About author

Effective June 1st, 2011, Fredrik Jejdling is Managing Director and Head of Region, Ericsson India. Fredrik has held key positions in Ericsson including Vice President and Head of Engagement Practices with responsibility for customer engagements within the region India (from August 2010 till end of May 2011). Between April 2006 and July 2010, Mr Jejdling was Vice President and Head of Sales for Business Unit Global Services. In this role he was responsible for sales and finance for the Business Unit and the Market Units’ services consolidated financial results. Prior to that, he was Director and Head of Managed Capacity responsible for developing the Managed Capacity offering for Ericsson.

Mr Jejdling’s previous assignments include various senior managerial positions in LUX Asia Pacific, Singapore and LUX Australia Pty. Ltd. (2002-2006), spearheading branding strategy and new products from design, development to sales system. From 1998 – 2002 he held managerial positions with Tele 2 Group offering Public Telecom Services, Transaction Processing & Clearing Services to Airports and Hotels. He has also served as Lieutenant, Combat Command Officer with Royal Swedish Navy responsible for the combat information centre and officer on the bridge.

Fredrik Jejdling holds M.Sc. in Economics and Business Administration (Major in Finance and International Business) from Stockholm School of Economics. He has an MBA from the Richard Ivey School of Business, University of Ontario, Canada. He also undertook Lieutenant/ Reserve Officers training from the Royal Swedish Naval Academy.

Article abstract

The mobile market in India has blossomed since the telecom sector was reformed but the MVNO model is yet to blossom. Although the regulator has recommended it in 2008, the DoT has not issued favourable guidelines that would help MVNOs to get established. In many emerging economies, encouraging mobile penetration in rural areas has proven to boost the economy and considerably increase the country’s GDP. To this end, the Indian Regulator supports the introduction of the MVNO model where only one network will cover remote areas. MVNOs can address special segments of the market and benefit India even further, with non-telco entrants focusing on new business areas such as banking, transport and retail.

Full Article

The telecom industry, with history dating back to 1850, has experienced the first wind of change at the Indian shores in the 1980s, when the private sector was allowed into telecommunications equipment manufacturing. After almost a decade, in the 1990s, the telecom revolution in many other countries, resulted in better quality of services and lower tariffs and led the Indian policy makers to initiate a change process finally resulting in opening up of telecom services domain for the private sector. Since then the Indian telecom sector has implemented several structural and technological reforms. India’s move towards globalization in the telecom sector was driven by transparent policies and sweeping reforms initiated by both the government and private players over the last decade. These initiatives dramatically changed the face of telecom industry in India and helped to achieve a stupendous growth in the number of mobile subscribers in India, making the telecom sector a vital catalyst for the overall growth of the Indian economy.
A well-established mode of communication can advance national economies by empowering its citizens and providing new revenue-generating opportunities. Studies reveal that even a small increase in mobile penetration can have a positive effect on a country’s Gross Domestic Product (GDP), as mobile communications boost economic activity at a macro level. Mobile connectivity is no longer a privilege - it has become a necessity and a key enabler of social and economic activity. Last year, another milestone was laid in the history of mobile industry. According to Ericsson’s estimates based on industry information, global mobile user base touched the five billion mark in 2010. The extraordinary growth of the mobility industry has been one of the most remarkable business and technology success stories of all time. Emerging markets like India and China have a major role in adding to this significant number of mobile subscribers.
The invention of mobile networks is a breakthrough in technology. The introduction of novel services coupled with the increasing importance of wireless communication, are aspects that contribute to the growth in the number of subscribers in the cellular segment. Certain factors that have contributed to make mobile penetration a huge success in India are a conglomeration of innovative ideas such as implementation of lowest tariffs, competition with many global players, availability of low cost and user-friendly devices or handsets, and rapid network rollouts. This also resulted in acceleration of economic growth to stand at a pedestal where we can proudly classify India as the largest network provider in the world after China.

The Indian market, with over 850 million subscriptions is one of the most competitive and dynamic telecom markets in the world despite a host of issues like large number of players, low tariff and declining ARPU. Taking into account the market dynamics, we are yet to see whether Mobile Virtual Network Operator (MVNO), a concept which created uproar due to regulatory issues few years back, can become a successful model in the Indian market.

As we know, MVNO is a mobile operator that does not have any spectrum of its own. It purchases bulk airtime from Mobile Network Operator (MNO) and may also utilise the infrastructure of an incumbent telecom operator. MVNO as a business model was first pioneered in Europe and the concept is now moving towards the emerging markets like Brazil and Chile in South and Central America, Turkey in the Middle East, India, Pakistan and Vietnam in Asia-Pacific. On the Indian soil, Virgin Mobile was the first MVNO to enter the market in tie up with Tata Teleservices. Another MVNO player in India is Blyk, having a unique business model, where it has launched its content service on Aircel platform. The customers need to pay extra to become a Blyk subscriber.

When a MVNO enters a market already dominated by incumbent players, they have to offer a unique value proposition in the form of brand value, attractive content or a segment specific service offering to attract the customers. The MVNO actually benefits from maintaining almost independent business model and to balance out its reliance on the Mobile Network Operator by investing in core network components and value added service platforms.

To survive in Indian market, the MVNOs need to have a sound business model. An aspiring MVNO must carry out a comprehensive assessment of its target market, expected Average Revenue per User (ARPU), expected competition level, existing market shares and mobile penetration. MVNO must focus on services differentiation against the service portfolios offered by different incumbent players and the addressable customer segments.

The revenue growth potential, large pool of churn customers, emerging broadband wireless technologies and compelling economics are creating market conditions conducive to give thrust to the MVNO business model in India.

The Telecom Regulatory Authority of India had, in 2008, given its recommendations on allowing MVNOs, however the final decision is still pending with the Department of Telecommunication (DoT). DoT is also considering the introduction of a mobile virtual network operator (MVNO) model to set up a wireless broadband network in rural areas which can be used by multiple operators. It would be better that only one operator is allowed to roll out the network in rural areas and other operators may use the same network for providing services through MVNO agreements. Through the MVNO model, an operator would be able to offer services using spectrum/infrastructure of other telecom service providers hence providing cost advantage to set up telecom network operations in rural India.

In summary, with initial success, MVNOs can be a viable business model, given the right regulatory environment, right focus group and right partnership with network operators. A strategy linked to the target market, promising customer growth rates and expected returns along with strict cost control are vital to the success of an MVNO. In future, not just telecom operators are expected to enter this segment but also players from diverse background like retail, banking and finance, and government sector. It offers a path to fixed mobile convergence, stimulating competition, supporting innovative services and boosting outsourcing offers, managed services and customer satisfaction.