This article is the second part of a guest submission by Ernest Akinlola, an MVNO expert and the Managing Director of Bboxx. Read the first part here.
Whilst MVNOs are now proliferated around the world, each jurisdiction is governed by specific regulations and the success of an MVNO will depend on how well it can navigate its specific environment.
The requirements for operating a successful MVNO business are fairly universal across regions, but the unique dynamics of each nation will necessitate different approaches to applying strategy.
The growth in MNVOS
Following Virgin Mobile’s introduction and enormous success, other MNOs saw the potential of the MVNO business model, and a new industry was created. To ride this new wave, One 2 One/T-Mobile, O2, Vodafone, and Orange all introduced MVNO offerings.
Currently, the UK has over 24 successful mobile virtual network operators (MVNOs), each with a unique business model that makes use of its own inherent strengths in its specific industry sectors, such as utilities, diaspora, retail, broadcasting, etc.
You can see from the figure that MNOs had such a strong belief in the MVNO concept that they not only hosted 3rd party brands but also built their own fully owned MVNOs as flanker or fighter brands. Today, MNO flanker brands make up over 25% of MVNO’s in the UK.
Utilizing unique techniques, many of these well-known branded MVNOs have achieved incredible success, frequently ranking higher in customer perception than the real host MNO on which they operate their service.
On the One2One network, Virgin Mobile frequently took first place for the best network, and Tesco Mobile recently won the Most Reliable Network category at the Trusted Reviews Awards 2022 last year. Such is the efficiency of a successfully executed MVNO approach that O2, the host MNO of Tesco Mobile, placed 7th while providing the actual network!
Tesco Mobile also took 1st place in a number of other categories, including Customer Care and Net Promoter Score (NPS). Tesco Plc converted every customer touch point by utilizing its strong supermarket retail network and gas stations.
Lycamobile is arguably the most recognised MVNO in the world and evolved out of Lycatel Calling Cards which focused on the diaspora customer segment in the UK. The pivot from the protracted process of using a calling card to make international calls to a sim card was a game changer.
Sim cards were sold through 1000’s of mom-and-pop shops, leveraging the existing and long-established distribution channels of the calling cards. As COO, I was responsible for rolling out the MVNO concept to an additional 7 countries across Europe, utilising the same capabilities of distribution and installed base of customers. Lycamobile is now active in 60 countries.
All these successful MVNOs utilised 3 common catalysts for growth: (i) an installed customer base (ii) an established distribution channel (iii) a differentiated proposition. [ad]
How can nascent Nigerian MVNOs emulate this success?
The MVNOs above were launched over an 18-year period with a maximum of 4 a year. This afforded them the opportunity to take learnings from previous incumbents prior to launching new propositions.
Nigeria’s MVNOs will tread a different path and will all materialise within the same time frame, similar to the launch of PSBs. This implies there will be a glut of product offerings in the market, all seeking to gain market share. MVNOs will not have the luxury to study the traction of their competitors, understand their capabilities, identify opportunities in the market, and then refine their strategies prior to launching.
Nigerian MVNOs will have to double down on their service differentiation from the onset, be crystal clear on strategy, and invest in resources to execute.
Pre-Launch Steps for Nigerian MVNOs
Business Plan
A business plan is a fundamental requirement for any business start-up and it should be no different for an MVNO. In the case of Nigerian MVNOs, it’s important to tailor the business plan in line with the capabilities of the licence acquired.
Wholesale agreement
The wholesale agreement governs the commercial relationship between the MNO and the MVNO. These types of partnerships only work if the wholesale agreement works. A badly negotiated contract can undermine the whole business model and prove to be an existential threat for the MVNO. MVNO /MNO relationships do turn sour so the importance of a robust agreement cannot be underestimated. There are 8 essential elements that form the basis of a successful wholesale agreement.
Technical partner
Also crucially important is the selection of the right technical partner to support the MVNO operations. There are several key criteria that MVNOs must use to assess the capabilities of the technical partner.
Stakeholder- Relationship Management
Both the MVNO and MNO must appreciate the nuances that will emerge in this new relationship and adopt all the 6 proven strategies to ensure that there is commercial congruence at all times.
Business Case
The business case needs to factor in all the key assumptions an MNO business case would adopt with the appropriate modifications specific to the MVNO. For example, whilst it is logical to assume that the MNO bears all the capex of hosting the MVNO, it is incorrect to assume that the MVNO will not incur any capex at all. There are at least 5 scenarios where an MVNO will have to incur a capex outlay.
Market Niche
As mentioned above the Nigerian MVNOs will launch into a mature telecoms market, with established MNOs and at the same time as other MVNO launches. So it stands to reason that building traction and scale is not going to be without challenges. The segmentation strategies adopted by the MVNO will need to be forensic and clearly thought through using proven methodologies.
Distribution Channels
Establishing a distribution channel from scratch is expensive and time-consuming. So the MVNO needs to critically assess other routes to market, leveraging its own network of contacts.
Brand
Choosing which brand to launch with is one of the most difficult considerations. Does the MVNO build a brand from scratch or consider at least 3 other brand adoption possibilities? This can only be determined by understanding the Nigerian context and finding out what works best with the target audience.
The MVNO Success Indicator Scorecard
To further aid the evaluation process, I developed a balanced scorecard tool, to consolidate the criteria into an overall score. The score for each category below is driven by the responses to 6 -10 critical questions under each category.
A weighting has been applied to each category to arrive at a final score where the maximum is 10 based on maximum marks of 70.
A score of 0 -3 can be considered as having a low likelihood of success, 4-6 medium and 7-10 Good.
This is an extremely pragmatic tool that can be used to gain a realistic assessment of MVNO’s prospects in Nigeria. It also encourages management to critically assess their readiness to launch the MVNO.
