The partnership between Tata Teleservices and Virgin Mobile, through a franchise agreement, for mobile services is a virtuous development that will enhance competition in the telecom market and also make space for new business models. Some rivals and critics have raised alarms, terming this new arrangement?by which Virgin offers its own services to customers on Tata?s network infrastructure?a scandalous violation of the industry?s licence regulations. Why, they ask, should Virgin sneak into an otherwise inviolable Indian market through the backdoor? Under Indian telecom rules, mobile virtual network operators, which operate in many markets abroad by buying bulk airtime from licensed service providers that have capacity to spare, are simply not allowed. Virtual services constitute a business model pioneered by Virgin in the UK, where the base infrastructure of cellular networks has been sought to be equated with the underlying links and routers of the Internet, the mere substratum for a whole lot of virtual possibilities. In India, Virgin has actually announced its own entry as a brand offering services aimed specifically at the youth.
While the fulminations will continue, the argument against the entry of Virgin is weak. The key issue is whether it intends to use radio spectrum, the limited availability of which is the raison d?etre of entry barriers in the first place, in excess of what is allotted to Tata Teleservices. The fact is, it does not. Nor is it, technically, buying airtime in bulk. Tata Teleservices, as an independent company in the private sector, has the right to offer whatever legal services it wants to customers, and if some of these are branded Virgin under a franchise deal, and even marketed separately by the UK firm, then that is its own business. All this will do, really, is expand the range of services available in the Indian telecom market, and given the brand?s reputation for differentiation, even spur another round of welcome innovation. This could add to the sector?s vibrancy, which will result in better services for customers and higher returns for investors. Even state-owned BSNL recently tried to use the franchise model to sell international calling cards, though these were to be co-branded. Virgin?s services are not, but if this means it will cannibalise Tata Teleservices? brand equity, then that?s the latter?s worry.