Policy on mobile virtual network operators may be announced soon

Policy on mobile virtual network operators may be announced soon

New Delhi: India’s long-awaited policy on mobile virtual network operators, or MVNOs, could soon be announced, providing a lifeline to telecom firms such as the state-owned Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) that are finding it difficult to add subscribers in a highly competitive market, as well as lowering entry costs for newcomers.

“We are looking at tweaking the policy so as to allow for something called a thin MVNO," a senior official in the department of telecommunications (DoT) said on condition of anonymity as he is not authorized to speak to the media. “This would allow an operator to share infrastructure, including spectrum", without owning any of it.

MVNOs buy airtime from a telecom operator and sell it to subscribers under a different brand. Both the state-owned companies have spare capacity that they could sell to such operators.

DoT is also tweaking the policy to prevent companies from taking undue advantage of price differentials.

“In the earlier policy, the AGR (adjusted gross revenue) would get added up but that would lead to arbitrage in the revenues so we have decided that both the firms (MVNO and operator) would have to report separate financials and P&L (profit and loss) accounts," another senior DoT official said, also on condition of anonymity.

According to recommendations by the Telecom Regulatory Authority of India made in August 2008, an MVNO would be free to choose its business model from among the three most typical ones—thick, thin and hybrid.

A thin MVNO offers services under its own brand without any infrastructure. It may merely provide the services of the carrier the airtime has been purchased from. A thick MVNO can set up its own billing systems and value-added service (VAS) platforms, while a hybrid is a mix of the two.

The service area of an MVNO would be the same as its parent operator and there would be no limit on the number of MVNOs attached to one.

“They would pay the same fees applicable as for an operator. MVNOs essentially help unified access service licence (UASL) holders use their spectrum more efficiently," the second DoT official added.

A thin MVNO “can buy airtime from multiple operators", an industry analyst with a research firm said on condition of anonymity.

“Think of it in terms of airline seats where you can’t sell today’s seats tomorrow," said Mahesh Uppal, a regulatory expert and director with Com First (India) Pvt. Ltd. “An operator can sell its unused minutes now and make a bit of money. It all depends on the capacity in the market and depends on the goal of the firm."

Both the DoT officials cited above said state-run operators have around 50% of unutilized network capacity due to the continuous surrendering of connections as well as the inability to market services effectively. An MVNO can use this spare capacity to offer a wide range of services that are available from the state-run companies, including broadband, an analyst said.

“The network that was installed some time back at very high costs is lying unutilized now," said the first DoT official cited above. “This is a huge opportunity loss to MTNL."

MTNL said on Friday that revenue from services dropped to Rs848 crore from Rs1,068 crore.

MTNL added 6.07 million GSM mobile phone customers and 120,000 broadband customers during the year ended 31 March. MTNL’s 3G (third-generation) subscribers totalled 348,000 at the end of the quarter.

BSNL posted a loss of Rs2,612 crore on revenue of Rs32,966 crore in fiscal 2010. In the year before, BSNL had posted a profit of Rs575 crore on sales of Rs35,812 crore.

The loss comes in a year when BSNL got Rs2,600 crore from the universal obligation fund to subsidize the landline business in rural areas and Rs3,080 crore as interest from surplus cash.

BSNL’s customer base has risen to 90 million (including 28 million fixed-line users and 62 million mobile users) from 65.7 million in 2006-07.