POTENTIAL OF CONTENT MVNO IN INDIA

PREPARED &
PRESENTED BY
VISHAL KAPIL
2008

PREPARED & PRESENTED BY :VISHAL KAPIL (kapilvishal@gmail.com)

MVNO
MVNO first appeared in Europe in 1999 and was then defined as – “A service provider which has a home
location register (HLR) and a visitor location register (VLR) within its mobile switching center (MSC), issues its
own SIM cards, and provides independent pricing and branding”.
Over the last few years this definition has transitioned, owing to changes in MVNO business & technology
models and the manner in which different countries have approached the subject.
It ranges from a reseller , service provider, enhanced service provider , co hosted or quasi MVNO to a full
service/ integrated MVNO.
In India, TRAI defines MVNO as:
“MVNO licensee is an entity that does not have assignment of spectrum for Access Services (2G/3G/BWA) but
can provide wireless (mobile) access services to customers by sharing the spectrum of the access provider
(UAS/ CMTS licensee)”

Globally MVNO business model has evolved as

1) Voice Focused, Price Driven Mass Market Model:
a) MVNOs providing services like voice & sms along with handsets & roaming- Represent the largest size
among all kinds of MVNOs (e.g GoMobile, Scarlet Telecom etc)
b) Large/ specialist retailers that have strong customer ownerships and large retail footprint (Walmart, Tesco
etc.)
2) Niche Focus, Voice Plus Brand Driven Model:
a) Community driven MVNOs around ethnic groups, student/ youth groups and sports etc. (RCSC Mobile,
Orscom, Happy Many etc.)
b) Content & Brand driven MVNO‟s (Helios, Hello MTV,M6 Mobile, Virgin Mobile etc)
3) Data Focus, Service Oriented Model (with deeper customer relationship through convergence experience)
a) Content & Brand driven MVNO‟s (Extreme, Djuice, Universal Music, Virgin Mobile etc)
b) Business & Consumer focus (Toucan, Debitel, Futur Telecom etc.)
PREPARED & PRESENTED BY :VISHAL KAPIL (kapilvishal@gmail.com)
CONTENT MVNO (BRINGING CONTENT ON THE GO)

•MVNO business model which is beyond bundled minutes, text &data

•Where the proposition is around strong desired/branded content (audio, video, music, text etc) and content
access experience for content on the go
•Enabled by the compatible access devices, content applications & widgets, technology, infrastructure, service
delivery and strong OSS/BSS
Success criteria/ factors:
1. Any content delivery or interactive content formats’ success depends on what you fill the
pipe with, the flow of contents in pipe, for whom its meant and how it’s priced & packaged
2. Success is tech environment dependent and requires interoperability with different
wireless access modes so as to provide seamless content access
3. It needs a focus on a customer segment that the host carrier cannot or does not want to
serve
4. An established brand or customer relationship that can be leveraged in the wireless arena
5. Unique content or loyalty programs
6. Deep pockets to make up for any weaknesses
How does it work in two different Technology environments:
1) For DVB-H and IP Datacasting technology environment, a Content MVNO can take shape in following models with three
parties involved
a) Broadcast Network Operator -BNO (who builds and operates DVB- H network)
b) Broadcaster/Content owner-B/C O (the one who controls & offers content)
c) MNO (Operates the mobile network)
Model 1- Broadcaster/Content owner driven:
•Where B/C O will acquire capacity from BNO & MNO by making payments towards using their infrastructure.
• B/C O will then sell his portfolio of content services to new customers fulfilling their content needs through enabled
handheld devices.
•B/C O subcontracts specialized MVNE/ MNO to take care of CRM & interactions apart from may be using MNO’s retail
chain, selling services to end customers PREPARED & PRESENTED BY :VISHAL KAPIL (kapilvishal@gmail.com)
CONTENT MVNO (BRINGING CONTENT ON THE GO)

Model 2 -BNO driven :

BNO buys content from B/C O, creates service portfolio, ties up with MNO and takes its services to the end
customers
Model 3 -Content & Brand MVNO Driven:
A Content & Brand MVNO on one hand acquires capacity from BNO and acts as a VBNO and on the other buys
content from B/C O , aggregates it‟s service portfolio and sells the same to its end customers

2) For 3G , UHF & WiMax environment : The Content MVNO can be anyone like B/C O or a Content & Brand MVNO
or a converged MVNO or even a content services enabled device manufacturer (e.g Apple, Nokia etc.), offering
content loaded services to end customers.

