Mobile Virtual Network Operators (MVNOs) have become key players in the telecommunications industry, especially in Africa, a continent where mobile technology is at the forefront. By leveraging existing infrastructure from Mobile Network Operators (MNOs). MVNOs, leveraging existing wireless network infrastructure by purchasing network capacity from Mobile Network Operators (MNOs), have rapidly gained traction in the market. Their business model, characterized by passing down cost savings to consumers, has propelled them to the forefront of the telecommunications industry.
As of 2022, there were 129 million MVNO subscriptions worldwide, with Africa contributing 7 million, accounting for 5.4% of the global market. However, in Africa, MVNOs represented only 0.6% of total mobile subscriptions in 2022, considerably lower than the global average of 1.3%. Despite this, certain countries like Senegal have witnessed higher MVNO penetration, reaching nearly 14%. Looking ahead, the MVNO market is expected to continue its growth trajectory, reaching a size of US$91.68 billion by 2028, with a CAGR of 6.75% from 2023 to 2028.
While MVNOs have seen significant growth globally, penetrating new markets, they face specific challenges when entering regions like Africa.
MVNOs are shaking up the African telecom landscape, offering competitive rates and innovative services. However, despite their potential, Africa's vast and diverse geography presents unique challenges for MVNOs.
Here's a closer look at the limitations they need to overcome:
· Regulatory Barriers
African regulations can be complex and vary greatly from country to country, posing a significant challenge for MVNOs looking to expand into new markets. Regulatory frameworks in certain African countries may not fully support or accommodate MVNOs, making it challenging for them to enter the market or operate effectively. Moreover, some regulations may favor Mobile Network Operators (MNOs), creating an uneven playing field for MVNOs. Scaling these regulatory challenges is essential for MVNOs to thrive in the African market and requires an understanding of local regulations and strategic planning to ensure compliance while pursuing growth opportunities.
· MVNO-MNO Landscape Challenges
The landscape of MVNO-MNO competition presents numerous challenges for MVNOs. From navigating market competition and customer acquisition to negotiating partnerships and overcoming dependency on MNOs, MVNOs must overcome various obstacles to establish a foothold in the telecommunications industry.
At the forefront is the intense market competition and saturation, where established MNOs often dominate, making it difficult for MVNOs to carve out a niche and attract customers. This struggle is compounded by the challenge of customer acquisition and retention, particularly in regions where brand loyalty to existing MNOs is strong. To compete effectively, MVNOs must develop potent marketing strategies and compelling value propositions to differentiate themselves and capture market share amidst intense competition from both established MNOs and other MVNOs.
Another significant limitation is building partnerships and negotiations with MNOs. MVNOs are often at a disadvantage due to their dependency on MNOs for network access and infrastructure. MVNOs depend on these agreements and this reliance can create vulnerabilities and limit the MVNOs’ ability to control service quality and pricing. Moreover, MNOs control the physical infrastructure, giving them significant leverage in negotiations. As a result, MVNOs may face difficulties in obtaining fair deals that enable them to compete.
· Infrastructure Restrictions
Infrastructure limitations present significant challenges for MVNOs operating in many regions of Africa. Despite the growing connectivity in Sub-Saharan Africa, there remains a substantial gap in reliable network coverage and internet connectivity, hindering MVNOs' ability to deliver quality services to customers.
This usage gap is attributed to factors such as affordability and digital skills, areas where MVNOs have the agility and flexibility to make a difference. Moreover, traditional MNOs are often hesitant to invest in the low average revenue per user (ARPU) rural market segment due to high-cost customer acquisition models, further exacerbating the infrastructure limitations. Despite the available coverage, the lack of services in these underserved markets presents a notable opportunity for MVNOs to capture mobile subscribers.
· Technological Adoption
In Africa, technological adoption poses a significant challenge for MVNOs, particularly with emerging technologies like eSIM. While eSIM offers enticing possibilities, its adoption presents a double-edged sword.
Many mobile users in Africa are unfamiliar with eSIM and may hesitate to embrace a technology they don't fully understand. MVNOs must invest in consumer education to highlight the benefits of eSIM, such as seamless device switching, improved security, and simplified plans. This requires targeted marketing campaigns, clear customer support resources, and even in-store demonstrations.
Additionally, integrating eSIM technology with existing systems presents complex challenges, especially for MVNOs with limited technical resources. Billing integration, customer onboarding revamps, and device management complexities all demand significant investments in system updates, process redesign, and device compatibility. These technical limitations are particularly daunting for smaller MVNOs, yet overcoming them is essential to maintaining competitiveness in Africa’s evolving mobile market.
To know that these are practical challenges, I recently had the chance to attend a webinar, and it offered some insightful information on the real-world challenges facing African MVNOs. Here are a few key takeaways that stuck with me:
MNO Hesitation on eSIM: MVNOs are facing resistance from MNOs regarding eSIM adoption, particularly in M2M (machine-to-machine) applications. MNOs are concerned that eSIM could make it easier for customers to switch providers, leading to increased churn.
MNO Integration Hurdles: Integrating eSIM platforms with existing MNO systems can be tricky, especially for M2M which requires a higher level of cooperation from MNOs.
Limited MNO Support: Securing adequate support from MNO partners can be a struggle for MVNOs. This includes challenges in obtaining access to network infrastructure, competitive pricing, and technical assistance.
Navigating the Regulatory Space: Regulatory compliance across Africa presents a complex hurdle for MVNOs. Dealing with licensing, spectrum allocation, and data protection regulations in various jurisdictions can be time-consuming and resource-intensive.
Technical Integration: Integrating eSIM solutions smoothly with existing MVNO infrastructure and business models requires significant technical expertise and resources.
Overcoming the challenges encountered by MVNOs in Africa demands a strategic approach centered on agility and adaptability. As the landscape of the mobile market continues to evolve, MVNOs must remain agile to capitalize on emerging opportunities and address shifting consumer demands.
Moreover, the rapid deployment of IoT technologies presents a promising avenue for MVNOs to overcome technical hurdles associated with the adoption of eSIM technology. Through streamlined device management, simplified onboarding processes, and seamless integration with existing systems, MVNOs can enhance their operational capabilities and drive customer satisfaction.
Furthermore, regulatory support and a conducive operating environment are imperative for the sustained success of MVNOs in Africa. Governments and regulatory bodies play a pivotal role in fostering a level playing field and promoting fair competition within the market. By enacting modern and equitable regulations, authorities can stimulate innovation and empower MVNOs to thrive in a dynamic ecosystem. For instance, the Nigerian government announced plans to grant licenses to MVNOs, breaking down barriers to entry and fostering a more open telecommunications landscape. This regulatory reform holds the potential to catalyze increased investment, stimulate market dynamism, and enhance consumer choice within Nigeria's mobile market.
As Africa progresses towards greater digital inclusion and connectivity, MVNOs stand to play a transformative role in driving socio-economic development across the continent. As the relationship dynamics between MNOs and MVNOs continue to evolve, consumers ultimately emerge as the primary beneficiaries of a more inclusive, connected, and vibrant mobile ecosystem. Thus, the collaborative efforts of industry players and regulatory bodies are paramount in unlocking the full potential of MVNOs and driving sustainable progress across Africa's telecommunications landscape.
Source: https://www.techafricanews.com/2024/03/07/a-look-into-the-challenges-african-mvnos-face-can-they-compete/
