After almost six years since it was first proposed, the Department of Telecom is all set to clear the policy for allowing Mobile Virtual Network Operators (MVNO) in the country.
Mobile virtual network operators are a category of service providers who take bandwidth and infrastructure on wholesale rates from existing mobile operators and then resell them in the market with their own branding and tariff plans.
They do not own either spectrum or network infrastructure but provide customised mobile services usually targeted at a specific segment.
This would allow small players that do not have the financial muscle to buy spectrum to become niche mobile service providers. For Indian telecom companies partnering with MVNOs could mean a cheaper and faster option to reach out to a larger customer base, than having to roll out their own network.
New players waiting to get a licence may also adopt this strategy. 3G also creates the opportunity for new entrants to use the excess bandwidth to sell discounted voice and data services.
In addition, it can create the opportunity for the development of more compelling content. This content can be pitched at specific sub-markets creating lucrative niche market opportunities. The MVNO platform also provides global telecom majors an easy foray into the Indian mobile market. Since acquiring a new telecom licence in the country has become a daunting task, global telecom majors may opt for this route.
Cheaper tariffs
For consumers, the introduction of MVNOs could bring cheaper tariffs and more competition in the mobile segment.
However, market watchers said the policy may be little too late given that the operators’ focus has moved away from reaching to more number of mass consumers to reaching to quality subscribers.
Tata Teleservices had earlier partnered with Virgin Mobile for an MVNO-type partnership a few years ago. But this ran into rough weather forcing the British company to pull out of the venture.
MVNOs also are completely dependent on the host carriers’ network coverage and reliability, and depend on them for service upgrades. They will have to risk their brands for inferior service quality from operators.
The necessity for MVNOs to compete on price in the short term, particularly in the low Average Revenue Per User (ARPU) Indian environment, exerts pressure on MVNO profit margins. As more players enter the market, they will drive down ARPU further, making the financial proposition less attractive.