Before coming to the decision to shut down mobile service provider Autopage, the business’ management considered a mobile virtual network operator model.
Mobile virtual network operators, or MVNOs, ride on existing networks to provide phone, messaging and internet services.
South Africa has seen a slew of MVNO launches this year with the likes of me&you mobile and First National Bank entering the space by riding on Cell C’s network.
Meanwhile, in July last year, retailer Mr Price also joined the MVNO space along with already existing Virgin Mobile.
Autopage, meanwhile, is currently shutting down its business because of issues such as ongoing mobile termination rates and continued industry and consumer deflationary pressures, according to a statement from the Altron Group earlier this year.
“So, before we went down this road, obviously in terms of good management you look at every aspect. You look at a Carphone Warehouse model of hybrid retail, you look at a quasi-retail owned franchise model. We looked at the MVNO model,” Boyd Chislett, the managing director of Altech Autopage told Fin24.
“I think the MVNO model is probably more beneficial for an MVNE (mobile virtual network enabler) than it is for an MVNO,” Chislett said.
A MVNE provides network infrastructure and services to enable MVNOs.
Chislett then went to say that he thought an MVNO model “in terms of a large go-to market model” is something that won’t work in South Africa, but that a focused approach is rather needed.
“I think doing it as Mr Price have done, or FNB, targeting core-select target market audience where you have an ongoing relationship and you providing that customer with an interlinked benefit with your banking, your cellphone, your laptop. Mr Price with credit, with clothing and the like. I think that’s the only way it works,” he said.
Chislett also said that returns are higher using a service provider model rather than that of MVNOs.
“So, let me give you an example, if we went into a full MVNO model as Autopage, and we were to look at the returns we generated under a SP model – not a chance. You’re just not going to see the returns you did under the traditional model,” he said.
“I don’t want to have aspersions on the MVNO model but I don’t think people are going to see massive growth. I don’t think you’re going to see big shareholder return. But it’s a nice-to-have when you’ve got a strong brand and then you’ve got some capital to throw around,” said Chislett.
In an interview with Fin24, Chislett said that Autopage could shut down at the end of February 2016 if approvals are given from the Competition Commission and the Competition Tribunal.