MVNO India.pptx

overview report on MVNO opportunity in India

1. MVNO INDIA

2. MVNO Operating Model Self Owned Model Mobile Virtual Network Enabler (MVNE) Mobile Virtual Network Aggregator (MVNA) model

3. Self Owned Model Setup Back end Large upfront costs Benefit from economies of scale http://tejas-iimb.org/articles/25.php

4. Mobile Virtual Network Enabler (MVNE) Partnering with a Mobile Virtual Network Enabler (MVNE) who would support it through its shared backend services. All that one need is a good business idea and capital to fund it. The MVNE model involves the leveraging of assets across a wide customer base to lower costs.

5. Mobile Virtual Network Aggregator (MVNA) model Need Loyal and strong customer base Need wide distribution network to offer these services Does not require high level of expertise Suitable for organizations with a small customer base that pool resources to have enough volume to be economically viable. Can act as an intermediate between different network providers, handset manufacturers, and back-end platform providers Lower risk profile of launching a MVNO It provides economies of scale to those companies that have a loyal and strong customer base and wide distribution network. If player does not possess the expertise in the wireless arena and has a customer base that does not justify a very high financial risk in terms of large spending, the MVNA model is the best option.

6. Regulatory Hurdles Foreign Direct Investment (FDI) investments Limitations on Foreign Direct Investment (FDI) investments in MVNOs (TRAI does not clarify the status). Mobile Network Operators are also limited in investing in MVNOs. High tax structure Problems in spectrum & licensing Undefined pricing policy Roaming agreements MVNOs (no proper norms ) Subscriber data sharing (yet to be formulated) Subscriber offer challenges.

7. Key Regulatory Issues Facing MVNOs in India The Indian telecom industry has unique characteristics that add complexity to the regulatory task. These regulatory considerations can be grouped into three categories— Industry Structure, Spectrum & Licensing and Operations. Several regulatory issues could directly impact the launch timing, scale and scope of MVNOs in India.

8. http://www.diamondconsultants.com/PublicSite/ideas/perspectives/downloads/India%20MVNOs_Diamond.pdf Key Regulatory Issues Facing MVNOs in India 1.FDI limits on investing in MVNOs: Foreign Direct Investment (FDI) limits in India are different for each industry sector. Given that MVNOs will be launched predominantly by non-telecom firms, the level of FDI investment in an MVNO may require clarification . 2.Limits on MNOs investing in MVNOs: If the regulator follows an approach of maintaining a strict separation between service provisioning and network operation, the regulator has to stipulate the maximum equity that MNOs can hold in their affiliated MVNOs. 3. Definition of Significant Market Power (SMP) status: As MVNOs increase an MNO’s subscriber base, the quantitative thresholds beyond which a MNO is seen as having SMP and the implications of achieving that status may require further clarifications . 4.Tax structure of MVNOs: The present taxation level of 4. Indian telecom players at 17%-26% is one of the highest in the world. Since MVNOs work on thin margins, high tax rates could prove to be an obstacle towards a viable commercial model . Industry Structure

9. http://www.diamondconsultants.com/PublicSite/ideas/perspectives/downloads/India%20MVNOs_Diamond.pdf Spectrum & Licensing 3. Defining regulatory boundaries: MVNOs are typically launched as an additional service by an incumbent in a different industry (e.g. media, retail).Clarifying the role and jurisdiction of different regulations in the context of an MVNO’s operations will serve to streamline their operations. 1. Licensing model for MVNOs: An effective approach for granting licences to MVNOs (e.g. auctions, fixed fee) which meets the regulator’s objectives as well as the commercial requirements of all stakeholders would be a key prerequisite. 2. MVNO access to the USO fund: Clarification on the regulatory position on access to Universal Service Obligation funds for MVNOs who may choose to provide services in rural areas. 4. Spectrum sharing implications: The MVNO model benefits further if spectrum sharing and trading are allowed, as it gives MVNOs increased flexibility. The regulatory position on such issues is not clear today.

