Virgin Mobile enters India, but not as MVNO

Updated:2008/3/3 11:22

MUMBAI: Sir Richard Branson, the colourful chairman of Virgin Group, decided to hang in front of a five-star hotel here on Sunday, to announce the launch of his brand in India’s mobile phone market. It was, in fact, suggestive of the delicate balance he is trying to achieve with Virgin’s venture in the country, caught as it is in a controversy over its legal status.

Sir Richard and his Indian partner went all out to assert that Virgin’s entry in partnership with mobile phone service provider Tata Teleservices is not as a mobile virtual network operator (MVNO)—a status not allowed in the country—but through a brand extension plan. And, both said they retain the option to work with other partners as well.

“Tata has got the network, we have got the brand.. it makes a win-win for both the companies,” the Virgin chief, dressed in a traditional sherwani, told ET. The deal is a simple franchise arrangement under which Tata will sell part of its services using the Virgin brand and pay per use, he said.

Tata officials said their service would now have two brands: Tata Indicom for the mass market and Virgin for the niche youth market. The Virgin-based service would offer the extra zing that young users want, such as music, games and downloads. Virgin and Tata hope the alliance will break even at a user base of 5 million, expected in three years. Mr Branson put the revenue target at Rs 35,000 crore by 2010.

Tata Teleservices has lagged competition in India’s growing, but fiercely fought, mobile phone market. It operates in the code division multiple access (CDMA) market, as opposed to the more popular global system for mobile communications (GSM) standard. The group, which has a pan-India-presence serving 22.5 million customers, had a 9.3% market share at the end of January, compared with rival Reliance, which had 17.5%.

Under the deal, Tata Teleservices will pay a pre-agreed fee to Virgin for every user buying the youth-focused service. Both, however, refused to give details of the revenue-sharing agreement. Mr Branson said that Virgin would also look to enter into similar arrangements to cater to GSM users in India. “In another nine months, when the new GSM players start rolling out their services, we would look to offer similar services on GSM as well,” he said.

Tata Teleservices managing director Anil Sardana countered complaints from some rivals that the deal amounted to Virgin’s being an MVNO. “This is not an MVNO agreement between Virgin and Tata Teleservices,” he asserted. “There is no airtime contract between us. Virgin Mobile is just another brand that the company would offer. It is us who will invest in infrastructure and get regulatory approvals and operate as a network service provider. Virgin, on its part, would just lend its brand and the value-added services (VAS) that come with it to us.” However, the Virgin brand is exclusive for Tata in the CDMA segment, he added.

Source:economictimes