Right now there are huge questions about the potential size of any future mobile virtual network operator business in India, one of the most-competitive and difficult mobile markets globally.
The Telecom Regulatory Authority of India in 2015 made possible MVNO licenses. The issue now is where and when an MVNO can create a niche, and if so, what potential niches could exist. Few think it will be easy.
Highly penetrated markets, like Delhi, Mumbai, and Chennai might hold some latent market segments, some argue, as the “one size fits all” plans might in fact hide some demand for more specialized plans.
In other markets, language or cultural affinity groups have proven to be important niches, for example. In some cases, multi-user plans have been a niche. In most markets, “lower cost” or “no credit check” or “prepaid” have been the key demand drivers.
One might argue the ability to compete based on “low cost” prepaid service is nearly non-existent in India. That is important since “low cost prepaid” has underpinned successful MVNO niches in other markets.
On the other hand, vigorous competition by the leading facilities-based carriers can undercut and even eliminate that niche. On the other hand, in the U.S. market, where vigorous price competition is evident, the MVNO market has remained stable.
Smaller facilities-based carriers, on the other hand, are in a downward spiral.
Since 2003, the largest four service providers have increased their share of connections from around 66 percent to 98.5 percent by year-end 2014, according to the Federal Communications Commission.
The share of regional and local providers has declined from around 34 percent to around 1.5 percent during the same time period.
That does not directly speak to the share held by MVNOs, however. In some sense, the volume of MVNO connections can be gleaned from data about wholesale connections, as every MVNO subscriber is served by a wholesale connection.
In the first quarter of 2012 wholesale connections represented about four percent of total connections.
In the first quarter of 2015 wholesale accounted for about six percent of connections. By the FCC’s count, wholesale (and presumably MVNO connections) have grown as a percentage of total.
One possible additional trend is that the major carrier “value” brands might be gaining share at the expense of “true” MVNOs.
“Mobile network operators can suffer from the limitations of a ‘one size fits all’ strategy,” said said Vinod Nair, Managing Partner of Diamond Management and Technology Consultants.
The issue is what niches might be exploited. Some have argued there is room for specialists emphasizing value added services, although some would argue that is precisely the approach Reliance Jio will take as it launches its new 4G network.
Others believe niches exist in the hardest-to-reach mountainous areas where mobile network coverage is difficult.
As India’s fragmented market continues to consolidate, niches will be harder to find, many would argue. Traditionally, MVNOs compete on price. But that will be very tough in a market where price competition already is fierce.
On the other hand, the U.S. experience suggests niches can be found and sustained, under some conditions.