Why Some MVNOs Fail and How Others Succeed
Africa’s MVNO space is heating up as new players enter the market, giving customers more choice and pushing them to seek out the most affordable, flexible, and innovative mobile packages.
According to a new report from tech industry research and advisory firm BMIT, the MVNO space is expected to outpace mobile operator market growth in years to come. BMIT estimates for South Africa put active MVNO subscribers at around 11 or 12 million by 2029, representing an annual compound growth rate of 18%.
But just because market activity is intensifying, it doesn’t mean that everyone will find success. As we’ve seen over the years with brands like Red Bull Mobile and Virgin Mobile, which tried to capture market share but never succeeded, new players face tough competition.
While multiple factors contributed to these failures – from brand perception and weak regulation to market competition and reliance on host networks – it goes without saying that one of the big reasons these offerings stumbled is because they were greenfield MVNOs. This means that they had no legacy systems, no existing subscribers and no inherited processes, which makes it difficult to reach profitability before your capital runs out.
So, how are so many new players making progress? Here are a few key factors that drive MVNO success.
#1 Leverage an existing customer base
If you look at the MVNOs that joined the market in the last five years, like Capitec Connect, TFG Connect, Mr Price Mobile and, more recently SPAR mobile and Old Mutual Connect, what they all have in common is an established customer base with which an existing billing relationship exists. By virtue of their position in the market, these MVNOs have lower customer acquisition costs, which means that they can reach profitability sooner. Consumers are more likely to switch to or adopt services from a brand they already know and trust, and one that requires little effort or resistance in doing so.
#2 Tap into rewards and loyalty programmes
By tapping into existing rewards and loyalty programmes, new MVNOs can deliver greater value to their existing customers. Take, for example, a big football club. Do they have a fan base? Yes. Do they offer subscription services to join the club? Yes. Do they have an app? Yes. Do they offer a SIM card? No. If this club decided to give fans a SIM card, they could incentivise them to buy an extra football jersey or game tickets by offering them data in return. This gives the football club fresh avenues to reward loyal fans and encourages them to engage more within the club ecosystem.
#3 Find the right network partner
Remember that MVNOs do not own their own network infrastructure, which means that they need to partner with an MNO (Mobile Network Operator) or MVNE (Mobile Virtual Network Enabler). But it’s not just a matter of working with whoever will take you. Successful MVNOs take the time to find and partner with an MNO that best allows them to sell their products at a competitive price. It’s not about being the cheapest, because these MVNOs can offer value elsewhere; it’s about finding a network partner that offers freedom and flexibility in the MVNO’s pricing strategy.
#4 Bring everything together in a single bill
For existing businesses looking to enter the MVNO space, having a pre-existing billing and collections relationship with customers is invaluable. It’s no surprise that expanding your business can introduce greater complexity, but if you already have this relationship, and you work with a flexible OSS/BSS platform, offering customers a SIM card on top of everything else you do is a matter of adding another line item to their bill at the end of each month.
Entering South Africa’s MVNO market is no easy feat, but success is possible with the right approach. Established customer bases, loyalty programmes, strategic network partnerships, and integrated billing systems all provide a head start that greenfield players lack. By combining these elements thoughtfully and strategically, new MVNOs can successfully bring innovative offerings to the table and position themselves to win in the market.