POTENTIAL OF CONTENT MVNO IN INDIA

Telecom network in India has seen an exponential growth in the wireless segment and today is the second largest
network in the world after China. There are more than 325 million telephone connections in the country of which
286 million are mobile connections (30th June 2008) with over 8 million mobile connections being added every
month making India as one of the fastest growing mobile markets in the world.
To achieve the target of 500 million connections by the year 2010 or a 50% teledensity; MVNOs are increasingly
being seen in India as potential service providers. But in a spectrum starved environment some hold a different
view on the viability of MVNOs ,stating that globally this concept worked largely in deeply penetrated markets
that have over-capacity , when MNOs have achieved high growth/ penetration and ROI on brand investments are
very low.
In TRAI‟s perspective ,different categories of users are increasingly emerging with varied preferences and It often
becomes difficult for a large operators to service such diverse requirements effectively. Such varied requirements
could get addressed by niche operators effectively, who can cater to specific customer segments through MVNO
route.
At present there are 11 active MNOs (Airtel, Vodafone, Reliance, BSNL, BPL, Spice, Idea, Aircel, Tata Indicom,
MTNL, Shyam telecom) & 1 MVNO (Virgin Mobile). While AT&T, BT & Orange as well as other non-core telco
business companies including ESPN, Disney and MTV are rumoured to be in fray for an entry in market as
MVNO. PREPARED & PRESENTED BY :VISHAL KAPIL (kapilvishal@gmail.com)
POTENTIAL OF CONTENT MVNO IN INDIA
Service tariffs in India are already one of the lowest in the World and with the current VAS portfolio which MNOs
are providing it seems its not enough to really make a quantum jump in revenues (given the falling ARPU trend &
VAS component-CDMA VAS as a component of ARPU, decreased from 11.5 percent to 7.5 percent and GSM saw
a decrease from 8.8% to 8.2% QoQ as per Dec 2007).
This leaves enough room for specialised services provided by non telecom companies such as retail/ FMCG/
Broadcasting & content owner/Content aggregator/ Information services provider to either start their services as
MVNOs or strengthen the existing/new MNOs & new MVNOs.
Content Services Types:
a) Video Content broadcast/Streaming -
Catch up programming, Prerecorded/Live TV, Music videos, UGC, Movie clips, Full length movies, On demand
videos etc. with distribution revenues through Download-to-own, Subscription, Rental, In-stream advertising,
always on 24/7 and pay per view models
b) Audio – Music, Audio Books, specialized radio content
c) Gaming
d) Social networking
e) Location-based content and information
f) Voice-activated localized GPS-based search
f) Education Content
g) Text based content
MVNO DYNAMICS:
Fact & Impact 1 : Pre Paid is more than 70% of total mobile phone connections in India. Scope will be for content
on demand or PPV services over subscription based(which will be prominent in post paid).
Fact & Impact 2 : Macro-economic indicators such as GDP per capita and population density vary considerably
across 23 telecom circles in India. Correspondingly, there are significant differences in the level of mobile
penetration and the degree of concentration in each circle apart from the content consumption habits.
In content consumption, even the leading national GEC channel has a federated reach/viewership across circles
and regional content plays a greater role. Given these disparities, it is more appropriate to consider India as a
collection of 23 separate markets with some exception hybrids (especially in tier1 cities) instead of a single
homogenous market when assessing the opportunity for content MVNOs. Also its only cricket & some special
sports events which has a homogenous content demands across circles. PREPARED & PRESENTED BY :VISHAL KAPIL (kapilvishal@gmail.com)
POTENTIAL OF CONTENT MVNO IN INDIA
Fact & Impact 3: In the current state, an MVNO model seems beneficial to an incumbent operator. Where Airtel,
Vodafone as well as Reliance‟s GSM will look to further scale as well as block spectrum (related to subscriber
base) while new license holder awaiting spectrum could use the help of an MVNO to lend support in active
infrastructure, branding as well as service differentiation (this situation will arise in some time given 30%
teledensity in country where lot of room is there, first to fill with the basic voice driven price based services).

Fact & Impact 4: No licenses have been granted for 3G & UHF and the status for WIMAX lacks clarity from the
regulator. This only points to a further delay in the content based services proposition by service providers.

So will broadcasters like STAR, ZEE, ESPN, Disney, MTV, TV18 & SUN etc. launch content MVNOs???

