The term #MVNO (Mobile Virtual Network Operator) is a relatively new concept in Nigeria that will soon become a household term by the end of 2024. An MVNO is a business model where an existing or new brand, leases the radio spectrum of an incumbent MNO (Mobile Network Operator) to provide value added services to customer segments that are not fully served by the incumbent MNO e.g. remote rural areas.
The genesis and role of an MVNO
MVNO’s were not a concept born out of design, they were born out of necessity. As they say, necessity is the mother of invention.
One2One launched the world’s first MVNO in 2000 when Virgin Management had the idea of running a mobile network without actually building one! At the time they had approached the dominant MNO’s in the market but had been declined due to a lack of strategic fit.
One2One was the fourth entrant at the time (just like Etisalat was in Nigeria in 2008) and needed to accelerate its market share and utilize its national network capacity. Once a network is built it becomes a sunk cost and requires traffic to generate revenue to cover its operational costs. The default would be to grow organically and run the network at a loss until it broke even. This would be analogous to an airline flying A380’s half empty across the Atlantic.
So the aspirations of both One2One and Virgin Management were seemingly aligned. As Head of Audit, I was given the task of assessing the validity and sustainability of this potential partnership and to make a recommendation to the board.
The rest is history, we formed a Joint Venture and launched the inaugural and most successful MVNO brand in the world and this spawned the worldwide revolution in MVNO’s.
The Nigerian context
MVNO’s will now be launched in Nigeria 20+ years later this year under a mandate by the NCC to the MNO’s. This is welcome as it’s been long anticipated. However the underlying dynamics are different to the more laissez-faire approach in the UK and rest of the world.
Firstly the regulator has mandated 5 different tiers under which an MVNO can operate. Diagram 1 below gives a snapshot of the different tiers and their potential services.
Secondly, Nigerian MVNO’s are mandated to MNO’s as more of a push strategy as opposed to a pull strategy. However in the UK, European and USA context, MVNO’s were embraced by the MNO’s as a strategic and tactical approach to grow market share, reach more customers and drive enterprise value.
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MNO’s in Nigeria now need to re-evaluate their strategic plans, their technical readiness, network capacity and indeed their human capital to manage a new business concept that may appear to be a logical extension, but it is not as simple as that. Along with the perceived benefits of launching an MVNO, there are inherent challenges that must be overcome to run a successful sustainable operation.
It is therefore incumbent and imperative on both the MVNO licensee holder and the MNO partner to fully map out expectations and a roadmap to success. This will be explored in more depth in the next article
It stands to reason that the higher the tiered license, the more complex and intricate the planning and execution will be, depending on the MNO readiness and integration capabilities etc.
On the other hand a tier 1 or 2 licensee may indeed be more of a plug and play, but it is inherently more dependent on the MNO and will need to have a strong voice to ensure good quality of service from the MNO network team. At the end of the day, the lower tiered MVNO’s are more closely dependent on the efficiencies of the MNO as compared with the higher tiered MVNO’s.
Irrespective of what level of service is provided, the main objective is to offer more value added services to customers, proliferate services to rural areas and to most importantly run a sustainable MVNO business.
