Business Today

Radio City plans to double the number of its stations, says CEO Apurva Purohit

Radio City CEO Apurva Purohit speaks with Business Today about the FM radio company's expansion plans in the upcoming Phase III radio license bidding.

twitter-logo Ajita Shashidhar        Last Updated: October 20, 2014  | 11:32 IST
Radio City CEO Apurva Purohit
Radio City CEO Apurva Purohit

Apurva Purohit, CEO of the Rs 250-odd crore FM radio company Radio City, is hoping to expand her network from the existing 20 cities to more than 40 cities in the upcoming Phase III radio license bidding. In a conversation with Business Today, Purohit says that after the Phase III bidding, which will make FM radio available in more than 250 cities and towns, advertisers won't be able to ignore the medium.

Excerpts:

Q. BIDDING FOR PHASE III RADIO LICENCE IS DUE TO HAPPEN ANY TIME. HOW WILL IT IMPACT THE RADIO INDUSTRY?

A. I am expecting M&As to take place as there will be all those single players or people who have licences for only two or three places but want to expand their regional presence in say Uttar Pradesh or Bihar. While all of us crib about Phase III taking time to happen, I think the good thing that the delay has resulted in is that it has given us all time to pay back our previous loans and put ourselves in a comfortable situation.

So, for example, last year we did 30 per cent EBITDA margin, one-and-a-half years ago we had paid back the entire loan we had taken for Phase II. So, we are a debt-free company, which means that the EBITDA is all cash profit.

We have been growing at a CAGR of 15 to 20 per cent in the last four-five years. So, suddenly there is enough money sitting in the bank. This is the case with not just Radio City, but three-four companies in the industry which are showing these kind of margins.

So, it gives a lot of confidence. Will the people who have not done radio before bid or buy over these single-station companies, that is anybody's guess.

Q. DOES THE RADIO INDUSTRY STILL COMMAND THE KIND OF EXCITEMENT IT DID A FEW YEARS AGO?

A. From a buying perspective it does. For somebody who wants to build a multimedia empire there aren't too many opportunities.

Q. THE RESERVE PRICES FOR PHASE III ARE KNOWN TO BE MUCH HIGHER THAN EARLIER. WILL IT NOT IMPACT PROFITABILITY?

A. When they were asking us to pay so much of reserve price, the question was will we get migrated to Phase III? (The FM radio licenses in the first phase were given out for 10 years and are due to expire.) What will be the cost of migration be? The last piece of news was that the government has accepted TRAI's (Telecom Regulatory Authority of India) migration plan. We will all get migrated to Phase III.

The amount we will be paying is 10 to 15 per cent higher than what we had budgeted.* Yes, the reserve prices are high. Prices in some cities are extremely high, but overall what we are going to pay for migration is not cheap, but reasonable from the point of view that you are getting 15 years extension. Our businesses in the current scheme can easily sustain the increase.

Q. HOW WILL LIFE CHANGE ONCE PHASE III IS ROLLED OUT?

A. All of us will be looking forward for expansion. We are planning to double the number of stations we have. So, clearly we are seeing not just geographical expansion but also more languages.

We are not present in Kerala, so more languages will come into our network and then, of course, there will be news that is going to be allowed, multiple frequencies will also be allowed. So, if we get a chance to get a second frequency in Mumbai, we could run it as a Marathi or an English channel.

The significant change will be geographic expansion. So, the moment it is available in 300-400 cities, FM will become a medium to contend with. Right now from a reach perspective, being available in 90 cities, we are still a niche medium.

Q. WHAT KIND OF AD REVENUE JUMP DO YOU EXPECT ONCE PHASE III KICKS OFF?

A. Radio has been the fastest-growing industry other than digital. But the base was tiny. So, I think the first two-three years will see an upward of 30-40 per cent growth because you are trebling the number of stations. The five per cent share of radio in the overall ad pie will move to 10 per cent.

Q. WOULD MORE NUMBER OF FREQUENCIES IMPLY SEGMENTATION OF CONTENT?

A. I don't think Phase III will result in any kind of segmentation. It will only happen when you have many more frequencies in one city. At present, Mumbai already has seven frequencies, an eighth player will come in. The eighth player is unlikely to go in for a niche offering, he will go in for a GEC (general entertainment channel) kind of offering.

It's only when there are 30-40 frequencies available in a city like Mumbai, and the larger players buy three or four frequencies, then they can think of creating bouquets. The Phase III story will be all about entering new geographies, while Phase IV will be all about segmentation.

Phase IV will be at least four-five years away. That's exactly the reason why we have invested heavily into offering segmented content in the online space.  We have 13 online stations which straddles from a spiritual channel to an independent music channel.

Q. DO YOU MONETISE YOUR ONLINE CHANNELS?

A. Yes, we do through advertising. But that will take some time, as you know most digital revenue to going to platforms such as Google. However, having said that, the start has been very good. Our non-terrestrial revenue is around 12 per cent.

Q. ISN'T ME-TOO CONTENT STILL A BIG CHALLENGE FOR YOU?

A. A GEC be it on TV or print continues to cover the same kind of content. Having said that, all of us have tried to build our own differentiations. We have built it through radio jockey profiles.

Right now as we speak, we are taking it to yet another level where, based on a lot of focus groups we have done across the country, we got insights on how consumers whether living in a city or town are looking at value adding to their lives in terms of personality development or knowledge. They want to interact with media which is not pure entertainment, but is also offering them some value addition. It could be some tips or news which they haven't heard before or some inspirational stories.

We have recently launched the City First Aap First campaign where the thought is that by interacting with Radio City, we will ensure that you are ahead of the pack.

* Apurva Purohit has clarified that she meant the migration fee that Radio City would be paying is 10 to 15 per cent higher than what it had budgeted and not 10 to 15 per cent of what was budgeted. The copy has been changed to reflect this.

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