10. A clarification in the regulatory position governing access to and sharing of this information for purposes of commerce and national security may be necessary. http://www.diamondconsultants.com/PublicSite/ideas/perspectives/downloads/India%20MVNOs_Diamond.pdf Operations 1. Wholesale capacity and pricing policy : If regulations mandate open access, then they need to address issues such as how much of the MNO capacity will be shared and at what price. It has the further task of monitoring the implementation of these guidelines by MNOs. 4. Concerns around subscriber data: The host MNO will have access to a MVNO’s subscriber database. 3. Guidelines on MVNO roaming agreements: An MVNO may require separate national and international roaming agreements from its host MNO. Guidelines may be necessary to define the options available to an MVNO. 2. ADC levy norms for MVNOs: The policy of charging ADC (Access Deficit Charges) on mobile operators could affect the viability of MVNO business models, given their thin margins relative to an MNO.

11. MVNO and Spectrum Charges Confusion According to the policy Spectrum charges : MVNOs = Existing operators But Regulations says : Spectrum charges = 2 & 6 % of telcos revenues But New Norms Spectrum Charge for the MVNOs = calculated based on subscriber base of the telecom company + Performance Bank Guarantee MVNO = 5% of what the existing mobile players have paid http://www.telegraphindia.com/1090226/jsp/business/story_10593258.jsp

12. 3G Auctions Seven companies won 3G Bharti Airtel - 13 circles Reliance Communications — won 13 circles each, Aircel - 13 circles Vodafone Essar - 9 circles Idea Cellular – 11 circles Tata DoCoMo – 9 circles respectively. http://economictimes.indiatimes.com/articleshow/6009710.cms

13. 3G Circle Telecom Operator Value of the Circle(Rs in Crore) Delhi Vodafone, Bharti Airtel,Reliance Communications 3317 Mumbai Reliance, Vodafone,Bharti Airtel 3247 Maharashtra Tata Communications, Idea Cellular, Vodafone 1258 Andhra Pradesh Bharti Airtel, Idea Cellular 1373 Karnataka Tata Communications, Aircel , Bharti Airtel 1580 Tamil Nadu Bharti Airtel, Vodafone, Aircel 1465 Kolkata Vodafone, Aircel, Reliance Communications, Aircel 544 Kerala Idea Cellular, Tata Telecommunications 312.5 Punjab Idea, Tata Telecommunications,reliance, Aircel 322 Haryana Idea, Reliance Communications, Tata Telecommunications, Vodafone 222.6 Madhya Pradesh Idea Cellular, Reliance, Tata Teleommunications 258.4 Rajasthan Reliance, Bharti, tata telecommunications 321 U.P. (West) Bharti Airtel, Idea Cellular, Tata telecommunications 514 U.P (East) Aircel, Idea Cellular, Vodafone 364.6         The new entrant S Tel got license for Himachal Pradesh, Bihar and Orissa. The Jammu & Kashmir 3G Air Wave is won by Idea, Aircel, Reliance Communications, and Bharti Airtel. Though Videocon Mobile took part in online auction it was not found on the list. The Delhi tops among the above circles with a value of Rs 3317 crore.  

14. Options for Non 3G Operators MVNO option - The non-3G telcos also seems to be slowly warming up to the MVNO option, even though they are yet to come up with specific strategies. “MVNO can be an option which we will review in the long run,” said Rajiv Bawa, executive vice-president (corporate affairs) at Unitech Wireless (A JV between Norway’s Telenor and Unitech that has recently rolled out services under the Uninor brand). http://economictimes.indiatimes.com/articleshow/6009710.cms

15. Pending : MVNO guidelines TRAI - entry fee of MVNOs Category A - $1 million for (metro cities) around Category B - $630,000 Category C - $210,000 DoT committee changes Category A - $630,000 (metro cities) Category B - $420,000 A Department of Telecom (DoT) committee made a few changes to TRAI's recommendations. The policy now only requires formal clearance from the apex decision making body of the DoT, the Telecom Commission, to be implemented. http://www.itexaminer.com/dot-lays-down-mvno-guidelines.aspx November 07, 2008

