BY: Admire Moyo, ITWeb’s News Editor.
Establishing a mobile virtual network operator (MVNO) can be a daunting task which needs proper planning and financial backing.
So said MTN SA wholesale executive, Quintus de Beer, yesterday in an interview with ITWeb, as the mobile operator ramps up efforts to drive South Africa’s growing MVNO market.
MTN launched its MVNO platform in 2020, a space where Cell C had been playing over the years.
According to a recent report by local market analyst firm BMIT, the collective market share of MVNOs will double in the next two to three years and account for 10-12% of mobile subscribers in five years.
An MVNO is a wireless communications services provider that does not own the wireless network infrastructure over which it provides services to its customers.
Typically, an MVNO enters into a business agreement with a mobile network operator to obtain bulk access to network services at wholesale rates, then sets retail prices independently.
As the MVNO market in South Africa continues on the growth trajectory, Telkom earlier this year announced plans launch its own MVNO platform.
Vodacom is also expected to launch its own platform after acquiring more spectrum last year.
According to De Beer, since going live, MTN now has in excess of 30 MVNO partners.
“Our primary mandate is to take the assets that we’ve got on the network and find ways to monetise them through third parties,” he said.
“We enable Cell C and Telkom and national roaming services. We also offer what we call interconnect services where we basically manage the relationships with your Telkom, Vodacom and Cell. For example, when you make a call from Vodacom to MTN, we make sure that the transaction can actually take place.
“That’s where we started, and now we are progressing to a fixed service where we are focusing on, for instance, long distance fibre networks, fibre-to-the-home, and microwave services to wholesale partners.”
He noted that the more recent one is when MTN “consolidated what was previously referred to as the internet service providers, where it is putting voice and data services together”.
“Internally, we call this a VNO (virtual network operator) because some of the guys now offer fixed services and mobile services; and that’s why we prefer the term VNO but in the outside world, it’s widely known as the MVNOs.”
Effectively, he explained, an MVNO would come to MTN and they will buy capacity from MTN in bulk.
“They then take that bulk capacity and break it down to pricing services that they want. So we don’t prescribe to them that you should sell a 50MB bundle or anything – it’s absolutely up to them to decide their value proposition. They’ve got a brand of their own, marketing of their own and pricing.
“At the moment, we are sitting at in excess of 30 partners already. That covers partners that are only doing voice-only kind of services or those doing data-only services and those who do voice, data, SMS, USSD, and we also enable those that just do SMS services.
“So it’s a bit of a variety in terms of what we offer but we offer all these permutations to the customers out there,” he said.
For De Beer, there are hundreds of reasons why the MVNO market is growing in South Africa, the biggest being the need for connectivity.
“Therefore, they [MVNOs] are selling data on the one side. They are also trying to make a profit out of selling that data and offering good customer service, and maybe sell one or two products on top of that,” he said.
“You then find a second category of people that say we know that data and connectivity are important to our customers, and we will sell them as part of our loyalty programme, to try and create retention on use of services. There, you will see the retailers and the banks and everybody that says if you use our app, the data is free; or if you use our app, we will give you data; or you can use your points to buy data.
“The third part is, for example, one of our partners MultiChoice. They do streaming of their content on top of our data services. The structure of that offering is: ‘I’m selling content to you, but in order to sell it to you, in the past, I did it via satellite; and now I use data services’. Recently, they started using fibre as well. But now they are coming to you and say: ‘now you can buy a data bundle and stream, for example 50 movies in a month’. While you can still buy more data, their primary focus is the content that they provide to you.”
Those are some of the traditional models but there are also some newer models that are coming, De Beer noted.
“These include the IOT space; for instance, where you’ve got all these smart devices…and these things need to connect to something. That’s where the utilities come in.”
There are also start-ups and people who want to sell new things and they are making things like data part of their value proposition, he added.
“We have reached a tipping point at this time; and we will see growth but I think one of the challenges is that the economy is tough on everybody.”
However, while the market is growing De Beer said one of the key things for an MVNO is they will need funding in order to start these businesses and get it to a point where it is profitable.
“An MVNO is not a silver bullet for everybody. People should not just see it as the next thing – it does need planning; you need to understand your value proposition because it’s not just only about price.
“Unless you can commit to that and get a bit of some funding to keep it going for a while, because it takes time to establish, then rather not do it. But it’s critical that we need them but the journey is not everybody’s kind of thing,” he concluded.
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