The public sector company is seeking out franchisees for 3G services. Now the only reason that a company would enter into such an agreement – similar to an MVNO service – is that it’s an opportunity to enter the Indian telecom market, and the tie-up will facilitate similar tie-ups with other telecom operators. Which is where this Tender document falls apart, because of the following special conditions:
5.1 MTNL may shall sign a mutually agreed exclusive (exclusivity for both MTNL & 3G-Franchisee) agreement with the selected company (3G-Franchisee) each in Delhi and Mumbai.
5.2 The agreement with the 3G-Franchisee is expected to be operative for 10 years.
An exclusivity pact with MTNL for a period of 10 years means that the company in question is limited to the cities of Delhi and Mumbai, which MTNL is only allowed to operate in. Both circles are saturated and very competitive, albeit with higher ARPU than the other circles. An agreement which included both MTNL and BSNL, and hence allow the franchisee a pan-India market to address, would have been more attractive as an option.
Download the MTNL 3G Franchisee EOI Document.
Indian Companies Cannot Participate, Except As A JV
While it’s not explicitly pointed, out, it’s clear that Indian companies will not be able to participate on their own because of the eligibility criterion laid out. According to sections 4.2 of the tender, the participating company, is global parent, or the joint venture should have the experience of providing 3G services to at least 1 million customers in at least 2 countries. The franchisee (or the parent and subsidiary or JV) should have a turnover of at least $30 million (or Rs. 150 crores) during the last two years, and should not be a licensed carrier in Delhi or Mumbai.
Customer Provisioning & Minimum Guarantee
The capacity provisioned for 3G services appears to be reasonable for the first year, but if the service takes off, then the franchisee, who will have to give a commitment of an average ARPU of Rs. 500 per customer. The capacity, however, will be reviewed year on year. We don’t think MTNL’s expectations, in terms of subscribers, are too high. It’s not clear whether the gross revenue will be inclusive of 2G calling, or just data.
The Franchisee has to quote a single revenue share percentage, which includes revenue earned from advertisements on the 3G network, and MTNL will decide the lowest (revenue share of bidder) in each area.
The 3G Franchisee will have to pay all taxes, levies, duties etc for his portion of income/ revenue, and the sharable revenue of MTNL will be after deduction of 3G license fee, spectrum fee, among other charges.
Earlier this year, MTNL introduced a 3G services EOI for VAS, which hadn’t enthused VAS companies, because of its unrealistic revenue expectations.
Date Of Sale of EOI: 14/07/2009
Last Date Of Submission of EOI: 17/08/2009 (Up to 13:00 hrs)
Date of Opening of EOI: 17/08/2009 (At 15:00 Hrs)
Last Date for seeking clarifications: 24/07/09
Contact Person (MTNL): Dinesh Gupta, agmprw3 at bol.net.in