Given the intense competition in South Africa’s mobile virtual network operator (MVNO) market, Vodacom must ensure its newly-launched mobile virtual network enabler (MVNE) has the correct focus, resources and positioning.
This is the sentiment shared by analysts, after mobile network operator Vodacom South Africa recently announced its new MVNO enablement platform, and noted it had signed up its first client.
Mr Price Mobile, the first MVNO to be supported on Vodacom’s network, is now activating new customers.
An MVNE provides network infrastructure and related services to an MVNO.
Cell C is the largest provider of MVNE services in SA, although MTN also launched a platform to become a host network.
MTN signed its first MVNO partner − Afrihost Air Mobile (then Afrihost Mobile) − in 2013, before launching a fully-fledged MVNO enablement platform in 2020, in a space that had for many years been dominated by Cell C.
Early last year, Telkom announced plans to enable MVNO partnerships on its network; however, it has not yet launched its service.
Experts recommend Vodacom position itself well, through an attractive value proposition, in order to attract clients.
Arthur Goldstuck, author and CEO of research consultancy World Wide Worx, explains: “The extent to which Cell C has refined its MVNO model and made it a market leader, despite being the smallest mobile operator, tells us that size alone is not the key to success. The challenge here, is for Vodacom to give its MVNO operation the focus, resources and positioning it needs to compete for business.
“Vodacom will need to be nimble in its operations in this space, as well as competitive in wholesale pricing. Neither of those are always as easy as they seem. A more subtle challenge is the fact that Vodacom does not need an MVNO strategy.”
While an MVNO strategy was crucial to Cell C's survival and growth, in terms of opening new channels of customer acquisition, Goldstuck points out it is simply an add-on service for Vodacom – which is already the largest operator in the country.
Goldstuck estimates that SA has about five million MVNO customers belonging to combined players in this space, including PnP Mobile, Boxercom, Poket Mobile, Sakeng Mobile, K’nect Mobile, TFG Connect, Capitec Connect, Melon Mobile and the recently launched Old Mutual Connect.
“Capitec alone is evidence of the viability of MVNOs in South Africa, especially for organisations with large customer bases that wish to expand their services to customers. There are still numerous opportunities for communities of interest to embrace MVNOs, and many large retailers have yet to follow Shoprite, Pick n Pay, TFG and Mr Price into the arena.”
Diversifying revenue streams
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.
According to a report by Africa Analysis, as of December 2023, SA’s MVNO service revenue is calculated to be R4.4 billion, growing at a rate of 12% per annum.
This shows a healthy market, indicating increased customer adoption and revenue growth in the MVNO market, it says.
Andre Wills, MD of Africa Analysis, points out that while Vodacom has not revealed the capabilities of its MVNE platform, or its wholesale pricing structure, these are likely to be similar to other platforms in the market.
“Vodacom's primary challenge will be determining how extensively it supports the MVNO model. This includes making decisions around wholesale pricing, network access and service quality for hosted MVNOs,” Wills states.
“Given the increasing number of MVNOs, Vodacom will need to ensure it can balance the potential cannibalisation of its own market share, while supporting its MVNO partners. With competitors offering advanced digital services and solutions, Vodacom must ensure its MVNO platform remains competitive in terms of technology and service offerings.”
MVNOs, he adds, are still commercially viable in SA, despite intense competition. The key drivers for their viability include niche market targeting, flexible service offerings and the ability to provide value-added services at competitive prices.
“A distinguishing advantage for Vodacom is its extensive network coverage, which is a critical factor for attracting MVNOs. The key concern will be the extent of market share loss within the postpaid base.”
One factor forcing some network operators to venture into the MVNO space is that the telecoms regulator − the Independent Communications Authority of South Africa − stipulates that winners of large spectrum blocks in the high-demand spectrum auction, such as Vodacom, are required to host MVNOs, Wills points out.
“Another factor is that MNOs are building services that go beyond traditional telecommunications in participation in the digital world. This includes expanding into areas like fintech, media and the internet of things, to diversify revenue streams amid growing competition in the telecoms sector.”
Shenge Buthelezi, managing executive of wholesale at Vodacom SA, says the operator’s competitive advantage as an MVNO enabler is that its platform provides the tool that helps the MVNO run a “telco within a telco”.
“The platform essentially creates a parallel ‘swim lane’ so that the MVNO can create its own products, rate plans, packages, bundles and even bundle depletion sequences. The approach taken by Vodacom is to provide its own platform, so that the MVNOs have an end-to-end telco service, to ensure the successful and seamless management of MVNO subscribers,” he explains.
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