Telco industry expert insights: Exploring MVNO business prospects in Africa

Andre Wills, Managing Director, Africa Analysis Team, South Africa opened the inaugural MVNO Nation Africa event with a fascinating overview of the current African market.

Andre provided a great perspective on the landscape for MVNOs in Africa, and set the scene perfectly for the rest of the event.  

The market for MVNOs in Africa is still in its early stages, but it is developing fast. And while only a few countries have seen real traction for MVNOs so far, the opportunities are there for businesses to enter the space and make a big impact. 

In fact, the continent has around 800 million active mobile SIMs right now, but only a small fraction of those come from MVNOs. 

African MVNO subscribers reached 10.6 million by the end 2023, which is only or 0.8% of the total African mobile market share. In comparison, across the rest of the world, subscribers reached 384 million by the end of 2023, which is 5.2% of the global mobile market share.

Clearly, there’s huge potential, but tapping into it at scale is proving challenging.

How has the MVNO market developed across Africa? 

Interestingly, Andre pointed out that the rise of MVNOs in Africa has occurred without regulatory mandates.

The entry of the MVNO has been at the goodwill of host mobile network operators (MNOs). There are no regulations to specify that MNOs need to open up the networks on a regulated basis to MVNOs. So, the MVNO markets have developed through the support of MNOs who recognised the potential that MVNOs bring to them. 

Andre said, “If we look at South Africa, Kenya, or Senegal, the MVNOs have come into existence without regulatory support, and they've survived because the market has dictated that they survive.”

“That’s a key point to highlight the value that the MVNOs bring, as they don't need to have regulations in place to sustain them. They were sustained through a better value proposition that the customers actually were attracted to, which highlights the value that the MVNOs bring to the market.”

Of course, the downside to that is MVNOs will only have commercial standing in contract law with the host network operator, but won't have a license to fall back on if there are issues.

How to approach and navigate the launch of an MNVO in Africa  

Andre emphasised the importance of understanding those regulatory issues for any business looking to launch and navigate the MVNO market in Africa right now. 

He said, “Does your regulatory regime support licensing you as an MVNO? If the answer is yes, you have a slightly different discussion than if the answer is no. For example, as mentioned earlier, the MVNOs in South Africa are not licensed. It's an anomaly because all other telecom services have a license.”

“So, if the answer is yes, that's a positive, because then the next question is whether you have regulated access to the MNOs’ networks.”

If a business doesn’t have regulated access to networks, then it’s crucial to negotiate commercially and strategically viable agreements with MNOs, to create a solid foundation for MVNO operations.

Andre advised those who don’t have that licensed, regulated access to networks should consider the strategy of finding a mobile virtual network enabler (MVNE) who can provide back-end services and support. 

Andre said, “As an MVNO, you want to focus on what you do best, namely servicing your customers. Working with an MVNE allows you to leave the back-office to those companies that specialise in the OSS and BSS for your operations, who can also aggregate traffic for you.”

However, if your local regulations do give you licensed access to networks, the next question is whether wholesale pricing is regulated. Regulated wholesale pricing removes pricing concerns. This frees up MVNOs to focus on building a strong brand and differentiating through customer service. 

For those with no regulatory support for MVNOs, as mentioned earlier, the commercial negotiations with the MNOs are key, and may benefit from the help of an experienced partner.

Understanding different strategies for new and existing brands 

The strategies for launching and growing an MVNO must be different for those with existing brands and those who don’t have an established brand.

For new brands: 

For businesses looking to build up a new brand and attract customers, Andre suggests customer service should be a top priority.

Andre said, “You can’t compete on price with the MNOs. There's a significant financial scaling aspect, and they've been in this game for many years. So, you need to build your brand based on delivering an extraordinary service that helps a specific segment and delivers great value to those customers.” 

“Focus on the customisation and the personalisation for your customers, and provide them with the best service offering possible.” 

For existing brands: 

For brands that are already established with an existing customer base, Andre advised integrating MVNO services into the wider offering. 

Aligning MVNO services with the wider CRM program can leverage existing customer loyalty and build on that to ensure the MVNO offering is successful. 

Most often, this involves using data or airtime as a reward for customers inside businesses like those with retailing or banking operations. 

How to differentiate as an MVNO in Africa 

Andre identified a few key factors that have helped MVNOs gain traction in Africa over the last two to three years. 

The first factor is the rise of the digital-first MVNO. 

Andre said, “When you look at a real difference-maker, it’s the rise of the digital-first MVNO, where they’ve come to the market targeting a community or a certain segment, and have customised and personalised their offering to those customers.”

The second factor, which ties into that, is personalisation and customisation. 

MVNOs must offer their target audience personalised services to attract and retain more customers. 

The third factor, which is mostly related to retailers and banks, is integrating the MVNO offering into customer loyalty programmes. 

Successful MVNOs have been using that approach to attract and retain customers. 

With banks, for example, some customers may need to be bank account holders to use the MVNO service. 

For a retail brand, customers can subscribe to an MVNO service and gain rewards via their existing loyalty programme. 

A key mistake to avoid 

Andre said, “I think it’s important to reiterate that you cannot be an MVNO trying to compete with the MNOs, as you’re probably going to lose. You can never compete head-to-head on pricing, so you need to have something more.”

“There’s two dimensions to that. Either you allow your customer to structure their package how they want to, and decide how much data, how many minutes, for example. Or you bring in additional services.”

For MVNOs in Africa, Andre suggested this could involve offering customers payment mechanisms for pre-paid electricity, pre-paid water, ticketing, gaming, or a range of additional online services.

Such added value will make an organisation more than an MVNO, giving customers something unique as an extra incentive. 

Andre added, “When we look at some of the more successful MVNOs that have launched recently, they’re not just a pure-play telecoms offering. The attraction for their customers is the bundle of services, not just a telecommunication service itself.”

“With that approach, you can allow customers to use whatever they spend on your MVNO services and give rewards back to them to spend on the other services. So, you start to integrate your customers’ spending ability and target the biggest share of their wallet other than just mobile.”

Key take-away: 

Overall, there’s an exciting potential and great opportunity for the African MVNO market right now. 

By 2028, the African MVNO base could increase from 10.6 million to 28.9 million across eight MVNO markets. 

But businesses must carefully consider how they can provide as much value as possible to their customers, to ensure they achieve not just customer acquisition but also long-term retention.