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In a competitive telecom market, how India’s first MVNO Aerovoyce plans to create its own space

Aerovoyce is a Mobile Virtual Network Operator (MVNO) which launched its services last month in Tamil Nadu, covering cities like Salem, Coimbatore, Thanjavur, Cuddalore and Kanyakumari. MVNO’s essentially buy different services (data, voice, messaging etc) in bulk from different telecom operators, and sell them under their own brand. Aerovoyce, which claims to have invested more than Rs 300 crore into its MVNO business, will bundle its mobile wallet and payments services with every SIM card: it operates under its parent company ‘ADPAY‘, which provides operator billing, mobile WAP/VAS, mobile ad networks and payment services to telecom companies.

Given the upheaval in the telecom space in the last year, with calling and data prices declining, and the market being highly competitive, where is the room for an MVNO in India? Will telecom operators work with an entity that could buy their services in bulk and price it cheaper, thus impacting their core business? Why would an MVNO focus on a low ARPU rural market, instead of a high yield urban market? How will it make money in the rural market?

MediaNama spoke with Sivakumar Kuppusamy, Founder & CEO of Aerovoyce to get answers to some of these questions. Select excerpts from the conversation.

Why Aerovoyce is focusing on the rural market

“We are currently running our MVNO services using our own cloud and our own infrastructure. So we need to test our network with existing telco’s infrastructure and optimise it better before expansion. So that’s why we have limited this rollout in the first phase, wherein the focus will be on rural areas and then move to urban areas in the second phase… Secondly, if you look at the overall telecom industry’s revenue, most of the healthy revenue comes from rural, not from urban. This is because the loyalty of a user in rural areas is more when compared to urban areas….also urban is more competitive and there a lot of players launching new offers every day.  Competing with urban players in a healthy situation would take a longer time than in rural areas.”

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How will Aerovoyce compete with existing telcos?

“Overall, the common notion is that the ARPU of the rural user is low. But that is not true. The current industry has not launched all of its services to rural. Some services remain exclusive to the urban market. But we should try launching new bundled services in the rural markets with affordable pricing. These are the services that they (rural users) need but don’t have access to…The choices available to urban users including 2g, 3g, 4g and broadband etc., should also be given to rural users as well. We will bundle each of these differently for rural users at an affordable price.”

“We will bundle access services like voice and data, broadband services like fiber connectivity, and other devices including hotspot devices. We will be coupling and be bundling these in different ways. We will also bundle Value Added services differently for rural and metro cities. We are also looking at creating our own WiFi hotspots if required.”

How is an MVNO different from a telco?

“A huge telco is restrained in how they can bundle services for the end users since they operator on a pan India basis. While operating on such a huge scale, you cannot personalise marketing plans and tariff packs for small cities and townships or villages; they simply put out a bunch of tariff packs for the entire circle. But in the case of an MVNO, we can deploy localised marketing and promotions and create localised offers and packs for users from villages, townships and other locals residencies. This is our strength, we tap the untapped market with cheaper rates and easily recover our investment into bandwidth. We focus on those submarkets where connectivity is less or data/calling rates are unaffordable. We figure out such sub-markets and focus on such people.”

“An MNO (telco) holding a huge market, cannot execute the same strategy as that of an MVNO operator and this gives us an upper hand in the rural market. Telcos cannot focus only on rural or urban market or execute a two-phase strategy like ours, which involves moving from rural to urban. They can instead exectute the same streategy in reverese only–i.e urban to rural. As an MVNO it’s easy for us to enter a low ARPU, high volume market like rural, and from there we will focus on the high ARPU, low volume market in urban areas. That’s the strategy we chose because at the end of the day we want to have a loyal customer base.”

Telco’s ‘serious’ about MVNOs after Jio entry

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“After Jio’s entry telcos have been looking at the MVNO market very seriously. They need hands to fight against Jio and they have to fight against other telcos as well. Prior to Jio’s entry, telcos weren’t looking at MVNOs seriously, until now…and the scenario has changed rapidly. When we approached them after Jio’s entry, they immediately started discussing wholesale pricing and offers, costs, etc. They were quite interested. Because they now require more partners to help expand their business….MVNOs are not a competition to them but rather a complement to them.”

