MVNOs may not succeed in India: study

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New Delhi, Aug 10 (UNI) Opening of the Indian telecom market to Mobile Virtual Network Operators (MVNOs) such as Virgin Mobile will have a negligible impact on existing players like Bharti, Idea and Reliance Communications, a study says.

Virgin mobile has been present in India now for over a quarter in a tie-up with Tata Teleservices under the franchisee arrangement.

Religare institutional research says Virgin has not helped ramp-up Tata Teleservices' market share. Instead, its market share is down from 9.3 per cent in December 07-February 08 to 7.6 per cent in the March 08-May 08 quarter.

Describing recommendations by Telecom Regulatory Authority of India (TRAI) on entry of MVNOs in the Indian telecom market as a positive move to formalise a business model, the study says it will lead to better utilisation of network resources, especially by the new licencees.

But it believe ''it will have a negligible impact on the incumbent players like Bharti, Idea and Reliance Communications''.

Religare lists highly competitive Indian telecom market, lowest tariffs in the world and shortage of spectrum among inhibiting factors for success of MVNOs in the country.

It says the Indian telecom market is already enormously competitive with six to seven players in each circle and five to six other players expected to launch their services, leaving little scope for the MVNOs.

Religare says since TRAI has not recommended any reservation on the network capacity for MVNOs nor fixed price on buying of bulk airtime, MVNOs remain at the mercy of the MNOs.

Internationally, one of the factors contributing to the success of MVNOs has been the low-cost model, especially in the European markets like the UK, where the tariffs have been high.

However, since tariffs in India are the lowest in the world, MVNOs do not have much scope for profitable operations.

It says if a ball-park rate of 20 paise per minute for buying airtime is assumed and an equal amount going for termination charges, it leaves little room for MVNOs to provide low cost service.

Realisation per minute for Bharti, Idea and Reliance Communications was at 66 paise per minute in June 08 quarter and this, too, has been falling at an average rate of five per cent over last couple of quarters, the study says.

Religare says since there is a shortage of spectrum for most of the existing players, it would be difficult for MVNOs to enter the Indian market in a tie-up with them. MVNOs may prefer to enter along with new licencees but will lag the market in terms of network coverage.

Globally, MVNOs have not been very successful, with the penetration of MVNOs subscribers at 3-3.5 per cent, despite several years since their launch.

Even in the UK, the US and Hong Kong, where MVNOs started operations between 1999 and 2001, their penetration is 7.5-8 per cent, Religare says.

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