock auctions for three days from 22.07.2015 to 24.07.2015.

e-Auction for the first batch of private FM Radio phase III channels began on July 27, 2015. Four rounds of bidding are held daily and by 14th August, 2015 which was the 15th day of bidding, 60 Rounds have been completed.

The auction is being closely monitored and supervised by senior officials to maintain integrity of the process.

At the close of the 15th day of bidding, 91 channels in 56 cities became provisional winning channels with cumulative provisional winning price of about Rs 1079 Crore against their aggregate reserve price of about Rs 449 Crore. The total reserve price of the first batch of 135 channels is Rs 550.18 Crore.

The first batch auction will pave the way for onset of FM Phase III regime, which will bestow many new facilities on the operators under the regime. In Phase III, license will be for 15 years as against 10 years in Phase II. Total FDI/ FII allowed in new regime is 26% as compared to 20% in Phase II. An operator in Phase III regime may own upto 40% of channels in the same city subject to three different operators in the city, whereas earlier policy provided for only one channel per operator per city. New regime also gives an operator facility to network its own channels within the country. Unlike Phase II, Phase III regime permits the operators to carry the news bulletins of All India Radio in unaltered form on mutually agreed terms and conditions with Prasar Bharati.

As the government has rejuvenated its approach towards North Eastern part of India with its ‘Act East’ policy, FM phase III policy also exudes this sentiment. It provides much needed support to the FM radio broadcasting services in cities of North Eastern part of India as in the cities of Jammu & Kashmir and Island territories, with provision of annual fee of the channels in these areas at half the rates for first three years, besides Prasar Bharati Infrastructure at half the lease rentals.


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