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Mobile virtual operators compete with established players in Africa

Rebecca Wanjiku | July 1, 2014

Mobile virtual network operators (MVNOs) are set to shake things up and challenge established players in the African telecom market.

Mobile virtual network operators (MVNOs) are set to shake things up and challenge established players in the African telecom market.

South Africa has had an MVNO operating in the country for some time. But MVNOs have recently been awarded licenses in Nigeria, Kenya, Uganda, Tanzania and Rwanda.

Players in the traditional telecoms market like Orange and Essar have struggled in new markets where extensive infrastructure and capital expenditure is needed. MVNOs depend on existing telecoms infrastructure and only provide services.

Equity Bank, Kenya’s largest bank in terms of customer base, recently received its MVNO license from the Communications Authority in the country, and is partnering with Airtel to launch a suite of services targeting Tanzania, Rwanda and Uganda, where it also has operations.

“We will provide a full suite of banking services on your mobile; allowing you to enjoy the convergence of all financial products on all channels, credit, savings, insurance, payments, transaction processing, brokerage, custodial and investment services,” said James Mwangi, CEO of Equity.

Equity has kept transaction fees for its mobile money services low, to rival those provided by M-pesa, the most common mobile money platform, operated by Safaricom.

“We cannot comment authoritatively on the likely impact the entry of MVNOs will have on our mobile money revenue stream in the short term; however, we can state that M-Pesa and M-Shwari (mobile credit) operate in a competitive environment and as a business, we have in place, business strategies necessary to enable us secure M-Pesa’s and M-Shwari’s leadership positions,” said Nzioka Waita, Safaricom Corporate Affairs Director.

The new MVNO services are also riding on interoperability with other payment platforms and mobile money players in the market, compared to M-Pesa, which is open only to Safaricom subscribers and businesses that enter into partnership with Safaricom.

Waita said there are ongoing discussions led by the GSM Association on opening up the M-Pesa platform, but he insisted that any discussions will have to be driven by industry standards, investments and the requisite regulatory framework.

In South Africa, where Virgin Mobile has been licensed as an MVNO for years, the situation is different; it has been challenging for MVNOs to break into the market, which is mainly dominated by voice and data. Mobile money is not widely used in Southern Africa.

“Virgin Mobile is the only MVNO in South Africa,” said Dobek Parter, Senior Telecoms Analyst at Africa Analysis.

“The experience to date has been rather poor, apart from its first two years of existence, it has been largely stagnant with about 0.5 percent of the market share; it has improved a bit in the past couple of years, but still remains a very niche market player.”

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