Virtual network operators struggling to launch services

Virtual network operators are finding it difficult to operate in the Indian telecom market because of lack of policy clarity and due to some licence conditions.

Virtual network operators provide telecom services without owning spectrum or network infrastructure. They buy bandwidth from mobile operators and sell it to users with their own branding and tariffs.

Licence conditions require virtual network operators to pay a fee of 8 per cent of their adjusted gross revenue, similar to mobile operators. Also a virtual network operator can tie up with only one mobile operator for a particular service.

The government has issued licences to 61 companies to work as virtual network operators but only a handful have commenced services.

“Virtual network operators are allowed to tie up with one telecom company for a particular service. This is affecting their ability to compete. If one mobile network is down, the service will be affected. Also the licence fee is a deterrent,” said Rajesh Chharia, president of the Internet Service Providers’ Association of India (ISPAI). He added virtual network operators were small enterprises that extended marketing for large telecom companies by offering innovative packages and prompt services. “Local entrepreneurs understand the local demand,” Chharia pointed out. The Cellular Operators’ Association of India said virtual network operators provided an option to increase telecom penetration but were finding it difficult to sustain operations in the hyper-competitive industry.

“The prevailing environment of inadequate or negative returns on investment is a challenge for virtual network operators,” said Rajan S Mathews, director-general, COAI.