TRAI seeks views on methodology for calculating reserve price of FM phase III

NEW DELHI: The Telecom Regulatory Authority of India (TRAI) has recommended that the reserve price for FM radio channels in phase III should be 0.8 times of the valuation of FM radio channels in that city.


In a consultation paper on the subject of reserve price at the request of the Information and Broadcasting Ministry, TRAI suggests reserve price of Rs 5 lakh per city, for FM radio channels in 11 border cities in phase-III.


The regulator has also asked if stakeholders agree with the proposed   approach/methodology for determination of the valuations of FM Radio channels in 253 new cities in phase-III.


The Ministry sent a reference dated 16 December 2014 to the Authority seeking recommendations  of TRAI on reserve prices for 831 FM radio channels in 264 new  cities in the phase-III. With this, the private FM radio operations would be permissible in 350 cities.


Comments/views of the stakeholders on the issues related to estimation of the reserve prices for auction of FM radio channels in new cities should be sent latest by 25 February.


TRAI has said that for FM channels in 253 new cities, the Reserve Price can be fixed at 80 per cent of the derived valuations.


For 11 new cities classified in the ‘Others’ category, no reference price is available from phase-II as no city was available in this category in that phase. These cities have population figures of less than one lakh and are located in the border areas of Jammu and Kashmir (J&K) and the North- Eastern (NE) States. The Cabinet approved the RP for each of these 11 cities as Rs 5 lakh.


These cities are of strategic importance. The availability of FM radio broadcasting service in these far-flung areas can also be used for Emergency Warning Services (EWS) with the specific approval and guidance of the local district administration. When the reserve price of Rs 5 lakh per city set for these cities in phase-III, the policy is compared with the proposed RPs for ‘D’ category cities of NE and J&K, it appears to be reasonable to encourage the participation of a large number of prospective bidders. The inherent design of an ascending e-auction process would anyway ensure that the true market value of the FM radio channels in each city is discovered during the process of auction. So the RP for each of these 11 new cities may be Rs 5 lakh.


The Consultation Paper noted that the non-refundable one time entry fee (NOTEF) for FM radio channels in all the cities coming up during phase III is to be discovered through an ascending e-auction. The phase-III policy guidelines provides the mechanism for migration of existing FM radio operators from phase-II to phase-III regime.


According to the decision of the Empowered Group of Ministers (EGoM), the Ministry had in April 2013 sought recommendations of TRAI on the migration fee to be charged from existing phase II operators on their migration to the phase-III regime of FM radio. Broadcasting authority sent its recommendations on ‘Migration of FM Radio Broadcasters from phase-II to phase-III’ on 20 February 2014.


The methodology for determination of the reserve prices for auction of FM Radio channels   was already finalised by the Government. In its recommendations of 20  February 2014, the Authority recommended that the methodology for determining the reserve prices for fresh (new) cities (where no private FM radio channels are operational) in phase-III should be reconsidered as the current methodology might jeopardize the auction.


Thereafter, MIB decided to seek fresh recommendations of the Authority on reserve prices for new cities in phase-III and also make the 2011 census data applicable for identification and categorisation of the new cities. Based on the 2011 census data, MIB has identified 37 additional cities where 112 private FM radio channels are proposed to be put up for auction. This is in addition to the already identified 227 new cities earlier earmarked for FM radio expansion as per the 2001 census data. Further, based on the 2011 census data, MIB has also upgraded the category of 11 new cities that were already mentioned in the phase-III policy guidelines dated 25 July 2011. Thus, there are now, in 264 (227+37) new cities, a total of 831 FM radio channels that are to be put up for auction.

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