* Govt OKs raising FDI to 26 pct from 20 pct earlier
* Govt sees rev of 17.33 bln rupees from Phase III spectrum
* Cos can now own more than one FM station in one city
(Adds quotes, details, share movement)
By Manasi Phadke
MUMBAI, July 7 India's federal cabinet on
Thursday raised foreign direct investment in the radio sector to
26 percent from 20 percent, and greenlighted an auction of more
spectrum for radio to raise 17.33 billion rupees.
The news brought relief to media companies, many running
frequency modulated or FM radio operations in losses, and
investors cheered boosting shares of Entertainment Network India
Ltd and Reliance Broadcast Network Ltd .
Shares of Entertainment Network, which owns Radio Mirchi,
jumped as much as 8.3 percent to a 33-month high of 286 rupees,
while shares of Reliance Broadcast, which owns Big FM, soared as
much as 13.7 percent to 91.35 rupees.
"The true potential of radio is basically to reach the
masses, where newsprint (and) television hasn't been able to
reach. So I think Phase III opens the door to that growth,"
Asheesh Chatterjee, chief financial officer at Reliance
Broadcast, told Reuters.
The Phase III auction will extend FM radio services to 227
new cities, in addition to the present 86 cities, with a total
of 839 new FM radio channels, a government statement said.
Most of new stations to be commissioned through this
auction are going to be in smaller cities and towns, which have
none or very few private players in the radio space.
Currently, most of the radio companies, including Reliance
Broadcast have very little foreign direct investment, falling
short of even the permitted 20 percent, Chatterjee said.
A local analyst, who did not wish to be named as she is not
allowed to speak with the media, said the entire radio industry
makes less than 1.5 billion rupees in profit.
"It is very small for a foreign guy to even look at it," she
"Right now the industry itself is very small because of the
Phase II policy structure, which really inhibits growth and
scalability is limited."
The phase III auction will address scalability and boost
profits, which would then generate interest among foreign
investors, she added.
The federal government has also opened doors for radio
companies to expand in cities where they are already present,
which will encourage niche programming. Currently FM radio
companies are only allowed to operate one station in any city.
Under the new policy, a single company can own up to 40
percent of the total number of FM channels in one city, as long
as there are at least three operators there.
The cabinet gave its nod for conducting an ascending
e-auction, like last year's telecom spectrum auction, replacing
the manual auction during the second phase.
An e-auction enables registration of bids and data updation
almost simultaneously which had helped players to fast outbid
each other in the telecom auction, while companies physically
file papers in the manual auction leading to longer disposal
(Additional reporting by Anurag Kotoky; Editing by Harish