Can MVNOs Succeed in India?

Companies from industries as diverse as retail and media and entertainment are quickly catching on to the next sales and marketing wave. They're using branded mobile devices to deliver unique services and content directly to customers. This phenomenon is known as mobile virtual network operator (MVNO) services. Businesses throughout the world see this opportunity as a way to expand sales channels—while using their existing assets, such as content or distribution channels...

The market for mobile virtual network operators will generate service revenue of $10.7bn by 2010. The market will be dominated by large operators, which as a group are likely to have 24 million subscribers in their fold. A mobile virtual network operator, or MVNO, offers mobile phone services without actually owning a network.

However, counter arguments to MVNO entry in India are begging a hard look. According to Cellular Operators Association of India (COAI), MVNO will not suit the Indian telecom market in view of constantly reducing tariffs, falling ARPU and low margins. DoT is also not in favor of the concept. Many international MVNO players with expertise in 3G services have been approaching the Indian government asking the DoT to take a re-look at the many benefits it promises.

However, to become a MVNO, companies have to start functioning practically overnight as a communications provider—without a wireless network. And they have to assume the complex operational tasks to run a communications company, including billing and customer care. This can be challenging, costly and time-consuming. To overcome these challenges and reach high performance as an MVNO, you need a partner with deep communications and wireless industry experience. And you need a team player with proven end-to-end capabilities to accelerate your MVNO launch.

But what I find the problem in India is the goverment  regulation.

 MVNOs in India are likely to face FDI limits. Given that non-telecom firms will launch MVNOs predominantly, the level of FDI investment in an MVNO may require clarification. The present taxation level of Indian telecom players at 17%-26% is one of the highest in the world. Since MVNOs work on thin margins, high tax rates could prove to be an obstacle towards a viable commercial model.

Now the question is how one can make profit out of it?

What i think is traditional setup wont work in india there has to be incresed colaboration between mobile operators and MVNO...Studies have suggested that India is an appropriate market for MVNOs with some metro cities (Delhi, Mumbai and Chennai) appearing to display ideal market conditions for MVNO launch. However, this is still early days for MVNOs in India, atleast for the time being.