Up to 70% of mobile virtual network operators (MVNOs) fail to reach sustainable scale within two to three years in SA, and only 10% to 20% become strategically significant, according to MVNO enabler MVNE.
The company believes SA is on the cusp of a fresh wave of MVNOs because spectrum liberalisation by the Independent Communications Authority of South Africa (ICASA) and mobile network operators (MNOs) becoming more wholesale-focused has lowered the barrier for new entrants.
MVNE cites Mordor Intelligence’s South Africa MVNO Market report, which values the local market at $543.48 million (approximately R9 billion).
Edward Wicks, chief commercial officer at MVNE, says banks, retailers, insurers and a growing number of digital brands are exploring mobile to deepen customer relationships and unlock new revenue.
"We currently have only around 4.5 million MVNO subscribers in SA. Markets like the UK – with a similar population – are moving towards 15 million subscribers. We see significant growth opportunities here.”
However, he warns that the promise of ‘MVNO in a box’ has made launching deceptively simple. “What hasn’t changed is the discipline it takes to make the business work commercially. Many MVNOs fail within their first year because they underestimate the commercial and operational reality.”
Wicks says would-be providers must ask several questions before venturing into the space: what problem are you solving for the customer? Does the business case still work after launch? And are you choosing a partner, or just buying speed?
“Connectivity on its own isn’t a differentiator. South African consumers already have access to multiple networks. They will only switch if the MVNO improves something tangible – pricing transparency, loyalty integration or convenience inside an app or service they already use.”
High failure rate
Mark Walker, director at technology consultancy T4i, says most MVNOs don’t make it past 18 to 24 months due to poorly defined value propositions and generic target customers. High competition, weak brand association and poor integration with the wider ecosystem are typical death-knells.
“A few common themes emerge when looking at successful South African MVNOs – clearly defined target communities like banking and insurance customers, and strong value propositions including cash back and digital product bundles that benefit the end-user,” says Walker.
“As MVNOs are retailing MNO capacity, margins are very thin and customer acquisition costs often wipe out any gains. A generic 'MVNO in a box' can rarely meet these criteria.”
Wicks adds: “Many providers can get an MVNO up and running quickly. That is no longer the hard part. The real test comes when the billing queries start arriving and something unexpected breaks. A platform will get you to launch day. After that, you are running an operating business, and you need a partner who is still in the room.”
Key success factors
Based on global case studies, Wicks says several factors need to be present for a would-be MVNO to succeed:
- A large existing customer base.
- An extensive B2B and B2C distribution footprint.
- A focus on digital and the market of the future.
- A brand that naturally extends to telecoms.
- Strong customer experience.
- A large employee base.
- An extensive loyalty programme.
MVNE believes demand for MVNOs will increase as brands seek to differentiate, strengthen customer relationships and offer personalised value propositions through mobile connectivity. Geopolitical uncertainty, supply chain pressure and increased competition are also likely to accelerate growth, the enabler adds.
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