The Union Budget last week permitted the expansion of the private FM radio space to 294 more cities. Prashant Panday, exec director & CEO, Entertainment Network India Ltd (ENIL) talking to CNBC-TV 18, says he is now optimistic that the finance minister will give a definite thrust to the FM phase III rollouts.
He says that now that multiple licenses are allowed in the metros, it would probably translate into higher revenues for larger broadcasters, if they can aggregate one or two more channels.
Here is the edited transcript of the interview
Q: First, a word on the positives that have come in from the Budget this time around. I understand that you can expand the private FM radio space to 294 more cities for the entire sector. Give us your view on impact on this sector as a whole? Are there any positives for your own company?
A: It is an old announcement. But I think when the finance minister makes an announcement as part of the Budget proposals, it carries its own weight. What that really means is that now there is a definite thrust that he now plans to give to the FM phase III rollouts.
It also means is that the timeline has probably been set now. There are certain issues which are pending with the EGoM on telecom and radio, which incidentally Chidambaram himself heads. Therefore, the hope in the radio industry is that he will now take quick decisions in the EGoM.
Q: What is you really looking forward to? There were some radio guys who were telling us that the fact that you can have three channels in towns with over 1 lakh population is a bigger positive - is that so?
A: There are two things. One, of course is the fact that there is a huge geographical expansion. Radio is a local medium. More than 60 percent of our revenues come from local businesses. Therefore, the more the local stations, the better it is for the radio business overall.
So that’s the big thing. But, the other thing of course, is that you are allowed multiple licenses now in the metros. The biggest radio markets are still located there. Therefore, I think for the larger broadcasters, if they can aggregate one or two more channels, then that means a definitive kick up for revenues in a profitable manner.
Q: The last time you spoke with us, you had indicated that in Q4, your revenues will grow about 10 percent. Given what you heard this time around, you think you could increase that run rate?
A: Once the government does the auctions, then it will probably take between 6 and 12 months for these stations to come alive. So nothing is going to happen in the next 12 months. But if the auctions happen by July as they are now suggesting, then maybe by Q4 or next year we will see some action happening.
Q: How is business? Not quite related to Budget, but how are your customers behaving, your ad revenue segment. Things are glum really for the advertising sector itself.
A: Things had started to improve. Third quarter was very good for everybody, but there is this entire thing about uncertainty. You really cannot be sure about what’s going to come up next. So every time you have a good month, you suddenly get surprised by a relatively weaker month next time around. So it is still uncertain.
I think the mood has started to lift at an overall level. If the RBI does in fact follow through and reduces rates consistently over the next 12 months, then I think the ad industry will benefit enormously from it.
Q: So fourth quarter revenues are likely to be better than the third, you think?
A: For ENIL, fourth quarter revenues have always been better than those of the third quarter. I cannot comment specifically because we do not give guidance.
Q: Can you give us an indication of how the non-radio business is doing in terms of your activations, mobile, digital, your other properties, etc. How much does it contribute to your total business currently?
A: Over the last couple of years, maybe even three years what has happened is that as the core advertising business has come under pressure. Clients are demanding better value and lower prices, we have actually shifted focus to offer a wholesome product range to our clients.
Therefore, our activation business or rather our non-radio business has actually been growing quite strongly. From about a 10-12 percent share of overall revenues - that part of the business now varies between 15-25 percent depending on which quarter we are talking about. But to answer your question, this is I think a long-term trend.