- 43 companies have paid a total of N8.6 billion to the Nigerian Communications Commission (NCC) to acquire MVNO licenses in Nigeria.
- The MVNOs by default, will provide telecom services in unserved and underserved areas leveraging the infrastructure of existing mobile network operators (MTN, Airtel, Globacom, and 9mobile).
- However, the MNOs are also facing challenges with investing in more infrastructure due to the declining value of the Nigerian currency.
- In anticipation of stiff competition, industry experts believe MVNOs can only succeed by offering unique Value-Added Services (VAS) that are not currently provided by the MNOs.
Some 43 companies aiming to provide telecommunications services in Nigeria through the Mobile Virtual Network Operator (MVNO) framework have spent a total of N8.6 billion to acquire the licences.
This comes amid concern by stakeholders that the new operators may have to struggle to acquire customers as the incumbent mobile network operators (MNOs) comprising MTN, Airtel, Globacom, and 9mobile are already dominating the market.
As of December 2023, data from the Nigerian Communications Commission (NCC) shows that the four mobile network operators had a total of 224.4 million active subscriptions.
The figure is expected to have grown over the last two months, except for the ongoing enforcement of the NIN-SIM linkage ban, which might lead to some subscribers being taken off the networks.
The 43 MVNOs, based on contractual agreements, will be leveraging the infrastructure of the MNO to provide telecom services in unserved and underserved areas of the country. This, however, raises more concern about capacity as the MNOs are currently finding it difficult to invest more in infrastructure due to the current forex challenge.
Specifically, MTN Nigeria, which is the largest telecom operator in the country, recently told Nairametrics that its capacity to invest more in infrastructure has been whittled down by the devaluation of the Naira.
Recommended reading: Why Nigerian MVNOs may not make money from voice, data
MVNO licence fee
Under the MVNO framework released by the NCC, there are five categories of operators in this segment covering tier 1 to tier 5.
According to the licensing framework, the highest in the categories, the tier 5 licence costs N500 million, while tier 4 goes for N200 million. Both the tier 3 and tier 4 licences cost N130 million and N60 million respectively, while the tier 1 licence is to be issued at N35 million.
Source: NCC’s MVNO licensing framework
NCC’s database shows that 10 companies have so far acquired the tier 5 license, thereby paying a cumulative of N5 billion to the regulator.
For tier 4, six companies have acquired the licence, paying a total of N1.2 billion, at N200 million per licence. The tier 3 category has the largest number of players as 15 companies have acquired the licence. At N60 million per licence, the total money paid amounts to N1.950 billion.
The NCC database shows that 11 companies have acquired the tier 2 licence, paying a total of N660 million, while only one company acquired the tier 1 licence.
Operational differences between the 5 tiers
According to NCC, Tier 1 operators are the Services Virtual Operators. This tier leverages its ability to offer services to its customers without owning any switching or intelligent network infrastructure. They do not control any numbering resources. Responsibilities lie with the host licensee to provide wholesale capacity to the V.O for delivery of its products and services.
- Tier 2 is the Simple Facilities Virtual Operator, which assumes more control of the value chain, which allows it to significantly differentiate itself from its host. The VO does not have Core Switching and Interconnect capabilities but can set up its Intelligent Network (IN) to provide its own IN services to the customer.
- Tier 3 are Core Facilities Virtual Operators, which rely on its technical and commercial prowess to launch and operate a full core network with switching and interconnect capabilities.
- Tier 4 are Virtual Aggregators/Enablers, responsible for aggregating and/or enabling VO services within the market. It relies on a model in which it stands as a middleman between the MNO and multiple VOs.
- Tier 5 are Unified Virtual Operators. A VO within this tier can decide the level of service it desires to offer ranging from tier1 to tier4. This gives the VO freedom of choice to deploy its services the way it deems fit as long as it still has a valid license.
Business case for MVNOs in Nigeria
Industry experts have, however, said the only way for the MVNOs to have a successful business in Nigeria is to offer an array of Value-Added Services (VAS) that are not being offered currently by the Mobile Network Operators (MNOs).
According to them, many Nigerians are already subscribed to voice and data services from the MNOs and may not want to change to MVNOs for the same services.
Specifically, the Chief Executive Officer of Wireless Technology Labs, Satya Mekala, said the licensed MVNOs will need to focus on special areas like education, agriculture, and rural development, among others.
- “Mobile operators are very rich, and they’re already making lots of money. It’s an unnecessary waste of time for MVNOs to compete with them. But some innovations are not happening with mobile operators, which offers opportunities for the MVNOs,” he said.
Mekala also stressed that collaborative efforts among MVNOs enabled them to pool expertise, tackle challenges collectively, build profitable ventures, and deliver essential value-added services crucial for the populace and the nation.
Similarly, the Vice President of TecnoTree, a telecom software vendor, Himmat Gill, identified fierce competition in an oversaturated market, limited control over network quality and service prioritization, and navigating through diverse regulatory landscapes across regions as some of the challenges that may impede MVNO’s success in Nigeria.
He, however, suggested market differentiation as a potential strategy for MVNOs to overcome these challenges.
- “Market differentiation can serve as a potent strategy for MVNOs to overcome the challenges of low revenue and competition from the MNOs. By distinguishing themselves from competitors, MVNOs can attract and retain customers,” he said.
What you should know
A Mobile Virtual Network Operator (MVNO) is a telecommunications product and service operator that rides on top of the infrastructure capacity of a fully licensed mobile telecommunication service provider or mobile network operator (MNO).
This means that the operators will not need investments in their infrastructure but leverage existing facilities across the country to provide services.
According to Fortune Business Insights, the global MVNO market size is projected to rise from $67.54 billion in 2020 to $123.40 billion in 2028, at a CAGR of 7.9% during the forecast period, 2021-2028.
As of June 2014, 943 MVNOs and 255 MNO sub-brands were active worldwide. This represents a total of almost 1,200 mobile service providers worldwide hosted by MNOs, up from 1,036 in 2012.