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As the MVNO market is experiencing exponential growth worldwide, players are already knocking the doors in India looking for strategic alliances.

TRAI has recommended that MVNOs be allowed in India while the issue is being hotly debated at all possible telecom forums and seminars. Among some international MVNOS interested in India, Telekom Malaysia, Virgin Mobiles, Mobile ESPN and ValueFirst are key names. According to sources, even Reliance Communications is keen to take the MVNO route for its GSM foray in some telecom circles.

MVNOs do not own either infrastructure or spectrum. They have business arrangements with traditional mobile operators to buy Minutes of Use (MOU) in bulk for sale to their own customers. Utilizing mobile telecommunications as a means to interact with the end-user, the MVNO can create significant additional brand-value and optimized customer experience for the intelligent virtual operator.

However, counter arguments to MVNO entry in India are begging a hard look. According to Cellular Operators Association of India (COAI), MVNO will not suit the Indian telecom market in view of constantly reducing tariffs, falling ARPU and low margins. DoT is also not in favor of the concept. Many international MVNO players with expertise in 3G services have been approaching the Indian government asking the DoT to take a re-look at the many benefits it promises.

Symbiotic Significance
MVNOs will drive collaborative growth-between the MVNO, the service provider, and other participants such as content providers-in all facets of the wireless market facilitating lucrative partnerships.

Besides expanding the existing customer reach, MVNOs will enhance profitability by generating additional revenue from the use of unused bandwidth. New technology development like 3G has created enhanced capacities and bandwidth. An MVNO can use this excess to sell different voice and data services, whilst allowing service providers to enhance productivity.

Well-diversified independent MVNOs can offer a product mix that incumbent mobile operators cannot match. For example, Virgin Mobile, an MVNO in the UK uses its market recognition to position itself for selling directly to its airline customers and others.

The niche markets provide an opportunity for the MVNOs to offer wireless products customized to the end-user lifestyles, thus maximizing the demand for wireless data services.

Regulatory Challenges
The regulatory challenges surrounding MVNOs in India are considerable and will require concerted action by several key stakeholders.

MVNOs in India are likely to face FDI limits. Given that non-telecom firms will launch MVNOs predominantly, the level of FDI investment in an MVNO may require clarification. The present taxation level of Indian telecom players at 17%-26% is one of the highest in the world. Since MVNOs work on thin margins, high tax rates could prove to be an obstacle towards a viable commercial model. Clear definition of licensing models, spectrum sharing and regulatory boundaries are some of the prerequisites.

Making Success
The major benefit to traditional mobile operators cooperating with MVNOs is to broaden the customer base (sell additional MOUs) at a zero cost of acquisition. It is likely that incumbent mobile operators will continue to embrace MVNOs as a means of deriving revenue to offset the enormous cost of building 3G networks.

Most regulating bodies worldwide are in favor of MVNOs as a means of encouraging competition, which would ultimately lead to greater choice and lower prices. Many incumbent mobile operators have begun to evaluate the opportunity to offer supplementary MVNO services of their own.

The experience in other markets suggests that the MVNO does not necessarily erode existing players' market share and profitability. They buy network capacity from existing operators, thereby generating more revenues.

Studies have suggested that India is an appropriate market for MVNOs with some metro cities (Delhi, Mumbai and Chennai) appearing to display ideal market conditions for MVNO launch. However, this is still early days for MVNOs in India, atleast for the time being.

Malovika Rao
malovikar@cybermedia.co.in