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AT&T, Virgin Media set sights on Indian MVNO ventures

Just over a month after the Indian government passed a law to allow MVNOs into the country, the floodgates have opened – with AT&T and Virgin Media the first to be swept up in the torrent of rumors surrounding the run-up to a spectrum mega-auction, one which will define the next generation mobile market in this vast country.

Anonymous government sources have reportedly leaked information that AT&T and Liberty Global’s Virgin Media have held discussions with officials about operating in India as MVNOs (mobile virtual network operators), purchasing airtime and bandwidth from existing players. Information is limited, but it seems that AT&T and Virgin are pursuing separate deals, not working together as some rumors had suggested.

For AT&T, this would mark a re-entry to the Indian market, where it operated from the mid-1990s until 2005 in partnership with Tata Group. Virgin Media has never been present in India, though its former owner, Richard Branson’s Virgin Group, did operate a Virgin Mobile MVNO there from 2008 to 2011, also in partnership with Tata. That Virgin Mobile brand no longer exists and operations have been fully merged with Tata’s subsidiary Tata Docomo (a joint venture with Japan’s NTT).

AT&T pursuing an Indian venture makes sense, given that it began its global expansion two years ago by expanding into another high growth emerging market, Mexico. Such countries are very different from the US in their consumer habits, but they offer far greater growth opportunities than AT&T’s home base. Vodafone – the second largest MNO in India after Bharti Airtel – is hotly tipped to be AT&T’s network host in India, while Virgin Media may hold discussions with Tata Docomo to “borrow” its brand as an MVNO.

 

The rumors come ahead of a spectrum auction set to take place in the country later this year, which raise the possibility that AT&T (or less probably, Liberty) might acquire its own spectrum rather than sticking to a simple MVNO.

“There is a huge quantity of spectrum over 2000 MHz that will be made available for sale and this could well be an opportune time for any new operator to come in,” claimed a source.

With an auction of this size, there will a rush of operators eager to expand their capacity – the spectrum on offer will be geared to high capacity rather than coverage. But it remains to be seen whether new entrants join the race, or whether it will be another tussle between existing players, as has happened in the past.

The opportunities are huge, among India’s one billion mobile customers, only around 12.5% are smartphone users, but this is expected to surpass 200m this year, according to research by eMarketer. But mobile and data tariff prices in India are among the world’s lowest, so any attempt at undercutting current players will be difficult, and the regulator has traditionally apportioned very small slices of spectrum, which have restricted MNO’s ability to offer high data capacity and speeds. They will be hoping that this policy is reversed in the capacity bands above 2 GHz.

Another controversial aspect of the Indian 3G and 4G auctions to date has been the failure of the operators to acquire nationwide frequencies in key bands, leaving them with a patchwork of licences and complicated negotiations for spectrum sharing and roaming.

These challenges point to consolidation and exits, which could accelerate if a major new player enters the space.  Only last month, Nordic operator Telenor was reported to be eyeing its departure from India by selling off its Indian subsidiary Uninor, for a sum around $1.7bn. Telenor’s Indian assets includes some precious spectrum, but it lacks the sufficient airwaves to give any outside player any real leg-up to challenge the dominance of Bharti, Vodafone, Idea Cellular, and RCOM – but all four players know that Uninor’s spectrum would be a useful addition.

An AT&T spokesperson said, “As a matter of policy, we do not comment on rumor or speculation.” Virgin Media has not yet responded to queries.

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