Monopolistic incumbent telcos, indifferent BSNL sound death knell for MVNOs in India, ET Telecom

NEW DELHI: The increasingly competitive mobile tariffs ushered in India after the foray of billionaire Mukesh Ambani’s Reliance Jio in 2016, as well as, a lack of enthusiasm from incumbent telecom operators and state-run Bharat Sanchar Nigam Limited (BSNL) has nearly put the final nail on the coffin of the Mobile Virtual Network Operator (MVNO) industry, according to analysts and an association. MVNO is a licensed reseller or distributor who purchases bulk voice and data from telecom carriers, and resells services under its branding, allowing telcos to further utilise their network capacities.

MVNOs can package voice and data services to cater to the unique requirements of niche segments, such as rural consumers and small businesses, but the sector has not taken off in India following multiple challenges making it difficult for companies to operate in the domain.

The reseller model and the MVNO industry at large, however, seem to have failed on the ground at least seven years after the Department of Telecommunications (DoT) granted MVNO licenses on the back of applications from as many as 80 companies.

“Reliance Jio and Bharti Airtel are incumbents and they think that MVNOs will be their competitors. BSNL has a huge spare capacity but its subscriber base has come down drastically due to the competition and marketing by private telcos,” RK Mehta, Secretary General of Virtual Network Operators Association of India (VNOAI) told ETTelecom.

Mehta said there is no government mandate for telecom operators to integrate their networks with MVNO licensees, and described the situation as a “policy paralysis”.

“Mobile is the only monopolistic market and being exploited by the incumbents,” Mehta added.

The government-owned telco had partnered with mobile payment firm AdPay to launch India’s first virtual telco AeroVoyce, and had then, been expecting an annual revenue of Rs 500 crore from the MVNO business. Today, the industry association alleges that BSNL has not lived up to the promises made for the MVNO business.

Last year, the association proposed to work with BSNL to help it generate a new revenue stream from VNOs, and in turn, help the telco enhance its market share by nearly 3%.

“Their (BSNL) response has been negative and lethargic,” said Mehta.

BSNL held a meager 7.78% market share in February 2024, while Reliance Jio’s pie stood at 40.15%, followed by Bharti Airtel (32.97%), and Vodafone Idea (18.93%), according to the latest data collated by the Telecom Regulatory Authority of India (TRAI).

On March 27, the telecom department, the telecom regulator, and BSNL officials held a meeting to discuss utilising the latter’s spare infrastructure capacity for virtual networks following a direction by the Telecom Disputes Settlement & Appellate Tribunal (TDSAT) after the Chennai-based Plintron sought the tribunal’s intervention due to the state-controlled telco’s “lethargic approach” despite a commercial agreement between the two entities.

However, the meeting remained inconclusive.

DoT awarded the license to Plintron in May 2017, for 10 years for two service areas – Andhra Pradesh and Tamil Nadu. The company, however, argued that it has close to 50,000 customers ready, and as per the deal, the revenue would be shared with the public sector telecom service provider, ETTelecom reported in its March 26 edition.

“The Indian MVNO segment has not taken off because the MNOs in India target all customer segments and do not see a value proposition of partnering with MVNOs. Similarly, the MVNO license holders have also not been able to convince themselves that they can make a good business case for MVNO,” Ashwinder Sethi, principal at Analysys Mason told ETTelecom.

Mohit Agrawal, Associate Director at Counterpoint Research said MVNOs have been successful in markets such as the UK and Europe as they cater to niche customer segments with customised offerings. “Many of the most successful MVNOs have tapped into the customer bases of established retail and media brands like Tesco and Giffgaff.”

Experts are unanimous in calling out the fact that MVNOs competitive pricing is gradually losing relevance as host telecom carriers themselves are increasingly offering competitive tariffs.

“In India, mobile service pricing has reached rock-bottom levels, rendering it no longer a distinguishing factor for MVNOs. Additionally, unlike in the west where MVNOs often extend from existing loyalty programs, in India, there is no entity with a sizable loyalty base for MVNOs to leverage,” Agrawal said.

Though MVNOs may have failed to crack the fiercely tough mobility services segment, experts opine that these companies can explore opportunities in areas such as travel and the Internet of Things (IoT) to stay afloat.

“The IoT landscape demands specialized domain knowledge and tailored offerings to meet specific application needs, making it an ideal space for MVNOs to explore,” Agrawal added.

The experts and industry believe it is high time for the policymakers to act before it gets too late as it sounds the death knell for the nascent sector.