The e-auction of the first batch of private FM radio phase-III channels concluded this week, which, apart from fetching the government Rs 1,157 crore in revenues, has also successfully tested a robust and transparent model for allocation of a public resource.
“At the end of the channel allocation stage, 97 channels in 56 cities became provisional winning channels with cumulative provisional winning price of about Rs 1,156.9 crore against their aggregate reserve price of about Rs 459.8 crore,” the information and broadcasting ministry said in a statement.
It said the summation of provisional winning prices surpassed the cumulative reserve price of the corresponding 97 channels by Rs 697.05 crore or 151.58%.
The bidding process adopted a Simultaneous Multiple Round Ascending (SMRA) e-auction method, conducted over the internet.
The process was ring-fenced with strong firewalls to prevent potential manipulation and rigging, experts said.
“Since it was managed electronically by a third party, chances of manipulating the results were nil,” said an industry expert who did not wish to identified.
All the bidders were given eligibility points (EP) on the basis of the earnest money deposited with the government. Every city had a certain number of EPs associated with it and a bidder could enter a city only if the necessary EPs were available.
This implies that a bidder cannot frivolously bid for cities beyond its qualification.
Also, by bidding in a city for a number of channels at a “clock-round-price,”if the price becomes the winning price and the channel becomes the “winning channel”, the bidder is considered committed to buy the channel.
Once a bidder becomes a provisional winning bidder (PWB) in a city, it cannot move out of that city unless removed by another bidder at a higher price.
The bidder’s eligibility points get blocked and cannot be utilised elsewhere, ruling out the possibility of any bidder trying to increase the price artificially after a certain level as it will increase the risk of getting stuck in a city.
The government’s objective to obtain a market-determined price of FM radio channels through a transparent, fair and impartial process has been more than fulfilled, experts said.
“Every investor has their own individual value expectation and those who bought the licenses at a higher value definitely believe in their capabilities to extract returns out of their investments,” said an expert, who did not wish to be named.
Also, the high interest shown by bidders will foster competition and benefit listeners through better broadcast quality and wider coverage.
“This auction will definitely stimulate competitive intensity in the radio industry as it will allow players to expand their national footprint and compete with established national players and bring the market close to equilibrium,” the expert said.
The auction saw huge demand for smaller cities such as Varanasi, Bareilly, Jodhpur, Guwahati and Shillong, demonstrating that radio players are bullish on these smaller markets.
Experts also pointed out that the fear that high prices could lead to a “winner’s curse” and companies forced to compromise on content quality does not hold, because the broadcasters can build on their networking and syndication strength for better returns to investors and all stake holders.
“The listeners will be the winner in terms of variety of choice available through differentiated high quality content.
Better returns driven by syndication and networking will open up further avenues of related expansion and diversification leading to generation of further employment opportunities,” an industry expert said.