So if Africa is the great emerging telecoms market – with some pretty mature markets in terms of technologies (3G, HSPDA, etc); services (notably Safaricom’s M-PESA and mobile money services now available) and high Mobile penetrations (South Africa and along the North African coast) – why have MVNOs not yet found favour?
Perhaps one of the most interesting cases is Virgin Mobile in South Africa: initially allied with Cell C – the smallest of the GSM operators in the country – Cell C has now dumped its shareholding in the operation, although still providing the network access.
If there is anything to be learned from this tale it is that a strong global brand in itself is not enough to automatically win share are garner new subscribers. Given that the failed Virgin operation in Singapore and the current South African business share many characteristics, it is perhaps surprising that Virgin Mobile is still slugging it out in South Africa.
The MVNO concept in the African market will largely benefit from its novelty and represents an important approach in helping operators establish products and services within unreached population segments, the end result of which is increased penetration.
As mobile telecommunication has proved a much needed “accelerator” to socio-economic development, MVNOs, when well-explained are likely to find a hearing with MNOs and Governments alike. Indeed, the sharing of infrastructure (a fundamental of the MVNO concept) will find favour with many African regulators who despair when base-stations are doubled or tripled at some popular location, whilst large swathes of the nation remain completely without any form of communication infrastructure.
It also ticks the regulatory box for increased competition, without resources being squandered on expensive duplicated networks. The prolonged gestation of the Glo network in Ghana bears testament to this particular problem. Airtel – right from the start when it acquired Zain in early 2010 – was talking about setting up or working with tower infrastructure companies (see AfricaNext’s Tower Co-Location Report).
However, for an MVNO entry to produce viable business outcomes, a conscientious due diligence process is indispensable. Huge, pan-African MNOs dominate market share in a number of countries and their influence ought not to be discounted. An irony here is that according to a recent issue of ‘Africa & Middle East Telecom-Week’, Libya was one of the highest nations ranked by mobile penetration at the end of 2010 – one suspects that after NATO has finished ‘remodelling’ the infrastructure, there will be few workable base stations and large swathes of the coastal region without service of any sort.
Gabon, Tunisia, Botswana, South Africa and Morocco are all reported to be over the 100% mobile penetration mark. It is as important identifying the right MVNO-MNO fit of ideas as it is to have the MVNO ideas themselves (however innovative).
The overall record with MNO setups has reflected good market uptake of their services. The MVNO may, at first, face suspicion from established MNOs for whom a loyal customer base, amidst raging price wars that have led to decreased ARPU, is critical to maintaining profitability. Keeping that in mind, the MVNO investor will realize price-led/retail MVNO ideas may encounter more resistance from MNOs unless a strong segmentation business plan can be articulated with a view to proving increased “proxy revenues” through bulk/wholesale purchases of MNO air-time by the MVNO.
Africa has surpassed 50% mobile user penetration. However, in most countries, a large portion of the population (roughly 50 percent) is below 19 and therefore has little or no “purchasing power”, representing a limitation towards full market penetration. The youth market segment represents a latent subscriber base in every Sub Saharan country. The potential for MVNOs exists in both in this latent market and the mainstream body of users among who segmentation has not been fully realized.
A new report from MindCommerce – ‘Africa MVNO Market and Competitive Analysis 2011’ - sets a context for potential MVNO operations and analyzes potential opportunities and limitations within the African market. It also presents a regulatory framework “barometer” for the following African countries; Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, Sudan, Swaziland, Tanzania, Togo, Tunisia, Uganda, Zambia and Zimbabwe.
There was a jolly useful summary of technologies by Country which MindCommerce have allowed me to reproduce from the report – just follow the link.
I have also been allowed to borrow a neat summary of successes and failures across Europe, Asia, Africa and the Middle East.
The “barometer” indicates; the National Regulatory Authority name and website, the current legislation on MVNOs, mobile penetration and subscriber base statistics. In some case, particular recommendations are made about the suitability of a market for MVNO operations.
Definitions of various MVNO models and their attendant degrees of risk are assessed. Four currently-operational African MVNOs (Virgin Mobile South Africa, Econet, Touba Mobile and Red Bull) are examined to determine their niche markets, “selling points” and emerging challenges to their long-term success. The role of service plans, tariffs, average revenue per user, value added services, and technology platform (2G/3G) has been assessed to determine the interplay of variables necessary to implement a successful MVNO model in an African market.
Key Findings:
> MVNOs have regulatory support in many African markets
> Telecommunications reform in Africa has liberalized (in almost all countries on the continent)
> Risks (unique to each country) must be adequately assessed before undertaking any MVNO investment.
> Africa is a huge opportunity as one of the fastest growing mobile markets in the world (in some cases attaining more than 100% growth in 24 months)
Questions Answered by Report
> Why will an MVNO succeed or fail?
> How can an MVNO best start in an African market?
> Is the regulatory framework in African favorable to MVNOs?
> What are the MVNO opportunities and challenges in Africa?
> Who are the key players in the African Telecommunications market?
> Which are the favorable methodologies to follow in the MVNO startup in Africa?
Africa MVNO Market and Competitive Analysis 2011
Market Study :: Published May 2011 :: 51 pages :: From GBP 497.00
Kind regards
Keith
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Keith Wallace
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