The growth story of mobile market in India is no brainer. Indian GSM operators added a record 9.1 million subscribers in February, reaching a total of 277.1 million users, (this is only GSM, the market is split 70% – 30% in GSM – CDMA). Bharti Airtel Ltd, India’s top mobile operator added 2.73 million, taking its subscriber base to 91 million that gives it a GSM market share of 33%. Vodafone Essar Ltd added 2.5 million users to reach total 65 million with a market share of 22%. State-owned Bharat Sanchar Nigam Ltd (BSNL) added for the month of Feb 2009 a total of 1.5 million users taking its subscriber base 44 million giving it a market share of 17%. Other big operator, Idea Cellular added 1.5 million to reach 41 million and attained a market share of 15%.
What are the main reasons for this high demand situation? Call rates as low as one US cent a minute (low prepaid tariffs). Aggressive customer acquisition campaigns with lifetime prepaid numbers without usage restrictions are being offered to the new customers. Availability of cheap handsets in the market has helped to reduce the entry barriers for segments with low income. A tertiary reason at best is the expansion of networks to smaller towns and rural areas, supporting the penetration growth.
What have been some recent movements amongst players interested in MVNOs in India? Attracted by a huge customer base, many players are looking to present themselves as serious players. There are reports that Nokia and Ericsson may be seriously considering MVNOs in India with Nokia already entering Japan to offer high end handsets as part of its MVNO strategy there. Apparently, both companies may have approached the DoT regarding their plans, following the Indian government’s recent decision to lift the ban on MVNOs in the country. Amongst the established telecom players who see MVNO as a route to gain footprint in the absence of MNO license include Telekom Malaysia, BT, Verizon and France Telecom among others. No surprises at Mobile ESPN’s interest in MVNO in India to leverage the sports fanaticism within the country. On the other hand, India ranking at the very top on number of sms per user has attracted ValueFirst, a leading provider of SMS services to India. Even some telecom operators who have license for telecom within India but do not have network want to reduce the start up cost and enter into MVNO agreements with already operating players. SWAN Telecom, one such player, is reported to have approached BSNL. Topaz Telecom of UK is also keen on having MVNO operations in India.
Is the regulation ready at last? The DoT (Department of Telecommunications) and TRAI (Telecom Regulatory Authority of India) have sorted the difference in shaping the MVNOs in India. The DoT has released detailed guidelines for MVNOs in March 2009. The department has decided to peg the entry fee for MVNO at a maximum of Rs 85 crore or USD 17 Million for a pan-India license. The maximum entry fee for Metro and circle A states has been pegged at Rs 5 crore or USD 1 Million, Rs 3 crore or USD 600 K for circle B states and Rs 1 crore or USD 200 K for Circle C states. 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. 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.
Meanwhile, the big fish, BHARTI Airtel chief is reported to have warned that he doesn’t think MVNOs will succeed in India, due to the situation of the tariffs. He’s essentially hinting at the low ARPU in the market. However, the low ARPU is a cause or an outcome is debatable. In order to gain more spectrum in the upcoming 3G auctions, there has been excessive focus to gain customers with aggressive offers in the market bringing the ARPU down. This partly explains the recent growth in the times of crisis in the Indian telecom market, hopefully.