TRAI Proposes Separate MVNO License, 74% FDI And Freedom Of Biz Model Choice; CS On Content Firms
By Cerius Shah - Wed 06 Aug 2008 12:07 PM PST
The telecom sector continues to buzz (sic). TRAI has issued its recommendations for MVNO, defining a Mobile Virtual Network Operator as “a licensee in any service area that does not have spectrum of its own for access service, but can provide wireless (mobile) access services to its own customers through an agreement with the licensed access provider, UAS/CMTS Licensee”.
. Further to the same, TRAI has recommended a distinct licensing framework for MVNO as well as freedom to chose whichever (Full/Intermediate/Thin) business model they would like to pursue. Additionally, the commercial model governing the relationship between a Mobile Network Operator (MNO) and MVNO will be left to market forces. CS has gleaned key points for an short executive summary below:
a: Any company (not limited to telco or allied industries) that fulfils licensing conditions (FDI, substantial equity) are eligible for a 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.
The recommendations give a good enough framework for players such as RCom, MTNL and Kishore Biyani’s Future Group to get started planning services. In the case of the latter, Future Group had recently appointed McKinsey and Value Partners to advise on how to spend its Rs 100 crore to invest in an MVNO. Considering the recommendations do not place any emphasis in owning infrastructure or liabilities associated with spectrum, knowledge-rich firms such as VAS providers stand a good opportunity to move higher up the value chain. As MobStir notes in a previous post, “Someone like STAR or ZEE should launch an MVNO where you get 200 minutes of conversation and all content for free for just 350 rupees a month. That would change the game. Minutes at 1 rupee and unlimited content at 150. They make all the money, own the subscriber and truly extend their brands and content into the mobile space.” Well, the costs do seem to be fairly magnificient for such a venture. However, someone with mighty content throughput like Star and Zee will also benefit with fatter margins. Besides with 3G on the anvil, a bundled - branded Mobile TV offering wouldn’t be too bad either. Download Release | Recommendations.
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