India welcomes virtual mobile telecom players

NEW DELHI, INDIA: India will allow firms to offer wireless telecoms services without owning networks or spectrum, the government said, a move analysts said was unlikely to bring a flood of new telecom players to the world's fastest growing market.

Mobile virtual network operators (MVNOs) rent radio airwaves and networks from existing telecoms firms and sell mobile services to customers, a model popular in mature telecoms markets in North America, Europe and East Asia.

Virgin Mobile LLC, partly owned by Richard Branson's Virgin Group, operates in the United States as an MVNO, catering to cost-conscious, pre-paid consumers.

Branson last year tied up with Indian telecoms operator Tata Teleservices to launch youth-focused services in the country. India's diversified Future Group has also said it wants to enter into mobile services as an MVNO.

Detailed guidelines will be issued after the regulator responds on queries from the telecoms ministry, according to a government statement on Wednesday.

But analysts did not expect the opening to lead to a flurry of interest or new investment, and at best it would provide an opportunity to gauge first hand an increasingly competitive market.

"MVNO is not something that is a roaring success across the world," Romal Shetty at consultancy KPMG said. "MVNO was a route to come and see the market."

But Shetty said it would "open up opportunities to test the waters in India," for firms operating in ever more saturated mature markets.

Rigidities in the recommendations would make entry unattractive, consultancy First Com's director Mahesh Uppal said.

"I don't see a flood," Uppal said. "As things stand now, the MVNO will have a restrictive licence and I do not see it as something that will give enough confidence for the existing operator or the MVNO itself."

In August 2008, the Telecom Regulatory Authority of India suggested a foreign holding cap of 74 percent in MVNOs, in line with other telecom services.

Mobile operators would be free to lease spectrum to as many MVNOs as they want, the regulator had said.

MVNOs would have to pay about 1.5 billion rupees ($30.2 million) for a nationwide entry licence, and annual licence fees would be the same as those paid by mobile operators, it said.

The regulator had said the move would help operators expand in the highly competitive Indian market, the world's second largest.

India added a record 15.41 million mobile users to its 12 networks in January, taking the total subscriber base at the end of that month to 362.30 million.