Presentation on MVNO

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• Presentation on MVNO
• ( Mobile Virtual Network Operator)

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Mobile virtual network operator

• A Mobile Virtual Network Operator (MVNO) is a
  company that provides mobile phone services but
  does not have its own licensed frequency
  allocation of radio spectrum, nor does it
  necessarily have all of the infrastructure
  required to provide mobile telephone service.
• MVNO purchase wholesale mobile minutes and resell
  to end-users.

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• MVNOs are roughly equivalent to the "switchless
  resellers.
• It works independently of the mobile network
  operator and can set its own pricing structures,
  subject to the rates agreed with the MNO.
• They do not have their own SIM-cards and the
  services provided by service providers depend on
  the services of the hosting MNOs .

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Background and history

• The emergence of the MVNO model in a market is
  often a result of two factors-
• 1) To lower the barriers for market entry and
  ultimately increase competition.
• 2) A strategic decision by an MNO looking to
  extend its existing operations and target niche
  or undeserved segments through a second or
  perhaps multiple brands.

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• The efficiency is obtained because an MVNO
  doesnt incur the significant capital expenditure
  on spectrum and infrastructure that an MNO.
• The regulator forced Host Network Operators
  (HNO's) to open their network it created a
  potential competitor for them. They were being
  forced into a commercial relationship that would
  eventually have a negative impact on its revenues.

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• Conversely and more recently many mobile network
  operators believe that there is merit in
  operating a wholesale MVNO business unit, to
  compliment their retail model.
• The first commercially successful MVNO in the UK
  was Virgin Mobile UK, launched in the United
  Kingdom in 1999 and now has over 4 million
  customers in the UK. Virgin replicated its UK
  success through its US operation Virgin Mobile
  USA.

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Mobile operators and MVNOs

• There are three primary motivations for mobile
  operators to allow MVNOs on their networks. These
  are
• Segmentation-driven strategies
• Mobile
  operators often find it difficult to succeed in
  all customer segments. MVNOs are a way to
  implement a more specific marketing mix, whether
  alone or with partners and they can help attack
  specific, targeted segments.
• Network utilisation-driven strategies
• Many
  mobile operators have capacity, product and
  segment needs. An MVNO strategy can generate
  economies of scale for better network
  utilisation.

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• Product-driven strategies
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  MVNOs can help mobile operators
  target customers with specialised service
  requirements and get to customer niches that
  mobile operators cannot get to.

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Virgin-Tata Deal

• Virgin Mobile is present in six countries the
  US, the UK, France, South Africa, Australia and
  Canada.
• Virgin Mobile India, a 5050 joint-venture
  between UKs Virgin Group and Tata Teleservices
  (TTSL)
• It is based on co-branding/brand franchising
  model.
• Tata Tele will pay Virgin a royalty for the use
  of its brand and a share, per subscriber, of its
  future revenue. Tata Tele will take care of
  billing and customer care, refrain from selling
  airtime minutes in bulk to Virgin, and retain its
  subscribers.

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• What Virgin would do is bring its customer
  service expertise to the table and help Tata Tele
  train its call centre staff. This is a better way
  to enter into the growing Indian telecom market.
  There is no capex burden and the exit option is
  also easier.
• The urban youth mobile services revenue is
  expected to cross Rs 35,000 crore by 2010.

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Controversy

• The Cellular Operators Association of India
  pointed out that the partnership between Virgin
  Group and Tata Teleservices has taken place
  through the back door under Mobile Virtual
  Network Operators (MVNO) route to enter into the
  Indian telecommunication market.
• The group further pointed out that the present
  Indian telecommunication licensing agreement
  clauses prevents buying of mobile capacity from
  an existing operator and subsequent selling of
  mobile services under its name is also prohibited
  under the law.

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• The authority of reallocation of spectrum lies
  with the Indian Department of Telecommunication.
• Pointing out that MVNOs definition worldwide
  included two things buying of bulk air time
  under contract from an operator reselling of
  minutes as well as customer ownership, Tata
  Teleservices said, None of these are applicable
  or relevant to TTLs launch of Virgin Mobile
  branded services.

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• As per the agreement, there would be two brands
  Tata Indicomm and Virgin. While Tata Indicomm
  would be positioned as a mass-market brand,
  Virgin would be positioned as a youth brand.

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Key Reasons for the deal

• The surveys and reports showed that Tata were not
  able to penetrate the youth segment as they had
  done with other customer segments.
• For the Tatas, the current move was an attempt to
  gain ground as they had a market share of less
  than 10 ( around 7.1).
• The company had tied up with Virgin due to its
  better recall value and positioning among youth
  globally.

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Advantages

• This deal gives it a first-mover advantage.
  Whenever regulations permit MVNOs to operate in
  India, Virgin would already be a recognised
  brand.
• When Tata Tele offer GSM services , the current
  relationship can be easily tweaked for a GSM run.
  It's a win-win situation for both sides.
• The move will give Virgin Mobile instant access
  to Pan-India network.
• Tata Tele they will get a recognized brand with
  a sound marketing plan to attract more
  subscribers.

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• Thus the operator gets to maximise returns on
  spectrum while the foreign player rakes in
  revenues without having to buy airtime.
• The high churn rate (once number portability
  kicks in) will also help them.

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Indian Challenge

• Countries like India or China, where consumers
  are price-conscious, larger operators are in a
  better position to offer competitive pricing due
  to economies of scale.
• That may be a (better) way to enter the market,
  but they may have no significant market share at
  the end of the day.
• The profit margin of MVNOs rarely crosses 20,
  and with the prepaid segment being a low-paying
  market, the business plan and positioning has to
  be right.

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• The brand hype will die after sometime, and then
  it will all boil down to quality of service,
  pricing and product suitability.

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• !!!!!! Thank You !!!!