None of these content companies like monopolies or monopolistic environments. With the size and scale of Airtel,
Vodafone & Reliance com etc they wield enough power in the market on account of their subscription base, reach
& customer relationship. Content companies will be careful in making such MNOs to leverage their content (in the
current scenario MNOs take maximum pie of revenue in content VAS services) and in lieu (if the market
conditions are conducive) might launch services without them in the first place.
Also, considering that content MVNO as a standalone offering has a little buy, it becomes difficult for these
companies to come out as a content MVNO on their own because they lack a considerable clout/ positioning over
their audiences.
ESPN Mobile in US did that mistake in 2006 when they thought with a strong TV audience of 97 million in size, a
strong brand association with sports genre, specialised content and a dedicated demography, they could launch a
successful standalone content MVNO. It was shut down in 2007. ESPN learned from its mistake and is now
present on V cast from Verizon & on AT&T Mobile TV apart from WAP applications.
I hold this view that a successful content MVNO will not be STAR, SONY, ZEE or Sun or their current distribution
companies STAR DEN, One Alliance, ZEE Turner or Channel Plus but most likely be their DTH companies like
TATA Sky, Dish TV or Sun Direct etc where they can leverage their current customer ownerships, investments in
customer care, CRM & OSS/BSS apart from tariff & product development capabilities. A lot is dependent though
on the technology they use , availability of access devices , pricing & packaging and above all the end customer
experience they provide PREPARED & PRESENTED BY :VISHAL KAPIL (kapilvishal@gmail.com)
POTENTIAL OF CONTENT MVNO IN INDIA
This in some ways is in line with the latest outcome of spectrum licensing auction results in US where Echostar
has won the next spectrum license for 3G operation beating google and plans to leverage its investments in Dish
Network, Sling media, Cable, old media content relationships, existing technology & service landscape (though it
will be a MNO roll out).

Also, there is a strong possibility of a Doordarshan MVNO launching first in the market ; with the Govt. support on
BSNL network with a mandate to leverage its national & regional content along with educational content coming
from Edusat or UGC services.

Where as MNO like Reliance ADAG which is now a Content producer, owner, distributor and launching DTH
services can become a content & brand/ convergent MNO for CDMA, content & brand/ convergent MVNO for
GSM and a Broadcast network operator if it bids & win UHF spectrum when allowed by a regulator.

Airtel on the other hand will aim to become a converged MNO

TV18 with its strong ambitions in the content value chain & Viacom funding/partnership; will most likely go for a
standalone content MVNO model. It will get driven by segmented news content & youth association of MTV
brands.

Customer segments

First movers or early adopters are digital natives who are exposed to various options/choices around content on
other platforms. They are quite aware of the control they want or exercise on the content , are participative, want
to consume content anywhere /anytime, seek convenience while being less patient and pay less/nothing for the
content. They are also aware of the limitations of access devices in telecom & interoperability issues in moving
the content.

PREPARED & PRESENTED BY :VISHAL KAPIL (kapilvishal@gmail.com)

POTENTIAL OF CONTENT MVNO IN INDIA
First movers or early adopters are aware of disruptive applications & technologies and might be difficult category
people to crack .
e.g One can see evolution of Livestation, Azureus & likes for a high quality content access on handheld devices .
Other such content apps & widgets will give a user all that he/she expects without paying more than what a
content MVNO will charge. In this case chunk of billing will go towards the bandwidth/data requirements and with
3G coming it will improve the performance further.

In India, in order to gain a sizable traction ,a content MVNO will have to create a compelling proposition that will
be a Mass in Niche with attractive pricing for access & devices.

It can start with some utility services like voice-activated localized GPS-based search , travel guide, packaged
entertainment content , mass sports (content from leading broadcasters & BCCI), a standalone or group gaming
content or music based service from some leading Music company.

So, according to me it will be a part of the so called early adopters in digital natives (barring cribbers & ones who
know all) and the next level of people; who are high on current ARPU, impulsive buyers with high disposable
incomes , people scoring high on behavioural & attitudinal attributes , peer pressure driven , living in tier 1 & 2
cities. They will be the first ones to go for content MVNO services.

Market Size (some guesstimates):

Tier 1 & Tier 2 cities (top 7 cities in India, with 50% teledensity) have 15% of total mobile subscribers out of 286
million universe which is 42 million today , considering that mobile penetration will near 100% by 2010 in these
cities, will touch 84 million users.
If we keep a content MVNO rollout in 2010 and an adoption of 2% in the 1st year , 15% in the 2nd year & 20% in
the 3rd year with ARPU levels at INR 600, 550 & 500 each year, this means that the market size will be 25 million
USD in the 1st year and will touch 210 million USD by the end of 3rd year .

