MVNO boom in South Africa

South Africa’s mobile virtual network operators (MVNOs) have seen significant growth in 2024, with telecommunications services even being highlighted as the country’s most popular banking product, according to net sentiment.

MVNOs are cellular service providers that don’t own network infrastructure and instead buy wholesale access from a mobile network operator to provide connectivity to their subscribers.

Cell C is South Africa’s largest enabler of MVNOs, even though it no longer operates its own radio access network. It is facing increased competition from MTN and Vodacom in this market segment.

Given an influx of new entrants, the market has snowballed over the past few years, with total subscribers almost doubling from 2.5 million in 2022 to just under 5 million in 2024, according to a BMIT report.

This is expected to grow between 11 million and 12 million by 2029.

The largest MVNO in the country by total subscribers is Capitec Connect, which saw its client base increase by 1.4 million and revenue grow by 137% during 2024.

This is according to Capitec Connect head Dalene Steyn, who told MyBroadband that “during this period, we expanded our value proposition to include more attractive data bundles, airtime advances, and a better client experience on our App.”

When asked about the MVNO’s plans for 2025, Steyn said that it will continue to innovate and produce new value offerings based on clients’ needs. One of these offerings, it says, will be eSIMs.

MVNOs have become a common offering for banks, with South African customers finding them to be their favourite banking product.

DataEQ’s South African Banking Sentiment Index for 2024, based on over three million public social media posts mentioning eight banks, found that telecommunications products had the highest net sentiment among financial offerings.

The report said that most of the conversation was driven by Capitec Connect.

The oldest bank-run MVNO in South Africa is FNB Connect.

FNB Connect launched its MVNO in 2015, initially roaming on Cell C’s network and adding MTN as a roaming partner in June 2023.

By June 2024, FNB Connect had 958,000 subscribers, generating R18.6 billion in revenue in the bank’s 2024 financial year.

“We have observed significant growth in our MVNO offering with data usage up by 64% in the last year,” FNB Connect CEO Sashin Sookroo told MyBroadband.

“This is due to upward customer usage and the shift of Cell C’s network to MTN, which has increased our coverage and improved network experience for our customers.”

Sookroo says that 2025 will see a number of major enhancements for FNB Connect customers. These include the MVNO’s eSIM offering, which allows new customers to join in under three minutes.

All of FNB Connect’s SIMs will also have free unlimited WhatsApp.

The bank’s loyalty programme will also become integrated with FNB Connect.

Customers will earn 15% back in eBucks from their spending on the MVNO and get up to 100% back in eBucks on a Connect device.

“Ultimately, we want to continue giving our customers more choice and great value through our wide range of deals and flexible options,” says Sookroo.

“It’s encouraging to see our high growth in data usage, which is a testament to customers choosing to use FNB Connect.”

The BMIT 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.

It also argues that shared-value business models will allow MVNOs to focus on improving data and Internet access usage across all customer segments.

“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.”