Good news for MVNOs in South Africa

Mobile virtual network operators (MVNO) are seeing renewed interest in South Africa and are emerging as the primary driving factor of the country’s mobile market growth.

This is according to the latest MVNO report from research and advisory firm BMIT, which highlights MVNOs’ role in South Africa’s mobile market.

The report shows MVNO subscribers have almost doubled from just over 2.5 million to under 5 million since 2022.

According to the report’s lead author, Johan Nel, this number is expected to grow to between 11 million and 12 million by 2029, yielding a compound annual growth rate of 18% and outpacing the mobile operator market.

Nel said he expects Cell C to continue to dominate the MVNO market, while banks and financial institutions, such as FNB and Capitec, are expected to dominate from a segment perspective.

With Telkom and Vodacom’s entry into the MVNO wholesale service market, healthy competition has emerged, which will help to drive market growth, according to the report.

This is evident because many of the 23 MVNOs have switched operators or have adopted a multi-operator strategy.

The report argued that the increased investment and venture capital in the market, with Cell C bolstering its service via its Multi Operator Core Network (MOCN) initiative, suggests that the MVNO business model has been proven.

Embedded SIMs (eSIMs) were also highlighted as an essential development for market growth as they offer the opportunity to start using new services immediately and reduce the cost of traditional SIM card distribution.

The report argued that the MVNO market has shifted away from solely focusing on subscriber numbers and has turned its attention to building sustainable businesses from existing customer bases, driving retention for its core business.

“Banking MVNOs are therefore effectively competing among themselves, as well as competing with mobile operators,” said Nel.

“These are wholly new market dynamics and it is quite exciting to see this evolving within the market structure. Measuring customer value now goes way beyond merely comparing price per gigabyte.”

The report noted that average revenue per user (ARPU) levels are set to increase due to a focus on what it has identified as bank-centric, retail-centric, and Internet service provider (ISP)-centric MVNOs.

This attracts higher ARPU customers who are switching from traditional mobile networks.

MVNOs are also beginning to zone in on the small and medium enterprise business segments.

“The evolution of more integrated, customer value enabling products will also drive better retention for MVNOs, further underpinning and supporting ARPU growth,” the report said.

Nel believes that MVNOs’ focus will now turn to improving data and Internet access usage across all customer segments, enabled by shared-value business models.

“People tend to think that MVNOs are merely disruptive competitors to the mobile operators,” said BMIT managing director Christopher Geerdts.

“While they do compete, and quite aggressively at that, one must also think of MVNOs as strategic partnerships intended to better leverage the spectrum and network infrastructure that the operators have built.”