South African MVNOs to double market share in 2–3 years

Mobile virtual network operators (MVNOs) will double their mobile services market share within the next 2–3 years, with industry participants expecting around 10–12% of mobile subscribers or more.

This is according to BMIT CEO Christopher Geerdts, who said his views were based on industry-wide consultation for their recently-released 2022 MVNO Report.

The report is sub-titled “The Cumulative Effect” due to the combined impact MVNOs are expected to have on the market.

Examples of MVNOs include Afrihost Air Mobile, FNB Connect, Capitec Connect, Standard Bank Mobile, Foschini Group’s TFG Connect, Mr P Mobile, Shoprite K’nect Mobile, PnP Mobile, Lyca Mobile, and SmartMobile.

BMIT said that although MVNOs still represent a relatively thin slice of the market, the entry of large, mass-market players is significant.

Geerdts believes the timing is right for MVNOs, even as the economy falters, because a range of growth drivers have now come together.

He said large banks and retailers, with their large subscriber bases and strong brand pull, have entered the market and introduced crossover products to add customer value.

“We live in exciting times, when financial operators are becoming lifestyle companies, retailers are becoming banks, and mobile operators are becoming digital technology companies,” he said.

Johan Nel, primary author of the BMIT MVNO Report, believes that the combination of fundamental shifts happening in the mobile, retail, banking, IT and media sectors, means that the MVNO market is sitting at an inflection point.

Nel said it would be an integral part of new, digitally driven, competitive frontiers across the traditional mobile industry boundaries.

“We are seeing next-generation business models and strategic partnerships kicking into full gear, underscored by the rapid uptake of fintech by the mobile operators, banks and the retailers,” he said.

“It is clear that several of the existing and new MVNOs are in a strong position to grow market share and make communications and devices more affordable.”

Nel said this is due to their respective market sizes and ability to attract a share of customer spending.

MVNO business models can also play a strategic role for big brand companies, he said.

Although most big-brand MVNOs are currently focused on below-the-line promotion initiatives, Nel regards these early approaches as learning curves that will evolve towards more integrated value propositions.

According to Nel, mobile operators have realised this and shifted to viewing MVNOs as strategic partners rather than as a disruptive element in the market.

Cell C, which for many years was the only operator to service MVNOs, currently has around 75% of MVNO subscriber share.

MTN, which only recently opened its network to MVNOs, has already gained 25%.

One of the reasons for this is that MTN has dominated the fixed-mobile data market.

It has partnered with Afrihost, Axxess, DStv Mobile, and other large ISPs, leveraging fixed mobile as a gap-closing technology to complement fibre network rollouts.

Nel said this fast-growing market is expected to gain further momentum as 5G coverage expands.

MTN has also partnered with Pick n Pay and TFG, as big brands with strong distribution leverage.

“The imminent entry of Vodacom will result in a race between the mobile operators to cement long-term focused strategic partnerships, which will also extend into enterprise and SMME market segments, as well as ICT partners,” BMIT predicted.

“In the early days, MVNOs relied heavily on MVNO enablers (known as MVNEs) to provide the technical platform and commercial services — notably MVN-X and Frei,” stated BMIT.

“However, as mobile operators start to offer these services directly and large MVNOs rely on in-house capability, these enablers will have to innovate to stay relevant.”

BMIT said one way they are doing this is by offering fintech and other digital services to MVNOs.

BMIT said it studied several countries where the mobile market has evolved towards excessive MVNO players and countries where the number of MVNOs has been low.

A few countries have stabilised at around 10 to 15 strong players, and Nel believes this is the most likely scenario for the MVNO market in South Africa.

“There are currently a few dozens MVNOs registered in our market, with more launches imminent, but the consolidation has already started, with the acquisition of a few of the smaller players,” he said.

Now read: Vodacom network open to MVNOs

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South African MVNOs to double market share in 2–3 years