Only a few weeks ago, Nigeria’s telecommunication regulator granted mobile virtual network operator (MVNO) licenses to 25 firms under the approved five (5) tiered license categories, collectively raking in 5.93 billion NGN (approximately 8 million USD) from license fees for only 4 of the tiered license categories (Adepetun, 2023).
This MVNO licensing is coming at a time that the Nigerian Bureau of Statistics (NBS) recently reported that in Q1, 2023, the ICT sector contributed 3.1 trillion NGN (est. 4 billion USD) to Nigeria’s GDP. There is some expectation that opening up the market to MVNOs will increase contributions to GDP, create jobs, and enhance services to consumers.
Considering Nigeria’s current misty socioeconomic and political climate, it is hard to say that there is any tangible excitement about the recent MVNO licensing despite assurances made by the regulator that the MVNO era will bridge the gap between unserved and underserved areas.
Before we proceed further, it will be fair to shed light on what “MVNO” means. MVNO means leveraging the existing infrastructure capacity of traditional mobile network operators to provide services to consumers.
In this simple definition, it is easy to deduce that MVNOs will not bother expending large amounts of capital to set up operational infrastructure. Lessons from mature markets with strong MVNO and MNO play show that MVNOs can control up to 40% of the market share.
This example of MVNO market success was evident in 2014 in Germany and Netherlands, with non-network players numbering 93 and 64, respectively (Lehikoinen et al., 2014). In countries like Nigeria, where the MNOs have fully settled in, there is still a scramble by the traditional MNOs to reach the same unserved and underserved client segments.
Subsequently, it will be interesting to see how the MVNO and MNO relationship will smoothly evolve without cannibalizing each other’s target market segments. MVNOs have to develop the right strategies for entry.
They will have to look beyond existing MNO markets to carve niche markets beyond the traditional ones that MNO business models currently serve.
The exciting part of the market will witness a battle of brands, where the strategy for new MVNO market entrants will be critical in crafting unique market segmentation strategies around the experience desired by target market audience segments for MVNOs to gain and sustain revenue while achieving niche market segment loyalty.
Whether the MVNO chooses to operate as a service provider, brand reseller, light or full MVNO, the pivot components of innovation, branding, and strategy will help them gain market entry and market position advantage.
With the recent licensing of MVNOs, the steps taken by NCC to perhaps increase the service span in the telecom sector while raking in revenues for the government from license fees, especially at a time the federal government of Nigeria desperately needs revenues may appear to be a laudable step.
However, in a country with large broadband infrastructure deficits, worth over 100 billion USD, where about 40,000 more towers and over 100,000 km of fiber optic infrastructure are still needed to bridge broadband infrastructure gaps, there is a need to pause and consider what might become of the existing infrastructure that often appears stretched in meeting current market consumer service needs.
This question is timely, especially recollecting how congested the mobile networks were during the COVID-19 pandemic, which resulted in poor quality of service (QoS). Putting things into proper perspective, MVNOs cannot succeed without MNOs.
Therefore, it makes sense for MNOs to invest and build more infrastructure to firm up their wholesale strategies in accommodating these newly licensed MVNOs.
References
Adepetun, A. (2023, June 7). Nigeria begins MVNO operations. 25 firms get licenses. Guardian. https://guardian.ng/business-services/nigeria-begins-mnvo-operations-25-firms-get-licences/
Asifa, I. (2023). ICT sector contributed N3.1 trillion to Nigeria’s GDP in Q1 2023 representing 17.47%. Technext.
Lehikoinen, J., Pont, P. & Sent, Y. (2014). Virtually mobile: what drives MVNO success. McKinsey & Company Telecom, Media & High-Tech Extranet.
