Starting A MVNO in India

The 3G auctions threw up quite a few different MNOs in India crowding the already overcrowded space. A lot of consolidation has happened since and the larger MNOs have consolidated their grip over the Indian Telecom scene.

A look at the numbers reveal that most of these companies have a market share of anywhere between 0 to 6 percent with Aircel having the highest market share of 6%. Ideally any new company now joining the fray as a MVNO/Telecom Operator in India, will be one that targets a market share of anywhere around the 10% mark.

The 3G auctions have bled the major MNO players and they are in need of alternate cash flows.

Under the circumstances, I believe that the time is ripe for some MVNOs to make an entry in to the Indian Telecom sector. They have not been able to increase their ARPUs or even monetize their newly rolled out 3G and now 4G LTE networks.

Requirements for starting a MVNO in India

Indian Company having a networth of Rs. 10 crore for Metro / Category A, Rs. 5 crore for Category B and Rs. 3 crore for Category C service area, paid up capital of 10% of prescribed networth and satisfying Annual Report 2008-09 141 licence conditions such as FDI,substantial equity etc., eligible to apply for MVNO licence.

MVNO to get parented to an MNO in a service area. The license service area of MVNO to be same as that of parent MNO. Arrangement/agreement between MNO and MVNO to be driven by market forces. No limit on number of MVNOs attached to an MNO.Agreement with MNO to be submitted before issue of license to MVNO. MNO to pay the spectrum charges for utilisation of spectrum by MVNO.

Entry fees for MVNOs – 10% of MNOs subject to a maximum of Rs. 5 crore and minimum of Rs.1 Crore for Metro/ Category ‘A’,Rs. 3 crore- 50 lakhs for Category ‘B’ and Rs. 1 crore- 25 Lakhs for Category ‘C’ service areas. Annual licence fees same as that of MNO of the service area. Allocation of Numbers, Number portability, Interconnection with other service providers and Roaming to provided by parent MNO.

Also one can use cloud computing in telco billing to provide solutions cheaper, faster and more easily.

The summary of recommendations are as below:

  • MVNO to be introduced as a distinct service provider with its own licensing and regulatory framework
  • MVNO to be issued a license under Indian Telegraph Act
  • Any Indian Company having a networth of Rs. 10 crore for Metro / Category A, Rs. 5 crore for Category B and Rs. 3 crore for Category C service area, paid up capital of 10% of prescribed networth and satisfying Annual Report 2008-09 141 licence conditions such as FDI, substantial equity etc., eligible to apply for MVNO licence.
  • MVNO free to choose its business model (Full or Intermediate or Thin).
    Typically, a Thin MVNO would offer services in its own brand without any infrastructure and a Full MVNO could set up its own HLR, VLR, IN switches, MSC etc., but not the Radio Access Network (RAN).
  • MVNO to get parented to an MNO in a service area.
  • The license service area of MVNO to be same as that of parent MNO.
  • A r r a n g eme n t / a g r e eme n t between MNO and MVNO to be driven by market forces.
  • No limit on number of MVNOs attached to an MNO.
  • Agreement with MNO to be submitted before issue of license to MVNO.
  • MNO to pay the spectrum charges for utilisation of spectrum by MVNO.
  • Entry fees for MVNOs – 10% of MNOs subject to a maximum of Rs. 5 crore and minimum of Rs. 1 Crore for Metro/ Category ‘A’,
    Rs. 3 crore- 50 lakhs for Category ‘B’ and Rs. 1 crore- 25 Lakhs for Category ‘C’ service areas.
  • Annual licence fees same as that of MNO of the service area.
  • Allocation of Numbers, Number portability, Interconnection with other service providers and Roaming to provided by parent
    MNO.
  • Subscribers to be protected for failure of agreement between MNO and MVNO or MVNO quitting service.
  • No Roll out Obligations for MVNO.
  • FDI limit – 74% same as MNO
  • Bank Guarantee: FBG – equivalent to two quarters license fees; PBG – 5% of MNO.
  • Restrictions on Mergers and acquisition on similar lines as MNOs.

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