Thursday, January 22, 2009

Virgin Mobile

We all know that Virgin Mobile launched their operations in mobile phone connectivity sometime in early 2008(around March, may be). And the brand has been creating a bang in its ad promos ever since. I was quite curious to find out more about Virgin's modus operandi, wooed by the charisma of the parent brand Virgin Mobile.

A few months ago, I discovered, much to my surprise, that Virgin Mobile's Indian JV partner was actually Tata Teleservices. Having discovered this piece of info, I conveniently took it for granted that Virgin was offering GSM services. And I was continuing to be under this impression until yesterday.

Turns out that Virgin Mobile India is actually offering CDMA services here. Then it struck me. Why in the best of their minds would Tatas have a JV with a company that is actually offering the same CDMA services??? and why would Virgin also agree to such a deal? is entering the indian market so lucrative for them that they dont mind partnering with a potential rival company?

Enter MVNO

Apparently it works this way. Virgin Mobile India has registered itself as an MVNO, which stands for Mobile Virtual Network Operator. An MVNO is different from the regular Mobile Operators in the sense that he does not own any physical infrastructure for his network service. He uses the infrastructure of another company, and sells his product. So basically, Virgin takes the Tata's licensed frequency on a lease and uses it to sell its SIM cards. Like people live in rented houses, Virgin pays Tatas for the frequencies and the physical infrastructure, their maintenance et al., and on its own focusses only on marketing its product.

When I read this, my first impulse was to compare Virgin Mobile India to a cuckoo bird, which gets to raise its children and yet doesnt have to be hassled with the actual parenting process. But then on second thoughts, I felt why not? I mean I'm sure Tatas are getting paid well for the services they are offering so why not? This is just another way to keep the cash registers ringing right. And then things fell into place in my head, and I realised how these two potentially rival companies could even think of operating in the same market.

As for the legality of such an agreement, I was able to lay my hands on a PDF of an old version of the license agreement that Cellular operators sign with the Department of Telecommunications. That file claims that a service provider signing up for the license is allowed to share the following :
a) “passive” infrastructure viz., building, tower, dark fiber etc.
b) point to point bandwidth from their own infrastructure within their Service Area to other licensed telecom service providers (no resale though)

Well, one thing is for sure. The rival GSM guys would have surely spent sleepless nights trying to come up with arguements to prove Virgin's cuckoo bird JV deal illegal. But here we are today, seeing Virgin becoming a fairly successful venture with a clever marketing , ad effort.

P.S.: Virgin Mobile is a successful telecom brand in the UK, and they operate as MVNOs there as well.