MVNOs have had mixed success around the globe. The MVNO market is still nascent in Africa, yet some new MVNOs have launched with a degree of success.

MVNO in Africa: Landscape, Challenges and Opportunities

Presented at the MVNO Conference in Cape Town on 1 Oct 2012 by Michael Greening

In 2012, Cartesian conducted research and analysis to understand the state, current and future trends, and likely evolution of the MVNO market.

SCOPE OF THOUGHT STUDY:

  • Thought Leadership: Cartesian drew on its knowledge base and experience from over 40 MVNO projects. We hypothesized trends and validated the research
  • Interviews: Cartesian interviewed key individuals within the MVNO space, including MVNOs, MNO wholesale teams and MVNEs.
  • Secondary Research: We conducted secondary web research to capture details on recent MVNO launces, failures and success stories. 

Outputs:

  • The research and analysis was conducted throughout 2012
  • Findings were presented at the MVNO Conference in Cape Town on 1 October 2012
  • This presentation contains the results of our analysis of Africa, and focuses on 10 key trends in MVNO - five challenges and five opportunities present in the market

Through this thought study, we address these key questions:

  • What is the state of the MVNO market in Africa today?
  • What are the main barriers, challenges and opportunities?
  • What should be the key considerations for MNOs?
  • What are the critical success factors for an MVNO launch? 

MVNO MARKET LANDSCAPE

MVNO Market Context

Globally many MVNOs have launched in the last few years to serve both mass and niche market segments.

Select MVNO Examples

MVNO Market Share Worldwide

The MVNO model is established and mature in a variety of markets worldwide.

MVNO Market Share Worldwide

Sources: Cartesian, Nereo, company websites and press releases

African Activity

The MVNO market in Africa is still in its infancy - however several MVNOs have rolled out or announced launch over the last five years with some degree of success.

African MVNOs

*Note: Senegal and Cameroon has MVNOs operating as sub-brand and resellers respectively, however a full MVNO license is still not on offer from the regulators.

Sources: PrepaidMVNO.com, TeleGeophrany, MVNODirectory.com, Company Releases, Cartesian

Trends Impacting MVNO

We see major challenges and opportunities for the launch of MVNOs in Africa.

Trends Impacting MVNO

Barriers

Regulatory issues, low ARPUs and high interconnect rates are viewed as the main barriers to launch MVNO in Africa:

  • Low ARPU is considered a significant barrier to MVNO in Africa
  • Regulatory issues are also perceived to be holding back the emergence of MVNO
  • High interconnect rates can prevent MVNOs from offering competitive off-net calling, especially as call volumes are unpredictable
  • Resistance by MNOs may be due to competing strategic priorities or simple fear over competition

 

Barriers to Launch of MVNO in Africa

Source: African Telecoms News Survey, Blycroft 2012

Price Volatility

Price volatility is also a big problem for MVNOs, which typically do not have the financial reserves to engage in price wars.

  • Prices have fallen by as much as 26% per year in some markets
  • MVNO margins are usually very finely balanced - a decrease in revenue of as little as 12% (Kenya) can completely destroy the business case
  • One way an MVNO can protect against this is to have wholesale prices linked to a retail price index in the contract
  • Nevertheless, MVNOs do no typically have the financial reserves to engage in price wars
  • Some level of pricing stability will be required for long term success of MVNO

Price Changes in Selected Africa Markets 2007-2011

Source: GSMA, Cartesian

MNO CONSIDERATIONS

MVNO Strategy Development

MNOs need to assess the potential risk (and wholesale reward) from MVNOs entering the market.

MVNO Strategy Development

KEY SUCCESS FACTORS 

When considering investing, MVNO entrants in Africa should be realistic about the prospects of success and be aware of the key success factors.

MVNO Investment KSFs:

  1. Ensure regulatory approval/sign-off before committing significant investment
  2. Develop a compelling MNO pitch to increase chances of securing a deal
  3. Develop points of differentiation that cannot easily be replicated (e.g. customer service)
  4. Understanding mobile economics to negotiate a win-win commercial contract
  5. Build in pricing re-negotiation and exit clauses into the contract
  6. Keep the operations lean (minimize the cost base)
  7. Avoid high customer acquisition costs (e.g. subsidies, giveaways, etc.)
  8. Do not over invest in CAPEX intensive assets and ensure pay-as-you-grow payment models are in place for MVNE partners
  9. Use existing and/or innovative distribution channels 

 

Enhance your MVNO business

Over the last three decades, Cartesian has worked on over 50 MVNO-related projects throughout the US, Europe, Middle East and Asia.

We provide advisory, project management and managed services for MNOs, MVNOs, MVNEs and MVNAs. Our MVNO-related experience includes:

  • MVNE strategy and proposition development
  • Platform requirements set-up for new MVNOs and sub-brands
  • Business assurance solution build and management
  • Vendor selection for MVNO and MNOs looking to engage an MVNE
  • MVNO strategy development and launch support

> Learn more about Cartesian's extensive MVNO Services