16. The key issues for MVNO entry MVNO licence - MVNOs need a licence to operate which will be depend on the service area of its host MNO. MVNO licence fee - Entry fees will be around 10% of the host MNO's entry fee. Annual licence fees - Same as that of the host MNO. Interconnection charges - To be agreed between the host MNO and MVNO, and driven by market forces. Foreign ownership - FDI limit is 74% for new entrants, which is the same as for MNOs in India. Consumer protection – in the event of failure of agreement between the host MNO and MVNO, or an MVNO exiting the market. http://www.developingtelecoms.com/pdf/indian-regulator-right-to-welcome-mvnos.pdf 11 March 2009

17. Comments “I understand a bit about telecom and given where tariffs are, I don't think MVNOs will succeed in India,” said Sunil Mittal, CMD, Bharti Airtel. “The Indian market is not matured enough to host MVNOs,” said Prashant Singhal, Partner, E&Y. But a section of the industry believes that it’s too early to write off the MVNO model. For new operators especially, it could be a huge boon as they seek to expand coverage quickly. A new operator could typically roll out a network in a few circles and then sign up as an MVNO in all other circles. This could well be the way to go for all new operators. http://www.moneycontrol.com/news/business/mvno-models-wont-workindia-at-current-tariffs-mi.

18. Industry View`s “There is a traditional MVNO model according to which Virgin Mobile in India is doing a good job. Further, it would be really interesting if we can have a rural localized MVNO. Can we have a village entrepreneur who is a specialized MVNO with information suitable for that village? My view is that India will see a few different models than what is available elsewhere in the world. We will experiment with some new models of MVNO,” says Vivek Mohan, president, Alcatel Lucent India “No longer is basic VAS considered to be the differentiator. Operators can add these services as easily as an MVNO can. Hence, more value offerings are needed,” says Raina of Patni . “Implementation of MNP is essential to create a competitive environment in which an MVNO can work. The case in example is Latin America where the MVNO model could not really pick-up, owing to non-implementation of MNP despite high mobile penetration and even higher percentage of post-paid subscribers,” says Vineet Sirpaul , executive director, Nu Tek India . “In the past the Indian media has talked about MVNOs. However, in India there is no definition under any telecom law or regulation that defines an MVNO outfit. The most common definition is that an MVNO is a company that buys bulk minutes from an operator. Virgin Mobile has been launched as a brand of Tata Teleservices. We do not sell bulk minutes and, therefore, this arrangement is not an MVNO,” says MA Madhusudan , CEO, Virgin Mobile India. http://voicendata.ciol.com/content/top_stories/209040101.asp

19. Virgin Mobile & Tata Teleservices Virgin has been selling a Tata connection under the Virgin brand and acting as a mere sales point. While Uninor & MTS are JV`s http://www.telegraphindia.com/1090226/jsp/business/story_10593258.jsp

20. MVNOs failures MVNOs failures (within a year) : 40% - Operation 15% - Struggle for margins.

21. Licence fee for MVNOs capped at Rs 85 crore The Telecom Commission has decided that Pay an entry fee which is equivalent to 10 per cent of what the unified access licence players pay, subject to a ceiling and floor price for each service area. Entry fee Metro and Circle A states - Rs 5 crore maximum Circle B states - Rs 3 crore Circle C states - Rs 1 crore Floor price Metros and Circle A states - Rs 1 crore, B Circle states - Rs 50 lakh C Circle regions - Rs 25 lakh For example, in order to get a licence for Delhi, MVNOs will have to pay only Rs 5 crore even though 10 per cent of the entry fee paid by the unified access providers would work out to be Rs 17 crore. In the case of Jammu & Kashmir, virtual players will have to pay Rs 25 lakh despite the 10 per cent working to be just Rs 20 lakh. Spectrum Charges Spectrum Charges for MVNO = Operator Performance Bank Guarantee = 5 % of Operator paid http://www.thehindubusinessline.com/2009/02/20/stories/2009022051880100.htm Feb 20, 2009

22. Conducive factors New players : Can sell excess capacity available on their networks to sell to MVNOs. Existing players who are not in the top 2-3 in terms of market share could also partner with virtual operators. As customers are migrated to 3G, the 2G network capacity becomes more readily available for MVNOs.

