Press Release:

TARIFF PLANS OFFERED BY VIRGIN MOBILE BRAND ARE 25-30% CHEAPER

THAN OTHER OPERATORS: MORGAN STANLEY

Morgan Stanley’s report rates the recent agreement between Tata Teleservices and Virgin Group as innovative

The brokerage house Morgan Stanley recently unveiled a report titled Virgin Mobile: One More Innovative Product for the Indian Consumer which analysed the recent Tata-Virgin agreement and its expected impact on the market. Under this agreement, Tata Teleservices recently launched ‘Virgin Mobile’ services in India through a brand franchise arrangement with Virgin Group to target the youth segment. Through Virgin Mobile Brand, Tata Teleservices aims to offer India’s youth a range of innovative and exciting services that give them world class experience at value for money price points.

According to the report, tariff plans introduced by Tata Teleservices under the ‘Virgin Mobile Brand’ are cheaper by 25-30%, compared to similar schemes offered by other players.  “Comparing the tariffs with Rs200 card of Bharti, the leading wireless operator, reveals that the plan is 25-30% cheaper, i.e., for the same price, the consumer could make outgoing calls for 140 minutes as against 85 minutes in Bharti’s plan,” says the report.

Beyond the value for money pricing, Virgin Mobile has launched an innovative tariff plan paying customers 10 paise for every minute of incoming calls they receive. This is reverse to the scenario, whereby only a few years ago customers had to pay to receive calls. 

The report has termed this plan of paying customers for receiving calls as Innovative, not disruptive. “We find it innovative because under the plan incoming is rewarded – which may lure consumers. In reality, it is costlier per minute than the average Revenue Per Minute (RPM) of Rs0.75-0.8 for India based on last quarter results. This leads us to believe it is not disruptive.”

The report also says that the two brands of Tata Teleservices viz. Tata Indicom and Virgin Mobile Brand will compliment each other and help the company to further consolidate its market share.  “The product adds to the TTSL kitty – the Rs200/month plan with Rs99 one-time cost, arguably the best selling ARPU segment – where the company was not present earlier. TTSL has not been a market leader, and this launch should enable it to garner better market share,” says the report

The report also commented on the recent attack by COAI on the agreement, terming it as a Mobile Virtual Network Operator (MVNO). MVNOs typically do not have licences or spectrum to provide telecom services, but buy airtime in bulk from licensed service providers for resale to consumers. GSM operators have said the partnership amounts to Virgin’s entry into India as an MVNO format. However, the Tatas insist that as there is no selling of bulk airtime, the partnership cannot be classified as an MVNO. Indian regulations do not allow MVNOs to operate in India.

Commenting on the issue, the report says, “We believe spectrum is a scarce resource, and competitive intensity in the Indian telecom sector is high, making it difficult to share spectrum. However, Virgin Mobile may use TTSL’s distribution network. Thus, we expect this to be a brand extension and not an MVNO, but we plan to wait for market feedback to revalidate our view.”

Putting to rest doubts over the deal between Tata Teleservices and Virgin Mobile, the Department of Telecom later said that the Government had no problems with the partnership. “We have just asked for some information (from Tatas) in view of the fact that some people had approached us. We will not scrutinise or vet the deal. We are also open to MVNO. Indian telecom market is maturing and this can be allowed,” said Mr Siddartha Behura, Secretary, Department of Telecom.

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