Jet Mobiles and Pepsi SIMS

Jet mobile cards and Pepsi SIMS? Just might happen in the
near future. And the reason is simple. India will cross the 200 mn mobiles mark
before end of next year, from zero a few years back. Now, that is an exploding
market. And one way to handle this explosion would be through Mobile Virtual
Network Operators. MVNOs have been around in the US and Europe for more than
five years. Yet, it is only now that they are becoming stronger and a force to
reckon with. At the last count, there were around 40 planned and existing MVNOs
in the US and 100 (including service providers) in Europe.

The MVNO is a reseller of mobile services who rides on the
infrastructure and spectrum of a traditional mobile network operator (MNO) by
buying minutes of use (MoU) from it. It sets up its own billing and
customer-care operations and has full control over branding, SIM card,
marketing, billing etc. It sells to customers with value-added services. The
logic is simple—leverage existing brands. And leave the infrastructure to the
mobile operator. MVNOs are often established companies with good brand
recognition, financial resources or marketing presence. This brings down
operational costs, which helps them offer cheaper mobile services. For instance,
large FMCG companies can bundle mobile services with their products or offer
customized product-specific content to their customers.

The pioneer in the field, US-based Virgin Atlantic airlines
functions as a discount MVNO in the UK market by selling to its airlines
customers and others. According to a 2005 report of MindBranch, a US-based
market research company, almost 25% of Denmark subscribers are with discount
carriers and MVNOs. There are other types of MVNOs, such as Lifestyle MVNOs,
that service niche markets.

In India, spectrum reselling is not allowed by Government
policy so the mobile players have built the brand and the infrastructure on
their own. But that may not remain the case forever. Policy reviews could permit
this to happen and that would open the market for international MVNOs to enter
or for local MVNOs to emerge.

For this model to succeed in India and other emerging
markets, the model will have to change from the one in use in the US and Europe.
Cost efficiency will be the determinant of success, not only in comparison to
MVNOs in developed markets but also vis-à-vis MNOs in the same market. This may
not be easy, since call rates are anyway much lower in the emerging markets.
Hence the discount based strategy that MVNOs in the West use, may not work here.

Selling network access to other carriers is not a new
phenomenon. It has happened in the wired world before, where companies sold
access to others in order to utilize unused capacity. In emerging countries such
as India, where market is still experiencing exponential growth, why should
mobile operators lease their infrastructure to others? They have invested
heavily in setting up the backend, building a brand and acquiring and retaining
customers. They have a constant shortage of capacity—so why should they sell
it of ? There could be interest, in case the MVNO can bring down the cost of
customer acquisition and servicing substantially by piggy backing on their own
brands and infrastructure. And not cannibalize on the higher paying customers of
the MNO.

What may work better therefore is the affinity model. Where
the services of the MNO are extended without cannibalisation. And these are
being tried out. MTV and Airtel launched co-branded SIM cards to woo Indian
youth. ValueFirst is one such MVNO in India, which provides data mobile service
for exchanging SMSs between computers and mobile phones by using its mobile
messaging software. SpiceJet will be using ValueFirst's services for sending
flight alert SMSs.

So will the MVNOs kick off soon in India? The jury is still
out.