BMIT sees MVNOs as the primary drivers of new mobile market growth.

BMIT’s latest MVNO Report, entitled “Sum of the Parts” comes at a time when MVNO’s are not only seeing renewed interest from across the industry, but emerging as the primary engines of market growth. The Report is based on extensive research and interaction with key industry players and outlines the key role that MVNOs are playing in shaping the future of mobile in South Africa.

Christopher Geerdts, Managing Director of BMIT, notes that the MVNO market has almost doubled in size in the last two years, well in line with their predictions in 2022, which were considered bold at the time. BMIT’s subscriber estimates, shown in the chart above, show the market passing its inflection point and now set for ongoing growth, whilst evolving into a healthy, vibrant, multi-dimensional, value adding contributor to mobile operators as well as big brand companies and, ultimately, to customers.

Johan Nel, Senior Management Consultant for BMIT and lead author of the report, expects that MVNO market growth will continue to outpace mobile operator market growth for some time to come. Nel expects the market to grow from around 4.8 million active subscribers at the end of this year, to 11-12 million by 2029. This represents an impressive compounded annual growth rate (CAGR) of 18%. Longer term, whether the MVNO market will go beyond 10% of market share, is quite possible, but depends on a number of factors, considered in the Report.

Nel expects the MVNO market to continue to be dominated by Cell C as the leading mobile operator for the hosting of MVNOs, while from a segment perspective, the banks and financial institutions will continue to dominate, with Old Mutual recently announcing its MVNO ambitions.

With Telkom now offering wholesale MVNO services, and after Vodacom’s long-anticipated entry into the market, healthy competition has emerged at the wholesale level, which will help drive this market growth, MTN has joined Cell C in taking on a steady pipeline of new MVNOs. There are currently 23 MVNOs active in the country, with new announcements set to continue. Many MVNOs have switched to using a different mobile operator or are using multiple operators, which Cell C has bolstered its network service via its Multi Operator Core Network (MOCN) initiative.

This suggests that the MVNO business model has been proven and has now started to attract the necessary level of venture capital and institutional investment needed to drive sustainable growth and competition needed for the market to remain healthy.

An important additional development is the emerging enablement of Embedded SIMs (ESIMs). South Africans are used to using multiple SIM to take advantage of different offers and services, so the ability to subscribe to a new service provider and to start using new services instantly and seamlessly, is a compelling alternative to the hurdle of using a physical SIM card, particularly for digital savvy customers. From a device point of view, this reduces the cost and environmental impact of traditional SIM card distribution.

However, the MVNO market is not simply about subscriber numbers, as the value add of MVNEs and MVNOs is significantly more than that. Moreover, MVNOs are no longer just opportunistic entrepreneurs with price arbitrage driven business models. Traditional MVNOs who tried to attract customers with lower prices, simply did not survive, or had to adapt.

Rather, the MVNO market in South Africa has evolved to an embedded level of sustainability, mainly because the focus now has become building sustainable businesses from existing customer bases, that inherently enables better value for the customers of big brand companies. In turn, this also drives retention for its core business, with banking being a good example. Digital enablement, customer engagement, and brand loyalty are increasingly becoming key drivers for big brand companies to add MVNO capability.

Banking MVNOs are therefore effectively competing among themselves, as well as competing with mobile operators, but in a new way and with value propositions that are inherently different than, for example, an ISP centric MVNO such as Afrihost. 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. It also has segment-specific context.” says Nel.