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Virtual reality dawns on telecom

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By OUR CORRESPONDENT in Delhi
  • Published 25.02.09
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New Delhi, Feb. 25: Mobile virtual network operators (MVNOs) — a growing breed of telecom players who rent spectrum and provide telecom services without building infrastructure — have been permitted to start operations in the country.

The department of telecom (DoT) today accepted the telecom regulator’s proposal to allow the entry of MVNOs, which has been a hotly debated subject for almost a year since it injects another element of competition into a sector that is growing at 25 per cent annually.

The MVNOs may have to pay around Rs 80 crore for a pan-India licence, which is over 95 per cent cheaper than the Rs 1,650 crore that new telecom players paid for 2G spectrum last year.

DoT officials said the detailed guidelines would be issued shortly. Sources said they could be announced in 10 to 15 days. “Virtual operators have been allowed to tie up with more than one existing telecom player in an area to launch their services,” the officials said.

Earlier, the Telecom Regulatory Authority of India (Trai) had recommended that MVNOs should use the networks of only one existing operator in a particular circle.

Analysts said the low entry fee for MVNOs would attract several domestic and foreign players to bid for these licences.

A number of foreign telecom players, including Orange Mobile, British Telecom, AT&T and Japan’s KIDDI, are planning to enter through the MVNO segment to cut rollout costs and overcome spectrum availability issues. Most developed countries such as the US and the UK have a robust MVNO regime.

An MVNO buys airtime at wholesale rates from existing mobile operators and then re-sells it to consumers under its branding and tariff plans.

The MVNOs do not own any spectrum or infrastructure such as telecom towers or transmission equipment. They usually target a specific user group such as youth or women.

These players are somewhat different from the brand tie-up that Virgin Mobile struck with Tata Teleservices last year. Virgin has been selling a Tata connection under the Virgin brand and acting as a mere sales point.

The policy, however, states that MVNOs will have to pay the same spectrum charges as existing operators. Under the regulations, telecom operators are required to pay between 2 and 6 per cent of their revenues to the government for spectrum.

In addition, they will have to give a performance bank guarantee equivalent to 5 per cent of what the existing mobile players have paid.

According to the new norms, spectrum charge for the MVNOs will be calculated based on the subscriber base of the telecom company whose infrastructure the virtual operator uses.