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Presentation on MVNO

( Mobile Virtual Network Operator)

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Mobile virtual network operator

AMobile Virtual Network Operator (MVNO) isa company that provides mobile phone services butdoes not have its own licensed frequency allocation

ofradio spectrum, nor does it necessarily have all ofthe infrastructure required to provide mobiletelephone service.

MVNO purchase wholesale mobile minutes andresell to end-users.

http://en.wikipedia.org/wiki/Mobile_phonehttp://en.wikipedia.org/wiki/Frequency_allocationhttp://en.wikipedia.org/wiki/Radio_spectrumhttp://en.wikipedia.org/wiki/Radio_spectrumhttp://en.wikipedia.org/wiki/Frequency_allocationhttp://en.wikipedia.org/wiki/Mobile_phone

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MVNOs are roughly equivalent to the "switchlessresellers.

It works independently of the mobile network operator

and can set its own pricing structures, subject to the ratesagreed with the MNO.

They do not have their own SIM-cards and the servicesprovided by service providers depend on the services ofthe hosting MNOs .

http://en.wikipedia.org/wiki/Telephone_exchangehttp://en.wikipedia.org/wiki/Telephone_exchange

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Background and history

The emergence of the MVNO model in a market isoften a result of two factors-

1) To lower the barriers for market entry andultimately increase competition.

2) A strategic decision by an MNO looking to extend itsexisting operations and target niche or undeservedsegments through a second or perhaps multiple

brands.

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The efficiency is obtained because an MVNO doesntincur the significant capital expenditure on spectrumand infrastructure that an MNO.

The regulator forced Host Network Operators(HNO's) to open their network & it created apotential competitor for them. They were being

forced into a commercial relationship that wouldeventually have a negative impact on its revenues.

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Conversely and more recently many mobile networkoperators believe that there is merit in operating a

wholesale MVNO business unit, to compliment theirretail model.

The first commercially successful MVNO in the UKwasVirgin Mobile UK, launched in the United

Kingdom in 1999 and now has over 4 millioncustomers in the UK. Virgin replicated its UK successthrough its US operationVirgin Mobile USA.

http://en.wikipedia.org/wiki/Virgin_Mobilehttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Virgin_Mobile_USAhttp://en.wikipedia.org/wiki/Virgin_Mobile_USAhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Virgin_Mobile

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Mobile operators and MVNOs

There are three primary motivations for mobile operators toallow 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 toimplement a more specific marketing mix, whether alone or

with partners and they can help attack specific, targetedsegments.

Network utilisation-driven strategiesMany mobile operators have capacity,

product and segment needs. An MVNO strategy can generateeconomies of scale for better network utilisation.

http://en.wikipedia.org/wiki/Marketing_mixhttp://en.wikipedia.org/wiki/Marketing_mix

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Product-driven strategies :

MVNOs can helpmobile operators target customers with specialised

service requirements and get to customer niches thatmobile 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 50:50 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 itsbrand and a share, per subscriber, of its future

revenue. Tata Tele will take care of billing andcustomer care, refrain from selling airtime minutesin bulk to Virgin, and retain its subscribers.

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What Virgin would do is bring its customer serviceexpertise to the table and help Tata Tele train its callcentre staff. This is a better way to enter into thegrowing Indian telecom market. There is no capex

burden and the exit option is also easier.

The urban youth mobile services revenue is expectedto cross Rs 35,000 crore by 2010.

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Controversy

The Cellular Operators Association of India pointed outthat the partnership between Virgin Group and TataTeleservices has taken place through the back door underMobile Virtual Network Operators (MVNO) route to

enter into the Indian telecommunication market.

The group further pointed out that the present Indiantelecommunication licensing agreement clauses prevents

buying of mobile capacity from an existing operator andsubsequent selling of mobile services under its name isalso prohibited under the law.

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The authority of reallocation of spectrum lies withthe Indian Department of Telecommunication.

Pointing out that MVNOs definition worldwideincluded two things buying of bulk air time under

contract from an operator & reselling of minutes aswell as customer ownership, Tata Teleservices said,None of these are applicable or relevant to TTLslaunch 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, Virginwould be positioned as a youth brand.

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Key Reasons for the deal

The surveys and reports showed that Tata were notable to penetrate the youth segment as they had done

with other customer segments.

For the Tatas, the current move was an attempt togain ground as they had a market share of less than10% ( around 7.1%).

The company had tied up with Virgin due to itsbetter recall value and positioning among youthglobally.

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Advantages

This deal gives it a first-mover advantage. Wheneverregulations permit MVNOs to operate in India,

Virgin would already be a recognised brand.

When Tata Tele offer GSM services , the currentrelationship can be easily tweaked for a GSM run. It'sa 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 onspectrum while the foreign player rakes in revenues

without having to buy airtime.

The high churn rate (once number portability kicksin) will also help them.

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Indian Challenge

Countries like India or China, where consumers areprice-conscious, larger operators are in a betterposition to offer competitive pricing due toeconomies of scale.

That may be a (better) way to enter the market, butthey may have no significant market share at the endof the day.

The profit margin of MVNOs rarely crosses 20%, andwith 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 itwill all boil down to quality of service, pricing and

product suitability.

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!!!!!! Thank You !!!!