23. Data MVNO What does it take to build a Data MVNO business? Rs 80 crore for a national MVNO licence Partnership with one of the operators to ride on their network required investment = Rs 200+ crore , and has the potential to deliver = Rs 2,000+ crore in 3 years for the market leader. Focus on and differentiation via data services (Tata Docomo had a great opportunity to do this with its launch recently, but didn’t - it focused on voice pricing which if successful can be replicated by others quickly, and also only attracts bottom of pyramid customers) Create a direct relationship with top of the pyramid, high-spending customers which can be monetised in multiple ways beyond data ( invertising for businesses is one example). The Data MVNO is an excellent example of an innovation that can be Made in India, and Made for the World . http://emergic.org/2009/09/04/growing-mobile-vas-in-india-data-mvno-the-disruptions/

24. Will MVNOs Survive in India? No Satyen Gupta, ex-Trai secretary and president of Association of Competitive Telecom Operators says, "MVNO is not successful everywhere, as there is good competition from other players. MVNO will not have much scope in India. Reasons : There are not many takers and for new entrants, Heavy competition & MVNO has to buy in bulk and sell at a low price at retail value. Since tariffs are already low, MVNO will not help in any way, it can only work with reduced tariffs."   http://voicendata.ciol.com/content/service_provider/110040204.asp April 02, 2010

25. Will MVNOs Survive in India? Favorable factors for MVNOs in India : Increase in mergers and acquisitions Passive sharing agreements “The success of a MVNO depends on the operator's business scale, that is how much they sell it for” Bhatt Virgin Mobile ( in India) : tier 2 & 3 towns are largely untapped MVNO with a strong retail chain may be able to address the issues of customer acquisition and customer care more effectively in its niche area of operations. It can be seen as a natural progression towards enhancing free market principles and contributing to the efficient use of existing telecommunication infrastructure." With thirteen operators and cut-throat competition, http://voicendata.ciol.com/content/service_provider/110040204.asp

26. Advantage for Local Operators The opening of the Indian mobile market to MVNOs : Allow regional MNOs to become MVNOs to enter other regions and Eliminate the expense of investing in a new licence or acquiring a local MNO. Promote competition between existing MNOs and throughout different regions. http://www.cellular-news.com/story/36351.php 4th March 2009

27. Challenges for New entrants Huge Market population of 1.2 billion people when the mobile penetration rate is extremely low at around 26% is certainly a dream prospect for MVNOs, and many will find it hard to resist. We suspect many new entrants will steer clear of targeting rural regions altogether. New customers via aggressive expansion into the rural regions (is to avoid direct competition with the Indian MNOs) . Tough to compete and survive on such low margins The urban regions will also be difficult for new entrants( 30% of the Indian population lives in the urban regions and that the mobile penetration rate is almost equal to this ). MNOs are very price competitive in terms of domestic and local calls, so it doesn't make much financial sense for MVNOs to compete head on. Instead MVNOs must segment the market and go after the under-served. One lucrative example is to target the wealthy segment by offering concierge services - a strategy employed by Dutch MVNO Baron Another potential segment is to target customers that make low-cost international calls, such as those that have family abroad - Lycatel and Lebara have successfully employed such a strategy in Europe. MVNOs need to make sure they choose the right partners that can allow them to offer the best range of services for their targeted segment. http://www.cellular-news.com/story/36351.php

28. Applicants for MVNO in India British Telecom Telekom Malaysia Mobile ESPN Nokia Ericsson ValueFirst Future Group SWAN Telecom Topaz Telecom France Telecom "MVNO is an interesting option that we are looking into. We have products in the value added services (VAS) space. With airtime we would complete the stack," Kiran Kulkarni , managing director, Geodesic Information Systems Ltd, told DNA Money . Kulkarni said Geodesic would look to associate with new telecom operators for MVNO rather than older ones for "they would be more accommodative than incumbents". http://www.dnaindia.com/money/report_geodesic-mulls-mvno-foray-to-broaden-offering_1309927 November 11, 2009 http://mvnosolution.com/en/en_overzicht_MVNO.asp

29. MVNO and 3G 3G will create enhanced capacity and bandwidth MVNO can use this excess capacity to sell voice and data services, allowing service providers to increase their productivity. Increase in competition will result in better services and lower prices. MVNOs keen on entering India are: Mobile ESPN – a sports theme MVNO, ValueFirst , Virgin Mobile, TeleKom Malaysia, BT.

