MVNO License Fee not Welcomed by Investors

As we had covered MVNO’s recent framework from PTA, there came another prospective from Jawwad Rizvi, in his recent report in The News.

According to Jawwad, the license fee of US 5 million dollars for MVNO license is going to be a unique attribute of Pakistan, as world over there is no license fee collected from MVNO operators.

Follwing is the complete story, in which he describes why PTA has imposed the license fee, and what investors think about the move

$5 million licence fee may deter investment Industry experts say MVNOs are service providers that buy time from mobile operators and sell value-added services to clients

Wednesday, October 28, 2009
By Jawwad Rizvi

LAHORE: A huge licence fee for the Mobile Virtual Network Operator (MVNO) set by the Pakistan Telecommunication Authority (PTA) will discourage and deter fresh Foreign Direct Investment (FDI) estimated at $100 million and thus destroy the potential beginning of the second wave of telecom and internet industry.

The PTA has now fixed an initial licence fee for an MVNO of $5 million or equivalent to Pakistani rupees, originally set at $10,000 then revised to $10 million.

The News has learnt that the PTA has published guidelines for the MVNO licence and has bound the applicants to pay $5 million for it. Around the world, including the US, the UK, Hong Kong and many other countries, there is no licence fee for MVNO operator.

The MVNO is an operator that does not own any spectrum; instead MVNOs have commercial arrangements with conventional mobile network operators (MNOs) for the provision of mobile communication services to their own customers.

The MVNOs do not own any spectrum but can deploy minimal or extensive infrastructure. They have business arrangements with traditional mobile operators to buy Minutes of Use (MOU) in bulk for sale to their own customers. Utilising mobile telecommunications as a means to interact with the end-user, MVNO can create significant value added services and additional brand-value for quality and valuable customer experience.

Buying wholesale voice and data services at discount rates from cellular companies the MVNO resell them with their own brand name and prices to end users. The MVNO companies typically have their own billing system along with customer support and can scale infrastructure to offer converged services like unified GSM and IP communications.

It is believed that some senior officials of PTA had opposed the idea of huge licence fee, however due to pressure of two leading cellular operators the authority decided to enforce fee on acquiring the licence.

An official privy to the development revealed that initially the work was progressing in a smooth pace and everything was moving in the right direction. The policy makers had a sudden shift in their approach and the decision to fix $5 million licence fee for MVNO was made.

One of the new entrants in the Pakistan MVNO market, Friendi Mobile, funded by US-based ePlanet Ventures is actively involved in acquiring MVNO licence. Friendi is first pan-regional MVNO in the Middle East with operations in Oman and Jordan. With its headquarters in Dubai, it plans to provide MVNO services in 17 countries stretching from Morocco to Pakistan.

Haider Raza, a venture partner with ePlanet Ventures, speaking to The News, said the Pakistani telecom market has a potential of 4 to 5 MVNO operators with a market potential of as much as $500 million or 10 per cent of the total mobile market by 2014.

The MVNOs can bring in FDI of $100 to 200 million and light up the path to other telecom and internet investments. The fresh investment will also trickle down into other untapped services of the telecom sector and encourage the other international players to invest in Pakistan.

Pakistan cellular industry has not been utilizing the potential of value added services and has just been focusing on voice revenue and price wars. He added that MVNO operators would target underserved markets, creating more choices for the cellular consumer, introducing healthy competition and added revenue.

The success of the MVNOs have the potential of opening new markets amongst another 100 million Pakistanis thus leading to the establishment of an additional $3 to 4 billion market. But all these things are possible if the government and policy makers make efforts to attract the investors, Haider said.

According to Haider Raza, the teledensity in the metropolitan areas in this country is not 100 percent and the MVNO operators could help in achieving that through specialized segments.

Chairman PTA, Dr Yasin talking to The News said the licence fee was irrelevant issue as it did not make any difference. He said the reason behind this fee was to provide an opportunity for serious investors rather than for those who create trouble for the regulator and the customers as well. The PTA had bitter experience of low licence fee in WLL and PayPhone licenses cases so it would not repeat the old mistake again, he added.

Dr Yasin further mentioned that if some serious investors showed interest of investment in MVNO the licence fee might be revised.