All licensed out but MVNO where to go

Aerovoyce, in April 2017, managed to launch its first fibre broadband service through a tie-up with BSNL. It also launched voice and data services under its own brand name in December 2017, with rates starting as low as Rs 79 ($1.1) per month for 1GB daily data, coupled with unlimited calls.

Today, Aerovoyce is live in the Tamil Nadu circle. But things seem bleak. MVNO has no takers. Consumers want none of it. Aerovoyce has just about managed to launch a commercial business out of Chennai. Before they can pick up, though, MVNOs are facing multiple crises. Their average revenue per user (ARPU) is falling. There’s no comprehensive regulation. Taxes are skyrocketing. Established operators are giving it the stink eye. And if all of these weren’t enough, there’s an acute shortage of high-quality spectrum.

All in all, ouch.

If this weren’t enough, as of May 2017, 61 companies with a telecom background have acquired MVNO licenses from the Department of Telecommunication (DoT). The licenses were handed out almost a year after the DoT approved the entry of MVNOs in India. More companies have applied for licenses but they’re yet to be approved.

But wait. If MVNO has tanked, beyond Kuppusamy and his team, is anyone affected? And if so, why is DoT still doling out licenses? Does India even need these right now?

Solid precedent

Kuppusamy, to his credit, was onto something. A graduate from Salem, Tamil Nadu, he found his footing in Zurich, Switzerland, working with big telecom players such as NTT Docomo, SWISSCOM, and others for 18 years. He wanted to, to use this football World Cup’s favourite catchphrase, bring it home.

The MVNO or the ‘mobile VNO’ business is largely a successful model. It has captured anywhere between 10% to 40% share in developed telecom markets like Europe and the US, according to a 2013 report by management consulting firm McKinsey. VNOs purchase voice and data in bulk from existing telecom players and then resell those minutes and data to the end customer under their own brand name by ‘virtually’ riding on an established operator’s network.

During Aerovoyce’s launch in April 2017, Kuppusamy told MediaNama that his company would cater to the rural population in Tamil Nadu, especially in remote pockets with populations of up to 20,000 people. He claimed to have put in Rs 300 crore (~$43 million) as an initial investment before dubbing his rural-first approach as the company’s “biggest strength”.

Except, this “strength” clearly wasn’t enough. Today, Kuppusamy’s company has put broadband services on hold. One of Aerovoyce’s distributors in Coimbatore said that the company is only selling SIM cards bundled with voice and cellular data. An official spokesperson, however, said that Aerovoyce has sold more than 5,000 SIM cards since its voice and data launch in December 2017 and is targeting to sell 1 million SIM cards as its first milestone. The spokesperson didn’t mention a deadline.

Now, Kuppusamy’s Aerovoyce may not ring a bell for all, but its timeline has moved alongside the most talked about telecom company’s launch. That’s right, Jio, which launched in September 2016, had added 56.18 million users by December 2016. This, opposed to Aerovoyce’s 5,000.

How could Aerovoyce grow or compete in a market where data gets sold for as little as Rs 19 (~$0.27) per GB? And what of the 61 others sitting on shiny new MVNO licenses with nowhere to go? The dilemma is the same.

The Developing Stage

In the US, top operators such as AT&T and Verizon have more than 10-20 partnerships with MVNOs, and they have slowly become the operators’ secret weapon to keep up with the competition. However, in developing markets like South Africa, around 20 MVNOs account for 0.6% (5 million) of the overall mobile connections. The share of MVNOs in developing markets such as South Africa and India is minuscule, mainly because telecom operators fear cannibalisation of their own revenues.

However, telecom experts argue that traditional cellular operators cannot become the only sellers of communication services. “MVNOs come in where the operators do not have the expertise in managing their business,” said a top executive of a telecom equipment manufacturer, who requested not to be named.

For instance, an operator may find it difficult to cater to a hospital chain that requires customised telecom services as hospitals need uninterrupted connectivity and a dedicated customer care line. “They [operators] can instead tie-up with an MVNO and resell to hospitals while taking a revenue cut from the MVNO,” he added.


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