Updated: How much should you bid for Phase 3 of the FM Auction?

FM Companies: Here’s the updated cheat sheet for bidding at phase 3 of the FM auctions.

This updated model has tighter ranges and is, in my opinion, more accurate. I used Facebook’s ad reach potential for each city as a predictor of its license fee to build a linear regression model. Predictions here are based on that model. If you’re interested, here‘s the code for that model.

This Facebook fueled model beats the franchise based model I built a week ago for two reasons. First, Facebook’s ad reach potential is a better proxy for a city’s advertising potential than franchise data. Advertising potential is directly related to how much companies will spend on advertising their products on radio, which, in turn, is directly related to the price at which an FM station gets sold.

Second, the Facebook ad potential helped my predictions get more granular. Two cities, no matter how similar they might be, rarely get sold at the same price. Using franchises as a predictor didn’t provide my data with this price uniqueness. I only ended up with many buckets of similarly priced cities. If a city had 1 Cafe Coffee Day and 1 Domino’s pizza store, my model predicted it to sell at the exact same price as every other city with 1 Cafe Coffee Day and 1 Domino’s pizza store. That’s still a good approximation, but my facebook fueled model allows me to go beyond that approximation.

For a 60% chance of winning the auction for a city, bid the amount in the second column. For an 80% chance, bid the amount in the third column. For an almost-certain 95% chance, bid the amount in the fourth column.

A third of the cities up for auction in the last round of Phase 3 of the auctions went unsold. The cities highlighted in the table below are my predictions for which cities are likely to go unsold in this round.

Ask yourself how badly you want the frequency of a particular city. Refer to the table to find the value that matches your priority for that city. Bid that amount. (All figures in lakhs of rupees.)

City	60% chance	80% chance	95% chance	Reserve Price
Achalpur	143	249	416	171
Agartala	279	383	546	16
Aizwal	308	411	573	12
Akola	213	318	483	30
Alappuzha	351	454	615	702
Amravati	259	363	527	351
Asansol	331	433	596	194
Barshi	152	258	424	171
Belgaum	323	426	588	702
Bellary	213	318	483	702

Click here to view and download the table.

If you’re very eager on buying the frequency for Achalpur, you’re best off bidding the amount in the 95% chance column. Bidding at 416 lakhs gives you an almost certain chance of clearing the round with the frequency in hand.

Suppose you’re not as confident about the frequency for Agartala; you’re not as desperate to go out and get it. You decide that you want to bid an amount that will give you a 60% chance of winning the auction for Agartala’s FM Station. Bidding at 279 lakh is your best bet.

A quick note about reserve prices: the higher it is compared to the 60% chance bid, the lower the probability of the frequency selling. For Achalpur, the reserve price (171 lakh) is above the 60% bid (143 lakh). For Agartala, however, there’s some distance between the reserve price (16 lakh) and the 60% bid (279 lakh). This means that the FM station for Agartala will sell like hot cakes but that for Achalpur won’t. Cities highlighted in the table are likely go unsold.

I hope this table was valuable to you. Good luck at the auctions!