1. Article for Press Release
Mobile Virtual Network Operators - Will it be the next success story in India?
Authored by Shweta Berry & Dhananjay Pavgi – Portfolio Management Group, Tech Mahindra Ltd.
The Indian telecommunications industry is one of the fastest growing in the world and as predicted by Boston Consulting Group,
the Indian telecom market will surpass a psychological $100 billion-mark by 2015, despite host of concerning factors such as
intense competition on the back of low-tariff structures and ensuing decline in ARPUs in the sector. Also, with the Indian
government’s determination for making the radio airwaves pricing market-driven, delinking license from spectrum, penalizing
the operators who could not roll 3G services after winning start-up spectrum and powering the consumers with ease to switch
operators with the launch of mobile number portability across the country, it is quite clear that there is an increase in the
regulatory intervention designed to lower the barriers for market entry and ultimately increasing competition.
Given the regulatory and market conditions, it is quite intriguing to see how the telecom service providers, especially the new
entrants who are yet to turn profitable or those who lost 3G auctions or even those who even after winning, could not launch
services and are under the threat to loose their spectrum would meet the pressure of sustaining in one of the toughest telecom
markets. In such a scenario, will the much talked about mobile virtual network operator (MVNO) business model make a
success story in India? Before we assess whether MVNO’s will flourish or struggle on the Indian soil, let us understand what
MVNO stands for and how are they different from mobile operators.
A MVNO is a mobile operator that does not have any spectrum of its own. It purchases bulk airtime from Mobile Network
Operator (MNO) and may also utilize the infrastructure of an incumbent telecom operator, also called Home Network operator
(HNO) to launch its services. The efficiency is obtained by the nature of the MVNO business model as an MVNO does not incur
the significant capital expenditure on spectrum and infrastructure that an MNO does, nor does it have the time consuming task
of rolling out extensive radio infrastructure.
As MVNOs enter into a market already dominated with incumbent players, they have to offer a definitive advantage in the form
of brand value, attractive content or a segment specific service offering to lure the customers. Various types of MVNO (see
figure 1.) exist which define the level of involvement in the telecom operations and nature of arrangement between the MVNO
& the incumbent operator.
Figure 1. Types of MVNOs
Article

2. Article for Press Release
An MVNO may depend on mobile virtual network enablers(MVNE) for providing back office services such as consulting and
integration services, end-to-end enablement services, messaging platforms, data platforms and billing solutions. MVNO may or
may not have any prior telecom experience. MVNC&SI acts as a trusted advisor and provides industry specific expertise to the
MVNO in areas such as strategy and planning, business case and operational models, system integration and end-to-end testing
etc.
MVNOs have a fair share of both successes and failures throughout the world. As per Ovum's latest forecasts, global MVNO
connections will reach 85.6 million by 2015, and revenues will reach $9.5 billion. While the established MVNO markets will drive
this growth, the emerging markets are also warming up to introduce MVNOs. Western Europe has pioneered the MVNO space
worldwide with approximately 357 active MVNOs. USA & Canada stand second on the charts with an approximate number of 72
MVNOs active. MVNOs are expected to move into markets in Brazil and Chile in South and Central America; Turkey in the
Middle East; and India, Pakistan, and Vietnam in Asia-Pacific. Currently there are no true MVNOs in these markets, but it is
expected that new MVNOs would enter from 2011 with India and Indonesia leading the way. South America is not to be left far
behind with Brazil planning to release regulations for MVNOs.
If we critically evaluate the entry of MVNOs into the Indian market, we can see various forces working in favor of and against
MVNOs. The mobile penetration is expected to go up to nearly 100% by 2015 and Mobile Value Added Services (MVAS) to
generate Rs 48,000cr worth of revenue, MVAS is clearly slated to drive the vehicle for inclusive growth in India. (Source: Study
on “Mobile Value Added Services (MVAS) by ASSOCHAM & Deloitte). This fusion of wireless and entertainment industry led by
the profound industry shift from being a voice-only market to one dominated by a glut of non-voice and mobile value added
services is creating a much larger and more profitable market. The revenue growth potential, large pool of churn customers,
emerging broadband wireless technologies and compelling economics are creating market conditions conducive to give thrust
to the MVNO business model.
Though the Indian telecom regulatory authorities are keenly studying these developments and formulating their
recommendations on MVNOs, the decision for allowing MVNOs to operate in India has been pending since 2008. As per the
Telecom Regulatory Authority of India (Trai), to maintain an exponential growth, introduction of MVNO is seen as a natural
progression towards enhancing free market principles and contributing to efficient use of existing telecommunication
infrastructure. Trai came up with a paper on the recommendations On Mobile Virtual Network Operator in August 2008. Table
1. summarizes the implications of the Trai recommendations for setting up MVNO business in India. Another positive
development took place in February 2009 when the Telecom Commission gave consent to the proposal of allowing MVNOs to
launch their services in the country. But post commission’s approval, the Indian government is yet to issue a formal notification
along with guidelines for MVNOs to operate in India. The final decision is still pending with the Department of
Telecommunication (DoT).

