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The impact of MVNO licence on Nigeria’s telecommunication sector – Businessday

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On 11th August 2022, the Nigerian Communication Commission (“NCC/the Commission”) notified the public that it would be issuing the Mobile Virtual Network Operators License (“MVNO License”) which would improve the telecommunication output of the country, enable the expansion and availability of quality mobile coverage, and close the gap to the unserved/underserved Nigerian population. In furtherance of this, the NCC issued the License Framework for the Establishment of Mobile Virtual Network Operators in Nigeria (“the License Framework”).
This article explores the role of an MVNO, the scope of the License Framework, its notable provisions and the licensing provisions under the License Framework.

Definition
An MVNO is defined as a wireless communication service provider that resells mobile network services bought at wholesale prices from Mobile Network Operators (MNO), such as 9mobile, Airtel, MTN and Glo, for discounted amounts to end users and customers. MVNOs carry out sales and marketing services but lack the network and core infrastructure to deliver network services; therefore, MVNOs depend on the host MNO to provide this.

According to the License Framework, an MVNO is a licensed entity permitted to provide virtual network services which include all network provisioning. The major difference between an MVNO and an MNO is that the MVNO does not have ownership of the spectrum elements, irrespective of its model of operation. Therefore, the MNVO depends largely on the infrastructure of a fully licensed mobile telecommunication service provider.

Scope of the license framework
The License Framework regulates the operation of MVNOs in Nigeria; delimits the market players, their functions and responsibilities; provides the structure and types of MVNOs, and sets out the services each of the tiers is entitled to provide. Furthermore, there are provisions addressing the licensing obligations of potential MVNOs, the fee, tenure, renewal and circumstances that may result in revocation or suspension of the license.

Some notable provisions of the License Framework are discussed below.
a. Commercial Agreement with MNOs
The License Framework expects MVNOs to enter a “Revenue Sharing Agreement’ or “Wholesale Agreement” with MNOs after negotiations. The two parties are allowed to enter into the commercial agreement on their own terms, subject to such agreement being fair and expeditious.
The Agreement, which must be filed with the Commission before applying for the MVNO License, must detail technical parameters, operations, financial obligations, legal understandings, and other stipulations as deemed fit by the parties.
b. Prioritisation of the unserved and underserved areas

A major priority of the Commission as reflected in the License Framework is the provision of mobile network services to regions of the country where customers are unserved or underserved. The Commission anticipates that MVNOs will play an important role in connecting and bringing access to mobile services to these regions. Accordingly, MVNOs that intend to provide services in these areas enjoy subsidised requirements.

c. Subsuming of VAS under the MVNO License

Some MVNOs are empowered to provide Value Added Services (“VAS”) without procuring the VAS License, subject to certain conditions. The effect of this is that the VAS License is subsumed under the relevant MVNO License. However, the MVNO licensees are forbidden from distributing VAS content created and managed by other VAS providers.

d. Revocation of license
The License Framework provides for the revocation or suspension of the MVNO license where: the MVNO violates the agreement between itself and the MNO; any of the conditions in the License Framework are violated; or where an MVNO provides services beyond the scope of its license.

e. Tiered system
The License Framework establishes a 4-tier system wherein the MVNOs are expected to operate, while affording prospective applicants an opportunity to choose a unified license which gives the entity the opportunity to operate within any of the tiers. The various tiers are discussed below under the licensing provisions.

Licensing requirements for MVNOs
a. Criteria for eligibility
A prospective MVNO Licensee must be a corporate body registered in Nigeria. It must file with the Commission, the full contract agreement with a Host Network Operator or a National Carrier, and show proof of financial capabilities to cover its capital expenditure (CAPEX) and operating expenditure (OPEX) for the implementation of its strategic operations. It is also required to meet the technical requirements of the Commission for operating within the tier of choice, and show proof of local content in its ownership and service delivery.

b. License process
To acquire an MVNO License from the Commission the licensee must complete an initial Introduction Form with all the relevant information, upon agreement with the host MNO. The licensee must also submit a Performance Bank Guarantee (PBG), Financial Bank Guarantee (FBG) and a summary of capital structure proving its capacity to fund and maintain its operations through the tenure of the license. Upon completion of the above, an administrative award will be made.

