Banking, mobile money and voice-as-data boost the opportunities for MVNOs in Africa

Banking, mobile money and voice-as-data boost the opportunities for MVNOs in Africa

Telesperience’s Teresa Cottam looks at how the Mobile Virtual Network Operator market is developing in Africa.

MVNOs are a feature of saturated markets in Europe and North America – encouraged by regulators to increase and maintain competition, and utilized by MVNOs to monetize unused capacity. The GSMA stated that at the close of 2015, two-thirds of the world’s domestic MVNOs are in Europe. But is that about to change?

While the MVNO sector is now established in certain Asian markets (with 137 MVNOs recorded by the GSMA in this region at the end of 2015), the MVNO market in sub-Saharan Africa is still nascent and sluggish to take off, with only 13 MVNOs recorded in this area in 2015.

Historically, MVNOs have struggled to gain a foothold in Africa due to a generally unsupportive regulatory environment: Early MVNOs in Africa don’t have a clear business plan and/or differentiator, and business models are challenging given the low ARPUs and small differential between wholesale and retail prices prevalent in the region.

The most advanced countries in Africa with regard to MVNO penetration are Kenya and South Africa, but even in these countries the number of customers using an MVNO is modest to say the least.

However, 2016 has seen a flurry of announcements in Africa, with both market developments and technical innovation starting to make the region look more promising for MVNOs. Telesperience data shows that of the 71 launches and confirmed intentions to launch recorded up to September 2016, 31 (44%) were in regions other than North America and Europe, with the Middle East and Africa accounting for 17% of the global total.

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Some of these opportunities derive from providing basic services such as voice. Customers have for a long time used multiple SIMs to help them avoid high cross-network call charges and expensive mobile termination rates. As Africa becomes more data-centric, therefore, MVNOs could provide voice calling as a data service – utilizing all available networks including WiFi hotspots. At the same time, regulators are beginning to mandate reductions in mobile termination rates (e.g. in South Africa), affording yet another opportunity for disruptive MVNOs to enter.

Beyond basic telecoms services, value-added services provide another entry point for MVNOs. African banks, for example, have clearly identified the opportunity to use mobility as a channel to deliver mobile money and banking services – responding to early moves in this market which saw MNOs providing these services. In South Africa, First National Bank’s FNB Connect, which launched in 2015, grew its customer base to 200,000 customers in the first year. FNB’s eWallet service is already one of the largest bank-led mobile money solutions in Africa – with R33 billion having been sent to 6.7 million people since their launch – providing a significant advantage to FNB.

Kenya’s Equity Bank Group meanwhile announced its intention to introduce its Equitel-branded MVNO service in Uganda, Tanzania, Rwanda, South Sudan and the Democratic Republic of Congo (DRC).

Traditional MVNOs have likewise recognized the potential of mobile wallet and money transfer services and many offer these services, or have partnered with banks to offer them. Lycamobile, for example, added a new mobile transfer service in December 2015. Lycaremit enables users to transfer cash via a smartphone to 50+ countries, with beneficiaries able to collect money via mobile wallets, banks or cash collection points.

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Home-grown MVNOs in Africa are also now experimenting with targeting niche communities. Bok Radio, for example, identified that 7.2 million people are first-language speakers of Afrikaans, while a further 8-15 million speak it as a second language. This led to the development of BokSel, a service provided in Afrikaans and associated with Bok Radio. The question is now whether BokSel can provide a sufficiently differentiated service to its customers that goes beyond language, identifying and targeting the unique needs of its Afrikaans-speaking customers.

Those network operators that have embraced the MVNO model also seem to have benefited. South Africa’s Cell C announced in July 2016 that it is supporting 1 million additional customers through its relationship with a number of MVNOs.

“MVNOs have incredible insights into their customers’ needs and based on those insights they can offer very targeted products,” said Cell C CEO, Jose Dos Santos, noting that the MVNO/MVNE platform is critical to the success of MVNOs.

Cell C’s success has not gone unnoticed either, with MTN now eying the opportunity. MTN SA CEO Mteto Nyati told ITWeb, somewhat cryptically:

“I cannot tell you about MVNOs but what I can say is you will hear soon, and it’s not just one thing, there are a number of things in the pipeline”

GM of partnerships Johannes Kanis commented that he sees MVNOs in South Africa as a big opportunity.

“…I think we have not even scratched the surface yet in SA…we are nowhere near what the market is capable of”, he noted.

opportunities for MVNOs in Africa