PREPARED & PRESENTED BY :VISHAL KAPIL (kapilvishal@gmail.com)

POTENTIAL OF CONTENT MVNO IN INDIA
REGULATORY ISSUES:
Salient features of regulatory recommendations for MVNOs:
•MVNOs should follow tariff related requirements as prescribed by TRAI
•Licensed circle of MVNO should be same as that of parent MNO. Separate license for each service area shall be required
•Any company whether a telecom firm, an FMCG, a service organization such as railways, public sector banks, etc. could
be eligible to become a MVNO
•An Indian company, which fulfills licence conditions such as FDI & substantial equity and the conditions of networth and
paid up capital shall be eligible for issue of MVNO license in a service area.
•Scope of service of MVNO would be within the scope of service of MNO, i.e. the MVNO can offer any or all of the
services that the MNO can offer subject to the agreement between MNO and MVNO
•Entry fee: It may be 10% of MNO‟s entry fee as prevailing on date in that service area subject to a maximum of Rs. 5
crores for Metros and Category „A‟, Rs. 3 crores for Category „B‟ and Rs. 1 crore for Category „C‟
•Level of FDI upto 74% may be permitted in MVNO. As in the case of MNO up to 49% FDI through automatic route and
beyond 49% up to 74% with prior FIPB approval may be prescribed
As Content MVNO will also be using frequencies & technology required for broadcasting features , it’s
important to mention TRAI’s Mobile TV policy recommendations too, salient features of the same are
as follows:
•Technology Neutrality (i.e. DVB-H, DMB or FLO technologies have been permitted along with others)
• 74% FDI permitted, but no broadcasting or Cable TV company can hold more than 20% in a mobile TV company.
Likewise a mobile TV company can not hold more than 20% in a broadcasting or Cable TV company
•Licenses to be issued for each “Circle” or for the entire country based on a bidding process for licenses
•Each licensee to be issued Spectrum of 8 MHz in UHF band V(585-806 MHz), only one license( or one spectrum slot)
to be permitted to any one company
•4% of gross revenues or 5% of the highest license bid; whichever is higher; to be paid as revenue share every year
•Net Worth requirements of $0.75 Million ( Appox.) per service area. This translates to about $15 million for the country
•Services to commence within 18 months; enforced by a performance bank guarantee of $0.5 million for each service
area ( $11 million for the country)
•Content to be regulated by the content code of the MIB
PREPARED & PRESENTED BY :VISHAL KAPIL (kapilvishal@gmail.com)
POTENTIAL OF CONTENT MVNO IN INDIA

REGULATORY ISSUES:
Comments on the recommendations

•Fully owned subsidiary by a foreign company is not possible and has to take a JV route for content MVNO
launch.
•Launch of Content MVNO is independent of the nature of promoting company‟s business, but a genuiness is
looked at.
•The mobile TV licensing recommendations as issued are quite onerous in terms of the license fees and ongoing
revenue shares. The performance bank guarantees are also very high
•Linking of annual revenue share to 5% of the highest bid for an area can be jeopardized by a rouge bid which
would imply all operators needing to pay a very high license fees
•By placing equity cross holding restrictions on broadcasting companies, it virtually prohibits such operators to
extend their services to the mobile screen- a natural extension. This means that different companies need to be
formed for each screen size or mode of delivery
•The mobile TV services, per se, have not been defined. Does mobile TV mean delivery to mobile devices or does
it mean to those with a specific screen size such as QCIF or QVGA or is it by basing it on terrestrial broadcast.
•The recommendations make no reference to other delivery extensions such as WiMAX, another mode of delivery
of mobile TV Technologies
•Interchangeability of handsets has been prescribed between different service provides ( if the handsets are
provided by them). This is tricky with various versions of the same technology much less between different
technologies. An example is the DVB-H technologies based on OMA-BCAST or DVB-CMBS implementations
•The recommendations are silent on audio services to be provided on the same media. At present the FM, to
which parallels have been drawn throughout, does not permit news and current affairs
•The FDI of 74% is inconsistent with the current licensing policy in the media sector where 49% is the norm.

PREPARED & PRESENTED BY :VISHAL KAPIL (kapilvishal@gmail.com)

About the Author – Vishal Kapil
I' am working as a Domain Consultant with the Media and Entertainment
Practice at Siemens Information Systems (currently focused on content
monetisation systems & services, including Rights & Royalty systems).

I manage and delivers strategic consulting assignments for media,

broadcast and entertainment clients of Siemens.
I have significant experience working with major content producers,
media organizations and technology vendors, understanding of
transforming business models and forming market entry strategy for new
services
I hold a Masters degree in Business Administration and have previously
worked with Wipro Technologies, BBC Worldwide & STAR TV

PREPARED & PRESENTED BY :VISHAL KAPIL (kapilvishal@gmail.com)