A Telecom Commission proposal to allow a licensing regime that would facilitate entry of mobile virtual network operators, or MVNOs, in India, could mark the bifurcation of licences in terms of networks and services. Hitherto, the licences were segregated in terms of the network and infrastructure.
In the US, mobile virtual network operators, or MVNOs, acquire talktime from telecom service providers and offer special bundles for those wanting to call India or other countries from where migrants came to the US. Globally, too, MVNOs have focused on acquiring customers in extremely segmented markets. Does this stand valid for India as well?
In India, one of the biggest costs for a telecom operator has been customer acquisition. In a growing country, while the growth of telecom subscribers in metros and Tier-I cities has more or less saturated, Tier-II towns and circles have shown tremendous growth in mobile subscribers. This is the main area where an MVNO could make itself count.
“The MVNO concept has been going on for a very long time in developed markets, and those markets in terms of dynamics are very different to the Indian market in terms of pricing, and that they’re more postpaid and contract driven. India, right now, already has one of the lowest tariff regimes globally,” said Rishi Tejpal, principal research analyst, Gartner.
He further said: “Having another operators coming into the market and competing on the price front will be very difficult for existing players. With MVNOs coming into the picture, another pricing war could become imminent, which none of the existing players would want to get into.”
However, some in the industry believe that entry of MVNOs could help incumbents by the way of reducing customer acquisition costs in rural markets that the virtual network operators are expected to focus on. “Some larger telcos may have surplus capacity in small towns, and their customer acquisition cost in those areas may be too high. So if they get an MVNO, which operates in that market can say that I will do the customer acquisition, you lease out your resources to me,” a senior official of one of the leading consultancy firms said.
From a telecom company point of view, this model would seem attractive to incumbents that are indeed sitting on unused spectrum such as MTNL, BSNL, Telenor, Aircel, etc. An industry expert said that for some smaller companies, it would become inevitable to rope in MVNOs and deploy their excess resources to survive.
Even in that case, it would be feasible for a company to become an MVNO only when it has strong sales and distribution network and wants to offer telecom services for captive purposes. Kishore Biyani’s Future Group, which already offers mobile services in partnership with Tata Teleservices under the E24 brand, reportedly plans to get a VNO licence once the final guidelines are out.
The MVNO regime is expected to bring out endless possibilities of services that could be offered. A large FMCG company could acquire licence to provide telecom services through its rural supply chain in parts of the country where mobile operators have not been able to reach.
“In upcoming green-field smart cities like GIFT, Dholera, Dahej, the city services providers can set up their own infrastructure at the development stage and take a VNO license to provide broadband and other telecom services to their residents inside the smart cities,” the Telecom Regulatory Authority of India had mooted in its recommendations issued last year
For the government, entry of MVNOs is expected to catalyse the process of the industry expanding infrastructure in the country. “Multiple service providers can play an important role in reducing the price of services and aid in penetration of services across service areas, particularly those areas which hitherto remained underserved or unconnected. This is especially important in the context of penetration and adoption of broadband services,” Trai had said.
Entry of MVNOs is also expected to keep possible lack of competition at bay in the industry that has seen a sudden spur of consolidation among companies. This would also help the government prevent some large operators outbidding smaller ones in spectrum auctions.
“If a smaller operator has commitment from an MVNO, it can fight with a larger operator for spectrum in auction, an exercise that would otherwise be futile for a service provider with few subscribers,” an expert said.
Rishi Tejpal of Gartner said that public sector operators were more likely candidates to lease out their resources and infrastructure.
“I would see public sector operators like BSNL or MTNL looking to use this opportunity to increase their penetration. They have a large infrastructure in place but they lack marketing capabilities. So this could be their chance to penetrate more into the market and generate more revenues,” Tejpal said.