Analysis

MVNOs are coming!

 

 

By Elvis Eromosele

Barring any unforeseen, the Nigerian Communication Commission (NCC) will grant licenses to companies to operate as Mobile Virtual Network Operators (MVNOs) before the end of this year. The telecom regulator insists that this is part of strategic effort to ensure the provision of qualitative and efficient telecommunications services throughout the country.

 

Professor Umar Garba Danbatta, Executive Vice-Chairman and Chief Executive Officer (EVC/CEO), NCC, revealed this at the Business Remarks Telecom Sector Sustainability Forum (TSSF) in Lagos this week with the theme Creating Awareness and Ensuring Sustainability of Mobile Virtual Network Operators (MVNOs) in Nigeria’s 5G Ecosystem”.

 

The session brough to mind an article that I wrote and posted on Facebook in 2014. I think it is still relevant today, now that the MVNOs are truly coming:

 

MVNOs are coming!

 

Variety, they say, is the spice of life. Imagine 10 service providers each knocking on your door and offering varying bundles (basic minutes, SMS and data), top-of-the-range content and innovative services all at rock-bottom prices. Ha, the life!

 

This might look like a dream right now but if official sources are to be believed it may happen sooner rather than later. Some swear this is where we are heading with the imminent licensing of mobile virtual network operators (MVNOs) in the wings. Customers can thus confidently look forward to a season of more predictable monthly bills and on-average lower costs.

 

Thus, after a dozen years of what has been described as a telecommunications revolution, we may well be heading into another revolution. This time: A Telecommunications SERVICES revolution.

 

But suppose one was to ask: what are MVNOs? These are communications services providers that do not own the wireless network infrastructure over which they provide services to customers.

Or put another way, MVNO operators are companies that will lease capacity from the mobile network, charge their consumers to use the services they provide and pay the operator to use their network and then keep the difference.

 

Sounds simple enough, but how would it work? Experts say an MVNO (prospective MVNO, if you like) enters into a business agreement with a mobile network operator to obtain bulk access to network services at wholesale rates, and then sets retail prices independently.

 

MVNO can be either convenient or no-frills. That is they may simply target existing and loyal customer base or offer a value proposition based on low-cost and basic services (e.g. basically minutes and SMS bundle, online sales and absence of handset subsidies).

 

Another valid question at this point is why MVNO? Any keen observer would by now be aware that the mobile telecom market in Nigeria is fast approaching maturity, with penetration rates inching closer to the 100 per cent mark. The challenge at this point is usually how to 1. Improve competition 2.

Ensure full capacity utilization and 3. Ensure customers have options – viable options.

 

Of course, the Nigeria Communications Commission (NCC) would not only have to license these operators but equally create what is known as enabling environment for them to thrive including but not limited to reduced license/operating fees amongst others.

 

Naturally, the NCC would realize money through taxes to be received from MVNO operators. This is a win-win scenario for the NCC, the mobile operators and the subscribers.

 

Globally, the emergence of the MVNO model in various markets was usually precipitated by varied local factors. In some markets, the MVNO concept came about as the result of regulatory intervention. Regulators wished to force established mobile network operators to offer wholesale access to their network to ensure robust competition to benefit the consumer. In other markets, mobile network operators responded to market opportunities to offer their excess capacity at wholesale rates to other entities to bring in incremental revenue

on what would otherwise be unused network capacity. Mobile network operators reason that savings from not providing customer service and marketing would offset any revenue lost by selling network access at wholesale rates.

 

These all make sense when one considers that an MVNO incurs no significant capital expenditure on spectrum and infrastructure and does not have the time-consuming task of building out extensive radio infrastructure.

 

Expectedly, it would not necessarily be all rosy. Like all good businesses for MVNOs to succeed they need to have a worthy story, a source of differentiation and continually strive to secure a mutually beneficial and attractive wholesale rate. What’s more, they should carefully select their vendors and think of a flexible business model that would enable them to keep pace with the rapidly changing mobile industry. They would also clearly need to have a clear technology roadmap and be prepared to follow current trends, keeping pace with technology developments while anticipating future trends.

It goes without saying that MVNOs have got to choose the targeted niches carefully.

 

This could be based on the segments already cover with an eye on differentiating with tailor-made services.

 

The truth is that the MVNO sector has unwittingly become a permanent fixture of the wireless space globally. Due to intense pressure to consolidate and rationalize the network provider side of the industry, MVNOS represent an appropriate way to lower the barriers to entry while enjoying economies of scale. This is probably why regulators around the world now also look at MVNOs as service-based players capable of building competition by offering consumers a choice of offers and lower prices. Indeed Wireless Intelligence reports that there are now about 812 MVNOS across the globe.

 

As an aside, those who should know insist Emirates Telecommunications Corporation (Etisalat), the United Arab Emirates mobile cellular operator picked by the country’s Mubadala Development Company to operate its $400 million telecoms license in Nigeria had initially planned to operate as the nation’s first Virtual Mobile Network Operator (VMNO) to speed up on its entry into the market. It however quickly jettisoned the idea due to what experts refer to as a glaring lack of enabling environment.

 

Today, sadly, this glaring lack of enabling environment persists. Thus, while the telcos would likely welcome the emergence of MVNOs as a new way to increase network traffic at a lower cost and open up new revenue streams for alliance partners, it may prove especially difficult locally with large-scale network congestion issues currently being faced by existing players.

 

Thankfully a lot of investment is going into the ground to boost network capacity by all existing telecommunications services providers. MTN recently completed a network modernization and upgrade project while Globacom just commenced a similar initiative. In fact, all operators are harping on investment to improve capacity.

 

MVNOs are really more than “me too” companies, they can indeed truly add value to the nation’s telecommunications industry. They boost capacity utilization and provide customers with much-needed alternatives. Experts insist that MVNOs are the next phase of growth for the telecommunications industry.

 

The consensus is that another factor fueling the rise of MVNOs is the emergence of social media. MVNOS benefit from the “shareability” that online social platforms provide. Thus by creating a socially-driven marketing campaign via Facebook, Twitter and YouTube, operators can engage with consumers and encourage them to share the MVNO services. With over 11 million social media activists, Nigeria may well be MVNOs heaven.

 

We better get ready then as MVNOs are indeed coming!

Elvis Eromosele, a Corporate Communication professional and public affairs analyst lives in Lagos.

 

 

 

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