Historically telcos always wanted to own the user base, why are they now opening up to MVNOs?

“Even though we earn the revenue by riding on an operator’s network, the volume of business still goes to the operator we have tied up with. Let me give you an example: Let’s say we have tied up with two operators–Operator A and Operator B. Now let’s assume that Operator A has the biggest base of 100 million customers. Rest of the operators which we may or may not have tied up with–Operator C, D, E–will always want to acquire Operator A’s customer base since its the largest. But you should also keep in mind that Operator A is constrained and cannot expand above a certain level. Whereas, Operator B will try to look at offering something new that Operator A won’t be providing, and try to attract Operator A’s customers.”

“In this competitive scenario, at times Operator A will end up losing a lot of customers. At that time, I can go to Operator A and introduce them to my MVNO strategy so that I can help them retain the customers they lost. So, even if we get bandwidth from operator A and run an MVNO service, the customers are under our company and use our services, but the volume of business still goes to Operator A…”Basically what we are doing is buying data for less than market rate at a wholesale price from telcos and ISP. And here if the operator we have tied up with is offering 1 GB of data at Rs 50, we will offer it at Rs 20. But now, all that’s required is to sell this data to users, which requires capital, strategy planning, marketing, branding, etc. We perform these functions instead of the telco themselves. Once we reap profits, the operator we tied up with gets the return from their wholesale investment.”

Will Aerovoyce look at using Jio’s network?

“No, we will not be using Jio’s infrastructure for the time being. And I don’t think they will open their network to MVNOs at this point of time. It is important for an MVNOs to ride on a well-proven infrastructure. Trying to run on a newly setup network is risky for an MVNO and will create issues with connectivity…Secondly, Jio’s network in rural areas aren’t up to the mark. From our user survey, looking at Tamil Nadu circle, the voice quality and data quality of Jio’s services were pathetic in rural areas. They (users) said they would try any service including Airtel, Voda, BSNL, but they would never again try Jio because…of issues like call drops and low-speed downloads. It’s going to take some time for Jio to upgrade their infrastructure and meet certain requirements.”

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Aerovoyce will bundle mobile wallet services with its telecom service

“MVNO mostly work on a low-paid model providing cheap calling rates and data. And most users are not aware of different kinds of services tariff plans available to them and some do not even know how to make recharge online. It would be helpful once you start to integrate a wallet with their SIM cards. Along with our own wallet service (ADPAY),  we are also allowing our users to use other wallet services like Paytm and MobiKwik, etc. We will not be pushing monopoly, we are a company which specialises in aggregation of services for better user experience.”

Changes that Aerovoyce might want in the current MVNO policies

“Firstly, we would like to have our own numbering series. But you should know that this issue is not because of policy, but because of current state of infrastructure which cannot support numbering for MVNOs. I would suggest a setup wherein the authorities can club all MVNOs together and provide them a numbering series set. And on the spectrum sharing guidelines…they (regulators) have to come up with more clarity in policies like whats the cost of the spectrum and how this spectrum can be shared. Currently all this done on a mutual basis and the policy does not dictate any specific conditions or terms.”

(Editor’s Note: While laying guidelines for MVNOs, the DoT said that an MVNO can tie up with as many telecom operators it wanted, but only one operator per access service type. This means one service provider partnership for data and only one service provider for voice. The DoT had earlier looked at tweaking this but has no finalised this yet.)

Should MVNO’s be allowed to take more the same service from more than one operator?

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“No, I dont think so. This is because at an operating level, such a set up will prove to be chaotic. Having more than one operator in on circle means, we will have to take care of pricing both the spectrum and take care of bundling both the spectrum differently, since two differrent operators will have a different set of arragments on how their spectrum is being shared with other operators.”

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