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TRAI Recommends 74% FDI In MVNO, Rs 150 Cr Licence Fee

14 August, 2008

Telecom sector is clearly in the midst of big action, but then, when was it not? After the policy for launch of next generation 3G services on the mobile, now the government is moving another step ahead by allowing mobile virtual network operators (MVNO) to set up shop in the country. Telecom regulator, TRAI has made a call to allow MVNOs to start business in India thereby increasing competition and improving services for the consumer. They have recommended a 74% FDI in MVNOs, and a Rs 150 crore nation-wide licence fee for offering MVNO services. TRAI recommendations will become a polcy only after they are approved by the department of telecommunications and detailed guidelines are issued.

MVNOs basically are firms who do not themselves own spectrum for providing mobile services but work in partnership with existing telcos who do own airwaves to increase subscriber base for a fee. Such services include more advanced content and applications. It is a concept which is already prevalent in the developed telecom markets around the world with around 360 operational MVNOs largely spread across Europe and the US.

The market has already got a taste of MVNO operations. British maverick businessman Richard Branson’s Virgin Group owned Virgin Mobile which is a large MVNO internationally (more than 5 million subscribers in the US) had tied up with Tata Group’s telecom arm Tata Tele to offer branded youth centric mobile services in India.

In March ‘08, Virgin Mobile had launched CDMA handsets in association with Tata Tele (a CDMA operator) where customers get paid for receiving calls. According to the deal, Tata Teleservices sells the Virgin Mobile brand and its services in the country and pays a royalty for every customer it gets on its network. This deal had run into trouble with the association of GSM based operators COAI claiming that the deal amounted to MVNO operations even as it was not allowed in the country. After the telecom ministry (DoT) got the clarification from Virgin-Tata, it had said that the deal did not amount to MVNO.

Now TRAI has asked the government to open the sector in line with the 74 per cent FDI cap as applicable in the telecom sector. Mobile operators can lease spectrum to as many MVNOs as they want and MVNOs interested in operating in India. Firms who want to enter MVNO space would have to pay about Rs 150 crore ($36 million) for a nationwide entry licence besides an annual licence fees on similar lines as those paid by mobile operators.

The TRAI recommendation comes just two days after diversified Future Group said it wants to enter into mobile services as an MVNO. Future Group CEO Kishore Biyani had recently said that he is talking to operators to start mobile services as a franchisee and will look to become a MVNO when the market opens. The group, which has interests in retail, real estate, insurance, financial services and logistics, has appointed consultancy firm McKinsey & Co and UK’s Value Partners Group as advisers for its telecom plans. It expects to spend Rs 100 crore for its mobile services foray.

The opening of the sector can see Virgin Mobile go for a full fledged launch of services in India, the world’s fastest-growing market for mobile services with operators adding more than 8 million subscribers a month.


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TRAI Recommends 74% FDI In MVNO, Rs 150 Cr Licence Fee

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