Telecom dept mulls MVNOs to bail out beleaguered telcos

The Department of Telecommunications (DoT) is planning to permit the introduction of mobile virtual network operators (MVNOs) in the country as one way to bail out the eight new telecom companies that are reeling from low tariffs and intense competition. The new telcos were given licences in January 2008, but many have not been able to even roll out their services.

“We will ask new operators to go for an MVNO model, rather than return spectrum, which could be another alternative,” said a senior DoT official. An MVNO would offer wireless services under its own brand name by taking on lease spectrum and infrastructure from a new telecom operator.

MVNOs can buy minutes of traffic in bulk and resell them to subscribers. Virgin Mobile, for instance, is one of the world's leading MVNOs and offers this service in Europe. ESPN and Disney are among the other companies that run MVNO services worldwide.

TRAI had in 2008 recommended that MVNOs be permitted in India. Subsequently, again through a reference from DoT in 2009, the telecom regulator came out with some changed guidelines. However, the decision was stuck with DoT. “This could be the right time to announce an MVNO policy, keeping in mind the exit options for new operators,” the official added.

DOT’S OPTIONS

# Allow MVNO operations to take up spectrum slack

# Permit surrender of spectrum and return their fees

# Come out with easier merger and acquisition rules

# Ease rollout obligation targets for the new telcos

DoT is also debating the contentious issue of permitting operators to hand back spectrum in return for the '1,650 crore paid to the government for a pan-India licence. DoT officials said the crucial issue that needs to be decided is whether a change in licensing norms has to be referred to TRAI. Currently, there are no provisions under which operators can return spectrum and be refunded their fees.

On Tuesday, Communication and IT Minister A Raja told reporters that the government is working on a bailout package for the new operators, which include Uninor, S-Tel, Etisalat DB, Datacom, Sistema-Shyam and Loop, among others. Raja said, "In the last operators' meeting, (the bailout plan) was highlighted... a bailout may be done. It will be discussed in the Telecom Commission.”

The move comes close on the heels of a request by at least three new operators that were granted licenses to surrender their start-up spectrum of 4.4MHz in return for their license fees. Present regulations also stipulate a lock-in period of three years, which means several new players will not be able to sell out before the beginning of next year.