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TRAI Recommends 20 Yr License, 74% FDI For MVNOs In India; Favours Telecom Operators

The TRAI, in its recommendations on Mobile Virtual Network Operators appears to have given the upper hand to Telecom Operators (MNOs), though it hasn’t quite followed through on all the demands that we had covered earlier – here. Importantly, MVNOs have been allowed to set up their own infrastructure, except base stations and Radio Access Networks. Please note that these are only recommendations, and the Department of Telecom will have the final say on pricing and licensing.

Download the recommendations here. As per the recommendations:

An MVNO will be given a renewable license for 20 years. The Entry Fee has been set at 10 percent of an MNOs entry fee for a service area, at a of Rs. 5, 3 and 1 crore for category A, B and C circles. MVNOs will be issued a separate license only after a Letter of Intent has been signed between an MVNO and a telco, and basic conditions fulfilled. If agreement is terminated, the license goes too, and MVNO will require a fresh license after new agreement with MNO. However an MVNO cannot get attached to more than one MNO in same service area, while an MNO can have as many MVNOs. The license fee appears to be rather high – the same as the telco for the service area.

Eligibility Criterion
The Net Worth requirement to be eligible for an MVNO license – Rs. 10 crores for A category, Rs. 5 crores for B category, Rs. 3 crores for C category. The paid up capital of an MVNO should be 10% of the prescribed net worth of a telco.

FDI, Mergers & Cross Holding
— FDI: An FDI limit of 49 percent through the automatic route, and up to 74 percent with the approval of the Foreign Investment Promotion Board (FIPB).
— Cross Holding: An equity holder with 10 percent or more equity in an MVNO cannot hold 10 percent or more equity in another MVNO. In a service area, an equity holder having 10 percent equity in an Telco cannot hold 10 percent or more in an MVNO. Note that the recommendation states that any party that has spectrum of its own cannot become an MVNO – ISPs cannot become MVNOs if they have broadband wireless spectrum.
— Merger: An MVNO can merge with Telco or another MVNO parented to the same telco in a service area. However, MVNOs parented to different telcos cannot be permitted to merge, since they will then be operating with more than one telco in a service area

What if an MVNO Fails? Or wants to switch telcos? –

Scope of an MVNO
An MVNO can offer any or all services offered by telco, but can only sign up with one telco in a service area. It gets parented to that telco in that service area. Importantly, an MVNO is free to choose its business model – a full MVNO can set up its own HLR (Home Location Register), VLR, IN Switches, but not Radio Access Network/Base Station Subsystem. MVNO subscribers are countend towards a telcos, for spectrum allocation. MVNOs have three compulsory functions – Three compulsory functions – Subsciber verification, Customer Management and Service provisioning. The telecom operator is responsible for spectrum charges, number portability and interconnect agreements with other telcos

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If An MVNO Fails Or Wants To Exit
This is an important condition because MVNOs have largely been unsuccessful across the world. What happens to the subscribers? The TRAI has mandated that to exit, an MVNO needs to give six months notice to customers, the telco, Department of Telecom and the TRAI. The Telco will be able to offer MVNO subscribers its services without any activation fees. Importantly, the MVNO will be disqualified from offering any services in that service area.

How It’s Stacked In Favour Of Telcos
If an MVNO exits a license area by anulling the agreement with a telco, it will be disqualified from a fresh license in that service area. If an agreement between an MNO and MVNO is terminanted, the license is terminated as well. An MVNO will need a fresh license with the MNO. If you note the condition above, it means that an MVNO cannot switch telcos in a service area. At the same time, a telco can have as many MVNOs as they want.

Related: What Indian Mobile Operators Want From Their MVNOs

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