c. Tiers
The License Framework establishes a 4-tier system while giving MVNOs the freedom to select a unified category which allows them to operate within any of the tiers. The tiers are as follows:

S/N TIERS FEATURES
TIER 1 SERVICES VIRTUAL OPERATOR (SVO)

▪ SVOs can offer services to customers without owning intelligent or switching network infrastructure.
▪ Host operators have the responsibility of providing wholesale capacity to the SVOs to provide their products and services. Thus, the host operator has a strong effect on the pricing of the SVO’s services.
▪ The VAS license is included in the SVO license; therefore, where an SVO provides VAS services, the conditions within the VAS license must also be complied with.
▪ The SVO can run its Short Message Service Centre (SMSC), which is a mobile phone network that handles text messages operations.
▪ The SVO licensee is in control of its brand, sales, distribution channels, device and phone sales and management, and customer relation platform.
▪ The tariff control here is very limited.

TIER 2 SIMPLE FACILITIES VIRTUAL OPERATOR (SFVO)

▪ The SFVO has more control over its value chain than the Tier 1 licensees, and can distinguish itself from the host.
▪ The SFVO can set up its intelligent network but does not have core switching and interconnect abilities.
▪ In addition to the features from Tier 1, SFVO has the ability to own its Home Location Register (HLR), Equipment Identity Register (EIR), Authentication Centre (AUC), Home Subscriber Server (HSS), own more customers and own and issue its own SIM.
▪ SFVOs can have their own short codes for customer care services.
▪ In relation to inbound calls, SFVOs share revenue structure with their host operators.
▪ The SFVO can generate its revenue because of its ability to control its pricing and tariff structure.

TIER 3 CORE FACILITIES VIRTUAL OPERATOR (CFVO)

▪ In addition to the features from Tier 2, CFVOs can launch and operate a full core network with interconnect and switching capabilities, such as Mobile Switching Center (MSC), Gateway Mobile Switching Center (GMSC), Packet Data Network Gateway (PGW), Serving Gateway (SGW) and Mobility Management Entity (MME). However, for radio access, they rely on their host operators.
▪ Unlike SFVOs, CFVOs have full control over their tariff structure as they do not share revenue structure for inbound and outbound calls.
▪ The Commission urges CFVOs to target unserved and underserved areas and offers subsidised requirements for CFVOs who operate in these areas.

TIER 4 VIRTUAL AGGREGATOR /ENABLER
▪ The Virtual Aggregator/Enabler is a middleman between the Mobile Network Operators (MNOs) and the other Virtual Operators. The Virtual Aggregator/Enabler buys network services from MNOs in bulk and then resells to other Virtual Operators.
▪ The Virtual Aggregator generally known as Mobile Virtual Network Aggregator (MVNA) has the liberty to choose the value chain it wants to aggregate. Thus, it can aggregate Virtual Operators from Tier 2 if it controls its intelligent network and content delivery platforms but relies on the host operator to provide switching and interconnect purposes.
▪ The Enablers generally known as Mobile Virtual Network Enablers (MVNEs) provide the platform other Virtual Operators need for business and operations support systems processes which in turn gives the Virtual Operators the opportunity to center their attention on marketing, sales and distribution aspect of their business.
▪ In unserved and underserved areas, the Virtual Aggregators/ Enablers can perform the role of CFVOs.

TIER 5 UNIFIED VIRTUAL OPERATOR

▪ The Unified Virtual Operators (UVOs) can choose to operate at whichever tier and offer services at such level.
▪ UVOs can enter into a Shared Rural Coverage Agreement with a licensed spectrum owner to directly provide services for customers in unserved and underserved areas.

d. License fee
The license fee for the respective tiers of the MVNO are as follows:

e. License tenure
The MVNO License is valid for a period of ten (10) years with an option to renew the license for another 10 years.

Conclusion
The introduction of the MVNO License is a commendable development from the Commission as it may stimulate competition in the telecommunications sector, lead to improved output and bring telecommunications services and products closer to historically unserved and underserved areas.
Importantly, the License Framework incorporates measures to ensure the achievement of these objectives.

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