Telecom Commission of India recently accepted the recommendations of TRAI over the long pending issue of MVNOs (Mobile Virtual Network Operators) in the country by approving a new category of unified license for virtual network operators.
MVNOs basically buy the bandwidth and talk time in wholesale from the telecom operators which own the spectrum and infrastructure. These virtual operators can then sell the usual telecom services (voice calls, data packs, etc) to the consumers under their own brand.
According to an official source, the proposal is yet to be approved by the telecom minister after which new unified license will be issued and implemented within few weeks.
“VNO will be able to offer all telecom services provided by a telecom operator with which it has partnered. It can sell services of more than one operator,” the source said. It further added that VNOs will be able to integrate service and offer it to the customer as they want.
“There will be no limit on integration and offering of services from license or government that will be available shortly. VNO on its own will be free to use the technology required for offering various services,” said the source.
VNOs usually sell these services at a cost lower than the regular plans of telcos to the consumers. And although it sounds like a loss to telcos but it is, in fact, a win-win situation for all the parties involved under normal circumstances.
Telcos usually invest a lot of capital in buying spectrums and building the required infrastructure. Especially in India, the price of spectrums is sky-high and telcos have to offer the services at very cheap prices to consumers due to high competition among various telcos companies.
So unless, the telecom company is a huge corporation able to afford such high investments, it is very difficult to make profits. This is the reason telecom companies in India have traditionally been arguing with authorities for sky-high spectrum prices and once also demanded the entry of MVNOs.
The entry of Mobile Virtual Network Operators opens another door of revenues for these telecom companies which can now offer their services and spectrum on lease to these operators. VNOs can also help the telecom companies to offset their expenditure by reducing marketing and sales costs as well as by sharing some of their operational expenses.
On the other hand, this can prove beneficial to many consumer companies in customer-facing sectors such as e-commerce, retail and even banks, who can become VNOs themselves and offer their customers these services and gain access to crucial customer insights and behavior patterns in the process.
However, there are many challenges associated with MVNOs in India which have arisen mainly due to the huge delay in this decision.
The demand for Mobile Virtual Network Operators was first raised way back in 2007 when a number of global operators including British Telecom (now known as BT), AT&T, and France Telecom had shown interest in the Indian MVNO space and urged the regulators to open the licensing process.
Since that time, a lot has changed in the Indian telecom sector with as many as 7-8 telecom operators already offering telecom services at very low prices.
Moreover, at present, most of the small telcos are in the stages of consolidation with big players . And big players such as Airtel, Vodafone or Idea Cellular themselves do not have spare bandwidths to offer to MVNOs.
Moreover, MVNOs themselves have to be a strong brand and have an existing presence to attract consumers for these services. This also involves additional marketing and distribution costs for companies looking to become MVNOs.
However, according to some, this will benefit the state-run telcos such BSNL, MTNL etc who are currently operating under loss and can earn revenues through these Mobile Virtual Network Operators. Plus, there is also a tremendous potential for the upcoming 4G expansion and even largely unutilised 3G spectrum which MVNOs can offer to the consumers.