This just in: Virgin Mobile’s (NYSE: VM) launch has hit a regulatory hurdle, reports CNBC-TV18. It seems that the Department of Telecom has issued a notice to Virgin’s JV partner Tata Teleservices, asking for details on the terms of the agreement between the two companies, to check whether Virgin Mobile India is an MVNO or not. Virgin has been asked not to launch services before getting a clearance from the DoT. Yesterday, CNBC-TV18 had reported that following objections from the COAI, Telecom Secretary S Behura has asked the licencing department to vet the JV.

On the face of it, Virgin Mobile India does appear to be an MVNO: the company hasn’t been allocated spectrum, and yet it uses a mobile operators pipe to deliver voice and value-added-services. They’ve also stated that both Virgin is free to partner with other mobile operators. However, this is likely to boil down to technicalities - on how exactly an MVNO is defined under Indian law, and how the deal between Tata Teleservices and Virgin Mobile has been structured. I wouldn’t be surprised if the deal structured to be within the law, and yet conforms to the above definition of an MVNO. Bear in mind that the billing here is being done by Tata Teleservices, and they’re not paying Virgin as per minutes of use, but reportedly, a fixed amount each time a consumer buys a service.

I think there’s also a larger issue also in play here - why exactly are MVNOs not allowed in India? If a mobile operator wants to allocate a part of his pipe or spectrum to a company that can manage services better - why not? It’s probably due to the spectrum crunch that India faces in certain circles, particularly the high-density, high ARPU, metro cities that the MVNO is likely to target. And with more telecom operators entering the frey, the government will be hard pressed to allocate spectrum to them. Still, I think the launch of Virgin augurs well for a country where value-added-services has been put on the back-burner by most mobile operators, particularly Airtel. It might just show operators the value of letting the professionals handle the content.