Trade Articles

The Telecom Regulatory Authority of India (TRAI) has make out the pathway for the mobile virtual network operators (MVNOs) in the Indian telecom market and has suggested the introduction of MVNOs as the separate service providers, working in its own licensing and regulatory framework in India. TRAI defines MVNO as"a licensee in any service area that does not have spectrum of its own for access service, but can provide wireless (mobile) access services to its customers through an agreement with the licensed access provider (mobile operators)". TRAI wants no government interference in respect of the agreement existed between the MVNO and operators(whose network it is using). Matters concerning to the number allocation, number portability, interconnection with other service providers, roaming etc. must be dealt by the parent operator, on whose network MVNO is riding. More interestingly, in a bid to safeguard the subscribers interest, in case either of the stakeholders pull out, the regulator has cleared that both the MVNO and the parent operator will enter into an agreement in this regard.

The business model of MVNOs are involved in purchasing the air time from existing operators which afterwards are sold under their own brand. In the recommendations made to the Department of Telecommunications (DoT), TRAI has make it clear that the the license should be given to the MVNOs under the Indian Telegraph Act. The regulator has stated the 74 per cent foreign holding cap in MVNOs, which is same as that of the Mobile Network Operator(MNO). Moreover, Mobile Network Operator (MNO) would be chargeable for utilization of spectrum by MVNOs. On global front there are 360 MVNOs working, of which 20 alone are in Denmark. In the international arena, companies like the UK's Virgin and BT Mobile and Japan's KDDI are using their telecom strategy on the basis of the MVNO model. However getting a license for the MVNOs could require shelling out of more bucks. Any Indian company having a net worth of Rs 10 crore for Metro/Category A, Rs 5 crore for Category B and Rs 3 crore for Category C service area, paid-up capital of 10% of prescribed networth and satisfying license conditions such as FDI, substantial equity should be eligible to apply for MVNO license, TRAI added.

India has transited itself into one of the world's fastest growing mobile services market with add on of more than 8 million subscribers every month. Stating the advantages of MVNOs in contributing towards the development of Indian telecommunication infrastructure, TRAI has cleared out that the MVNOs cannot take part in the spectrum auction for access services in their respective fields as they do not have their own spectrum. The TRAI move is said to ignite the stiff competition in one of the world's fastest growing mobile market. This move will facilitate firms to have mobile services in the absence of cellular networks(radio frequencies).The TRAI move will open gateway for the worldwide telecom majors and allow an access in the India's growing mobile sector via the MVNO way. Besides it will help them in roll out services in specific zones. Like focusing only towards big cities and paying attention towards particular population segments. Explicitly clearing the key points of the model, analysts have also make it clear that this model will help in accommodating many new operators in India, without escalating the so-called spectrum crunch. Further added, many new entrants with the use of this model can now expand their services in throughout the India. Such entrants have been given license valid for few circles. While making its announcement, TRAI said "The introduction of MVNO should help the MNO (mobile network operator) to widen and deepen its market besides promoting competition in the market. The challenge is to optimally utilize available resources while ensuring competition and availability of services at affordable price."

MVNOs are bind to follow all current merger and acquisition rules and regulations. Industry watchers are taken it as a deterrent factor for MVNOs in entering to India. The Indian regulations somehow against of the virtual operators. This is because, in international arena, the MVNOs can choose out small equity stakes from the network of operators they are using. Here, if the MVNO wants to make use of the networks from the multiple players and is intending to pick out an equity stake, it becomes difficult as the Indian norms in today's date do not facilitate any company to hold more than 10 per cent stake in varied telcos. The same situation will arise in respect of the Indian operators. Mr. Pankaj Mahendroo, national president of the Indian Cellular Association stated that the MVNOs could trigger the handsets bundling with the cellular connections because more and more operators will show their interest in exploring the niche markets. It has evolved out as the boon for small players, especially when Indian profit margins are razor thin and it has the world's lowest tariff rate. The TRAI move has evoked the mixed responses in country. Leading players like Bharti Airtel, Reliance Communications and BSNL have showed up their stand by conferring the fact that the MVNO's may prove to be a not required policy for the Indian market. While they have not come up with full opposing position but they ae waning that too much competition can harm the Indian telecom sector."MVNOs are successful in markets where there are few players and high tariffs. But in a country like ours where there are so many operators, rock-bottom tariffs, and a wide range of services, MVNOs may not have a USP. It will not be easy to undercut large operators such as Bharti, Vodafone and RCOM on the price front as they have large economies of scale"says TV Ramachandran, the director general of COAI, the industry body of GSM operators.