MVNO boom in South Africa

South Africa’s mobile virtual network operator (MVNO) market has shown significant growth in the past three years, with many new entrants establishing meaningful operations in the rapidly growing telecommunications subsector.

In particular, established brands whose core business is not in the telecoms space are finding that the addition of an MVNO offering is helping them access portions of their customers’ digital spend that they previously did not have access to.

This is according to Andre Wills , MD at Africa Analysis , who spoke to TechCentral about the company’s recently released 2023 SA MVNO report in an interview. An MVNO is a brand, often not in telecoms, that uses an established mobile network operator’s infrastructure to provide their own mobile voice and data services to their clients.

A strong brand and an existing customer base are only two of the components required for success

“The market has changed,” said Wills. “When the MVNO market was established in Western Europe, MVNOs targeted niche markets that the traditional [mobile network operators] did not service. Nowadays, MVNOs are strategic elements in the strategies of large brands, used to expand the range of their offerings to their customer base.”

Wills cited the success of Capitec Bank through its Capitec Connect MVNO offering, as well as Standard Bank through Standard Bank Mobile. These “branded” MVNOs positioned themselves for success by taking advantage of the trust they have already established among their existing customers to gain traction in mobile. Wills said that Capitec Connect and Standard Bank Mobile each have over a million registered Sims on their platforms.

Make or break

But having a strong brand and an existing customer base are only two of the four components required for MVNO success, Wills explained. The presence or lack of strong distribution channels and a comprehensive customer support ecosystem can also make or break an MVNO.

“Pre- and post-onboarding support is the one factor that causes hardship for MVNOs in customer growth. Typically, MVNOs overlook this factor in their strategy, but it is the key differentiator between whether you grow, stagnate or decline in the market,” said Wills.

Read: FNB signs MTN as second MVNO partner

But gaining access to a customer’s digital spend is not the only benefit that branded MVNOs are reaping from using telecoms to expand their service offerings. The added value given to customers helps increase their “stickiness”, strengthening the brand profile and providing a differentiator from competitors.

From Africa Analysis’s perspective, there is room for growth in South Africa’s MVNO market, and not only for branded MVNOs; telecoms “pure plays” are increasingly popular, too. Pure-play MVNOs, like Melon Mobile, are those that do not start out with an established brand or large customer base and have telecoms services as their core business.

Africa Analysis MD Andre Wills

According to the report, MVNO Sims in use in South Africa surged to 4.3 million in 2023, a staggering 51% growth rate over 2022. The overall market is valued at R4.3-billion. The Africa Analysis report projects that the market will reach 10 million Sims by 2028, with the entry of other large retail brands potentially propelling that to 13.5 million Sims.

Read: Listed: MVNOs in South Africa – and a look at the state of the market

Africa Analysis data shows that 95% of all MVNO Sims in South Africa are hosted on the Cell C network. The remaining 4.6% are hosted on MTN. Vodacom and Telkom, however, are expected to begin hosting MVNOs in the next 18 months, said Wills. – © 2024 NewsCentral Media\

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