Virtual mobile networks set to enter India

Reliance Communications, Essel line up launch plans.

Mobile users can expect a sharp fall in tariffs and access to a range of sophisticated services if the government accepts recommendations by the Telecom Regulatory Authority of India (Trai) to permit mobile virtual network operators (MVNOs).
 

TRAI’S MVNO CALL

• MVNOs to be allowed to operate across 2G, 3G and broadband wireless access networks
• No limit on the number of MVNOs attached to a mobile network operator
• No roll-out obligations
• Licence area to be the same as the parent operator
• 74% FDI cap
• Eligibility criteria require any Indian company with net worth of Rs 10 cr for metros or Category ‘A’ areas, Rs 5 cr for Category ‘B’ and Rs 3 cr for Category ‘C’
• Entry fee to be equivalent to 10% of what the parent operator has paid, to a maximum of Rs 5 cr for Metro/ Category A, Rs 3 cr for Category B and Rs 1 cr for Category C
• Annual licence fee for the MVNO to be the same as network operator of their service area
• Allocation of numbers, number portability, interconnection with other service providers and roaming to be provided by the mobile operator.
• Agreement between the MVNO and operator to be submitted before the issue of the MVNO licence

MVNOs do not own spectrum, the radio frequencies that enable wireless communications, but can provide mobile services by leasing or buying capacity from mobile licensees.

The move is expected to bring in a bevy of new international and Indian players in the mobile space that could drive down tariffs even more.

Reliance Communications (RCom), for instance, has held preliminary talks with France Telecom to offer Orange MVNO services in India. With RCom rolling out a pan-Indian GSM network, it is expected to have sufficient surplus capacity to lease out to MVNO operators.

Subhash Chandra’s Essel group might be first off the block. “Now with the policy we will explore an association with service providers and handset manufacturers,” said Ishwar Jha, CEO, Digital Media Convergence, a part of the Essel group.

Sources said the Essel group is in talks with BSNL to offer an MVNO service that will offer entertainment information on the mobile.

Broadcasting companies like ESPN, Star TV, Disney and MTV, which have a presence in the MVNO space globally offering niche services, might tap the opportunity in India too.

“Trai’s recommendations open a whole new opportunity to offer differentiated services and options for Indian consumers,” said Viren Popli, senior vice-president, Star Mobile Entertainment.

Virgin Mobile, the world’s largest MVNO, already offers youth-targeted services through a marketing tie-up with a Tata group company and is expected to convert itself into an MVNO once the policy is approved. The company declined to comment

Earlier this year, the tie-up came under attack from GSM operators who alleged that Virgin was making a backdoor entry into the country when MVNO policy was not in place.

Incumbent operators, however, are sceptical about the entrance of MVNO. “This model was successful abroad mainly because there were two or three players and the average revenue per user was high, so they could still make margins,” said T V Ramachandran, Director General, Cellular Operators Association of India.

“But operators like Bharti Airtel, Vodafone and Idea Cellular will undercut MVNOs’ business,” he added.

Ramachandran also doubted whether players will have surplus capacity to lease.