3. Article for Press Release
In the mid of January 2011, Trai issued yet another consultation paper on "Issues related to Telecom Infrastructure Policy",
incorporating initial comments from stakeholders on whether or not the MVNOs should be allowed to operate in the country. It
has asked the industry and other stakeholders to give inputs on the issues raised in the paper by January 31, and send in
counter-comments on February 7. Also, in its recent press release, Trai has further recommended that any firm which wishes to
become a MVNO should also be granted a universal access service licence (UASL) without any spectrum. Such companies can
subsequently enter into a spectrum sharing arrangement with an operator having spectrum. As part of the recommendations
the Trai has also said MVNOs should fulfill all the obligations of a telecom licensee.
It is interesting to note that while the market still awaits final verdict from the government on MVNOs entry in India, companies
vying to take the first mover advantage, are finding innovative ways of addressing to MVNO needs of the market. Table 2
presents a snapshot of existing MVNO like business models:
Table 1: Implications of the TRAI recommendations (2008) for setting up MVNO business in India
Source: Telecom Regulatory Authority of India, paper on the ‘Recommendations On Mobile Virtual Network Operator (MVNO) ‘published on 6 August 2008.

4. Article for Press Release
Host
Operator
Franchisee
/ Partner
Year of
partnership
Business
Model
Brand Service Target
Segment
Value Proposition
Tata
Teleservices
Future
Group,
India’s
largest retail
chain
February
2010
Marketing
alliance
Talk24
(T24)
GSM
Only the
Customers of
Future Group
'Shop More, Talk
More and Talk more,
Shop More'
Works like a loyalty
programme, wherein a
customer of Future
Group will get some
talk time when he
shops at Future Group
and vice-versa.
Aircel
Blyk, a
Finland based
successful
Youth MVNO
Company
November
2009
Revenue-
share
Blyk GSM
Youth
segment
Interactive text and
multimedia messaging
as an advertising
format, with opt-in
subscribers.
Subscribers get
freebies, according to
individual interests.
Tata
Teleservices
Virgin Group,
a leading
branded
venture
capital
organization
of Sir Richard
Branson
March 2008
Revenue
share
Virgin
Mobile
CDMA &
GSM
Urban Youth
segment
across 300
cities
Pocket Friendly,
innovative offerings
such as “Get paid for
incoming”, “New 50 P
STD Local” etc to meet
their style, budget &
aspirational quoitent
Table 2:Snapshot of existing MVNO-like Business Models
Tata Teleservices have been the pioneers, having two partnerships based on likes of the MVNO model. The latest one is with
India’s largest retail chain, the Future Group and the first one was with Virgin Mobile. The combined subscriber base for TATA
Indicom and Docomo which has 26% investment since Mar 2009, is 80,817,298 as on October 2010(source: Telecom Track)
while Virgin Mobile claims that it is now adding more than ten per cent of Tata Tele's subscriber base every month and that its
Indian operations are the second largest, globally in terms of subscriber base.
Virgin Mobile has revenue share arrangement with Tata Teleservices and targets the youth segment across 300 cities which is
about 30-40 per cent of the market opportunity. Virgin has its own design team for the handset which works with the
manufacturers to develop customized devices. The company has been able to drive adoption of value-added services to 30 per
cent of its revenues compared to market average of just 10 per cent. This has also pushed up its average revenue per user to
double that of other CDMA players. The company was offering CDMA-based mobile services till recently and has now moved
into the GSM space as well. For Tata Teleservices, there is benefit in terms of the additional customers as well as increased
minutes of use on its network.
Future Group’s Talk 24 (T24) mobile services are sold only to the Future Group customers, thus, functioning like a loyalty
programme wherein a customer of Future Group will get some talk time when he shops at Future Group and vice-versa. This is a
unique marketing alliance between a retailer and a telecom operator in India. It offers TATA direct access to millions of Future
Group customers through its widespread retail presence across India in over 75 cities and 65 rural destinations.
The success of TATA’s may aspire the incumbent operators like BSNL who don’t see marketing & branding as their core
strengths and would consider leasing out excess network capacity to MVNOs for better utilization of resources and an venue for
alternate revenue generation.

