“There is a traditional MVNO model according to which Virgin Mobile in India is doing a good job. Further, it would be really interesting if we can have a rural localized MVNO. Can we have a village entrepreneur who is a specialized MVNO with information suitable for that village? My view is that India will see a few different models than what is available elsewhere in the world. We will experiment with some new models of MVNO,” says Vivek Mohan, president, Alcatel Lucent India.

For an existing MNO, it would be a big challenge to put in meticulous research on the impact of a new business model. In addition, creating a place for itself and gaining a substantial market share is also not going to be a cakewalk. While the urban parts of the country have already reached a level of stagnation, capturing new customers in rural areas would also take a while.

“No longer is basic VAS considered to be the differentiator. Operators can add these services as easily as an MVNO can. Hence, more value offerings are needed,” says Raina of Patni.

Satya N Gupta, chief regulatory advisor, SAARC region, British Telecom says, “Will this model add value to the existing market in India? I don't think so. First, there is no scope on the tariff front. In India it is already among the lowest in the world. Second, it would also not make the right business case as many existing operators face a tough task of grabbing customers.”

On second thought, many industry experts feel that new entrants will stay away of targeting subscribers in rural areas altogether to avoid direct competition with Indian MNOs, who are aiming for a big pie of new consumers from this segment.

But much would depend on the guidelines and key government regulations related to MVNO, intra-circle roaming, and introduction of mobile number portability in the country.

“Implementation of MNP is essential to create a competitive environment in which an MVNO can work. The case in example is Latin America where the MVNO model could not really pick-up, owing to non-implementation of MNP despite high mobile penetration and even higher percentage of post-paid subscribers,” says Vineet Sirpaul, executive director, Nu Tek India.

Newly established 3G/4G networks would be ideal for MVNOs to offer high-speed data applications (like videoconferencing, banking and travel applications, etc). And it is likely that mobile operators will grab this opportunity to generate more revenue to compensate the enormous cost of building 3G networks.

More Bottlenecks
Experts have raised doubts on MVNOs getting a fair deal to initiate business offerings in India. Since it is the non-telecom firms who would primarily adopt the MVNO model, there should be a clear elucidation from the government over the FDI limit. The MVNO would need to bank upon value added services in India; reliability on margins will not serve the purpose.

“MVNOs in this country are going to face a tremendous challenge because they will have to work by sharing bulk minutes. Since most operators have very small spectrum, sharing bulk minutes at low cost is going to be a big challenge for their own financial viability. Therefore each operator will see its own business case and then work on it,” says Anil Sardana, MD, TTSL.

While in the UK MVNOs focusing on international immigrant population are doing reasonably well, other markets such as the US are confronted with a lot of pressure because of high subscriber addition cost due to handsets subsidies.

In the US market, though rolling out of branded handsets is still a common phenomenon, MVNOs with subscriber base of around 5-8 mn have not been able to get the same deal as that of AT&T or Verizon. According to experts, these companies have a subscriber base of 80-100 mn and can easily approach a handset manufacturer to drive the costs lower.

The Final Say
In India, where most operators are in the race to offer the cheapest tariffs, it would be exciting to see if the MVNO model can prove to be a different case altogether. Though we have seen moderate success through Virgin Mobile, who claims to be a franchise model and not an MVNO, to get better RoI MVNOs will initially be restricted to the upper-end segment.

If Virgin Mobile tries to retain its franchise association with Tata Teleservices and do not go for an official MVNO license, Virgin Mobile will be able to enjoy a number of benefits. If the company does not go for a license, it will be free from paying license fee, free from mandatory QoS regulations, among other things.

“In the past the Indian media has talked about MVNOs. However, in India there is no definition under any telecom law or regulation that defines an MVNO outfit. The most common definition is that an MVNO is a company that buys bulk minutes from an operator. Virgin Mobile has been launched as a brand of Tata Teleservices. We do not sell bulk minutes and, therefore, this arrangement is not an MVNO,” says MA Madhusudan, CEO, Virgin Mobile India.

Similarly, understanding the challenge of a profitable subscriber acquisition also plays a vital role. If we go by statistics, over 40% of MVNOs fail within a year of their operation and 15% struggle for margins.

“There needs to be a mutually acceptable and beneficial partnership between the MVNO and network operator. An MVNO is successful only when both parties offer a value proposition exclusive to them, and these offerings can complement each other in the form of a strong and compelling product,” says Raina of Patni. The second aspect would be to settle on the degree of control that the MVNO would have over the operator's existing customer base.

“In an ideal scenario, the MVNO should be in control of customer relationship which includes access controlling subscriber calls for specific behavior,” Raina adds.

In addition to large investment in advertising and handset subsidy, there would be a huge cost involved in call control tools like an SCP, and establishing relationships with third party service providers like payment managers, retailers, value added service providers, etc.

We have seen both successful and failed examples of MVNOs across the world. However, to grow in the Indian market, MVNOs would need to bank on a comprehensive roadmap, policies that should be very promising for prospective subscribers and new business models. At the end of the day, both the operator and MVNO should believe in the model, otherwise it would be a tough task to make the MVNO concept a success in India.

Jatinder Singh
jatinders@cybermedia.co.in