Rivals Challenge Virgin-Tata Deal

Tata Teleservices Ltd. and Virgin Mobile Telecoms Ltd. have spent all week defending their brand partnership in India as rival operators have kicked up a stink over the deal, claiming it's a roundabout way for Virgin to become an illegal mobile virtual network operator (MVNO).

Even before the two companies announced their joint venture last Sunday, the Cellular Operators Association of India , which represents India's GSM-based operators, was insisting to the Department of Telecom (DOT) that the deal violates regulations. (See Virgin Mobile Goes to India.)

CDMA-based Tata Teleservices shot back by raising questions over some GSM operators' managed services agreements that have them outsourcing their infrastructure management to foreign companies like Nokia Networks and IBM Corp. (NYSE: IBM).

The DOT has asked Tata Teleservices to clarify the terms of the deal, which has the operator paying to use Virgin's brand name to offer voice and value-added services, but it has not put the service launch on hold. An MVNO arrangement, illegal in India, would involve Tata selling capacity to Virgin Mobile to run its own services and billing over the network.

Among its service features, Virgin Mobile India is offering customers 10 paise (about 0.25 U.S. cents) credit for every minute of incoming calls they receive from another network. The COAI argues that such an offer would involve Virgin buying airtime from Tata.

According to the Press Trust of India news agency, Anil Sardana, managing director of Tata Teleservices, told reporters Friday that the operator had sent the requested information to the government. "The tie-up for Virgin Mobile services is above board and completely in compliance with the laws and regulations of the country," he said. "[The] network belongs to us... billing will be done by Tata Teleservices and revenues will come to us."

Sardana said the new Virgin Mobile India service, which targets 14- to 25-year-olds, had signed up 500 subscribers within two days of launching.

The upshot of the debate is that the Department of Telecom is considering lifting the ban on MVNOs. Telecom secretary Siddartha Behura has told reporters the DOT is open to allowing MVNOs now the market is maturing, and it's likely to ask the Telecom Regulatory Authority of India (TRAI) to draw up recommendations on how to make that happen.

India has 13 mobile operators, the majority providing services on GSM networks. Five new companies have been given approval by the DOT to set up networks in a bid to increase competition as the market continues to grow at a rate of more than 8 million new subscribers every month. (See A Guide to India's Telecom Operators.)

— Nicole Willing, Reporter, Light Reading

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