In a reversal of its recommendations made in April 2008, the Telecom Regulatory Authority of India whittled the increase it had suggested then in the foreign direct investment cap for companies set up to uplink television news channels, as well as in FM radio.
It also suggested bringing down the level for automatic route approval in all broadcast distribution services from 49 per cent to 26 per cent, thus bringing more investments under the ambit of the Foreign Investment Promotion Board (FIPB). The ministry of information and broadcasting (I&B) would now decide on the recommendations.
Trai wants the FDI cap in FM radio raised from the current 20 per cent to 26 per cent. In 2008, it had suggested the cap be increased to 49 per cent. In companies set up for uplinking TV news channels and current affairs, the FDI cap has been kept unchanged at 26 per cent. In 2008, Trai had wanted the cap upped to 49 per cent.
The regulator is also for more scrutiny of FDI investments and has proposed reducing the limit under which companies could get clearance on the automatic approval route, from the earlier recommended 49 per cent to 26 per cent.
These cover direct to home (DTH) TV, MSOs (multiple system operators), HITS (head end in the sky) and mobile TV, among others. However, it reiterated the earlier recommendations on raising the foreign investment limit in broadcast carriage services which include DTH, MSOs, HITS and internet protocol TV (IPTV)--from 49 to 74 per cent. But it has added a stiff rider for MSOs saying the increase be allowed only if they digitise their networks.
Trai has also made a specific recommendation for local cable operators. It has proposed that the FDI cap be reduced from 49 per cent to 26 per cent. This is primarily to encourage consolidation of these smaller operators with the bigger ones.
Broadcasters were clear that the 26 per cent FDI limit for uplinking news and current affairs' channels was inadequate. "The cap at 26 per cent essentially reduces us to being only a financial investor in news ventures. Therefore, setting up a news channel currently does not make sense for us," Uday Shankar, CEO of STAR India, had said in an interview earlier.
Opinion is divided on the changes for FM radio. "The recommendation is in line with expectation. In TV news, as well as newspapers, the FDI cap is at 26 per cent because of the sensitivity associated with this sector. Similarly, with FM radio, as under the new policy, FM radio news will be allowed," said Prashant Panday, CEO of Radio Mirchi.
However, others think the FDI cap should have been increased to attract investments. "In radio, an increase to 49 per cent would have been beneficial, as it would have brought in more investments in an industry at a nascent stage and help it to grow," said Farokh Balsara, India head of media and entertainment at Ernst & Young.
"Anything below 49 per cent FDI is inconsequential," said Vineet Singh Hukmani, managing director, 94.3 Radio One. It is about time something substantial was done for the radio industry, like the license extension from 10 to 15 years that puts the life back into it. Such things are just weak consolation measures. The industry needs some real sops."
"For the radio industry, there has been only a marginal revision in FDI limit from 20 per cent to 26 per cent, which for a nascent industry is not encouraging and will not unleash the true growth potential of the category. It is important that media platforms be treated neutrally, with radio being given a fair chance, with the FDI limit increased to at least 50 per cent," said Tarun Katial, CEO, Reliance Broadcast Network Ltd, which runs the BIG FM channel.
Raising of caps were hailed where these were recommended. Katial said the increase to 74 per cent for broadcast carriages would encourage digitalisation. M G Azhar, president, strategy and business development at Den Networks, a leading MSO, said: "This new limit is good for the sector. It will attract investment and pave way for speedy digitilisation of the cable and satellite industry."
"The move will propel the growth of IPTV in a big way and foreign investments will come in this sector, which will help its growth," said Mahendra Nahata, chairman of Smart Digivision, a company which provides IPTV services through MTNL and BSNL.
The I&B ministry had asked Trai last September to review its April 2008 recommendations in the wake of recent changes in general FDI policy.
A Consolidated FDI Policy issued by the Department of Industrial Policy and Promotion took effect on April 1 this year. It modified the method of calculation of foreign investment in Indian companies.