Making a case for MVNOs in India

Background : Indian Telecom

The 3G auctions and the subsequent churn have created a few more operators in the already crowded Indian telecom space. This though, augurs well for everyone concerned. The new operators, especially the ones with pan Indian ambitions like Aircel, Uninor, Videocon, Spice and Virgin mobile are focusing on getting as much market share as possible by using:

• Innovative OSS/BSS systems
• Unique Marketing Strategies
• Banking on Number Portability

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 5% mark.

Long Tail

According to the Wikipedia:

"The Long Tail or long tail refers to the statistical property that a larger share of population rests within the tail of a probability distribution than observed under a 'normal' or Gaussian distribution."

Amazon and Netflix are cited as prime examples of the Long Tail principle. The Long Tail principle helps businesses realize a significant profit by selling many hard to find items at a high margin.

Blue Ocean Strategy

Blue Ocean Strategy is a strategy which helps an organization achieve high growth by creating a new demand in an uncontested market space. Blue Ocean is all about "Value Innovation". Value Innovation is the alignment of innovation with utility, price and cost principles. This in turn helps create uncontested market space which makes the competition irrelevant.

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 141 licence conditions such as FDI,substantial equity etc. is eligible to apply for MVNO licence. MVNO must get parented to an MNO in a service area. The license service area of MVNO will have to be the 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. A MVNO will have to submit the agreement with MNO before issue of license to MVNO. MNO will be responsible for paying the spectrum charges for utilisation of spectrum by MVNO.

Rajesh at Emergic provides a more accurate figure and states that the total cost of a new MVNO is "Rs 80 crore for a national MVNO licence", adding that "My estimate is that this will require an investment of about Rs 200+ crore, and has the potential to deliver a topline of about Rs 2,000+ crore in 3 years for the market leader."

Consolidating my understanding of the current scenario, I believe that the Data/VAS based MVNO targetting a niche consumer base can definitely generate a large amount of income. Just as the blackberry is gaining in popularity as it provides a niche data service, there is an opportunity for the service provider to serve the "Long Tail" and yet bring in the profits.

* Numbers from Mohit Agarwal's article at Telecomcircle.

MVNOs : Explained

What are MVNOs?

Mobile Virtual Network Operators are telecom operators which do not own any telecom infrastructure and yet survive in the market based on their strategic alliances with current MNOs - Mobile Network Operators. MVNOs usually buy MOUs - Minutes of Use in bulk from traditional mobile operators for sale to their own customers.

The introduction of MVNOs in the market is a natural progression towards having a free market and contributing to the efficient use of telecom infrastructure. A mature market is expected to provide the customer with choice. It often becomes difficult for a large operator to service such diverse requirements effectively. Such varied requirements could get well addressed by niche operators catering to specific customer segments. These operators create a structure that differentiates between wholesale and retail operators.

Method of Service Delivery

MVNOs deliver their own SIM cards and are also responsible for branding, marketing, billing and customer care. Some MVNOs have their own infrastructure whereas some do not own infrastructure but are based on services provided by it such as:-
• Tariff and service design control or
• Only pre-packaged services.
• Service implementation and differentiation
Based on their infrastructure, MVNOs can be classified as Skinny MVNO, Thin MVNO and Thick MVNO.

Symbiotic relationship between MNOs and MVNOs

MVNOs cannot exist without MNOs.
MNOs also derive a lot of benefit from MVNOs, such as:
• MVNOs help in expanding the market size and penetration.
• MVNOs help MNOs target specific segments where they are weak and create a wider customer base. A larger market helps all the players concerned. MVNOs follow a Blue Ocean strategy of creating an uncontested market by reconstructing market boundaries.
• MVNOs help provide specific products and Value Added Services to customers. Eg. Disney provides cartoons and entertainment and ESPN helps provide sports information to its client base.
• MVNOs help MNOs in effective network and bandwidth utilization.
• MVNOs also help MNOs lower operational costs which accrue in the form of billing, sales, customer services, marketing budgets as they directly buy minutes from MNOs.

MVNOs and Blue Ocean strategies

The MVNO model is about providing differentiated services and hence rather than fight the battle, they create a whole new battlefield of their own choice. This is what Blue Ocean strategies are all about and so MVNOs are the best vehicles of experimentation for enterprising entrepreneurs.