5. Article for Press Release
Another innovative way of market entry is that of Blyk, headed by ex-Nokia head. Though Blyk operates as a MVNO with ad-
funded model in other countries, it has taken a content service provider route in India, launching its content services on the
Aircel platform. The Aircel subscribers have to pay an additional service charge of Rs. 74 to become a Blyk subscriber. Blyk has
already signed up more than 100,000 subscribers since its launch in November 2010. The partnership is on a revenue-share
basis, with Aircel providing the connectivity and Blyk taking care of advertisement sales and campaign management. The real
value to advertisers (and merchants, governments, developers, enterprises and other upstream customers) is from having
access to a seriously large numbers of end-user customers willing to accept advertising and other telecom-enabled VAS services.
This makes the two-sided telecom opportunity most valuable to larger operators and also to the operator community working
collaboratively. The success of this model remains to be seen in the Indian market as such a platform will only thrive when it has
an larger pool of retail partnerships in place for revenue generation and also provides an effective end-to-end service delivery.
For example, identification, authentication, advertising, billing, content delivery, customer care & contact centre management
has to be effectively coupled with a very strong product management capability. And all this has to be done in most cost
effective manner to stay profitable.
Hence, with the initial success stories of the MVNO like business models, time is not far when MVNOs would start flourishing on
the Indian soil as well. Some of the likely players from India could come from retail, banking and finance, or even government
sectors like the Indian Post. International players like Telekom Malaysia, Mobile ESPN and ValueFirst are planning to take the
MVNO route and are already looking for strategic alliances in India. Government’s latest initiatives towards making the
spectrum on demand would mean more value-added services (VAS) like Internet browsing and downloading being possible on
2G as well. Also, operators missing out on 3G licensing can take the MVNO route to carve a share of 3G pie as only four out of
the 10 or so operators in each circle have 3G spectrum. The MVNO model opens up the possibility of such services being
launched by more and more players.
Owning the customer with the lowest possible build and operate costs is the success mantra for the MVNO business model.
Hence, players devising their entry strategy must ensure that they have the right mix of services and a lean but scalable Business
and Operations Support system which enables reduced time to market. MVNOs need to conduct due diligence for selecting
their IT partners and opt for solutions which could be customized to suit their business objectives without sacrificing on the
ability to come out with innovative offerings. The solutions need to be evaluated on features such as flexibility of bundling voice
services with VAS, customize billing and rating engine for creating innovative product offerings, converged billing and preferably
have inbuilt support for using business intelligence to device promotions and campaigns, execute loyalty programs and
customer care initiatives for managing the customer experience throughout their lifecycle. Right IT solution is the backbone of
MVNO business, driving growth and revenues. And equipped with a strong backbone, MVNO’s would be able to device
innovative pricing structures which help in faster customer acquisition as they pass cost benefits to customers.
For the customer, the introduction of MVNO would mean a wide variety of services packaged together in one bouquet with the
option of customization at very affordable prices. This would improve the overall Customer satisfaction level and would help
stabilizing and increasing the current ARPU levels of the operator. They would have ample number of choices not only in terms
of network parameters, but also, favored brand, brand loyalty, specific discounts and schemes available, etc.
However, given the nature Indian market which has high price sensitivity and low profit margins due to falling ARPU’s, the
financial viability and sustainability needs to be worked out before exploring the turf. Little differentiation in value proposition
from exiting MNO offerings, inability in understanding and addressing to the needs of the niches identified or a flawed business
model which overlooks the need for developing strong distribution capability are some of the marketing failures an MVNO must
be thoroughly prepared to avoid. Another major reason of failure is bad customer experience with the service fulfillment and
delivery. Customer churn increases with repeated bill shocks, call drops and failure of service provider to respond well in time.
Churn due to over-billing and revenue leakages and frauds due to under-billing, wrong billing or no billing due to inconsistent IT
systems and network outages can lead to a complete failure of an MVNO. Hence, critical evaluation of products on reliability,
scalability and efficiency as well as ensuring vendor’ after sales service support is a must. Similarly, in case of a hosted partner,
MVNOs must select an experienced partner with established repute, ensure that all the critical SLA’s are defined properly, there
is no room for ambiguity in responsibilities and the partner is committed to deliver. Same is true while choosing an MNO as well
as capital investors. A serious dent is caused to business profitability when the relationship with the host mobile operator is
strained or they are simply not motivated to encourage the MVNO it hosts to be successful or when investors under capitalize
the business. It goes without saying that business will only be successful when organizational competency and good program
management with right partner ecosystem is developed. And last but not least, costs such as entry fee, licenses, investing in
evaluating and tying up with an MNO, establishing a service delivery platform have to be factored in and weighted against cost
of exit, in case business does not flourish.

6. Article for Press Release
In parallel, devising the right strategy to approach the Indian market and gain mileage from its natural demographic advantage
due to high percentage of youth population and burgeoning middle class with pro-spending habits will play a crucial role in
defining success for the MVNO. The Indian diversity offers a number on niches based on languages (22 languages have status of
official languages in the constitution of India), 23 regions with each having its own culture and community lifestyle, huge NRI
population in pockets of Kerala & Punjab; in addition to the existence of varied socio-economic and demographic segments, that
can be tapped successfully. Another crucial aspect is the enablement of IT and network platform for supporting the subscriber
base with flawless service delivery. It would be wise not to opt for reinventing the wheel when they can partner with a solution
provider who offers ready to use service delivery platform on a hosted model and enables quick launch to market.
It will be indeed interesting to watch how MVNOs will identify their niches going beyond age & economic strata and kickoff
another revolution by catalyzing 100% adoption of telecom services in India. In the nutshell, MVNO’s are in a strong position to
appeal to the customers with service innovation, enabling rapid customer acquisition. They have the dual benefit of making the
market more efficient on the cost side and expediting the adoption of services on the revenue side. Though individual
performances of players would vary, but MVNOs do have the potential of changing the structure, economic flows and culture of
the Indian wireless industry for years to come.
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