30. 3G,MVNOs to cause paradigm shift MVNO`s & 3G : Will increase in Mobile advertising in India 3G will open up new avenues for advertisers Rich media content and video over the mobile phone advertisers may be able to subsidize the cost of downloading rich media content by subscribers help grow subscriber base in the country. Saxena said: "For example, a song from a new Bollywood film can be put up for download with an ad of a soft drink company as a pre-roll or a mid-roll. Consumers can download this song for free while the soft-drink company pays for the download." http://www.zdnetasia.com/mobile-marketing-takes-off-in-india-62053597.htm

31. 3G : MVNO 3G, MVNOs to cause paradigm shift http://www.zdnetasia.com/mobile-marketing-takes-off-in-india-62053597.htm 2G issue : Low Advertising spends Simple text SMS Basic pictures. 3G Advantages : High Advertising S pend Expected rich media content video over the mobile phone low cost of downloading rich media content "3G will open up new avenues for advertisers, such as rich media content and video over the mobile phone." .. Vasudevan "For example, a song from a new Bollywood film can be put up for download with an ad of a soft drink company as a pre-roll or a mid-roll. Consumers can download this song for free while the soft-drink company pays for the download." …. Saxena "With 3G, a paradigm shift is expected in mobile advertising." … Khemka MVNOs will be dependent on VAS and advertising to create a differentiator, it will be an important contributor to the growth of mobile advertising," Saxena

32. Post 3G : MVNO MVNO`s can : Subsidize the cost of downloading rich media content by subscribers. Change India's mobile advertising scenario substantially Help growth in the mobile marketing industry Subscriber base in the country. Eg : MVNOs can even offer the entire mobile service for free if the subscriber opts to receive a certain number of advertisements per week(Blyk mobile model,UK).

33. Blyk mobile model Blyk is an operator in the United Kingdom that sells mobile network for free. It gives customers free airtime in exchange for accepting up to six advertising messages per day . Blyk generates all of its revenue from advertisers. The company's priority is to ensure it has a user base that advertisers will pay a premium to reach. http://www.zdnetasia.com/mobile-marketing-takes-off-in-india-62053597.htm

34. Detailed guidelines for MVNOs in March 2009 The DoT has released detailed guidelines for MVNOs in March 2009. Entry fee for MVNO pan-India license : Rs 85 crore or USD 17 Million (max) The maximum entry fee for Metro and circle A states has been pegged at Rs 5 crore or USD 1 Million, Circle B states Rs 3 crore or USD 600 K for and Circle C states Rs 1 crore or USD 200 K for. The commission has set the floor price at Rs 1 crore for metros and circle A states, Rs 50 lakh for B circle states and Rs 25 lakh for C circle regions. http://blog.valoris.com/ April 15th, 2009 April 15th, 2009 April 15th, 2009 April 15th, 2009 http://valoris.com/blog/?tag=regulation

35. Main Conditions for MVNO launch As per a sector monitor of India, the main conditions for MVNO launch include: a: Any company (not limited to Telco or allied industries) that fulfils licensing conditions (FDI, substantial equity) are eligible for a MVNO license. b: While an MNO can have any number of MVNO’s attached to it, one MVNO cannot get attached to more than one MNO is a service area. As for the entry fee, it is proposed to be 10% of MNO’s entry fee as prevailing on date in that service area subject to a maximum of Rs. 5 crores for Metros and Category ‘A’, Rs. 3 crores for Category ‘B’ and Rs. 1 crore for Category ‘C’. c: MNO should pay spectrum charges also on the revenue of MVNO(s) or all the payments made by MVNO(s) to MNO, whichever is higher. d: The subscribers of MVNO(s) should be counted towards parent MNO for the purpose of spectrum allotment in bands where subscriber based criterion is applicable for spectrum allotment. e: An equity holder, having 10% or more equity in a MVNO cannot hold 10% or more equity in another MVNO. Also, an equity holder having 10% or more equity in an MNO cannot hold 10% or more equity in a MVNO f: Definitions of circles, validity of licenses (20 years) as well as the FDI limit (74%) are the same as those currently in use by MNO. http://valoris.com/blog/?tag=regulation April 15th, 2009