The different ways in which MVNOs operate around the world are:
Business MVNOs like BeyondMobile and Abica provide bespoke services to businesses.
Discount MVNOs provide cut-price call rates to market segments.
Lifestyle MVNOs like Helio focus on specific niche market demographics.
Advertising-funded MVNOs like Blyk or MOSH Mobile build revenues from advertising to give a set amount of free voice, text and content to their subscribers.
Ethnic MVNOs like Lebara target ethnic communities by providing inexpensive calls to their home country.
Tesco, a UK based retailer, started an MVNO with O2 and An Post, Ireland’s postal service started one with Vodafone.

Future of MVNOs

A lot of the MVNOs mentioned haven’t worked and there have been some high profile failures, notably that of Disney and ESPN. But the business model of MVNOs is still a lucrative one and there are more and more players joining in the fray. More about MVNOs in India soon.

Cellular Phone Security

I recently lost my cellphone and that was when I came to know about IMEI number and why the Government of India is not allowing China made cellphones without IMEI number to work in India. My cellphone was a cheap Nokia one and losing it gave me endless joy as it helped me get a newer better version. But what if you have a high end phone and you lose it. There is a way to ensure that if you do not get your cellphone back, you can at least ensure that whosoever gets it is not able to use it too. Read On.

What to do if your cellphone is stolen?

Every phone has a IMEI number. IMEI - International Mobile Equipment Identity or IMEI number is a unique which helps identify mobile and some satellite phones. IMEI number is usually found in the battery compartment of the mobile phone and should not be confused with the IMSI number about which we will learn more later. The primary use of the IMEI number is to provide more security by uniquely identifying every phone working on the network. We can easily know the IMEI number of our phones by pressing *#06# into the keypad.

So how can IMEI number prevent our cellphone from getting stolen?

The IMEI number is mapped to the device and this mapping has a one to one relationship. This means that there is one IMEI number for every single device. The moment we start using a cellular phone with a valid IMEI number, the same is transmitted to and stored by the service provider in a register called as the EIR - Equipment Identity Register. GSM network operators maintain three lists of international mobile equipment identities (IMEI) in their Equipment Identity Register (EIR):

# grey - GSM mobile phones to be tracked

# black - Barred GSM mobile phones

# white - Valid GSM mobile phones

Hence if the user tries to connect to the network and get on call using the Barred GSM mobile phone, he/she will be barred from using the network.

But what if the phone is taken to another region where our network provider and hence his EIR are both not accessible. That is when CEIR comes in to play.

CEIR - Central Equipment Identity Register is a database of IMEI number of blacklisted devices. Chinese mobiles have been banned in India if they do not possess IMEI number and the same has been facilitated by the use of EIR and CEIR.

Network Operators Benefit through IMEI number?

The increasing number of high end phones in the market also increases vulnerability of network operators due to spamming, spoofing and hacking. Spoofing can change the identity of the user and this might lead to revenue leakage. Network operators benefit from having a built in mechanism that can help them keep suspicious cellular phones in check.

Mobile Phone Tracking through IMEI number

Cellular phones can be tracked and their location can be established using Mobile Phone Tracking mechanisms. Mobile Phones can be tracked by cellular towers, software in the cellular phones or by using a combination of both these mechanisms.

Cellular towers can track a phone in its cell or other cells by interpreting signals and signal strength from the cellular phone and also by using methods such as triangulation.

Handset based techniques can be implemented when the mobile device is equipped with GPS or a software that helps track its location.

Sometimes methods that utilize both of these techniques are also used to track the cellular phone. If you are buying a high end smart phone then you can be rest assured that it will be having most of the security mechanisms already built into its system.

IMEI number vs IMSI

The IMEI number is associated with the device and has no relation whatsoever to the subscriber. The IMEI number should not be confused with the IMSI - International Mobile Subscriber Identity which is used to create relevant entries about the phone in the HLR - Home location register or the VLR - Visitors Location Register. The IMSI is stored in the SIM card. It is a 15 (or sometimes 14)digit long number which consists of the Mobile Country Code (MCC) which is 3 digits long, and is followed by the Mobile Network Code (MNC), either 2 digits (European standard) or 3 digits (North American standard). The remaining digits are the mobile station identification number (MSIN) within the network's customer base. The IMSI is used to activate/deactivate the customer account by the telecom service provider when the customer lodges such a request. So when we call the call center and ask the service provider to stop billing on our card, this is the number that they use to deactivate the customer account.