MVNOs may enter Indian wireless telecom market

By SiliconIndia   |   Wednesday, 20 September 2006, 07:00 Hrs
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Mumbai: Strong local or global consumer brands might be the next entrants into India's urban wireless telecom markets in India, predicts in a report: "Is the Indian Market Ready to Go Virtual for Mobile?" by Diamond Management and Technology Consultants.

"A proactive approach by the regulators and the Department of Telecommunications could encourage both mobile network operators (MNOs) and potential mobile virtual network operators (MVNOs) to partner together and address segments of the Indian wireless market that are currently under- served," said Vinod Nair, Managing Partner of Diamond's India practice. "This could provide further impetus to the booming mobile market in India today."

A MVNO model has proven successful in the UK, the US, and some European countries whereby companies such as Virgin, Disney and Tesco are now significant competitors in the wireless communications market. While the wireless business in India is growing about 75 percent year-over-year, regulatory requirements around industry structure, spectrum allocation, and licensing and operations currently present formidable barriers to the MVNO model in India.

The consulting firm also reports that despite these challenges, segments of the wireless market in India are reaching a level of maturity to support the entry of strong consumer brands. Highly penetrated markets, may lead to a situation where some customer segments are likely to be "under-served" in specific aspects of their mobile experience. The dissatisfaction could come from either poorly tailored products and services or intangibles such as a mismatch between their individual lifestyles and what their operator's brands stand for.

"Mobile network operators can suffer from the limitations of a 'one size fits all' strategy," said Nair. "That strategy has resulted in some scale benefits and lower operating costs for wireless operators in India but over time it is likely to cause some dissatisfaction amongst specific customer segments with specific needs and desires. That's when MVNOs can step in and capture market share."

The wireless markets in Delhi, Mumbai and Chennai today are characterized by a number of mobile networks and there is evidence of additional network rollouts by new entrants. This would suggest the potential opportunity for an MNO with a less competitive retail operation to offer wholesale capacity to an MVNO in a "win-win" scenario for both.

"We know that some MNOs are actively exploring MVNO opportunities with potential partners in these key circles," said Nair. "However, most MNOs are aggressively targeting first-time subscribers to drive growth and are unlikely to pull back from the retail market or from specific customer segments. Our experience indicates that some MNOs might derive additional value by adopting a wholesale model in addition to their retail model and partnering with MVNOs who bring complementary capabilities and customer franchises."

The regulatory challenges surrounding MVNOs in India will require concerted action by several key stakeholders, including incumbent mobile network operators.

"The absence of a clearly defined regulatory framework is a significant impediment today," said Nair. "However, we believe that key urban markets will, in the next two years, offer some attractive opportunities for leading international MVNOs, local Indian companies and even government-owned entities to launch MVNOs in India."

Because launching an MVNO is a significant challenge, Nair advises Indian mobile network operators and those companies considering entering the MVNO market to begin exploring their strategic alternatives sooner rather than later.

Identifying an underserved segment of the wireless market is the cornerstone of a successful MVNO strategy, said Nair. Examples of such target segments could include segments as diverse as urban youth, specific ethnic communities, dedicated cricket fans, or high end business users.

Choosing the appropriate business model and partnering with the right network host is critical for the success of an MVNO. In selecting a network host, MVNOs should consider an MNO's commitment to the wholesale business in addition to pricing, support, network capabilities, technology and retail focus.

For their part, MNOs must make important decisions about their retail operation, their wireless platforms, their suite of service offerings, pricing, and their organizational model so that they can be best positioned as a preferred provider of services to potential MVNOs.

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