"We will sign an agreement with Music Broadcast within a month for handling their ad sales and provide content. This will be a fee-based agreement," Star TV spokesman Yash Khanna said on Friday.

Star's announcement comes amid industry allegations that the deal with Ispat group would tantamount to Star's staging a backdoor entry into the FM radio privatisation process, in which foreign companies are barred from entering in every way.

Despite repeated attempts, Ispat gorup officials could not be contacted for comments.

Industry sources also said that by Music Broadcast's terming its FM service as `Star Radio,' both Star and the Ispat Group hold an "unfair advantage" since government has barred use of established brands for FM radio braodcast.

Meanwhile, denying allegations that the company was making a backdoor entry into the FM licensing process, Star's Khanna said "a lot of people have made these allegations which are baseless. We will provide content to Music Broadcast."

As per the license agreement conditions laid down by the ministry of information and broadcastiong (I&B) "the licensee should be a company registered in India under Companies Act 1956."

Rules further stipulate that "all shareholding in it should be held by Indians except for the limited portfolio investment by foreign institutional investors, non-resident Indians, persons of Indian origin and overseas Corporate bodies....company should have no direct investment by foreign entities, NRIs and OCBs."

While denying that the company had flouted any norms, Khanna, however, admitted that Star may also facilitate infrastructural inputs to Music Broadcast, but this was yet to be worked out.

"We may also provide some technical help to Music Broadcast but negotiations are still on and nothins has been finalised. We may end up providing infrastructural support," Khanna said.

Meanwhile, News Television India has set up a separate radio division last month to spearhead its foray into the FM Radio sector as a content provider for all FM license holders.

Star's foray into FM Radio services follows government's decision last year to open up this sector for private participation, for which it allotted frequencies in 40 cities.

While announcing the launch of a separate radio division, Star had clarified that it "did not make a direct entry into the FM radio business in India because of government regulations which bar foreign companies from operating terrestrial broadcasting services."

Another major media player Zee Telefims had to withdraw from FM bids last year for precisely the same reason - since the company had NRI shareholding, which is treated by the I&B ministry as foreign holding and made another bid via an associate company.