36. Regulators : MVNO Favor TRAI is in favor of allowing MVNOs DoT is against COAI is against

37. Whom should the MVNO`s target ? Youth segments Lifestyle segments Enterprise segments Data-driven segments - Capgemini July 21, 2009 http://voicendata.ciol.com/content/news/109072101.asp

38. Youth Segment The youth population in India – 15-24 year age group -224 mn ( 238 mn by year 2015). > 27 mn youth belonging to households with an average annual income of $15,000 and above. Segment which MVNOs can target aggressively. Capgemini estimates that the market for mobile services for youth is likely to be a $15.4 bn opportunity by 2010 .

39. Premium Segment Operators in India have positioned themselves as mass market players. No exclusivity for potentially high-end customers. Current services offered lack premium offerings such as Preferential customer care, Higher guarantees on QoS , Premium bundled handsets Other personalised services. Currently more than 7 million people in households with annual income between $23,000 and $45,000. This segment is likely to be attractive for the higher ARPU it promises. (For example, the ARPU from the more expensive PDA users in the country is 11 times the ARPU from a CDMA user) . Capgemini estimates the market for this segment to be worth around $2.5 billion by 2010.

40. Enterprise Segment The expected spending on mobile communication for enterprises is $2.7 billion by the year 2010. Enterprises requirements : such as managed mobility, M2M services and mobile enterprise applications But these are not the core operator skill sets. ICT service providers could launch MVNOs on similar lines as Embarq and Earthlink, which target the business and professional segment, and provide additional enterprise services for differentiation. Global telcos present in India in the enterprise ICT services space could expand their service portfolio by offering enterprise mobility services as MVNOs.

41. “MVNOs dont stand a chance selling re-branded airtime, unless they co-opt with other partners in the eco-system to sell solutions and value added services.” Manas Ganguly Technology Enthusiast and Blogger, Telecom Professional, Mobile Phones Product Marketing Specialist.

42. News : Industry comments Indian market has already been tested by an MVNO disguised as Brand Extension and that should farely give an idea of customer readiness for MVNO in India . And I think the response is not that great as was expected from young Indian customers. The brand which I am talking about has all characterstics of MVNO . Latest recommendation by TRAI on MVNO has provided much clear picutre to future MVNO players in India . Also heard about Nokia planning on its entry as MVNO . However, I feel Indian market is still not there for MVNOs. a- Launch of new wireless players ex Swan, Unitech,etc will anyway bring huge competition on voice prices. So, business viability of MVNO will be questioned and MVNO realy need to re-work on there numbers. Therefore, MVNO are going to wait and watch till new wireless landscape emerges. That might taken another year or so...assumption- DoT has set deadlines for new players as Q2 2010 for launch b- There is new phenomenon in wireless space wherein players are creating sub segments for them which again competes directly with MVNO concept. c -Worldwide MVNO has been facing financial problems and running operations in price sensitive market like India will be another challenge unless they dont get strong partners , maybe leading wireless player that time... Having worked on strategic assignments for assessing MVNO market worldwide,I would see MVNOs entering in India only after teledensity increases to 70+ kinds That is when MVNO will get a more stable market to plan their approach successfully. As of future of MVNO in India , I see Indian customers still sticking majorly to leading wireless players. So MVNO really need to work on their positioning. I see many MVNOs entering once the traction starts and then only 2-3 players remaining and they will be one who gets their operation metrics and partnerships right. Priyank Chandra Business Consultant- Strategy and Change at IBM Global Business Services

43. “I am sure that the market is very much present for such kind of business. It is only a matter of time. If you look at the ARPU's of Virgin Mobile and the kind of penetration in CRBT that they have for subscribers, which is much more than traditional operator's in INDIA - it would really make sense for a MVNO business to come up.” Suresh T Kumar 苏雷什 Ŧ 库马尔 Mobile VAS - Business Development & Mktg