MVNO, in the Indian context

Mobile Virtual Network Operator (MVNO), are sometimes also incorrectly known as Mobile Service Providers (MSP). MVNO’s do provide Mobile services to subscribers or enterprises, however they do not own core network infrastructure. Some large & well-established MVNO’s do own some infrastructure s.a. Value Added Service (VAS) infrastructure or Service-Control infrastructure, however – not a very common thing. The MVNO’s buy discounted air-time in bulk, and make their money by rebranding & reselling air-time. MVNO owns the subscriber information, and takes care of customer-care, marketing and most importantly billing. The reason why MSP is not same as MVNO is because, while all MSPs are not MVNOs, all MVNO’s are MSPs. A telco’s owning the core network, are also MSP’s, but the term is loosely meant to refer to MVNO’s.

MVNO’s offered a good & profitable business-model few years back, when they were introduced. Take ‘Virgin Mobile’ for instance. The success, led to MVNO’s sprouting up like mushrooms in moist grasslands. The excellent marketing momentum, the differentiated service offerings and service levels that that large and generally established brands created in form of MVNO’s, slowly started losing steam. In a few years, as the mobile telecom industry’s average ARPU’s were dragged by gravity, and customer-churn ruined profitability predictions,  the Telco biggies owning the core-network, saw the (by-then) somewhat ailing MVNO’s as easy prey. While the weak died or withered-away, the better of the lot got consumed by the brick-n-mortar Telcos. It gave the Telcos immediate (large) subscriber-base. As a result, the reality today is that very few MVNO’s are doing well or even surviving.

Now with the phenomenal growth of mobile subscriber base in India and China, MVNO’s are getting attracted to these markets. Of course in India, regulatory constraints limit the operation in true MVNO model, however, a smart exclusive Franchaisee model is being adopted. The Franchaisee model and MVNO model are however not necessarily first cousins. While we need to wait to see how the model plays out in India, the difference that one may expect are that the customer-care and billing are not operated by the MVNO(-like) Franchaisee, but by the host Telco. Some “patch-on” branding will be possible (e.g. Franchaisee branded post-paid bills, or franchaisee branded SIM-card packs & recharge-coupons), however, it may not have the same impact of a true MVNO’s all-pervasive branding. And then, if the Telco’s were to host the rather ‘costly’ liability of customer-care & billing, the amount of discount they would be able to offer to the Franchaisee wouldn’t be in the typical range of 20-25%. As anybody could guess, most Indian telco’s are already under a tremendous cost-pressure. Another factor is that the churn in Indian Telcom industry is generally driven by one strong factor, i.e. “perceived cost/minute”. Quality of service, or quality of customer-care, differentiation in terms of Value Added Service availability or even coverage, are not highest determinants.

Net-net, it does not take a lot of imagination to analyse the viability of the MVNO / Franchaisee model, and predict the outcome. However, it could certainly make the already competitive Indian mobile telcom market, hotter.