Radio phase-III rules may kick off M&As, see smaller players exit: Experts

Push into C&D category cities to aid growth; sector had shrunk to half its pre-pandemic market size of Rs 3,100 cr due to Covid-19 and other curbs over past two years

The new radio phase III guidelines, announced last week by the government, may pave the way for mergers and acquisitions, sector experts and radio broadcasters said. Smaller players may choose to exit the market now, as the government has removed the 15 per cent ceiling on channel holding, which was inhibiting growth.

“The radio sector had shrunk to half its pre-pandemic market size of Rs 3,100 crore due to Covid-19 and other related restrictions over the last two years,” said Ashit Kukian, chief executive officer (CEO), Music Broadcast Ltd (MBL), part of Jagran Prakashan, which runs the Radio City brand of FM stations in the country. “The market is beginning to recover now. Guidelines that open up the market for growth are always welcome,” he said.

Prior to Covid-19, the Anil Ambani-led Reliance Broadcast Network (RBNL), which runs Big FM, had decided to offload its radio business to MBL, for Rs 1,050 crore. However, the deal was called off last year, as the players had not received approval from the Ministry of Information and Broadcasting to go ahead with the transaction.

Industry sources say that RBNL may revive plans to sell its radio business now as the market begins to open. Executives from RBNL were not immediately available for comment. But Anurradha Prasad, president, Association of Radio Operators for India (AROI), an apex body representing the sector, said that the government’s move to allow participation of companies with a net worth of Rs 1 crore in the bidding process for category ‘C’ and ‘D’ cities would expand the market.

She also pointed to the removal of the three-year window for restructuring of FM radio permissions within the same management group during the licence period of 15 years, aiding M&A activity in the industry.

“About 47-50 per cent of the advertising volume share in the radio sector comes from non-metros,” she said. “Unlike metros and bigger cities where there is a plethora of entertainment options, the smaller markets present a huge upside for growth for radio broadcasters. Larger players and newer entrants may want to get there now. At the same time, those wanting to exit the market can also do so with the current set of guidelines,” she added.

According to the EY-FICCI media and entertainment report for 2022, India has around 34 radio broadcasters operating 385 FM stations in 112 cities. The market is estimated to touch Rs 1,800 crore by the end of the 2022 calendar year from Rs 1,600 crore, which was the size in 2021. By 2024, the radio sector could touch Rs 2,100 crore in terms of size, which is still below its pre-pandemic market size (of Rs 3,100 crore) by 32 per cent, the report said.

Some players also point to the need for increasing the current phase three licence period by three years and rationalising annual licence fees to assist the medium. “Every step that the government takes to help the radio sector is welcome. However, to aid the industry, it should also consider extending the current licence period by three years. We have only another seven-and-a-half years’ left for the existing licence period to come to an end. Covid-19 has set the industry back. We do need some time to recover ground,” said Prashant Panday, managing director and CEO, Entertainment Network India, which owns the Mirchi brand of FM stations.

In the past, the AROI had made multiple representations to the government asking for a one-year waiver on all licence fees and charges and restoration of government advertising on radio. The body had also asked the government’s publicity department to clear payments due to the sector.