Vodafone branded station on the Gurgaon Rapid Metro line. Micromax, Airtel and Induslnd Bank have also branded stations for 3-5 years in the network
The Mumbai Metro will be the second mass transit project in the country to use station branding for revenue. The first phase of the Metro between Versova and Ghatkopar is auctioning rights to name 12 stations on the line.
Gurgaon Rapid Metro, built by Infrastructure Leasing & Financial Services (IL&FS) in November 2013, was the first to auction naming rights for four stations. Station branding could help build more Metros in Indian cities. Most Metro projects in the country are undertaken by a partnership of state and central governments. Only a few, like the Hyderabad Metro being built by Larsen & Toubro, are private. Non-fare revenue is crucial for the success of mass transit systems in India with fares kept deliberately cheap under populist pressure.
Station branding is successful internationally, but it has just taken off in the country and Metro operators here have low expectations. The Mumbai Metro, built for Rs 2,356 crore on a 35-year concession, expects only 5-10 per cent of its revenue from beyond ticket sales, of which 40 per cent is slated to come from advertisements and station naming rights, a spokesperson for Mumbai Metro said in an email response to Business Standard.
Station naming contracts are usually awarded for five years, which can be extended by five more years. Sources close to the bidding process for the Mumbai Metro stations said annual rights were sold at about Rs 2-6 crore for each station. The name of the successful bidder will prefix the name of the station and the company will have rights to 13 elements like areas in the station, pamphlets and brochures, on the Mumbai Metro website, and during announcements.
Similarly Gurgaon Rapid Metro earlier expected just about 10-15 per cent of its overall revenue to come from non-tariff avenues, about 40 per cent of which came from station branding. Barely four months after the start non-fare-box revenue has jumped to 30-40 per cent as the branding initiatives including train wrapping kicked off. The contract period is about 3-5 years and players such as Vodafone, Micromax, Airtel and Induslnd Bank have branded the four stations.
And the associated brands see a synergy with modern urban transport and use branding opportunity as a way through which they can sneak into the busy schedule of an urban consumer.
This association has positively impacted our scores for depth of brand. The Vodafone Store at the station provides commuters a quick access to our products and services, said Ronita Mitra, Senior Vice President — Brand Communication & Insights, Vodafone India.
Delhi Metro Rail Corporation (DMRC), the most successful metro in the country, has abstained from using branded stations. With a working network of 189 km, the “excessive presence” of private players could undermine the DMRC brand, said a company executive on condition of anonymity. He added the idea was discussed some time ago, but was not thought viable, along with a proposal for advertising in Metro coaches.
DMRC earns about 65 per cent of its revenue from non-operational activities like consultancy, retail, real estate development, advertisements and bank deposits. An increased dependence on non-fare revenue is not without its risks. The Delhi Airport Metro line expected about 70 per cent of its revenue to come from real estate and retail development, the expectation failed to materialise, and the line is losing about Rs 4 crore a month. Reliance Infrastructure, the private partner, exited the first private-public urban infrastructure project in the country citing breach of the concession by DMRC.
But as the engagement of private players in urban infrastructure increases, the pressure to break even early can only raise the reliance on non-fare revenues. The 72-km Larsen & Toubro Metro Rail Hyderabad Limited project is based on a model of 50 per cent revenue from fares, 45 per cent from property development and five per cent from advertisement and other miscellaneous sources.
Internationally, governments and Metro operators have made much more money through station branding. Dubai Metro was the first project in the world to sell station naming rights. This was followed by Metros in Chicago, Boston, Houston, London, Philadelphia, Montreal, Rio de Janeiro and Gurgaon.
GOING THE BRAND WAY
One of the first public-private partnership Metro projects in the country to become functional, the Gurgaon Rapid Metro has no equity infusion from the government
Under station branding, the name of the brand will prefix the name of the station with publicity at crucial points at the station
Mumbai Metro phase-I is built by a special purpose vehicle, Mumbai Metro One Private Limited (MMOPL)
- Reliance Infrastructure holds 69 per cent of the equity share capital of MMOPL, while Mumbai Metropolitan Region Development Authority holds 26 per cent and the remaining five per cent is held by Veolia Transport, France