African MVNOs – Are We There Yet?

Mobile Virtual Network Operators (MVNOs) are wholesale intermediaries reselling packaged access purchased from Mobile Network Operators (MNO). They buy bandwith in bulk discounts from MNO (Mobile Network Operators), the owners of  both spectrum and the network infrastructure, to sell at relatively reduced rates to their customers.

MVNOs comprise different types, based on their levels involvement in the value chain from network access to distribution. At one end of the scale are branded resellers which operate solely as distributors while at the other end of the scale are full MVNOs which leverage the MNO’s Network infrastructure and add value to other elements of the mobile value chain to create attractive propositions for their customers. MVNOs may sometimes deploy enablers (MVNE ) and or aggregators (MVNA) to help them further reduce their costs by taking on ancillary & back-office services so that they can focus on their core business and service to customers.

The cost profile for an MVNO is not as high as an MNO. MVNOs own neither the network infrastructure nor pay the large fees during spectrum auctions but they make money by buying large amounts bandwith from the MNOs at a discount and selling the network access to their customers at cheaper rates than the MNO. The MNOs on the other hand see MVNOs as a revenue stream from unused or under utilised network assets, as well as a channel for accessing difficult geographical or customer segments. These customers not only gain from a fall in prices for network access, but also from better packaged deals through increased competition between an increased number of network players. An increase because through an MVNO, it is possible for any company with a large existing customer base and strong brand to become a network player since the services they provide can then be used to both strengthen product portfolios and retain customer loyalty.

At their core, MVNOs are resellers, intermediaries or middlemen which should make the African marketplace a particularly attractive one for such players however, a decade after their introduction, Africa still held just 12% of all MVNO launches worldwide, according to Wireless International, with the largest proportion going to thriving in the saturated markets of Europe and North America.

The reasons for the slow adoption in Africa are not difficult to see as Virgin, which successfully runs an MVNO business in the UK, had to scale back its ambitions when faced with the South African market. Because apart from an overall supporting  regulatory framework of the country, market or region, MVNOs need most of all the willingness of the existing MNOs to release available spare capacity in bulk discounts. But while surplus capacity, where supply exceeds the demand, can be found in saturated markets such as the UK & US, African mobile penetration levels are still relatively low (63%).

MVNOs have also been quoted as thriving where there’s a preponderance of post paid customers with higher disposable incomes e.g. the developed markets. But, African markets are still overwhelmingly pre-paid and the low ARPUs make it difficult for potential MVNO investors. However with growth in data and 3G / LTE / 4G networks, the ARPU may change as the declining prices of smartphones brought about by some of the region’s favourite brands e.g Nokia and Samsung increase the demand for data. Perhaps these were indicators supporting Informa’s forecast of mobile penetration levels of about 80% by 2017 in Africa. Such levels of penetration have been quoted as the  minimum to support an MVNO market.

Nevertheless, there are also attitudes an to contend with, because MVNOs exist only because the MNOs are willing to make bandwith available to them. In many African states, such as Egypt, South Africa, Kenya etc, which are some of Africa’s largest mobile markets, governments still have stakes in  mobile operators and while this remains true, it’s difficult to see how MVNOs can successfully become players in the mobile market. Nevertheless, in some states, the authorities do not issue specific MVNO licenses, but are instead willing to license ‘wholesalers’ and ‘resellers’ – cases in point include, Cameroon’s Set’ Mobile and Senegal’s ‘Kirène Mobile’.

Be it an MVNO in South Africa, Senegal, Madagascar or resellers elsewhere in Africa like Cameroon where Samuel Eto’o’s Set’ Mobile has recorded just 200,000 subscriptions, as reported by Global Mobile Daily, the pressure is on MVNOs to come up with products which truly differentiate themselves and capture those hard to reach MNO segments. This feat, although relatively challenging in mature markets, has added complexity in African markets because of the overall lesser disposable income. But that too like much in Africa is changing for the better, therefore it’s safe to say in the near future, we can expect to see more of these middlemen in the African mobile telecoms market.

Lloney Monono, Bristol, UK

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Categories: Technology

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