The most discussed topic of last year in the MVNO world was certainly the changes in the Nigerian market and the 41 MVNO licences awarded by the Nigerian regulator. At the MVNO Nation Live event in Valencia last October, Usman Mamman, Head of the Licensing Department at the Nigerian Communications Commission, gave an update and background on the changes in the Nigerian telecommunications market.
About the Nigerian telco market
The telecommunications industry in Nigeria is a significant contributor to the country's GDP, accounting for approximately 16%. Recognizing the importance of this sector, there is a concerted effort to encourage the growth of Mobile Virtual Network Operators (MVNOs). Market entry facilitation, access to network infrastructure, and the regulation of wholesale rates are among the measures being implemented. Additionally, initiatives such as number portability, network sharing, and spectrum access aim to foster competition and innovation.
Despite having four major network operators serving a subscriber base of around 220 million, there are still challenges related to quality of service and coverage. As a result, there is a growing opportunity for MVNOs to address these gaps and tap into the hidden potential within the market. With over 230 million potential subscribers, particularly a youth demographic comprising 60-70% of the population, MVNOs have the opportunity to offer innovative services tailored to specific needs and preferences.
In terms of internet usage, Nigeria boasts a total of 122 million internet users, with data services provided by both major telcos and smaller Internet Service Providers (ISPs). This presents a lucrative market for MVNOs to capitalize on, especially considering the youthful demographic's high demand for digital services.
In summary, the Nigerian telecom market is ripe with opportunities for MVNOs to thrive and innovate. By addressing the challenges faced by traditional network operators and catering to the diverse needs of the population, MVNOs have the potential to make a significant impact and drive further growth in the industry.
What are the new regulations?
In 2017, the Nigerian Communications Commission (NCC) initiated the development of a framework for Mobile Virtual Network Operators (MVNOs), following a proposal and request for proposal (RFP) process in accordance with the NCC Act of 2003. Subsequently, in August of the following year, the NCC issued a public advertisement inviting prospective applicants to apply for MVNO licences. The framework, structured into five categories ranging from brand resellers to full MVNO operators, was designed based on successful models existing in the market.
The response to the MVNO initiative was significant, with multiple applicants expressing interest in providing MVNO services in Nigeria. The distribution of licences across the categories reflects a diverse range of players, with one licensee for Category 1, 10 for Category 2, 15 for Category 3, 5 for Category 4, and 10 for the last category. Despite the ambitious nature of this endeavor, the NCC believes in the untapped potential of MVNOs to cater to a variety of market segments beyond traditional SIM and data users.
Emphasizing the importance of targeting specific customer segments, particularly the youth and millennials who constitute a significant portion of Nigeria's population, the NCC envisions MVNOs serving various sectors such as business enterprises, international travelers, and the entertainment industry. Additionally, opportunities in hospitality, tourism, education, and fintech sectors are being explored to maximize the impact of MVNOs in the Nigerian market.
With a total of 41 new MVNO licences issued, the NCC acknowledges the challenges ahead but remains optimistic about the potential of MVNOs to drive innovation and meet the diverse needs of Nigerian consumers across different sectors.
How does it work in practice?
In terms of requirements, MVNOs must obtain a licence and pay the applicable fees. Additionally, they need to establish an MOU with the MNOs as they leverage their infrastructure. Compliance with quality of service regulations and submission of relevant agreements, especially those with MNOs, is crucial. Ownership is restricted to a maximum of 10% to address competition concerns.
Usman Mamman, Head of the Licensing Department at the Nigerian Communications Commission (UM): “Regarding the impact on consumers, we anticipate increased competition, stimulating investments, job creation, skill development, and entrepreneurship opportunities. MVNOs are expected to address specific niche markets and demographics, fostering expanded access and inclusion. Furthermore, we anticipate revenue generation, facilitation of new services like IoT, and leveraging the deployment of 5G services in Nigeria by existing providers. In conclusion, the concept of MVNO is not intended to compete with host MNOs but rather to complement services, improve quality, and encourage fair market competition and choice.”
How has the market changed?
UM: “Certainly, we have just issued the licences, and currently, negotiations are ongoing between the MVNOs and the MNOs, which have not been concluded yet. Negotiations are also in progress between the MVNOs and their technical partners. As of now, none of them has launched services. Regarding potential additional MVNOs, we are closely monitoring the market, considering the novelty of this concept. While the initial number appears ambitious, we want to assess the market dynamics before proceeding further. The number is substantial, and for now, we have paused to evaluate how this initial group performs before making further decisions.”
Asked whether 41 licences are sufficient the speaker believes that they have licensed enough for the initial phase. However, they acknowledge that the market is dynamic, and they aim to observe the deployment progress before making further decisions. While the number of licences may seem ambitious, they are taking a cautious approach to ensure success before considering additional licences.
Establishing a level playing field
The regulator is well aware of the challenges faced by MVNOs in negotiations with MNOs. We are in the process of establishing basic rules, particularly regarding the wholesale pricing framework. An amended framework will be released soon, serving as a guide for negotiations. Additionally, the regulator has the authority to intervene in cases of refusal or disagreements related to integration and interconnection. We are committed to addressing these challenges to ensure the success of MVNOs in the market.
The clock for the 12-month deployment period starts ticking from the issuance of the licence. However, the speaker acknowledges the challenges and realities of the market. The regulator is working on releasing a wholesale pricing framework by the end of this month, which will serve as a guide for negotiations. They understand the complexity of negotiations with MNOs and are committed to supporting the MVNOs to ensure successful deployment within the given timeframe.