With the local mobile virtual network operator (MVNO) scene gaining momentum and the current consolidation culture being driven by SA's top mobile players, the mobile network wholesale status quo is likely in for a shake-up.
This is according to industry watchers, and comes in the wake of one of SA's biggest banking brands, First National Bank (FNB), announcing its mobile offering, as well as Vodacom and Telkom looking to buy ICT giants Neotel and Business Connexion to bolster their respective businesses.
Ravesh Ramlakan, CEO of FNB Connect - which officially joins the MVNO fray next week - says the bank's MVNO platform is already "operator agnostic", which means FNB could connect to two or three different mobile networks, should this become an option. "Thanks to the way our architecture has been set up, we could also use Vodacom and MTN's networks."
As it stands, however, Cell C is the only operator that offers an MVNO service. Vodacom and MTN provide wholesale voice and data services, but only sell their network services under their own brands.
But Ramlakan believes - given the current morphing mobile landscape - this situation could soon change. He notes many other countries have wholesale regulations in place that make it obligatory for dominant players to open up their networks for use by MVNOs, but SA is "still coming out with those regulations".
He says FNB predicted three years ago that there would be "a lot of MVNOs coming in" by 2015, "and look what is happening now". Ramlakan now predicts SA can expect to see regulations that force operators to open up their networks for wholesale use in its future.
"With FNB coming into the market, I think it will change a lot of the mind-set that exists. The operators are going to start thinking they can't let all the MVNOs go to Cell C, and want to get in on the action. At the moment they are in protectionist mode, except for Cell C. Cell C is the most willing to change the market and the existing commercial arrangement ? and more open to partnerships.
"With the level of saturation SA is seeing at the moment, the environment has to change so that MVNOs are enabled."
Regulatory intervention
The Independent Communications Authority of SA (ICASA) did not directly address ITWeb's query as to whether the authority plans to introduce regulations that make it obligatory for operators to feed MVNOs. However, it says, "should regulatory action be considered, it would possibly represent the introduction of pro-competitive remedies under Section 67(4) of the Electronic Communications Act".
The regulator adds it has committed to developing a list of "priority markets" in the 2015/16 financial year. "This list will lead the authority's future competition investigations."
Africa Analysis analyst Dobek Pater says ICASA could possibly introduce regulations that compel other operators to follow Cell C's example, although the regulator is "hopefully" currently preoccupied with setting in place the new spectrum award process. "Depending how the market is ultimately structured, this could provide a solution to MVNOs."
Cell C CEO Jose dos Santos says successful MVNOs generate "much-needed competition" in markets, especially saturated markets. "In cases like FNB, they also provide platforms of innovation and new thinking, particularly in markets like South Africa, where lack of competition has led to a margin of stagnation."
He says, given the saturation in the South African market, other operators may want in on the MVNO action, but Cell C has a head start, in that "[the company] has invested in a first class mobile virtual network enabler platform, which allows Cell C to launch MVNOs in a very efficient manner".
Up until now, say analysts, Vodacom and MTN have had no real need to go the MVNO route. IDC telecoms analyst George Kalebaila notes the networks of the "big two" are fairly well utilised with current customer numbers. "Cell C, on the hand, has spare capacity that could be used by MVNOs."
The focus for MTN and Vodacom, says Kalebaila, is to provide better network quality for their existing subscribers, especially with the strong growth in data usage in the last couple of years. "I don't see MTN or Vodacom clamouring for MVNO attention in the short- to medium-term."
BMI-TechKnowledge director Brian Neilson says it is likely there will be regulatory intervention in the future, especially as the effective number of infrastructure players is reduced; for instance due to MTN and Telkom's proposed cooperation. MTN and Telkom plan to share network infrastructure, although this move still needs approval from the competition authorities.
"The European precedent, for example, is to allow such a reduction in infrastructure players through mergers or network-sharing arrangements (the latter being what Telkom and MTN are talking about), under certain conditions - usually by forcing them to allow MVNOs, and regulating the wholesale pricing so that it also makes commercial sense to prospective MVNOs."
Own accord
Arthur Goldstuck, MD of World Wide Worx, says SA's operators are more likely to open up to MVNOs on the realisation that it would represent a revenue stream to bolster that which is being lost through waning voice and SMS revenues. "There is not the same kind of regulatory pressure in the mobile space as there is in the fixed-line space, where taxpayers funded the rollout of infrastructure over many years."
ICT expert Adrian Schofield says there may be no need for ICASA to interfere, given the operators are servicing the retail market quite well. "[A move of this nature] is unlikely to reduce prices for consumers, nor add new consumers in significant volumes."
Goldstuck says, speaking to MVNOs, the sense he gets is it will become a competitive differentiator for mobile operators, to open up to MVNOs - as a means of expanding their customer base. "For example, with FNB now on board, Cell C has a powerhouse reselling capacity on its network."
At this stage, while it is certainly a discussion point at ICASA and an area it might decide to regulate, it is more a question of business strategy for the operators, says Goldstuck. "It could be argued that [Vodacom and MTN] were given many years of exclusivity and there needs to be a basis to open it up to niche players."
The problem with operators waiting too long, says Goldstuck, is that the big MVNO players will have no option but to go with Cell C and likely to be reluctant to change to another network at a later stage - given integration and billing complexities and the legacy systems that get created over time.
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