BMIT has recently published its 2022 MVNO Report, sub-titled ‘The Cumulative Effect’, due to the combined impact MVNOs are expected to have on the market. This impact comes from what BMIT sees as the embedded leverage of the retailer and banking MVNOs, which comes from their brand power, their wallet share and their distribution capability.  Johan Nel, primary author of the BMIT MVNO Report, believes that the combination of fundamental shifts happening rapidly in the mobile, retail, banking, IT and media sectors, means that the MVNO market is sitting at an inflection point and will 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 says, “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”. This is due to their respective market sizes and ability to attract a share of customer spending, MVNO business models can, in turn, play a strategic role for big brand companies. The diagram below clearly shows the relative sizes of the markets in which MVNOs are playing, and what partnerships and enablers can unlock these markets:

Size of MVNO markets

Christopher Geerdts, BMIT’s CEO, believes that the timing is now right for MVNOs, even as the economy falters, because a range of growth drivers have now come together: Large banks and retailers, with their large subscriber bases and strong brand pull, have entered the market and introduced exciting crossover products to add greater value for customers. “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 says.

MVNOs’s still only represent a relatively thin slice of the market, but the entry of large, mass-market players is significant. Based on industry-wide consultation, Geerdts believes MVNOs will double their mobile services market share within the next 2-3 years, with industry participants expecting around 10-12% of mobile subscribers, if not more, going forward.

Most of the big brand MVNOs are currently focused on below-the-line promotion initiatives, However, Nel regards these early approaches as learning curves that will rapidly evolve towards more integrated value propositions and closer alignment with their own brands, segments, distribution footprints and loyalty programmes.

Mobile operators have realised this and made a fundamental shift 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, while MTN, which only opened its network to MVNOs recently, has already gained 25%. One of the reasons for this is that MTN has dominated the ‘fixed-mobile’ data market, partnering with Afrihost, Axxess, DSTV Mobile, and other large ISPs, leveraging fixed mobile as a gap-closing technology to complement fibre network rollouts. 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.

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

BMIT has studied several countries where the mobile market has evolved towards excessive numbers of MVNO players, as well as countries where the number of MVNOs have been low. A few countries have stabilised at around 10 to 15 strong players and Nel believes that 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.

Ultimately, BMIT believes that the mobile operators and MVNOs will be working together more closely in strategic partnerships. This will create leverage to unlock more value more rapidly and more sustainably, than what would have been achievable by individual players.

The combined impact of these partnerships will be substantial and MVNOs will become embedded in the distribution of mobile services. That is why BMIT captioned the MVNO Report “The Cumulative Effect”.

References to this report in the media:

TechCentral: MVNOs to grab at least 10% of SA’s mobile market

ITWeb: New players take on Cell C in SA’s MVNO race