Valuing commercial radio licences

摘要

Within the EU regulatory framework, licensees for commercial radio broadcasting may be charged a fee to ensure optimal allocation of scarce resources but not to maximize public revenues. While radio licence renewal occurs in many EU countries, an objective, model-based approach for setting licence fees has not been used so far. In this paper, it is described how such a fee can be determined for the purpose of licence renewal or extension. National and regional Dutch FM licences were valued, taking into account that simulcast broadcasting of digital and analogue radio is obligatory upon extension. Licences are valued using discounted cash flow methodology, whereby the cash flows of an averagely efficient entrant are taken as the benchmark for valuation of each individual licence. Cash flows during the licence period 2011-2017 are forecast based on generalized least squares regressions, using financial variables of Dutch radio stations for the years 2004-2008. Separately, bottom-up cost and investment models are used to calculate analogue and digital distribution costs. This results in a value per licence, based on objective licence characteristics, which can be used to set licence fees if administrative renewal or extension is opted for instead of a new auction or beauty contest.