Entry of MVNOs will ring in lower prices
Entry of MVNOs will not only result in more competition, innovation and diversity in telecom services, it will also ring in lower prices. Sleek mobiles
By Ritwik Donde & Joji Thomas Philip, TNN |
MUMBAI/NEW DELHI: The government���s expected permission for mobile virtual network operators (MVNOs) will remove a strong entry barrier in the telecom services segment and enable asset-light companies to set up shop in the world���s fastest growing mobile market, experts said.
It will boost handset sales and also help new service providers, which have recently got licence, to utilise their capacity better and enter service circles for which they don���t have licence.
���It���s more the merrier,��� says Nokia India marketing director Devinder Kishore. ���Bringing in such players would add to the eight-million subscriber additions per month that we are witnessing.���
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The Department of Telecommunications (DoT) plans to allow MVNOs, removing a legal bottleneck that led to a controversy involving the entry of Richard Branson���s Virgin brand in a tie-up with Tata Teleservices. All operators in India now operate on their own network.
A Mumbai-based analyst said MVNOs would spruce things up for the newcomers to the mobile telephony market in India. MVNOs, such as Virgin Mobile and BT in the UK, would help them gain valuable market experience. ���Mobile virtual network enablers will also benefit since they provide services such as customer care, billing, content, and open source software platforms,��� the analyst said.
Many new licensees believe MVNOs will add efficiency in their roll-out plans. While none of the new entrants would comment officially as they await spectrum, some of them told ET that this model would bring in additional revenues and contribute towards the creation of sizeable capital value. ���Additional revenues are important as the margins in this sector are razor-thin and further reduction of tariffs is not feasible. Besides, the coming together of two brands will bring in additional subscribers,��� one aspirant service provider said.
Also, some of the new entrants have been granted licences only for a few circles and can now expand to the rest of India using this model.
With the coming of MVNOs, the mobile market would see more bundling of handset with operators looking to tap into niche markets, says Indian Cellular Association national president Pankaj Mahendroo. ���It would also lead to improved sales volumes for high-end product categories like music phones and Internet-enabled phones,��� he added.
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In fact, India is all set for a target of 100-million handsets by the end of this year and MVNOs would add substantially to this number.However, an analyst at a global research firm says that the government needs to give special attention so that the quality of service is maintained by the operators. ���It is of prime importance that the policy if introduced ensures that it allows no scope for fly-by-night operators to set up shop,��� the analyst said.
MVNOs will bring with them their own set of issues. ���Globally, MVNOs often pick up small equity stakes in the networks of operators they use. If an MVNO were to use the networks of multiple players here and intends to pick have an equity stake, it is a difficult proposition.
This is because, current Indian regulations do not allow a company to hold more than 10% stake in different telcos. Similarly, if many existing Indian operators or even one of them want to pick up stake in an MVNO, the same regulation applies. The regulations are, therefore, structured against virtual operators,��� explained another executive with a leading telco.
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Another industry source said that if the government (DoT or Trai) want MVNOs to succeed in India to bring about more competition, innovation and diversity in services, it should adopt the Hong Kong model. This is because the regulations in Hong Kong mandate that MVNOs be part of the auction for 3G spectrum. This implies, all successful bidders for 3G frequencies must set aside 30% of their network capacity for MVNOs. This has resulted in all players scrambling to partner with MVNOs, which in turn has led to greater competition and increased quality of services for the users.
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