Private radio operators on Wednesday welcomed the clearance of FM phase III expansion but expressed concern over possible high licence fee as the government aims to raise Rs 1,733 crore from auction.

"Given the amount of money the government is looking to raise, radio operators will have to pay a heavy price for new licences," Association of Radio Operators for India (AROI) President Anuradha Prasad told PTI.

She said it will take a lot of time for companies to break-even and start making profits as they are dependent on advertising revenues alone.

While stating that the announcement is a good and positive move for the industry on a macro level, Prasad also expressed apprehension over the method of auction.

"The radio (licence) auction should not be done on the lines of 3G auction," she said, adding unlike telecom industry, radio users do not pay for content.

The Cabinet chaired by Prime Minister Manmohan Singh today cleared guidelines of the much-delayed FM Radio Phase III expansion.

The FM Phase-III policy extends FM radio services to about 227 new cities, in addition to the present 86 cities with a total of 839 new FM radio channels.

Commenting on the development PWC Senior Manager Regulatory Services Sahil Gupta said : "The increase in FDI limit from 20 per cent to 26 per cent will encourage foreign investors as it will enable them to have veto power in the management."

Radio City CEO Apurva Purohit, however, said the industry was expecting much higher level of foreign investment being allowed in the radio sector as it is not at par with other industry segments.

The e-auction, which the government has envisaged for taking forward the expansion, is still not perceived as the best way by the industry players.

It would enable competitors to get a clear idea about a rival's bandwidth and financials, said Gupta of PWC.

ENIL (Radio Mirchi) CEO Prashant Pandey said: "Though e- auction was being opposed, now that the government has decided to go ahead with it, we will have to calibrate our bidding strategy accordingly."

On the government's decision to allow radio channels to broadcast news he said: "We are unhappy with the sourcing as news can only be taken from AIR. But hope that gradually it will be opened up."

The industry is also of the view that multiple frequencies will give a huge impetus both in terms of reach and depth.

"Companies will be able to offer different genre in the same city," Purohit of Radio City said.